January 17, 2014

Briefing for Dan Utech

Agency Deliberative - do not quote or cite 1
Overview

 Background on Tier 3 Vehicle and Fuel Standards

 Major Issues from Public Comment

 Benefits and Costs

Agency Deliberative - do not quote or cite 2
Tier 3 Program Recap

 Systems approach: more stringent vehicle standards enabled by

gasoline sulfur control

 Sulfur interferes with catalyst function

 Further reductions in gasoline sulfur are needed to allow vehicles to reach the

Tier 3 standards

 Sulfur reduction achieves large emission reductions from the in-use fleet

 Harmonized vehicle program

 Coordinated with California LEV III and GHG for model years (MY) 2017-2025

 Broadly supported by auto industry so they can produce and sell a single fleet of 

vehicles nationwide

 Part of comprehensive approach to create cleaner, more efficient

vehicles

 Timing aligned with light-duty greenhouse gas standards for model years 2017-

2025

 Phase-in begins with MY 2017 for vehicles and CY 2017 for fuels

Agency Deliberative - do not quote or cite 3
Tier 3: Air Quality and Public Health

 Tier 3 standards would reduce ozone, PM, and toxics

 Immediate health and air quality benefits because of 

the immediate reductions from lower sulfur gasoline

 Will help attain and maintain ozone and PM NAAQS

 Provides cost-effective national reductions that avoid 

more expensive local controls

 Reduces pollution near roads

 More than 50 million people live, work, or go to school 

near major roads

Agency Deliberative - do not quote or cite 4
Public Comments

 Proposal signed March 29, 2013

 About 140 unique organization comments

 About 3,800 citizen comments (not part of mass campaigns)

 About 230,000 comments from 25 unique mass campaigns

 Auto industry broadly supportive

 Comments stress the importance of harmonizing with LEV III and 

finalizing ASAP

 Needed to support LEV III and LDGHG/CAFE product planning

 Already making decisions for MY2017

 Enables some lower-cost technologies for complying with vehicle greenhouse gas

standards

 States and environmentalists also stress urgency

 No other measures provide reductions as large or as quickly

 Some ozone nonattainment areas have 2018 deadlines

 Public health benefits are needed as soon as possible

 Oil industry concerned about lead time and questions the need for lower 

sulfur Agency Deliberative - do not quote or cite 5
Lead Time

 Central programmatic issue for Tier 3 final rule

 We intend to finalize the 2017 start date (as proposed) 

 Auto industry supports this if rule is final in early 2014

 This provides ample lead time for oil industry

 Flexible early credit program and nationwide averaging, banking, and 

trading provide up to 6 years of lead time

 Refiners can generate early credits even with their existing units, and phase in

investments as needed

 3-year delay for small refiners and small volume refineries

 Technical and economic hardship provisions as a failsafe

 Finalizing two additional flexibilities to provide additional assurance

 Carryover of “banked” credits from Tier 2

 Longer deficit carryforward in the case of a hardship

 We have strong technical analysis to defend the appropriateness of the

2017 start date and rebut oil industry claims

Agency Deliberative - do not quote or cite 6
Changes from Proposal

 Finalizing largely as proposed

 We sought comment on the per-gallon sulfur cap (applies in

addition to the annual average)

 We have decided to keep the per-gallon cap at its current level, 

consistent with oil industry’s strong preference

 We are finalizing E10 as the vehicle certification test fuel (we had 

proposed E15) 

 Updated cost, emissions, AQ, benefits analysis

 Updated cost analysis dramatically decreases vehicle and fuel costs

 More robust estimate of costs of precious metal loadings in catalysts, 

based on comments

 With updated refinery modeling we now model trading between

companies instead of just within companies

 We account for adoption of LEV III by California and 12 other states

Agency Deliberative - do not quote or cite 7
Benefits of Tier 3

8

•Total Ozone and PM-related Premature Mortality Avoided: 

•770-2,000 in 2030

•Other PM- and ozone-related health impacts avoided in 2030:

•Hospital admissions and asthma-related ER visits: 2,200

•Asthma exacerbations: 19,000

•Upper and lower respiratory symptoms in children: 30,000

•Lost school days, work days, and minor restricted activity days: 1.4 million

•Total Monetized Benefits in 2030

•$7.4 to $19 Billion (3% DR)

•$6.7 to $18 Billion (7% DR)

Agency Deliberative - do not quote or cite
Cost Estimates

 Fuel Sulfur Standard

 Less than 1 c/gal (0.65 cents)

 Vehicle Standards

 Average $72 per vehicle (in 2025, at full phase-in)

 Annual Cost in 2030

 $1.5 billion

 $800 million for vehicle program

 $700 million for fuel program

 Total Monetized Benefits

 $7.4 to $19 Billion (3% DR); $6.7 to $18 Billion (7% DR)

 Benefit-to-Cost Ratio

 4.5 to 12.7

Agency Deliberative - do not quote or cite 9
Next Steps

 Submission to OMB in the last week of January

 EPA signature February 28

Agency Deliberative - do not quote or cite 10