03 July 2000 00:00 [Source: ACN]Glenn Hess of CMR questions four NPRA spokesmen about the in dustry's activities on the environment and recent legislation
Q The final Tier 2 gasoline and auto anti-pollution programme rule announced by President Clinton in December includes complicated provisions that ultimately will require a 90% reduction in the amount of sulphur in gasoline. What challenges does this rule pose for the refining industry?
###9167###A Thompson: The Tier 2 gasoline programme is an extremely ambitious, high-stakes approach to reducing sulphur in gasoline.
It requires the refining industry to make unprecedented investments in improving technology to meet the rule's timing requirements. The final Tier 2 rule will require the refining industry to invest an estimated US$3-5bn in order to comply with a new 30ppm gasoline sulphur standard for automobile model year 2004. Conservative estimates have stated that the costs will rise 3-5 cent/gal. The refining industry presented the Environmental Protection Agency (EPA) with an alternative that would have achieved many of the same goals as this rule, but would have provided industry with more time and flexibility. This plan was rejected by EPA. Extending California-like standards to the entire US could lead to supply and price instability nationwide.
NPRA's Tier 2 focus will now be to assist NPRA members with implementation of the programme with particular emphasis on how to acquire necessary permits in a realistic time frame.
Q To what extent and in what manner are NPRA member companies participating in EPA's voluntary programme to provide basic toxicity information on high production volume (HPV) chemicals? What benefits for industry do you hope to eventually see evolving from the data developed?
A Kennedy: The NPRA member companies are participating in the HPV voluntary programme as individual sponsors of chemicals and in consortia.
Most member companies are involved with one or more of three consortia: the Petroleum HPV Testing Group, managed by the American Plastics Institute (API); the Chemical Manufacturers Association (CMA) Hydrocarbon Solvent Panel; and the CMA Olefins Panel. In the petroleum HPV group, 83% of the participants are NPRA members.
This participation represents good product stewardship and a willingness to volunteer information regarding chemical hazards instead of waiting for regulations requiring the data. By joining a consortium NPRA companies share the burden of developing the hazard data, which will be generated in a manner acceptable to the scientific community, including EPA.
It is anticipated that when the hazard assessment data is converted to risk assessment, it will be shown that there is a low risk to the public from exposure to our industry's products.
Q This spring, EPA will embark on another major effort to control mobile source emissions by proposing a rule that is expected to call for a sharp reduction in the sulphur content of diesel fuel used by US truckers. In December, the American Petroleum Institute said it could support a regulation to lower the sulphur content of highway diesel fuel from the current average of about 500 ppm to 50 ppm in 2007 or later. What is NPRA's view on low-sulphur diesel fuel?
A Slaughter: NPRA has stressed to EPA that it supports reasonable reductions in diesel sulphur levels, but the Agency must recognise that extremely low numbers could cause supply and capacity-related problems. NPRA supports diesel on-road sulphur reductions to no lower than 50 ppm caps no earlier than 2010, with no specified average. Only sulphur should be considered in EPA's diesel rule. There should be a technical review to assess engine and fuel production capabilities in 2003. NPRA recognises the need for off-road diesel sulphur reductions, which EPA currently intends to consider in a subsequent rulemaking. Emissions standards and fuel standards should be set to minimise overall cost to the consumer and result in cost effective reductions. As this rulemaking proceeds, EPA must be sensitive to diesel supply implications, and the availability of technologies capable of meeting regulators' objectives.
Regulators must guard against unreasonable requirements which could threaten the viability of refineries, and cause market disruptions in getting critical energy products to consumers.
Q In response to EPA's proposed low-sulphur rule, some oil industry representatives argued that the requirements would put some small refiners at economic risk and force higher gas prices in areas not affected by serious air pollution. The final regulation includes some pollution credit trading provisions and flexibility to help the small refiners. Are these changes sufficient to address the industry's concerns?
