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Jun 2014
06
June 06, 2014

New Tailpipe Sulfur Standard Will Challenge Industry, Costs Motorists


The federal government’s plan to reduce sulfur content in gasoline by 66 percent will lead to higher fuel prices at the pump and could cause hardships for the petroleum industry.

The U.S. Environmental Protection Agency’s sulfur reduction mandate for light duty vehicles was contained in the agency’s “Tier III rule,” also known as Control of Air Pollution from Motor Vehicles: Tier 3 Motor Vehicle Emission and Fuel Standards.   The new rule will allow federal standards to align with standards already adopted by California.

While the federal Clean Air Act generally precludes states or localities from adopting emission standards for motor vehicles, the Act has long had a provision, the “California waiver,” allowing California to adopt unique emission standards for motor vehicles in recognition of the air quality problems in California that can be attributed to motor vehicles emissions.  Once California is allowed under the Act to adopt such standards through grant of an EPA “waiver,” then other states become authorized to adopt those standards. Thus California, with an approving EPA, can drive the regulatory agenda nationwide for vehicle emissions.

The new regulation strengthens the light-duty vehicle tailpipe emission standards for ozone precursors, such as organics and NOx, beginning with model year 2017 and supplants the so-called “Tier II” standards promulgated in 2000. Full implementation of the rule will occur between the 2017 and 2025 model years.

The EPA’s Tier III rule lowers the sulfur content standard for gasoline from the current 30 parts per million standard established under the Tier II rule to a new 10 ppm standard. The agency believes revising the gasoline sulfur standard is warranted on several fronts. First, the EPA recognizes that achieving and sustaining vehicle emission performance is dependent upon catalytic technology, which can be “poisoned” by fuel sulfur. Second, the fuel sulfur standard is achievable by the petroleum industry and is consistent with standards already adopted in California, Europe and Japan.

Vehicle manufacturers appear to be relieved that the EPA has now federalized emission standards such that separate vehicle fleets will not have to be manufactured and sold in California and other states following the California standards. But the petroleum industry is clearly concerned about the timeline afforded to meeting the revised sulfur standard, the amount of flexibility provided for satisfying the standard, and the cost both in capital expenditures and the price at the pump.

The EPA and the American Petroleum Institute (API) have widely varying views on this issue. EPA officials believe the cost of meeting the new sulfur standard may be as small as .01 cents per gallon of gasoline. API thinks the cost may be as high as 6-to-9 cents per gallon in some markets. Whether the petroleum industry will challenge the EPA’s rulemaking remains to be seen.

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