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## BOB SLAUGHTER 

##  President

June 5, 2002

Office of Policy and International Affairs

Office of Electricity and Natural Gas Analysis

PI -- 23

Attention:  Voluntary Reporting Comments

U.S. Department of Energy

Forrestal Building, Room 7H-034

1000 Independence Avenue, S.W.

Washington, D.C.  20585

 

Dear DOE:

 

          The National Petrochemical & Refiners Association (NPRA)
represents most of the domestic refining industry plus petrochemical
manufacturers with processes similar to refining.  NPRA members supply
consumers with a wide variety of products used daily in home and
businesses.  These products include gasoline, diesel fuel, home heating
oil, jet fuel, lubricants, and the chemicals that serve as the "building
blocks" in making products as diverse as plastics, clothing, medicine,
and computers.  For our members, energy is both an input and a product. 

 

          Public policy issues involving all aspects of the climate
change debate, including the voluntary reporting of greenhouse gas
emissions, are important to our members.  NPRA welcomes the opportunity
to provide comments on possible modifications to the guidelines
governing the Voluntary Reporting of Greenhouse Gases Program (VRGGP)
and carbon sequestration under section 1605(b) of the Energy Policy Act
of 1992. This specific DOE notice seeks proposed improvements to the
current registry to "enhance measurement accuracy, reliability and
verifiability, working with and taking into account emerging domestic
and international approaches."  

           

          NPRA supports the President's decision to review the climate
change program and identify cost-effective and flexible solutions. NPRA
is pleased that the Administration wants to ensure that businesses that
register voluntary reductions are not penalized under any future climate
change policy and that credit is given to companies that show real
emission reductions.  The refining and petrochemical industries are
already doing a great deal to reduce greenhouse gas emissions, and any
changes to the reporting program should acknowledge progress that
refiners and petrochemical producers have made. 

 

 **U.S. Refiners Face Significant Environmental Requirements in the
Decade Ahead**

 

          In the years ahead, the domestic refining industry will face
an avalanche of new environmental requirements---most of which fall
within a narrow time period for implementation.  Policy makers must be
aware of these new programs and consider the adverse impact any new
program (see attachment) could have on the industry and its ability to
provide adequate transportation fuel supplies.  Capital requirements to
meet EPA's new clean fuels rulemakings will be remarkably high.  The
National Petroleum Council (NPC) estimated that \$8 billion will be
needed to meet EPA's low sulfur gasoline rule. An additional \$8 billion
will be needed to comply with EPA's ultra low sulfur highway diesel
program. Additional capital investment may also be required to comply
with possible future EPA rulemakings, such as Mobile Source Air Toxics
(MSAT) Phase 2.  In addition, later this year the Agency will initiate
an off-road diesel sulfur reduction rulemaking. 

 

The Senate recently passed legislation which calls for an ethanol
mandate in gasoline of 5 billion gallons by 2012 and an MTBE ban in four
years.  Considerable current gasoline volume will be lost if MTBE is
removed from gasoline.  In RFG areas, MTBE provides as much as 10-15% of
the gasoline volume, and if this volume is lost supply shortfalls and
price volatility may result. Thus, there is a great deal of uncertainty
about the future of MTBE and cost estimates for just a phasedown or
elimination of MTBE are at least \$2 billion, according to the NPC.

 

Growing demand for transportation fuels and the need to comply with
overlapping fuel regulatory specifications are stretching supply
capabilities dangerously close to the limits of current production
capacity.  With refinery utilization expected to remain high, supply
capabilities can become problematic. The supply/demand balance in the
gasoline market has tightened over the years due to steadily increasing
gasoline demand with relatively little growth in U.S. refining
capacity.  Domestic refining capacity expansions may not materialize if
stringent new motor fuel composition standards and/or New Source Review
compliance costs require unreasonable amounts of capital and/or
discourage investment.

 

          We bring the list of regulatory challenges to your attention
because at a time when refiners must meet a surge of new environmental
standards, it is extremely important that any changes to the GHG
Registry remain voluntary in both the short term and the long term.

 

**Refineries Operating at High Utilization Rates**

 

          The direction and goals of the Administration's climate change
program, and its greenhouse reporting element are very important to NPRA
members.  Oil provides 40% of U.S. total energy consumed and 98% of our
transportation fuels.  Total U.S. petroleum product demand was 19.6
million barrels per day in 2001 (8.6 MMB/D of gasoline; 3.8 MMB/D of
diesel and heating oil, and 1.7 MMB/D of jet fuel).  The Energy
Information Administration forecasts that petroleum demand will increase
by 1.5% per year to the year 2020 and there will be a 65% growth in
imports of refined products. 

 

Historically, the refining industry has kept pace with increasing demand
and quality requirements given adequate time and realistic
expectations.  However, current high capacity utilization rates at U.S.
refineries may be difficult to maintain.  While utilization rates for
most industrial sectors average between 75-82%, EIA reported that in
recent weeks, refinery utilization rates have been running over 95%.

**Conclusion**

  

NPRA does not support the Kyoto Protocol because it relies on disputed
science and inequitably assigns responsibility for mitigation to
developed nations.  NPRA members always support harnessing the creative
force of the marketplace to find innovative technologies and programs to
protect and improve our environment. Our members are already acting to
reduce greenhouse gas (GHG) emissions by improving energy efficiency. 
Energy efficient facilities and enhanced flexibility through
market-based mechanisms are positive ways to ensure a stronger U.S.
economy.   

 

 Strong and healthy petroleum refining and petrochemical manufacturing
industries are of vital importance to the competitiveness of the U.S.
economy and to national security.  NPRA's refining and petrochemical
members are working to promote efforts to reduce GHG emissions and we
want to make both government and the public aware of the extent of these
efforts.  However, it is extremely important that any possible changes
to the GHG Registry preserve its voluntary approach.

 

                                                                                     
Sincerely,

![](media/image2.png){width="2.8402777777777777in"
height="0.5701388888888889in"} 

 

 

                                                                                     
Bob Slaughter

 

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