A Sternfels: EPA incorporated several changes in the final rule to address the concerns of small refiners. In the final rule, the Agency defined small refiners as those with 1998 average corporate employment less than, or equal to, 1500 employees and corporate capacity less than, or equal to, 155 000 bbl/ day. The original proposal defined small refiners as those with 1500 employees. EPA changed the 2004-07 interim gasoline sulphur standards for some of the affected small refiner facilities. The final rule is very refiner-specific. Some small refineries will have a higher per-gallon cap, while some could have a lower cap. The initial proposal did not permit small refineries to use credits to comply with the interim average sulfur content standards, but the final rule does allow this procedure. The Agency also created 2004-06 interim gasoline sulphur standards for facilities in the Geographical Phase-in Area. This was not in the original proposal. While the final rule provides some relief on timing, many in the industry are concerned about these new challenges and the long-term impact on the refining industry.
Q In a similar ruling last year, the DC appellate court halted EPA's implementation of stringent new air and airborne quality standards (NAAQS) for low-level ozone and particulate matter, saying the agency had overstepped its authority. EPA now plans to appeal to the Supreme Court. If EPA prevails, what would be the consequences for the nation's refiners?
A Slaughter: If the US Supreme Court reinstates all parts of EPA's revised NAAQS for ozone and particulate matter, the consequences for the nation's refiners would be severe.
In order to meet the new NAAQS, states would be required to implement pollution control measures on refineries in addition to clean air programmes in effect.
States may also be forced to require cleaner burning fuels. These control measures, on top of the capital requirements for implementation of Tier 2 gasoline sulphur requirements and the imminent regulatory activity affecting diesel, air toxics and MTBE usage, cause great concern within the refining industry.
Q The EPA is expected to propose changes in the amount of benzene and possibly other toxics in gasoline at some point this year. What does the industry anticipate in terms of rule-making on this issue?
A Thompson: Section 202 (l) of the Clean Air Act directed EPA to complete a study of toxic air pollution from mobile sources, including vehicles and fuels by 15 May 1992 and issue final air toxics rules by May 1995.
Section 202 (l) specifically mentions benzene, formaldehyde, and 1,3-butadiene should be included in the study, which was to focus on air toxic emissions that posed the most significant risk to human health.
EPA was delayed in completing the study and issuing air toxics standards. It is now under court order to propose regulations by April 2000, with a final rule by December 2000. It is likely EPA will propose stringent new air toxic standards for both conventional gasoline and reformulated gasoline (RFG). EPA will issue these new toxics standard as part of its Integrated Urban Air Toxics Strategy which addresses both area and mobile sources of pollution throughout the country. It is expected that EPA will target benzene in gasoline and is seeking information and data from industry in order to make a cost effectiveness determination of possible benzene control options.
Q The industry scored a major legal victory in January when the US Court of Appeals for the District of Columbia overturned EPA's attempt to allow areas of the country which are in attainment with the clean air standard for ozone to opt into the federal reformulated gasoline programme. Why did NPRA challenge this rule, and how will the appeal court's ruling benefit consumers?
A Sternfels: NPRA challenged EPA's revised opt-in regulation because EPA's attempt to expand the universe of areas eligible to 'opt in' to the reformulated gasoline programme violated the plain wording and obvious intent of the Clean Air Act. Congress went to extraordinary lengths in the CAA Amendments of 1990 to focus the RFG programme on areas which have the greatest air quality needs. NPRA saw the EPA regulation as going far beyond the clear intent of congress. The decision sends a clear message of restraint to EPA. Given the acknowledged cost and supply drawbacks associated with RFG, it seems entirely sensible to confine opt-in to areas experiencing non-attainment. It is a major victory for consumers in many parts of the country, who will not have to pay unnecessary increases.
To meet clean air requirements and receive federal highway improvement funds, states will be able to choose from a wider selection of more cost effective pollution reduction programmes.
Q With respect to the growing controversy over MTBE, does NPRA advocate or support a ban or phaseout of the use of MTBE in reformulated gasoline (RFG)? What position does the industry take on the Inhofe-Feinstein Senate bill to grant states the authority to waive the 2% oxygen content requirement for RFG?
