HOUSTON (ICIS)--US refiners face a tight deadline, an industry advocacy group says, under new motor fuel standards announced on Monday by the US Environmental Protection Agency (EPA) that aims to reduce sulphur levels in gasoline by more than 60% by 2017.
The Tier 3 standards, announced by the US Environmental Protection Agency (EPA) on Monday, aims to reduce sulphur levels in gasoline to 10 ppm from 30 ppm. The move will result in a reducing 260,000 tons (236,000 tonnes) of nitrogen oxide (NOx) emissions by 2018, the EPA said.
Charles Drevna, president of American Fuel & Petrochemical Manufacturers (AFPM) group, was critical of the standards and said that the 2017 deadline does not give refiners enough time to make modifications in a manner that would avoid potential supply disruptions.
"EPA’s decision to move forward on Tier 3 is yet the most recent example of the agency’s propensity for illogical and counterproductive rulemaking," he said.
The EPA did include some flexibility for refiners, including a credit averaging, banking and trading programme to help refiners spread out needed investments. A carryover provision will allow a refinery that does not meet the 10 ppm standard in a given year to make up the deficit the following year. Also, a hardship provision will be accessible on a case-by-case basis, according to the EPA.
Out of 108 gasoline refineries in the US, 40 are already meeting the standard or can purchase credits to be in compliance, according to EPA analysis, while another 67 are expected to be able to comply through modifications to existing equipment within two years. One refinery will need a new gasoline hydro-treater, the EPA said.
The changeover to Tier 3 fuel standards could cost the refining industry $10bn in capital costs, according to a study commissioned by the American Petroleum Institute (API). The annual compliance cost could be $2.4bn, which could increase the cost of a gallon of gas by up to 9 cents, the API said.
The costs are unnecessary and may actually increase greenhouse gas (GHG) emissions due to the energy-intensive hydro-treating equipment needed to reduce sulphur levels, API said.
"It will provide negligible, if any, environmental benefits. In fact, air quality would continue to improve with the existing standard without additional costs," Bob Greco, API downstream director, said.
The EPA estimates the Tier 3 standards will add 1 cent/gal of gasoline. The overall cost of the programme is projected to be $1.5bn in 2030; however the EPA estimates savings in health benefits from the reduced emissions will be $6.7bn-19bn.
Tier 3 also brings federal standards in line with California emission standards, allowing US auto manufacturers to sell the same vehicle in all 50 states. The timeframe for the fuel standards is designed to work with the next phase of the Clean Cars Program in model year 2017, the EPA said.
General Motors, in a statement on Monday, praised the harmonising of the state and federal standards and the provisions for lower sulphur fuel levels.
"Since the vehicle emission system and the fuel used act together in determining the emissions performance of the vehicle, automakers need cleaner fuels to achieve the lowest possible emissions," the US automaker said.
The EPA changed the standard fuel to E10, a 10% ethanol blend, from E15, a 15% ethanol blend, between the proposed and final Tier 3 standard. The E15 fuel blend has shown minimal proliferation in the US, while the E10 blend is expected to be in-use fuel for some time, the EPA said.
"We are pleased that EPA agreed that the certification fuel should be the gasoline most commonly available and used by consumers, which is E10 and not E15 as originally proposed," Drevna said.