Tuesday, September 23, 2014

EPA Air Official Rebuts Industry Predictions On Costs, Scope Of Fuel Rule

Posted: January 26, 2012

A top EPA air official is criticizing an industry-backed study predicting gas price increases and other significant costs from potential agency revisions to its existing fuel and vehicle emission rule, saying the study assesses regulatory options EPA is either not considering or that would be far more stringent than it plans to propose.

Speaking Jan. 26 at the Washington Auto Show in Washington, DC, Margo Oge of EPA's Office of Transportation and Air Quality disputed the findings of an "oil industry" study -- an apparent reference to the July study by the energy consulting firm Baker & O'Brien, which predicted that the so-called "Tier III" revised fuel and vehicle emissions standards would raise the cost of gasoline as well as close refineries by dramatically lowering the cap on sulfur in fuel and imposing other stringent controls.

The study predicted that fuel costs would increase 12 to 25 cents depending on how strictly EPA proposes to tighten limits in several areas, including Reid Vapor Pressure (RVP), a measure of fuel volatility. The cost prediction also factors in predictions that EPA could ratchet the existing sulfur cap of 30 parts per million (ppm) down to as strict a level as 5 ppm.

Industry and GOP critics of the proposal have warned it could harm the oil industry and even prompt some refineries to shutter. A bipartisan group of senators has urged EPA to halt the rule in part due to their concern about the potential for the tightened standards to result in gas price increases, citing the study to back their arguments.

But Oge said that the Baker & O'Brien study is based on costs of a program "EPA is not planning to propose," specifically saying that the agency is "not planning to propose" the "very low levels" of RVP assumed in the study.

Oge also criticized the study's assumptions about sulfur limits, saying that it made assumptions about EPA's sulfur cap that are "very different" than what EPA is planning to propose. While the Baker and O'Brien study includes in its strictest sensitivity case a level of 5 ppm, source say EPA appears to be weighing a 10 ppm limit.

A 10 ppm standard would also be consistent with Oge's previous comments on the rule, which appears stalled at the agency. She told a Nov. 2 hearing of the House Science Committee's energy panel that an October 2011 National Association of Clean Air Agencies (NACAA) study outlining options for reducing fuel sulfur content is "more close . . . to what EPA is planning to do" with the standards -- the NACAA study finds that a 10 ppm sulfur cap could produce significant reductions in nitrogen oxides and sulfur dioxide at a cost of less than one cent a gallon of fuel.

Noting the price increases predicted by the strict controls assessed in the industry-backed study, Oge said at the auto show that "the oil industry doesn't have that number right. The number is too high."

But the petroleum industry has consistently defended the study, with an industry source recently saying it provides the "full picture" of the impact of the potential rules and that it has "major concerns" with EPA's efforts to revise the rule. "It's a basic concern about the whole approach. It's a feeling that it's an overreach," the source said, questioning the environmental benefits and economic justification for revising the existing Tier II rules.

EPA Stalls Tier III Rule

Although EPA's Office of Transportation and Air Quality has completed its work on the rule, sources say, EPA appears to have stalled the proposal and is yet to send it for formal White House Office of Management and Budget pre-publication review. Sources suggest EPA may be stalling the rule due to concerns that industry and GOP critics will succeed in framing it as one that will raise gas prices.

In EPA's latest regulatory agenda published Jan. 20, the rule is slated to be published in March 2012, with a final rule due in October 2012. The agency also highlights the rule in an accompanying "Statement of Priorities" document, saying it will cut nitrogen oxides, particulate matter and air toxics and help states meet EPA air standards.

Activists, state regulators and others have in recent letters urged EPA to quickly propose the rule. In a Jan. 25 letter, environmental commissioners from Connecticut, Maryland, Massachusetts, New York, Rhode Island, Vermont and the District of Columbia say EPA's modeling shows current rules are insufficient to help those states meet the agency's 2008 ozone standard. They say the new rule will help them meet the limit while also cutting acid rain and toxic air pollution.

The officials say light-duty vehicles are the largest source of NOx in their region, emitting more than 700,000 tons of NOx per year. "Lowering the sulfur content of gasoline to 10 parts per million (ppm), as EPA is considering, would immediately reduce NOx from this sector by more than 25 percent. Over time, the vehicle standards will dramatically reduce harmful pollutants as the Tier 3 vehicles replace older cars and trucks in the fleet," the regulators argue.

"Without Tier 3 and other federal measures, more costly emission reductions will have to be accomplished by controlling local sources in our states beyond what otherwise would be needed, in order to compensate for the foregone national measure," they add. -- Bobby McMahon & Doug Obey


Trial Subscriptions

Want more of this exclusive environmental reporting? Sign up for a free trial to InsideEPA.com.

Your trial to InsideEPA.com includes an email news reminder sent to you every business day with the latest top stories, access to the must-read 'Insider' blog and a rundown of the most significant new documents in environmental policy. And you also have online access to Inside EPA Weekly Report, the award-winning newsletter that started it all.

There is no obligation at all with taking a trial subscription. It will expire automatically with no further action required from you.

Sign Up.