A Sternfels: MTBE is the most commonly used oxygenate that meets federal RFG standards. It has been found in drinking water in California and 26 other states. In July 1999, an EPA Blue Ribbon Task Force recommended comprehensive improvements to the underground storage tank, safe drinking water, and private well protection programmes; a substantial reduction in MTBE use as a gasoline additive; and removal of the Clean Air Act oxygenate requirement for RFG. NPRA believes the 2% RFG oxygenate mandate must be eliminated, and will urge the congress to consider the Smith-Inhofe-Feinstein bill permitting states to petition EPA to opt out of the RFG oxygenate requirement. Regional MTBE solutions must be considered, and there should be neither an ethanol nor renewables mandate. There should be no 'backsliding' on achieved air toxics reductions and legislators must ensure that reliability of gasoline supply is maintained. NPRA urges EPA and congress to give serious consideration to the Blue Ribbon Panel's findings and recommendations.
Q In his State of the Union Address, President Clinton called global warming 'the greatest environmental challenge of the new century'. What is NPRA's position on legislative proposals that would give companies incentives in the form of credits for making early, voluntary reductions in greenhouse gas emissions?
A Kennedy: President Clinton signed the Kyoto Protocol in November 1998 during the Fourth Conference of the Parties in Buenos Aires, Argentina. If submitted to the Senate for advice and consent to ratification, it would require the US. by 2008-12, to make a 7% reduction in greenhouse gas (GHG) emissions from 1990 levels. In addition, the Protocol currently does not include developing nations such as China, India, and Mexico. The Clinton Administration's FY 2001 budget includes US$4.1bn in tax incentives, research investments and grants to local communities, to name a few, for projects to mitigate GHG emissions. This request is the largest-ever climate change budget proposal. Proponents of the Protocol will argue that these programmes demonstrate prudent actions in dealing with the possibility of global climate change, while opponents argue that these actions constitute 'backdoor; implementation of Kyoto by the Administration without Senate ratification. There have been several bills introduced on Capitol Hill that, in general terms, allow companies which reduce their energy-related emissions today, to earn credits which they could use under a Kyoto, or Kyoto-like, Protocol of tomorrow. NPRA has concerns regarding several aspects of these programmes, as well as what government agency will be targeted to administer climate change programmes. For instance, if EPA administers these programmes, it would have even greater authority to regulate energy usage and supply. Although doubts remain about some fundamental questions regarding the measurement of climate change and the appropriate ways to address any changes, the oil and chemical industries are taking voluntary action to reduce greenhouse gas emissions while these issues are being resolved. NPRA has and will continue to work with the Administration as well as other industry groups to promote resolution of the science question, in addition to engaging in discussions about methodologies for identifying GHG reductions.
Q Congress has been deadlocked over Superfund reform for many years. Lawmakers are now trying to reach consensus on a bill that would provide limited, targeted reforms to the Superfund programme. What legislative changes does NPRA believe are most essential to improving what is now a 20-year-old programme?
A Kennedy: Since the expiration of the Superfund taxing authority on 31 December 1995, Superfund reauthorisation and reinstatement has continuously been debated on Capitol Hill. Two major competing Superfund reform bills were approved by House Committees in 1999 - commerce and transportation. Because of significant differences between them and controversies over reinstatement of Superfund taxes, there was never a floor vote. In addition, Ways and Means Committee Chairman Bill Archer (Republican, Texas), and others, remain adamantly opposed to reinstatement of the expired Superfund taxes.
There has most recently been an attempt to move a bill that would require reinstatement of the Act's broad-based tax, the Corporate Environmental Income Tax, combined with relatively few changes in Superfund's substantive provisions. NPRA is concerned that such an effort could also result in reimposition of the programme's larger, traditional taxing scheme. NPRA opposes reinstatement of any of the Superfund taxes in the absence of substantial reform.
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