According to information available from the EPA website (www.epa.gov/otaq/tier3.htm), the U.S. Environmental Protection Agency (EPA) is finalizing a rule designed to reduce air pollution from passenger cars and trucks. Starting in 2017, Tier 3 sets new vehicle emissions standards and lowers the sulfur content of gasoline, considering the vehicle and its fuel as an integrated system. Under the final Tier 3 program, federal gasoline will be required to meet an annual average standard of 10 parts per million (ppm) of sulfur by January 1, 2017. EPA is also finalizing standards that maintain the current 80 ppm refinery gate and 95 ppm downstream cap.
The Tier 3 fuel program includes a number of flexibilities such as a credit averaging, banking and trading (ABT) program that will allow refiners to spread out their investments over a 6 year period and provide for a seamless transition from the Tier 2 to the Tier 3 ABT program. EPA is also finalizing a three-year delay for small refiners and small volume refineries as well as other flexibilities for refiners such as deficit carry-forward and hardship provisions for extenuating circumstance
EPA estimates the costs of sulfur control would be less than a penny per gallon. To comply with the Tier 3 sulfur standards, refiners will take a range of actions depending on the current configuration of their refineries and their other market investment plans. Based on EPA’s peer-reviewed refinery-by-refinery analysis, of the 108 gasoline refineries impacted by Tier 3, 40 are either already meeting the 10 ppm standard, or are expected to purchase credits to show compliance. Another 67 are able to comply with modifications to their existing equipment, which can occur in two years’ time. Only one is projected to require the installation of a new gasoline hydrotreater, which can be installed in 3 years.
The EPA anticipates that even those refineries that comply through the use of credits will make a variety of operating changes and/or low capital cost changes to lower their sulfur levels below their current Tier 2 levels to minimize their need for credits. Many variables determine the retail price of fuel. The primary factor is the price of crude oil on the global market, and other factors include weather, transportation, supply and demand, distribution and marketing costs.
In recent years, due to lower crude oil and natural gas prices, U.S. refineries have reported lucrative fuels margins and high run rates while exporting greater quantities of diesel and gasoline, meaning that foreign markets may also be affecting domestic fuel prices. Gasoline sulfur control for Tier 3 would add just 0.2 percentage points to the refining component.
The Agency’s evaluation of gasoline sulfur control costs has undergone independent peer review and is corroborated by two independent studies: a 2011 study conducted by Mathpro for the International Council on Clean Transportation and a 2012 study conducted by Navigant for the Emissions Control Technology Association.
EPA is finalizing the proposed start date of January 1, 2017 for the fuel sulfur control program with a number of flexibilities that will, in effect, provide nearly six years of lead time for those refineries that may need it. These flexibilities include:
- A credit averaging, banking and trading (ABT) program allowing refiners to spread out their investments through 2019 and provide for a seamless transition from the Tier 2 ABT program to the Tier 3 ABT program, including the ability to carry over “banked” credits from Tier 2
- A delay in the start date for approximately 30 small refiners and small volume refineries until 2020
- A one year deficit carry-forward provision that allows an individual refinery that does not meet the 10 ppm standard in a given year to carry a deficit forward for one year if necessary, as long as they make up the deficit the following year
- Hardship provisions that allow refiners to petition for compliance assistance on the basis of extreme hardship or extreme unforeseen circumstances.
According to the EPA, reductions in gasoline sulfur will achieve immediate emissions reductions and health benefits from the existing fleet, and in time to support states’ efforts to attain and maintain the existing health-based National Ambient Air Quality Standards (NAAQS). The gasoline sulfur standards, which take effect in 2017, will provide large immediate reductions in NOx emissions from existing gasoline vehicles and engines on the road today, and significantly reduce ambient concentrations of ozone. NOx emissions will be reduced by about 260,000 tons, or about 10% of emissions from on-highway vehicles, in 2018 alone.