UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 


WASHINGTON, DC. 20460

OFFICE OF


AIR AND RADIAThON 

The Honorable Darrell Issa 

Chairman 

Committee on Oversight and Government Reform 

U.S. House of Representatives 

Washington D.C. 205 15-6143 

Dear Chairman Issa: 

I am writing in response to your letter of April 4, 2012, co-signed by your colleagues, regarding the U.S. 

Environmental Protection Agency's anticipated Tier 3 proposed standards for gasoline. The enclosure 

provides detailed responses to your questions. 

If you have further questions, please contact me or your staff may call Cheryl Mackay in the EPA's 

Office of Congressional and Intergovernmental Affairs at (202) 564-2023. 

Gina McCarthy 

Assistant Administrator 

Internet Address (URL) http/fwwwepa gay


Recycled/Recyclable . Printed with Vegetable Oil Based Inks on 100% Postconsumer, Process Chlorine Free Recycled Paper
^.,TED STA,. ^zM ^ ^

z

^^^

^^ PR°^^

°

^

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY


WASHINGTON, D.C. 20460

OFFICE OF


AIR ND RADIATION 

The Honorable Jim Jordan 

Chairman 

Subcommittee on Regulatory Affairs, Stimulus 

Oversight and Government Spending 

U.S. House of Representatives 

Washington D.C. 20515-6143 

Dear Chairman Jordan: 

I am writing in response to your letter of April 4, 2012, co-signed by your colleagues, regarding the U.S. 

Environmental Protection Agency's anticipated Tier 3 proposed standards for gasoline. The enclosure 

provides detailed responses to your questions. 

If you have further questions, please contact me or your staff may call Cheryl Mackay in the EPA's 

Office of Congressional and Intergovernmental Affairs at (202) 564-2023. 

Gina McCarthy 

Assistant Administrator 

Irrierriet Address (URL) http/Iwwepa gov


Recycled/Recyclable . Printed with Vegetable Oil Based Inks on 100% Postconsumer. Process Chlorine Free Recycled Paper
^N\TED STA T^8

^SjS^^

^LPROTEO\

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 


WASHINGTON, D.C. 20460

OFFICE OF


AIR AND RADIATION 

The Honorable Mike Kelly 

U.S. House of Representatives 

Washington D.C. 20515-6143 

Dear Congressman Kelly: 

I am writing in response to your letter of April 4, 2012, co-signed by your colleagues, regarding the U.S. 

Environmental Protection Agency's anticipated Tier 3 proposed standards for gasoline. The enclosure 

provides detailed responses to your questions. 

If you have further questions, please contact me or your staff may call Cheryl Mackay in the EPA's 

Office of Congressional and Intergovernmental Affairs at (202) 564-2023. 

Gina McCarthy 

Assistant Administrator 

Internet Address (URL) http//wwwepa gos 


Recycled/Recyclable • Printed with Vegetable Oil Based Inks on 100% Postconsumer. Process Chlorine Free Recycled Paper

1. Please explain EPA's anticipated regulatory actions with respect to Tier 3 gasoline standards, 

including a detailed outline of EPA's anticipated timeline for proposing Tier 3 gasoline 

standards. In addition, please respond to the following questions. 

Response: The EPA is developing Tier 3 standards to respond to the critical need to improve air 

quality, and to enable a harmonized national vehicle emissions control program. The EPA is 

designing these standards to reduce motor vehicle emissions and help state and local areas attain 

and maintain the existing health-based air quality standards in a cost-effective and timely way. 

The reductions in ozone and particulate matter would avoid premature mortality and other health 

impacts, including respiratory symptoms in children and exacerbation of asthma. 

The approach the EPA is taking in developing Tier 3 standards considers the vehicle and its fuel 

as an integrated system, which would enable technologically feasible and cost-effective emission 

reductions beyond what would be possible looking at vehicle and fuel standards in isolation. 

