Valero, Others Voice Concern Over Tier 3 Compliance Price Tag

EPA hasn't proven benefits worth the costs, company says

SAN ANTONIO -- Valero Energy Corp. said the cost of complying with the U.S. Environmental Protection Agency's proposed pollution standards for gasoline would cost hundreds of millions of dollars in equipment construction and upgrades alone.

The San Antonio-based oil company expects to spend $300 million to $400 million building new equipment to remove sulfur from gasoline and to expand existing facilities, Valero spokesperson Bill Day told The Wall Street Journal.

He said Valero expects to incur additional operating costs each year, and those costs have yet to be determined.

Following an approach that addresses vehicles and fuels as an integrated system, the new Tier 3 proposal would enable the greatest pollution reductions at the lowest cost, the EPA announced March 29. 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 proposed standards would reduce gasoline sulfur levels by more than 60%--down to 10 parts per million (ppm) in 2017.

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

The EPA said most refineries would be able to comply with its plan to reduce the amount of sulfur in gasoline with little to no effort, the newspaper reported.

"The EPA hasn't shown anything that suggests [the proposed standard] is going to have the benefits that would be worth the costs," Day said.

He said Valero is not involved in discussions with the EPA on the proposal, though he said the industry has had some input at times.

The EPA is accepting public comment and is expected to hold public hearings on the proposal.

The EPA's proposed Tier 3 fuel regulations would raise refiners' and retailer's costs and increase retail gasoline prices, provide little or no environmental benefit and increase carbon emissions, according to American Petroleum Institute (API) and The American Fuel & Petrochemical Manufacturers (AFPM).

U.S. Senator Jim Inhofe (R-Okla.) joined Ranking Member Sen. David Vitter (R-La.) and senators Heidi Heitkamp (D- N.D.), John Hoeven (R-N.D.) and Mary Landrieu (D- La.) in sending a letter asking President Obama to suspend the EPA's efforts to implement Tier 3 regulations.

Inhofe, a senior member of the Environment & Public Works Committee, said, "I remain concerned that the EPA's overly stringent requirements will impact prices at the pump for hardworking Americans. I look forward to discussing EPA's adverse posture towards fossil fuels with nominee Gina McCarthy as the country transitions away from our dependence on foreign sources of energy. I believe it is possible to simultaneously protect the public interest, while instituting common sense regulations on the sources of energy generation that powers this machine called America--unfortunately it seems our President does not share this vision."

Science, Space & Technology Committee chairman Lamar Smith (R-Texas), said, "The EPA is the federal government's worst offender when it comes to overreaching regulations that hurt American consumers. EPA's Tier 3 gasoline regulations could cause refinery closures and increase gasoline prices on hard-working Americans. I am also troubled that the EPA ignored the law and is several years late in releasing a mandatory study to examine potential adverse air quality impacts of renewable fuels and determine if the rule is even necessary."

He added, "I share the concerns expressed by Senate Democrats that EPA has not provided clear scientific justification that Tier 3 regulations are necessary or will benefit public health. Despite knowing the potential adverse effects these regulations could have on the economy, the EPA continues to press forward with its activist agenda. The Obama administration must consider the negative economic consequences before moving forward. The Science Committee will closely review the science behind this rule."

Valero, through its subsidiaries, is an international manufacturer and marketer of transportation fuels, other petrochemical products and power. Its assets include 16 petroleum refineries with a combined throughput capacity of approximately 3 million barrels per day, 10 ethanol plants with a combined production capacity of 1.2 billion gallons per year, and a 50-megawatt wind farm. Approximately 6,800 retail and branded wholesale outlets carry the Valero, Diamond Shamrock, Shamrock and Beacon brands in the United States and the Caribbean; Ultramar in Canada; and Texaco in the United Kingdom and Ireland.