Bloomberg News

EPA Said Poised to Lower U.S. Sulfur Limits on Fuel to Curb Smog

March 01, 2014

The U.S. Environmental Protection Agency plans to unveil new regulations next week to reduce smog from automobiles, including cutting by two-thirds the level of sulfur in gasoline, according to people familiar with the agency’s deliberations.

Under rules to be issued March 3, the EPA is expected to stick to the broad targets included in a proposed regulation published last year that would lower sulfur in gasoline to 10 parts per million from the current 30 parts, the three people said. New limits will also be imposed on tailpipe emissions.

“This is the most significant move to protect public health that the EPA will make this year,” said Frank O’Donnell, president of Clean Air Watch, who said he hasn’t seen the final rules though supported the proposal. “There is literally no more effective tool to fight smog. Every American will breathe easier because of these standards.”

Supporters of the rules say they could be one of President Barack Obama’s most significant environmental initiatives. Smog has been linked to asthma, lung cancer and heart disease.

The new regulations were the subject of years of conflict between automakers, which support cleaner fuels that lower their costs, and the oil industry, which will bear billions of dollars in extra costs.

EPA spokeswoman Alisha Johnson declined to comment on the final rule. “We’re continuing to work to finalize the rule and will announce it once it’s ready,” she said.

Match California

Automakers have supported the so-called Tier 3 motor vehicle and fuel standards -- unlike earlier efforts in the 1990s -- because the new U.S. rules would generally match California’s. That means the industry could produce one set of cars for the U.S., rather than two, lowering costs.

Sulfur occurs naturally in crude oil and can build up on a vehicle’s catalytic converter, making a device that’s designed to reduce smog-forming pollutants less effective over time, said Clean Air Watch’s O’Donnell.

“If the catalytic converters aren’t working right, breathers suffer,” he said.

With higher sulfur levels in gasoline, automotive engineers must calibrate vehicles to burn off the pollutant, said Wade Newton, a spokesman for the Alliance of Automobile Manufacturers, which represents 12 companies including General Motors Co. (GM:US) and Volkswagen AG. (VOW) That process consumes extra energy and worsens fuel economy, he said.

“Our clean autos need clean fuels to run on,” Newton said. “They really need to go hand in hand. A lower sulfur level is also important because without it, it becomes more expensive for drivers.”

Capital Costs

The oil industry will have to pay an estimated $10 billion in capital costs and $2.4 billion in annual compliance costs, American Petroleum Institute President and Chief Executive Officer Jack Gerard wrote in a Feb. 26 letter to supporters about the pending announcement. The Washington-based trade group has projected the regulations could increase gasoline prices by up to 9 cents a gallon.

Regulators haven’t provided enough evidence that the lower sulfur levels will “appreciably improve air quality,” Gerard wrote. The EPA is moving “too far, too fast,” he said, “to impose restrictions that are both costly and unnecessary.”

Companies such as Exxon Mobil Corp. (XOM:US) and BP Plc (BP/) opposed the rules, saying in written comments to EPA that the deadline for compliance was too short and the agency hadn’t shown significant health benefits from lower sulfur limits.

‘Screws Up’

The standards, which also include emissions reductions for passenger cars and trucks, will help prevent as many as 2,400 premature deaths annually by 2030, according to an EPA fact sheet issued last March when it proposed the regulations. While the costs of the program would be about $3.4 billion by that year, the resulting health benefits would be worth as much as $23 billion, according to the agency.

Automakers will embrace the EPA regulations because it will make it easier to meet air-quality targets and improve fuel economy, Representative John Dingell, a Michigan Democrat, said in an interview. He said he hadn’t seen the final rule.

“We do have a serious problem with too much sulfur in gasoline,” Dingell said. “It screws up the mufflers, it screws up the catalytic converters, and it screws up a lot of other things, too.”

The EPA said the standards would cost refineries less than a penny per gallon of gasoline, on average. The standards, to be phased in between 2017 and 2025, would carry an average cost of about $130 per vehicle in 2025, the agency estimated in last year’s proposal.

Gasoline Prices

The Association of Global Automakers, whose members include Honda Motor Co. (7267), Nissan Motor Co. and Ferrari SpA, have said the regulations would put U.S. gasoline chemically on par with fuel sold in Europe and Asia, reducing the need for variations in design.

The impact on gasoline prices for consumers will be minimal, said Mark MacLeod, director of special projects for the Environmental Defense Fund, who said he hadn’t seen the final rule.

“This rule shows that environmental performance and a strong economy go hand in hand,” MacLeod said. “The great thing about the clean-fuel standard is once it goes into effect, every car in America will become cleaner.”

To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net; Brian Wingfield in Washington at bwingfield3@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net; Bernard Kohn at bkohn2@bloomberg.net


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