EPA Proposes Tier 3 Vehicle Emission & Fuel Standards

Among "tsunami" of regs that would raise retail gas prices, industry groups say

WASHINGTON-- The U.S. Environmental Protection Agency (EPA) has proposed what it is calling "sensible" new standards for cars and gasoline, the Tier 3 Vehicle Emission & Fuel Standards Program.

These new standards are a component of the Obama administration's national program for clean cars and trucks, which also include fuel efficiency standards that it said "are saving new-vehicle owners at the gas pump today."

The EPA's proposed Tier 3 fuel regulations could, however, raise refiners' and retailer's costs, provide little or no environmental benefit and actually increase carbon emissions, according to American Petroleum Institute (API) downstream group director Bob Greco.

The Society of Independent Gasoline Marketers of America (SIGMA) opposes efforts by the EPA to finalize a rule requiring Tier 3 gasoline standards because they would dramatically increase prices at the pump, it said on its website, listing it among its top priorities.

Following an approach that addresses vehicles and fuels as an integrated system, the Tier 3 proposal would enable the greatest pollution reductions at the lowest cost, the EPA said. It would slash emissions of a range of harmful pollutants, including smog-forming volatile organic compounds and nitrogen oxides by 80%, establish a 70% tighter particulate matter standard and reduce fuel vapor emissions to near zero. It would also reduce vehicle emissions of toxic air pollutants, such as benzene and 1,3-butadiene, by up to 40%.

The proposal provides flexibilities for small businesses, including hardship provisions and additional lead time for compliance, said the EPA.

"The Obama Administration has taken a series of steps to reinvigorate the auto industry and ensure that the cars of tomorrow are cleaner, more efficient and saving drivers money at the pump and these common-sense cleaner fuels and cars standards are another example of how we can protect the environment and public health in an affordable and practical way," said EPA acting administrator Bob Perciasepe.

According to the EPA, by 2030, this cleaner fuels and cars program would prevent annually up to 2,400 premature deaths, 23,000 cases of respiratory ailments in children, 3,200 hospital admissions and asthma-related emergency room visits and 1.8 million lost school days, work days and days when activities would be restricted due to air pollution. Total health-related benefits in 2030 would be between $8 and $23 billion annually, it claimed.

In developing the proposal, the EPA said it met with representatives from the automotive and oil and gas industry as well as environmental, consumer advocacy and public health organizations. Based on feedback from these groups and a rulemaking process, the proposal would provide up to $7 in health benefits for every $1 spent to meet the standards, the EPA estimated. The proposed sulfur standards would cost refineries less than a penny per gallon of gasoline on average once the standards are fully in place, it said. The proposed vehicle standards would have an average cost of about $130 per vehicle in 2025, it said.

The proposed standards would reduce gasoline sulfur levels by more than 60%--down to 10 parts per million (ppm) in 2017. Vehicles built prior to the proposed standards would run cleaner on the new low-sulfur gasoline, providing "significant and immediate" benefits by reducing emissions from every gasoline-powered vehicle on the road.

The proposed standards would work with California's clean cars and fuels program to create a "harmonized" nationwide vehicle emissions program that enables automakers to sell the same vehicles in all 50 states. It would expand across the country a standard already in place in California, said a FoxNews report.

The proposal is designed to be implemented over the same timeframe as the next phase of the EPA's national program to reduce greenhouse gas (GHG) emissions from cars and light trucks beginning in model year 2017. Together, the federal and California standards would maximize reductions in GHGs, air pollutants and air toxics from cars and light trucks while providing automakers regulatory certainty and streamlining compliance, said the EPA.

"There is a tsunami of federal regulations coming out of the EPA that could put upward pressure on gasoline prices," API's Greco said. "Consumers care about the price of fuel, and our government should not be adding unnecessary regulations that raise manufacturing costs, especially when there are no proven environmental benefits. We should not pile on new regulations when existing regulations are working."

EPA's Tier 3 proposal would increase the cost of gasoline production by up to nine cents per gallon, according to the API, citing an analysis by energy consulting firm Baker & O'Brien.

If EPA adds a vapor pressure reduction requirement in a separate regulation, it would push the cost increase up to 25 cents a gallon, said Baker & O'Brien. Separately, gasoline costs would also rise 30% by 2015 unless changes are made to federal ethanol mandates, according to a new study by NERA Economic Consulting.

Greco also cited EPA's upcoming proposal for new ozone standards that could further increase manufacturing costs. "Implementing the new requirements would actually increase greenhouse gas emissions because of the energy-intensive equipment required to comply," Greco said. "We urge the administration to bring common sense back into the regulatory process. Unnecessary regulations just mean higher costs and lost jobs."

The American Fuel & Petrochemical Manufacturers (AFPM) said it is "concerned" by the proposal, which it said would require further reductions in sulfur levels in gasoline without significant benefits.

"EPA's decision to move forward with Tier 3's gasoline sulfur reduction program is completely without merit given that the agency has not previously offered any cost/benefit analysis to justify this onerous rulemaking," said AFPM president Charles T. Drevna. "The agency's failure until [now] to provide any information on the need for this discretionary rule, despite repeated requests from American fuel manufacturers, strongly suggests the lack of a credible case." 

He added, "Tier 3 rulemaking that targets trace amounts of sulfur in gasoline is not worth the direct threat to our domestic fuel supply, consumer cost at the pump and American jobs."

Rob Underwood, director of government relations for the Petroleum Marketers Association of America (PMAA), said his group had been working with lawmakers to delay the measure. "We wanted to at least get more scientific evidence showing that these rules would be beneficial to the environment," Underwood told BusinessWeek. "It's going to raise prices. And that's not even accounting for the supply constraints and higher volatility in pricing."

Once published in the Federal Register, the proposal will be available for public comment, and the EPA will hold public hearings to receive further public input.