Thus, the Tier 3 approach the EPA is considering includes more stringent vehicle emission 

standards, as well as reductions in gasoline sulfur content. The Tier 3 standards under 

consideration would, when finalized, create a comprehensive regulatory approach that would 

provide certainty for both the auto and oil industries. Under a single harmonized national vehicle 

program, the Tier 3 standards under consideration would provide for coordinated implementation 

with the California vehicle program and the EPA and Department of Transportation's recently 

proposed light-duty vehicle standards to reduce carbon pollution and improve fuel economy for 

model years 2017 through 2025. 

The specific timeframe for issuing the Tier 3 proposal has not been determined. 

a. Some reports indicate that EPA's anticipated Tier 3 standards will propose 

reducing sulfur content in gasoline from 30 ppm to 10 ppm.' Are these reports 

accurate? Please explain. 

Response: The Tier 3 standards under consideration are national vehicle emissions 

standards that would harmonize with the Low Emission Vehicle (LEV III) standards 

recently adopted by the California Air Resources Board. To enable these vehicle 

emission standards to be achieved, the EPA has under consideration al 0 ppm average 

sulfur content for gasoline a level already being achieved in California. The cited 

reference assumed a 10 ppm average sulfur standard. However it also assumed a very 

stringent 20 ppm per gallon cap on the sulfur content of gasoline which is not part of the 

EPA's intended approach. 

b. Some reports indicate that EPA's anticipated Tier 3 standards will not include 

reduced limits on Reid vapor pressure (RVP). 2 Are these reports accurate? 

See Baker & O'Brien, Inc., Addendum to Potential Supply and Cost Impacts of Lower Sulfur, Lower RVP 

Gasoline (Mar. 2012). 

2 Id.
Response: The Tier 3 standards under consideration take a systems approach - more 

stringent vehicle emissions standards enabled by more stringent gasoline sulfur control. 

Thus, the Tier 3 standards under consideration focus on controlling the sulfur content of 

gasoline, and do not include any other fuel quality changes. 

c. Does EPA intend to propose limits on RVP in subsequent rulemakings at some 

point in the future? Please explain. 

Response: We are not currently planning to propose any further RVP control. 

2. According to one study, EPA's anticipated Tier 3 standards will require $10 billion in capital 

investment and $2.4 billion in ongoing annual compliance costs. 3 These costs are likely to be 

passed on to the consumer.4 Has EPA completed its own analysis of the costs associated with 

its anticipated Tier 3 gasoline standards? Please explain and provide documents sufficient to 

support your response. 

Response: See response to question 3 below. 

3. The same study also estimates that EPA's anticipated Tier 3 standard would increase the cost 

of gasoline by six to nine cents per gallon. How much does EPA estimate that its Tier 3 

standards would increase the cost of gasoline? Please explain and provide documents 

sufficient to support your response. 

Response: The EPA's analysis of the costs associated with the gasoline sulfur control program 

under consideration, found them to be on average about a penny per gallon. Our evaluation of 

gasoline sulfur control costs has undergone independent peer review and is corroborated by an 

independent study by Mathpro Inc., 5 which also estimated average gasoline sulfur control costs 

of 1.4 cents per gallon and capital costs of $3.9 billion using "conservative [high cost] 

assumptions." We have provided the Mathpro study for your reference; however, our own 

evaluation is not yet publicly available and is awaiting interagency review. The referenced Baker 

& O'Brien study estimates a slightly higher average cost increase of 2.1 cents per gallon, with 

marginal cost increases for the highest cost refineries of 6-9 cents per gallon; even this estimate, 

however, is based on a number of problematic assumptions that bias the study towards 

overstatement of costs, including exceptionally high capital costs assumptions that warrant 

independent peer review, a very high rate of return on capital investment assumption, a very 

stringent cap on gasoline sulfur content, and lack of programmatic flexibilities the Agency plans 

to propose. Even so, looking across all three studies places the cost for Tier 3 sulfur control in 

the range of 1 to 2 cents per gallon. 

Baker & O'Brien, Inc., Addendum to Potential Supply and Cost Impacts of Lower Sulfur, Lower RVP Gasoline 

(Mar. 2012). 

See id. 

