Obama rule would slash gasoline emissions, raise prices

The Obama administration on Friday formally unveiled a plan to throttle the amount of sulfur emissions allowed from gasoline at a potential price tag ranging from a penny to 9 cents per gallon — depending on who you ask.

The manufacturers of emission control systems for cars, which back the so-called Tier 3 standards, commissioned a Navigant Economics analysis last year that said the change would hike pump prices by about a cent per gallon. An Environmental Protection Agency model also said the final price tag would amount to about a penny extra per gallon.

But the oil industry, which opposes the proposal, points to its own analysis by Baker & O’Brien Inc., that concluded manufacturing costs could jump by up to 9 cents per gallon.

Either way, gasoline costs are forecast to climb under the Environmental Protection Agency’s nearly 1,000-page proposal, which would force refiners to slash sulfur emissions from gasoline to an average of 10 parts per million, down from a current threshold of 30 parts per million. For outspoken supporters and critics of the plan, the question boils down to whether the higher costs are worth it.

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Public health advocates say the low-sulfur fuel mandate would provide a big boost in air quality, quickly reducing smog-forming ozone pollution from vehicles and the respiratory illnesses that go along with it.

High ozone levels impair the development of lung function in otherwise healthy children and exacerbate respiratory problems in others. Smog can make it tougher to control asthma in children and adults, resulting in more frequent hospitalizations, premature deaths and emergency treatment.

The EPA cast its proposal as a set of “sensible standards for cars and gasoline that will significantly reduce harmful pollution (and) prevent thousands of premature deaths and illnesses, while also enabling efficiency improvements in the cars and trucks we drive.”

The agency estimates that the standards will help avoid as many as 2,400 premature deaths each year and 23,000 cases of respiratory ailments in children.

Under some supporters’ calculus, health costs would go down more than gasoline prices would go up.

EPA’s analysis said the plan would result in $8 billion to $23 billion in annual health-related benefits by 2030.

The Navigant Economics study also was pegged to medical savings; it concluded that the health benefits from the low-sulfur fuel mandate would translate to at least $5 billion annually by 2020.

“These common-sense standards will save lives, save money and clean up our air – all at a minimal cost,” said Luke Tonachel, senior vehicles analyst at the Natural Resources Defense Council.”

Public health advocates say the effects could be especially significant in cities with heavy pollution, such as Houston. Statewide, Texas exceeded health-based ozone limits more than 120 times last year, according to the Environmental Defense Fund. In Houston, eight-hour average ozone levels exceeded a standard of 75 parts per billion 35 days last year.

“More than one in three Americans live in areas where air pollution levels exceed at least one federal limit,” noted Michelle Robinson, director of the clean vehicles program at the Union of Concerned Scientists. She called the proposal “a common-sense step that will protect our health while growing our economy.”

But the oil industry said the public health benefits of the low-sulfur mandate are illusory and unproven.

“The costs and economic impacts of this are very real,” said Bob Greco, downstream director of the American Petroleum Institute. “We don’t think it’s justified.”

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Greco said it’s unclear how much ozone concentrations would actually decline if sulfur emissions dropped another 20 parts per million — after previously being scaled back from 300 parts per million.

Greco cast the fuel proposal as part of “a tsunami of federal regulations coming out of the EPA that could put upward pressure on gasoline prices.”

“Consumers care about the price of fuel, and our government should not be adding unnecessary regulations that raise manufacturing costs, especially when there are no proven environmental benefits,” he said.

Rep. Ed Whitfield, R-Ky., the chairman of the House Energy and Power Subcommittee, said the proposal shows the Obama administration is “out of touch” and is the work of an “overzealous EPA.”

“Hard-pressed families (are) already struggling to afford each fill-up,” Whitfield said.

Rep. Fred Upton, R-Mich., who heads the House Energy and Commerce Committee, noted that gasoline prices are already high — and any further increases would especially “hurt the nation’s most vulnerable individuals and families.”

“We cannot afford policies that knowingly raise gas prices,” Upton said.

Refiners say the remaining sulfur is especially difficult to remove from gasoline and would require installing energy-hogging hydrotreaters at the facilities. Ironically, said Greco, the equipment could actually boost the carbon footprints of refineries, even as regulators are on a separate path to set limits on greenhouse gas emissions from the facilities.

Charlie Drevna, head of the American Fuel and Petrochemical Manufacturers, said U.S. refiners have already spent billions to bring sulfur emissions down from the 300 parts per million standard of 2004, and the EPA’s proposal to go further would require another $10 billion in new infrastructure. On top of that, AFPM predicts $2.4 billion in additional annual operating costs.

“Tier 3 rulemaking that targets trace amounts of sulfur in gasoline is not worth the direct threat to our domestic fuel supply, consumer cost at the pump and American jobs,” Drevna said.

Automakers say the change would allow them to build cleaner combustion engines, giving them new avenues to meet environmental mandates. Lower sulfur fuel allows catalytic convertors to work more efficiently, causing fewer tailpipe emissions.

The change also would allow automakers to sell the same vehicles in all 50 states — including in California, which has tighter tailpipe emissions requirements.

The reduction in air pollution tied just to the reduced sulfur would be equivalent to taking 33 million vehicles (or one in eight cars) off the road, according to the National Association of Clean Air Agencies.

Because of the high stakes, there has been a flurry of last-minute lobbying by automakers, emissions control technology makers and refiners on the issue recently.

In addition to cutting sulfur from gasoline by more than 60 percent, the EPA’s proposed plan would reduce nitrogen oxides by 80 percent, set a 70 percent tighter particulate matter standard and reduce fuel vapor emissions to near zero. According to the agency, the plan also would reduce vehicle emissions of toxic air pollutants, such as benzene and 1,3-butadiene, by up to 40 percent.

The requirements would be enforced beginning in 2017. Relatively small refiners producing less than 75 thousand barrels per day would effectively have an additional three years to comply. A hardship provision in the proposal also would allow refiners to petition the EPA for more time.