EPA Releases New Fuel Standards

Oil industry says costs to consumers will be higher than administration claims

Oil pumps in California / AP
March 3, 2014

The Environmental Protection Agency issued stricter rules for sulfur emissions in cars Monday, a move supported by the auto industry and environmentalists but opposed by oil refiners.

The EPA’s new regulation will require oil refiners to remove all sulfur from gasoline, and it will mandate carmakers to phase in cleaner technology in engines. The EPA said the new rules will reduce smog and respiratory problems, saving $6.7 billion and adding $19 billion in economic benefits from improved productivity.

"These standards are a win for public health, a win for our environment, and a win for our pocketbooks," EPA Administrator Gina McCarthy said in a statement. "By working with the auto industry, health groups, and other stakeholders, we're continuing to build on the Obama administration's broader clean fuels and vehicles efforts that cut carbon pollution, clean the air we breathe, and save families money at the pump."

The EPA estimates the price of gasoline will rise by two-thirds of a cent per gallon as a result. The sticker price of a car will also increase by $75.

The EPA worked on the new rule with the Alliance of Automobile Manufacturers (AAM), a trade group that represents Ford, Toyota, and General Motors. The AAM did not oppose the rule.

However, the oil industry opposed the new rule, saying it will raise costs for producers and consumers while not significantly improving air quality. Ninety percent of sulfur is already removed from gasoline under current regulations.

"This rule’s biggest impact is to increase the cost of delivering energy to Americans, making it a threat to consumers, jobs, and the economy," the American Petroleum Institute’s Downstream and Industry Operations Group Director Bob Greco said in a statement. "But it will provide negligible, if any, environmental benefits. In fact, air quality would continue to improve with the existing standard and without additional costs."

The EPA’s cost-estimate is also disputed by industry analysts. Charles Drevna, president of the American Fuel and Petrochemical Manufacturers lobbying group, told the New York Times that the price of gasoline could rise by 9 cents per gallon under the new rule.

"I don’t know what model [the EPA] uses," Drevna said. "The math doesn’t add up."

In addition, the oil refining industry argued that the industry will struggle to meet the 2017 deadline.

"Besides the enormous costs and negligible environmental benefit, we are also concerned about the timeline of EPA’s new rule," Greco said. "The rushed timeframe leaves little opportunity for refiners to design, engineer, permit, construct, start up, and integrate the new machinery required. This accelerated implementation only adds costs and potentially limits our industry’s ability to supply gasoline to consumers."

Environmentalists applauded the new rules. Clean Air Watch president Frank O’Donnell said the new rules "could prove to be the signature clean-air accomplishment of the entire Obama second term."

"Without any doubt, this is the most significant move to protect public health that the EPA will make this year," he said. "There is literally no more effective tool to fight smog. There is no action EPA could take to produce such positive results."

The new standard will go into effect in 2017, the same time as stricter fuel-efficiency standards that were announced by the Obama administration in 2012 with support from the AAM.

Published under: EPA , Gina McCarthy , Oil