Mobile Sources Forum Archive

Summary of Testimony and Responses on Recommendations for WRAP Comments to EPA on Proposed "Tier 2 Motor Vehicle Emission Standards and Gasoline Sulfur Control Requirements"

Revised 9/17/99

Overview

The Western Regional Air Partnership (WRAP) Mobile Source Forum has drafted recommendations from the WRAP to the Environmental Protection Agency (EPA) on EPA's proposed Tier 2 Vehicle and Gasoline Sulfur Standards. These recommendations were directed at addressing concerns about potential adverse impacts of EPA's proposed gasoline sulfur regulations on small refineries in the West while protecting air quality. The draft recommendations were posted on the WRAP Web site and directly mailed to interested parties. Public testimony was received at a Public Workshop held in Denver on August 23rd. Written comment was accepted up until August 26^th.

There was a wide range of views expressed in the testimony by representatives of the western oil industry. Most of the oil industry submitting testimony supported the proposed WRAP recommendations. About a third of the western inland refineries did not submit testimony which may be an indication they do not oppose the proposed WRAP recommendations. Opposition from the oil industry included views that not only did not support the proposed WRAP recommendations but also opposed giving small refiners relief through the SBREFA program proposed by EPA.

All other interests that submitted testimony including the auto industry, states and environmental organizations supported the proposed WRAP recommendations.

See attachments referenced by number for original text of testimony.

Oil Interests Generally in Support

Cenex Harvest States (41 mbd refinery near Laurel Montana) - written testimony submitted by Ron Pletcher. Fully supports WRAP recommendations providing they are adopted in total and correctly interpreted.

Response: None necessary

Conoco (51 mbd refinery near Billings Montana and 58 mbd refinery in Denver) - verbal testimony provided by Dennis Creamer at public workshop. Supports proposed WRAP recommendations because they provide time to evaluate new technology.

Response: None necessary

Chevron (45 mbd refinery in Salt Lake City) - written testimony submitted by Walt Maguire and Larry Shanks. Support proposed WRAP recommendations since they prevent competitive inequalities and spread out compliance in a realistic and achievable time frame.

Response: None necessary

Fina Oil and Chemical Co. (58.5 mbd refinery in Big Springs, Texas) - written testimony submitted by Neal Abernathy. Support expanded definition of small refineries. Feel all refineries should fully participate in banking and trading. Eliminate compliance with corporate average. Allow sulfur credits to be used for meeting caps as well as averages.

Response: The proposed WRAP recommendations include full participation in banking and trading for the new small refinery category. The SBREFA small refiner program proposed by EPA allows eligible refiners who elect to participate in this program to generate credits but does not allow these refiners to use sulfur credits for demonstrating compliance with annual average standards. It was felt that no recommendations should be made about any aspect of the SBREFA program because of the extensive process EPA used to develop this program and the amount of additional time that would be needed to change it. SBREFA eligible refiners could decline to participate under the SBREFA program, and if eligible, to "opt-in" to the recommended new small refinery category which would allow full banking and trading. Compliance with the corporate average for all small and larger refineries is proposed to be maintained on the basis that the recommendations were meant to give compliance relief directly to small refineries but not to corporations. It is recommended to maintain EPA's policy of not allowing sulfur credits to be used for demonstrating compliance with per gallon sulfur caps on the basis that this provides an absolute limit to the sulfur levels in gasoline and thus an absolute limit on the possible permanent damage to future Tier 2 vehicle catalytic converters.

5. Flying J/Big West Oil (11 mbd refinery in Salt Lake City, Utah) - Written testimony submitted by Jeff Utley. Supports proposed WRAP recommendations but urges one nationwide banking and trading program and elimination of the anti-backsliding language as it duplicates existing anti-dumping language.

Response: The WRAP recommendations propose a banking and trading program which is identical to the EPA's large refinery program with the exception of the credit generation component. In contrast to EPA's proposed program, the proposed WRAP credit generation program for small refineries does not allow credits to be generated for sulfur reductions from relatively high gasoline sulfur levels. These types of reductions are relatively low in cost and it would not be equitable to allow low cost credits to be used to defer compliance with lower sulfur level standards which would be relatively high in cost to achieve. This is particularly the case for a category of refineries that would be already gaining some financial advantage by being provided compliance relief. The proposed WRAP recommendations also provide a higher trigger point for credit generation which would encourage more early reductions and credit generation. It is not clear that the existing anti-dumping provision under the Clean Air Act would prevent increases in sulfur levels that would result in a significant increase in emissions from Tier 2 vehicles. The existing anti-dumping provisions are based on a complex model designed for 1990 Tier 0 vehicles which are an order of magnitude less sensitive to sulfur than Tier 2 vehicles are expected to be. The proposed WRAP anti-backsliding recommendations and rationale have been amended to provide reasonable operating flexibility, a concept embraced by the existing anti-dumping provisions. This change was made in harmony with other requests from the WRAP Public Advisory Board and Environmental Defense Fund (see testimony item numbers 17 and 18).

