Update on Federal and State Fuel Issues

1
Update on Federal and State Fuel Issues

• for the
• NOACA Air Quality Workshop
• by
• Bob Leidich
• BP America Inc.
• March 22, 2005
• Cleveland, Ohio

2
Overview

• Federal Fuel Issues
  - Tier II Gasoline Sulfur Rule
  - Highway
  and Non-Road Diesel Rules - Key Fuel Provisions
  of Energy Bill
• State Fuel Issues
  - State MTBE Bans - Current
  Gasoline Types
• Impact of New Ozone National Ambient Air Quality
  Standard
• Comparison of Federal RFG, 7.8 and 7.0 RVP clean
  fuel options

3
Tier 2 Gasoline Sulfur Rule
Refinery Importer Gasoline Sulfur Standards
4
U.S. Gasoline Sulfur Level
5
Highway Diesel Rule

• Beginning June 1, 2006, minimum 80 highway
  diesel production at 15 ppm maximum sulfur, and
  balance at 500 ppm maximum sulfur
• Key dates
• June 1, 2006 at refinery
• July 15, 2006 at terminals
• September 1, 2006 at retail
• Beginning January 1, 2010, 100 highway diesel
  production at 15 ppm maximum sulfur

6
Non-Road Diesel Rule

• Beginning June 1, 2007, agriculture,
  construction, locomotive and marine (NRLM)
  diesel fuel at 500 ppm max sulfur and min 40
  cetane index or max 35 volume percent aromatic
  content
• Beginning June 1, 2010, agriculture and
  construction diesel fuel at 15 ppm max sulfur
• Beginning June 1, 2012, locomotive and marine
  diesel fuel at 15 ppm max sulfur

7
U.S. Diesel Fuel Sulfur Level
8
Key Fuel Provisions of a Comprehensive Energy Bill

• Renewable Fuels Standard is established requiring
  5 billion gallons by 2012 includes credit
  banking and trading and no per gallon minimum
• Two percent RFG oxygen requirement is repealed
• Provisions for defective product liability
  protection included for both ethers and ethanol
  (prohibits lawsuits that say MTBE is a
  defective product)
• National phase-out of MTBE with minimum 4 years
  lead time after enactment of legislation

9
States with MTBE Restrictions
12/31/03 0.6
1/1/07 0.5
7/1/00 0.33
1/1/07
8/1/04 0.5
7/1/00 0.5
1/1/04 0.5
6/1/03
1/1/04 0.5
7/1/00 0.5
7/13/00 1.0
7/1/05 0.5
7/24/04 0.5
7/24/04 0.5
1/1/04
4/30/02
7/1/05 0.5
7/1/04 0.5
1/1/06 0.5
1/01/05 0.3
Dates represent effective date of MTBE
ban Percentages represent diminus levels
Updated 8/4/04
10
Summer Gasoline Requirements in 2002
Gas Spec Legend
Conventional
7.0 RVP, 150 ppm S
CA CBG
Pacific Ocean
Oxy Fuel/Ethanol Mandate
7.0 RVP
Southern RFG
Northern RFG
Federal/CA RFG
7.8 RVP
Northern RFG w/Ethanol
7.2 RVP
11
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12
Classification of 8-Hour Ozone Nonattainment Areas





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County has multiple classifications severest
classification is noted
Updated 10/5/04
13
Impact of Federal Regulations on On-Road and
Off-Road VOC Emissions for Southeast Michigan
VOC Emission Inventory, Tons Per Summer Day
Source Air Improvement Resource Inc. Final
Report, 2/23/05 for SEMCOG, Auto Alliance and API
14
Impact of Different RVPs on VOC Inventories in
Southeast Michigan
VOC Emission Inventory, Tons Per Summer Day
Source Air Improvement Resource Inc. Final
Report, 2/23/05 for SEMCOG, Auto Alliance and API
15
Net VOC Benefits in 2007 for Southeast Michigan
Area
VOC Benefit, Tons Per Summer Day
Source Air Improvement Resource Inc. Final
Report, 2/23/05 for SEMCOG, Auto Alliance and API
16
Impact of Federal Regulations on On-Road and
Off-Road NOx Emissions for Southeast Michigan
NOx Emission Inventory, Tons Per Summer Day
Source Air Improvement Resource Inc. Final
Report, 2/23/05 for SEMCOG, Auto Alliance and API
17
Net NOx Benefits in 2007 for Southeast Michigan
Area
Exhaust NOx Benefit, Tons Per Summer Day
Source Air Improvement Resource Inc. Final
Report, 2/23/05 for SEMCOG, Auto Alliance and API
18
Fuel Implementation Issues
Federal RFG 7.0 RVP
Timing, Years from 4 Years
1 - 3 Years Date of Final
Regulation Refining Issues Major
Capital Moderate Capital Implementation
Issues Basic Nonattainment State Compliance
and Areas Cannot Opt-In Enforcement Program to
RFG Required Supply Issues Significant
Impact Moderate Impact Midwest Notional
Refinery Average 1.7 6.2
0.6 3.0 Incremental Cost, Cents Per Gallon
(Preliminary) (Preliminary)
19
Summary

• Federal regulations are providing significant
  reductions in VOC and NOx emissions
• New 8-Hour Ozone Standard may require a clean
  fuel option in some Ohio nonattainment counties
• Federal RFG, 7.8 and 7.0 RVP provide significant
  VOC emission reductions and minimal, if any NOx
  emission reductions
• Low RVP options likely to be more cost effective
  than RFG and have less severe implementation
  issues