energy producing states coalition december 2, 2012 steve higley manager, outreach american fuel...
TRANSCRIPT
Energy Producing States CoalitionDecember 2, 2012Steve HigleyManager, OutreachAmerican Fuel & Petrochemical ManufacturersWashington, DC
Impending Regulations: Costs and Consequences
Page 2
Regulatory “Train Wreck”
A blizzard of stationary source regulations threatens U.S. refining and petrochemical operations, American jobs, and our nation’s economy. Regulations of major concern include:
• Renewable Fuels Standard (RFS)
• Low-Carbon Fuel Standard (LCFS)
• Tier 3 Gasoline Standards
• 2013 Ozone NAAQS revisions
• Greenhouse Gas Regulations
Some are conflicting; some will be impossible to meet; all will have significant consequences.
Page 3
Federal Renewable Fuels Standard (RFS2):
• Requires 36 billions of biofuels to be blended into the fuel supply by 2022
• Mandated volumes divided into 4 major categories:
Total renewable fuelsAdvanced biofuels
Biomass-based diesel Cellulosic biofuel
Renewable Fuels Standard
Page 4
Two large barriers make it difficult to meet RFS2:
1. The amount of ethanol that can be blended into gasoline
Current law caps ethanol in gasoline at 10%
Addition of greater volumes of ethanol will be difficult without:
increasing the blending limit for standard vehicles, or expanding the use of E85 in flex-fuel vehicles
EPA granted “partial waivers” to allow E15 (gasoline with 15% ethanol) use only in vehicles MY2001 and newer
Legal challenge lost on standing, but some judges in opinion concurred EPA action was illegal
Feasibility of the RFS2
Page 5
Two large barriers make it difficult to meet RFS2:
2. The types of biofuels required under the standard
Nearly all of the ethanol sold in the U.S. is made from corn
However, RFS requires increasing amounts of “advanced biofuels” (i.e. not made from corn starch)
For 2012, EPA reduced the EISA requirement of 500 million gallons of cellulosic biofuels to about 9 million gallons
Actual 2012 production to date: 20,000 gallons
Feasibility of the RFS2
Page 6
• Acts as a cap-and-trade program for fuels
Seeks to reduce carbon intensity (CI) of fuel pool through fuel switching
Goal of program is to replace traditional fuels (gasoline, diesel) with “low-carbon” fuels (i.e. cellulosic, electricity, hydrogen)
• California implementing LCFS as part of AB32
10% CI reduction over 10 years
• Other states pursuing LCFS programs: OR, WA, 11 Northeast/Mid-Atlantic States
• EPA believes it has authority under CAA for national LCFS program through regulation
Low-Carbon Fuel Standard
Page 7
CEA report (SAIC modeling) on Northeast regional LCFS:• Increase in consumer gasoline costs of 112%
• Loss of 147,000 jobs in Northeast region
• $27 billion decline in regional GDP
• $28.8 billion decline in disposable household income
Charles River Associates study on national LCFS program:• Increase in consumer gasoline/diesel costs of up to 170%
• $1,400 – $2,400 decline in annual household purchasing power
• $410 – $750 billion decline in U.S. GDP
• Net loss of 2.3 – 4.5 million American jobs
Low-Carbon Fuel Standard
Page 8
“Tier 3” Gasoline Regs
• Initiative announced by President Obama in May 2010
EPA proposal expected in 2012 or early 2013
Final rule in 2013
Perhaps effective in 2016, in time for MY 2017
• Will include gasoline sulfur reduction; could also include gasoline RVP reductions
• Under Tier 2, sulfur already reduced 90%
• Independent study: 9 – 25 cent per gallon cost increase, 4 to 6 potential refinery closures
Page 9
• January 7, 2010: EPA published proposal to tighten ozone NAAQS
Set primary standard between 60 and 70 parts per billion (ppb) over eight hours
No new science evaluated
• September 2, 2011: President Obama announced Ozone NAAQS reconsideration would be withdrawn
• Regularly scheduled 5-year reconsideration of the ozone standard (mandated by CAA) will occur in 2013
Ozone NAAQS
Page 10
Sept. 2010 Manufacturers Alliance (MAPI) study examined impacts of a 60 ppb ozone NAAQS:
• Annual attainment cost of $1 trillion+ from 2020-2030
• Reduction in GDP of $676.8 billion (3.6%) in 2020
• 7.3 million jobs lost by 2020
• “The net result would likely be another inducement for companies to move operations offshore”
Ozone NAAQS
Page 11
Page 12
• EPA issuing GHG regulations for large stationary sources
Title V; PSD permits for sources > 100,000 TPY (new facilities) or > 75,000 TPY (major modifications)
GHG New Source Performance Standards (NSPS) for utilities, refineries
Regulations for refineries anticipated 2013; unsure what they will look like
Regardless of what they look like, will conflict with other regulations already discussed
NSPS will trigger GHG regulation for existing sources
GHG Regulations