Montana Refining Co. (7 mbd SBREFA eligible refinery in Great Falls, Montana) - written testimony provided by Leland Griffin. Supports WRAP recommendations.

Response: None necessary.

Wyoming Refining Co. (12 mbd SBREFA eligible refinery in northeast Wyoming) - written testimony submitted by Bob Neufeld. WRAP proposal offers an acceptable middle ground. Interpret proposal for new "small refinery category" significantly more stringent than SBREFA. Goal that all refineries continue to operate and produce low sulfur fuel for maximum emission reductions at minimum costs enhanced by WRAP proposal.

Response: None necessary.

Colorado Oil and Gas Association - written testimony submitted by Ken Wonstolen. Supports proposed WRAP recommendations.

Response: None necessary.

Petroleum Association of Wyoming - written testimony submitted by Thomas Clayson. Supports proposed WRAP recommendations

Response: None necessary.

Oil Interests with No Position

Western States Petroleum Association - Submitted written testimony dated August 26, 1999 and a clarifying letter on September 16, 1999. Indicates that WSPA historically supports uniformly implemented regulations and generally opposes unique standards for small refiners. Indicates that with diverse views within WSPA, they are unable to take an overall position. WSPA suggests, if WRAP feels special treatment for some refineries is necessary, that periodic "compliance plans" be submitted to appropriated agencies. WSPA feels this would demonstrate that small refineries are committed to manufacture low-sulfur gasoline at the end of the extended compliance period and that they are making progress in meeting key milestones.

Response: The WRAP agrees with WSPA that progress of small refineries towards the manufacture of low sulfur gasoline meeting the national standard is an extremely important goal. In fact, the proposed interim gasoline sulfur standards of a 300 ppm per gallon cap and a 150 ppm annual average requires small refineries to demonstrate they are producing lower sulfur gasoline during the compliance phase-in period. To make this point clear, clarifying language has been added to the rationale for the WRAP's 3^rd recommendation on Small Refinery Interim Sulfur Standards. The proposed approach was intended to stay within the enforcement and compliance framework EPA proposes for large refineries and SBREFA refiners which follows the general approach of imposing and enforcing interim sulfur standards. The proposed anti-backsliding provision also provides a buttress to the compliance program goal.

Oil Interests Generally in Opposition

11. Giant Industries, Inc. (21 mbd refinery in Gallup New Mexico, 17 mbd refinery in Bloomfield New Mexico) - written comment submitted by Sarah Allen. Giant feels that compliance relief should be limited to small refiners, that is refiners with a total refining capacity of 125 mpd. They also feel that either a compliance extension or allowance to participate in a banking and trading program should be provided, but not both.

Response: The proposed WRAP recommendations are based on the general concerns by small refineries that all small refineries should be treated on an equal basis because they face similar market competition, higher construction costs and lower priority for equipment and construction vendors. Small refineries not under SBREFA are already allowed under EPA's proposed program to participate in a banking and trading program but there is a general feeling among small refineries that this will not provide sufficient compliance relief. It is felt that providing a one-year compliance extension is an appropriate approach to providing additional compliance flexibility.

Frontier Refining & Marketing Inc. (39 mbd SBREFA eligible refinery in Cheyenne Wyoming) - written testimony submitted by Gerald Faudel. Feel proposed WRAP recommendations undermine the small business relief provided by SBREFA.

Response: The proposed WRAP recommendations are viewed as a middle ground approach between the stringent EPA requirements for large refineries and substantial compliance relief provided to small refiners through SBREFA. The proposed WRAP recommendations provide just a one-year compliance extension to the new small refinery category in contrast to SBREFA refiners which get a two-year extension under EPA's proposed program with another possible two-year extension for economic hardship. The interim annual average and per gallon cap standards recommended for the new small refinery category are also about half way in between those for an average SBREFA refinery and large refinery. The proposed WRAP recommendations purposely do not include changes to the SBREFA program thus these refiners would continue to have substantially more compliance relief than proposed for the new small refineries category. This approach would therefore not significantly undermine SBREFA relief.