Mathpro Inc., Refining Economics of a National Low Sulfur, Low RVP Gasoline Standard, for The International 

Council for Clean Transportation, (October 25, 2011)
4. According to some reports, EPA may delay its regulatory action on Tier 3 gasoline standards. 

a. Does EPA intend to delay the proposal of Tier 3 standards? 

b. Has any individual within the Executive Office of the President advised EPA to delay 

proposal of Tier 3 gasoline standards? 

c. In determining when to issue its anticipated Tier 3 standards - and whether to delay 

the issuance of these standards will EPA factor in "political considerations" 

stemming from rising gasoline prices? Please explain. 

d. Would a delay in EPA's issuance of proposed Tier 3 standards affect the 

"harmonization" of California and federal gasoline standards? Please explain. 

e. Will any delay in EPA's issuance of proposed Tier 3 standards affect the ability of 

auto manufacturers to comply with the MY 2017-2025 fuel economy/greenhouse gas 

emissions standards? Could a delay in lowering sulfur standards increase costs to 

automobile manufacturers? 

Response: The specific timeframe for the Tier 3 rulemaking has not been determined. 

California has for many years had more stringent gasoline standards than the rest of the 

Nation. The Tier 3 standards under consideration would not attempt to harmonize federal 

gasoline standards with the California gasoline standards. The purpose of the draft 

proposed Tier 3 gasoline sulfur control would be to enable the Tier 3 vehicle emission 

standards and allow them to be harmonized with the California LEV III vehicle emission 

standards. Since California has already taken action in the past to lower the gasoline 

sulfur content to 10 ppm, their recent action to finalize LEV III vehicle standards did not 

require action to further control gasoline sulfur within California to enable the LEV III 

standards. 

Manufacturers are fully capable of complying with the MY 20 17-2025 fuel 

economy/greenhouse gas (GHG) emission standards independent of any action on Tier 3. 

However, Tier 3 standards would provide vehicle manufacturers with certainty of the full 

slate of standards that would apply to their MY 20 17-2025 vehicles as they begin product 

design efforts. 

The proposed MY 2017-2025 GHG and fuel economy standards are performance-based 

standards; that is, they do not specify the technologies an auto company can use to 

comply with the standards. In the Joint NPRM for the MY2017-2025 standards, the EPA 

and NHTSA investigated a wide range of vehicle technologies, including a range of 

potential powertrain technologies capable of reducing GHG emissions and increasing fuel 

economy. These include gasoline engine technologies, diesel engines, hybrid-electric 

powertrains, plug-in hybrid electric vehicles, and all-electric vehicles. Among the 

gasoline technologies considered in the Joint NPRM are both stoichiometric gasoline 

engines and lean-burn gasoline engines. Stoichiometric gasoline engine technologies do
not require any change in gasoline fuel properties. However, lean-burn gasoline 

technologies are projected to require lower sulfur gasoline than is currently used in the 

U.S. today in order to provide meaningful GHG reductions. Some auto companies have 

indicated that a 10 ppm cap on gasoline sulfur such as that currently in place in Europe, 

Japan, Korea, and the state of California would be necessary to enable lean-burn gasoline 

engines as a potential technology for the United States. The EPA, however, has not based 

the proposed MY 2017-2025 GHG standards on manufacturers employing this 

technology and there are a large number of other vehicle technologies which can be used 

to meet the proposed standards, as discussed in the Joint NPRM. Thus, while Tier 3 

sulfur control may afford manufacturers some additional design options, it is in no way 

essential for meeting the proposed MY2O 17-2025 GHG standards. 

5. Automakers have said it will be problematic if the EPA decides to move forward with autotechnology standards without also imposing tighter fuel standards. According to a 

spokesperson for the Alliance of Automobile Manufacturers, "If now is not the right time for 

fuels, then it may well not be the right time for autos." 

a. Are the Tier 3 gasoline standards related to the Administration's proposed MY 20 17-

2025 fuel economy/greenhouse gas emissions standards? 

b. Did EPA discuss future Tier 3 gasoline standards with the Executive Office of the 

President, the National Highway Traffic Safety Administration (NHTSA), CARB, 

any auto manufacturer, or any other entity during discussions on the MY 2017-2025 

fuel economy/greenhouse gas emissions standards? If yes, please list with whom 

these meetings took place and describe these discussions. 

c. Did EPA promise or otherwise represent that the agency would propose Tier 3 

gasoline standards during negotiations with automobile manufacturers during 

discussions over the proposed MY 2017-2025 fuel economy/greenhouse gas 

emissions regulations? Please explain. 

