Obama and EPA propose clean gasoline rules that could raise fuel costs

The Obama administration will propose new gasoline rules today to help curb air pollution from cars, a move backed by automakers and environmentalists though opposed by oil producers who say it will increase fuel prices.

The draft regulation would cut the amount of sulfur in gasoline by two-thirds, to 10 parts per million from 30, according to several people briefed on the Environmental Protection Agency proposal. Julia Valentine, an EPA spokeswoman, didn’t have an immediate comment.

With the sulfur rule, the government is targeting a gasoline ingredient that hurts the effectiveness of vehicles’ catalytic converters, allowing more smog-causing pollutants into the air. Smog is linked to a variety of heart and lung ailments.

“We know of no other air-pollution control strategy that can achieve such substantial, cost-effective and immediate emission reductions,” Bill Becker, executive director of the National Association of Clean Air Agencies, said yesterday in a statement. The group says the rule is the equivalent of taking 33 million cars of the road.

EPA officials told him that the agency will move ahead with the so-called Tier 3 rule today, Becker said by telephone. The EPA will probably spend the rest of the year analyzing input from the public and stakeholders, he said.

Oil industry representatives yesterday faulted the proposal ahead of its formal release, saying it would increase gasoline prices and reduce fuel supplies while providing few health benefits. Rob Underwood, director of government relations for the Petroleum Marketers Association of America, said his group had been working with lawmakers to delay the measure.

‘Raise Prices’

“We wanted to at least get more scientific evidence showing that these rules would be beneficial to the environment,” said Underwood, whose Arlington, Virginia-based group represents companies that distribute fuel to gas stations. “It’s going to raise prices. And that’s not even accounting for the supply constraints and higher volatility in pricing.”

The EPA’s proposal would raise gasoline production costs by 9 cents a gallon, according to Bob Greco, a director at the American Petroleum Institute, a Washington-based trade group.

Other proposed EPA regulations, including a mandate for ethanol use, would also boost production costs and would be passed along to motorists, he said.

“There is a tsunami of federal regulations coming out of the EPA that could put upward pressure on gasoline prices,” Greco said in a statement.

The EPA has previously estimated the rules would add 1 cent to the per-gallon cost of gasoline.

Prices Fall

The nationwide average price for gasoline at the pump fell a half-cent to $3.645 a gallon, AAA said yesterday on its website. The cost has dropped for eight days and is 26.6 cents below the year-ago level. The average price in 2012 peaked on April 4 and April 5 at $3.936, the motorists’ group said.

Frank O’Donnell, president of Clean Air Watch, an environmental group, said he has been told the proposed rule was coming. It “could be the most significant and landmark clean air accomplishment” of President Barack Obama’s second term, he said.

Refiners would have to comply with the rule by 2017, O’Donnell said yesterday by telephone.

“This is a big step forward for this country to catch up to the clean fuels available in other industrialized nations,” Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, said by e-mail.

Complementing Enhancements

The Washington-based group, whose members include General Motors Co., Ford Motor Co., and Toyota Motor Corp., said cleaner fuel will complement the industry enhancements of emission- control technology and is needed to meet greenhouse-gas and fuel-economy standards.

Health advocates also welcomed the proposal ahead of the announcement, saying it would bring public benefits.

“Passenger vehicles are major sources of ozone and particle pollution that pose serious threats to public health,” Paul Billings, senior vice president of the American Lung Association in Washington, said yesterday in a statement.

The proposal was sent Jan. 29 to the White House Office of Management and Budget for an interagency review, the final step before its release, Bloomberg BNA reported.

Gina McCarthy, assistant EPA administrator for air and radiation, said Jan. 30 at a policy forum in Washington that the rule is intended to establish a U.S. standard for fuels after California set its own low-sulfur gasoline standards, Bloomberg BNA reported.

“It is an attempt to nationalize, again, fuel standards,” she said. “California and others are out in front of this.”

Exxon, Valero

Exxon Mobil Corp., the largest U.S. oil company, referred all inquiries related to the proposed Tier 3 rules to the American Petroleum Institute.

Valero Energy Corp., the world’s largest independent refiner by processing capacity, doesn’t have an official stance on the rules yet because the company hasn’t seen an official proposal, according to Bill Day, a spokesman for the San Antonio-based company.

Lowering the sulfur content in fuels generally requires more-complex refining processes that are both “expensive and energy-intensive,” Day said by e-mail.

Stephen Brown, a lobbyist in Washington for Tesoro Corp., a San Antonio-based refiner, said the rule may cost the industry $9 billion or more.

Brown said the draft rule will give small refiners three additional years, until 2020, to comply. The delay makes the rule “less onerous,” though still expensive, he said.

With assistance from Angela Greiling Keane in Washington, Lynn Doan in San Francisco and Barbara Powell in Dallas.

Editors: Michael Shepard and Ted Bunker.

To contact the reporters on this story: Brian Wingfield in Washington at [email protected]; Jim Snyder in Washington at [email protected]. To contact the editor responsible for this story: Jon Morgan at [email protected].