Gary-Williams Energy Corp. ( 50 mbd SBREFA eligible refinery in Wynnewood, Oklahoma) - written testimony submitted by Sally Allan. Feel current SBREFA provisions still result in a serious economic disadvantage. Feels relief offered by proposed WRAP recommendations is basically the same as or even greater than relief currently proposed for SBREFA refiners. Cites an example of a small refinery and SBREFA refinery with 300 ppm baseline sulfur levels which could result in the small refinery being allowed to operate at a slightly higher sulfur level in the interim compliance period than the SBREFA refinery if the small refinery provided early reductions down to 214 ppm (SBREFA refinery would be required to comply with a 200 ppm sulfur average in the phased in compliance period).

Response: See response to Frontier Refining and Marketing Inc. regarding the relief provided to SBREFA refiners compared to that given by the proposed WRAP recommendations. The example cited is possible but unlikely without the small refinery expending significant capital. The small refinery would have to expend funds earlier than the SBREFA refinery to provide the early reductions to generate sufficient credits to allow it to operate above the recommended phase in period standard of 150 ppm. The small refinery would also have to meet the proposed national standard of 80 ppm cap and 30 ppm annual average sooner.

14. Exxon (52 mbd refinery near Billings, Montana) - written testimony submitted by unnamed party. Opposes EPA's SBREFA relief and proposed WRAP compliance relief for small refiners. Feel these provisions will distort the free market and possibly result in investment decisions that would reduce gasoline supplies. Proposes phased implementation delaying application within PADD IV states to eliminate need for special treatment for small refineries. Suggest that program could be delayed in western states to 2008/9 because of lack of real need. Benefit of proposal would be to retain EPA program for eastern states, provide relief in western states and eliminate foreign refiner impact since it is not based on refinery volumetrics.

Response: A compliance relief program, as suggested, that is limited to western states would significantly delay important air quality benefits associated EPA's proposal and would be opposed by other states outside the west which have small refineries which face similar negative impacts to those faced by western small refineries. The issue of foreign refiner impacts is much more complicated than can be addressed through the WRAP process and EPA has indicated they have to and will deal with it.

Automobile Manufacturers in Support

Association of International Automobile Manufacturers - written testimony submitted by John Cabaniss. Desire to have cleaner gasoline as soon as possible. Concerned that some LEV and Tier 2 vehicles will be permanently damaged by higher sulfur fuel. This could subject manufacturers to recall vehicles. Recognize the special problems of the western small refineries and are willing to accept a reasonable compromise. Supports proposed WRAP recommendations.

Response: None necessary.

States in Support

Oregon Department of Environmental Quality - written testimony submitted by Langdon Marsh. Supports proposed WRAP recommendations and compliments stellar achievement of the WRAP process.

Response: None necessary

WRAP Public Advisory Board in Support

WRAP Public Advisory Board - verbal comment provided during August 17 meeting. Support proposed recommendations. Request more highlight of air quality benefits, clarification and strengthening of anti-backsliding provision, clarification that 2-year economic hardship extension available to SBREFA small refiners is not intended to be allowed for new small refinery category and referencing NOx SIP call states as in proposed rule.

Response: First three requests are also made by Environmental Defense Fund. See response to number 18 which addresses these issues. The NOx SIP call rule has been confirmed to be a final not proposed rule, therefore the existing reference is correct.

Environmental Organizations in General Support

Environmental Defense Fund's Rocky Mountain Office - written comment provided by Vickie Patton. In general believe the WRAP recommendations are a workable proposal. Should cite many air quality benefits of low sulfur gasoline. Request revisions to clarify several issues including anti-backsliding, inapplicability of compliance waiver, air quality benefits and national versus regional issue.

Response: Proposed suggested rewording of the anti-backsliding provisions is acceptable and the proposed recommendations have been amended accordingly. A separate section on air quality benefits has been added to the proposed recommendations, which provides more detail on the air quality benefits of low sulfur gasoline. It was the intent of the proposed WRAP recommendations that by not mentioning the additional two-year economic hardship waiver available to SBREFA refiners it would be understood that this was not being recommended for the new small refinery category. Clarification language has been added to the proposed recommendations to make this clear. A language change to clarify the benefits of the proposed rule to western air quality was made in recommendation 1. (national Vs regional sulfur control program).

America Lung Association of Colorado - written testimony submitted by Stephanie Olmo. Requests a public disclosure be added to recommendations to identify low sulfur gasoline availability to give consumers the opportunity to mitigate adverse impacts on their vehicle catalysts.

Response: This is a good idea but it has been studied by an EPA advisory committee and felt to be impractical because of the product exchanges between companies and mixtures of gasoline batches of different sulfur levels that occur in service station underground tanks. Those oil companies that can maintain consistent low sulfur gasoline will likely voluntarily provide advertising of low sulfur gasoline to gain public and consumer interest. However, a statement has been included at the end of section 7 recommending EPA explore methods to encourage voluntary retail disclosure.