What The New EPA Regulations Mean For The Bulk Fuel Industry

Justin Christensen |

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The EPA’s new Tier 3 Motor Vehicle Emission and Fuel Standards objective is to further cut sulfur content in gasoline from 30 to 10 ppm. The proposed change is generating plenty of debate, and depending who you ask, it has different implications.

The Federal Government, public health groups, environmental advocates, various organizations in the automakers industry and of course, the EPA are keen on the implications it will have in their fields. For the oil and gas industry, however, it’s another story.

The Timing

Although the regulations aren’t effective until January 1, 2017, refineries have raised a number of concerns over the compliance date. Due to the nature of requirements, it is an insufficient period of time for processing permits, design, engineering and implementation. Initial planning and procedures can take as much as a year and a half before construction even begins – and that’s if everything flows smoothly on top of regular operations and maintenance.

The EPA has said that 108 refineries will be affected; 25 are ready for the change, 67 will need minor modifications and for 16, it will be more major.

The Cost

Estimates from the EPA indicate the project should cost less than one penny per gallon of gasoline. However, an analysis conducted by the American Petroleum Institute (API), that was further supported by the American Fuel and Petrochemical Manufacturers, have revealed that manufacturing costs will be more along the lines of 5 to 9 cents per gallon.

This is over and above the $10 billion for initial capital investments, a substantial rise in refinery energy requirements, yearly compliance expenses of $2.4 billion, and a notable increase of greenhouse gas emissions as reported in a study completed by Baker & O’Brien for the API.

The Past

With environmental awareness and concerns front and center on many agendas, this latest fuel regulation is among a list of many. An API survey estimates that refiners have spent about $43 billion to stay current with environmental compliance, operations and their facilities. It’s high price just to stay in business.

US Energy Information Association statistics show that the number of operating refineries in the US has dropped from 158 to 143 since 2000, after the EPA’s Tier 2 Program for Cleaner Vehicles and Cleaner Gasoline was implemented.

The Future

No one has a crystal ball, but taking everything into consideration, it’s quite likely the consumer will feel the impact of the change as well. Some industry experts estimate gas prices could be 30 to 65 cents more per gallon down the road. How the refineries will fare this round of work and investment will remain to be seen.

As for the environmental benefits, some believe Tier 2 has already made most of the change and Tier 3 will be quite minimal by comparison. With the latest emissions regulations for CO2 reduction at coal-fired power plants, 2030 is going to be an interesting year. Will the government’s projections be substantiated? Or will a few drops of change be overshadowed by more expense?

Whatever the new regulations may bring, you can be assured that your fuel distributor will be on top of the latest changes and developments. They will continue to deliver the best products at the best prices and help your business to adjust as it needs.