Response: As discussed in response to question 4 above, and as documented in the Joint 

NPRM for the proposed MY2O 17-2025 GHG standards, the EPA has not based the 

proposed GHG standards on any change to gasoline fuel properties. In the Joint NPRM 

(See 76 FR 74976), the EPA did discuss the potential for a Tier 3 program to change the 

vehicle certification fuel properties, and we discussed our intention that if such a change 

were to be made later in a Tier 3 rulemaking, then the EPA would consider in a future 

rulemaking action if any test procedure adjustment factor would be needed for the CAFE 

and GHG standard in order to take into account a change in the certification test fuel. 

The EPA did have discussions with auto companies and other stakeholders regarding the 

potential interactions between a potential Tier 3 program and potential GHG standards 

for MYs 2017-2025. As discussed in response to Question 4 above, a number of auto 

companies encouraged the EPA and NHTSA to consider lower-sulfur fuel as a means to 

enable lean-burn gasoline technology. However, as discussed in response to Question 4, 

the EPA did not base the proposed MY2017-2025 GHG standards on the use of any lean-
burn gasoline technology. 

The EPA did not make any commitments to auto companies or any other stakeholder 

that, as a condition of the proposed or final MY2017-2025 GHG standards, the EPA 

would in a separate rulemaking propose and finalize Tier 3 vehicle emissions and 

gasoline fuel standards. The proposed MY2017-2025 GHG standards stand on their own, 

and compliance with those proposed standards would not require any change in gasoline 

fuel properties. 

6. Section 209 of the Energy Independence and Security Act (EISA) required EPA to conduct a 

study to determine whether "renewable fuel volumes.. .will adversely impact air quality as a 

result of changes in vehicle and engine emissions of air pollutants." Although EISA required 

the study to be issued eighteen months after EISA's enactment in December 2007, EPA still 

has not completed the study and there are indications that EPA will release the study 

simultaneously with its Tier 3 proposal. 

a. Why has EPA failed to complete the study according to the statutory timeline in 

EISA? When does EPA intend to complete the study? 

Response: After EISA was enacted, the EPA's first priority was to draft regulations and 

implement the Renewable Fuel Standards mandated by section 2 11(o) of the CAA. As 

part of that rulemaking effort, the EPA assessed the emission and air quality impacts of 

the standards. That regulatory analysis showed increases in air pollution resulting from 

the increased use of renewable fuels, but it was only for the incremental increase in 

renewable fuel volumes required by EISA, and was based on emissions data from older 

vehicles that were available at the time. Consequently, in parallel, the EPA undertook the 

long lead-time work needed for the anti-backsliding study, including extensive vehicle 

testing to quantify the impacts of fuel changes in modern vehicles and update the motor 

vehicle emissions model. 

The EPA is currently conducting analysis and peer review for the anti-backsliding study, 

which is the culmination of years of vehicle testing, data analysis and emissions modeling 

that the EPA has been conducting since the Energy Policy Act and EISA were enacted. 

b. Because Congress intended the study to be used to inform future fuel regulations, will 

EPA commit to completing and releasing the study - with sufficient time for public 

comment - prior to proposing Tier 3 gasoline standards? 

Response: The Tier 3 standards under consideration are independent of the antibacksliding study required by sections 211(q) and 211(v) of the Clean Air Act. The Tier 3 

standards under consideration focus on vehicle emissions standards in response to our 

obligations and authority under section 202(a) and the fuel necessary to enable them in 

response to our obligations and authority under section 211(c). In contrast, the antibacksliding study will examine the broader issues related to impacts of renewable fuels, 

and it is required as a prerequisite to regulations under section 211(v). The antibacksliding study will not affect any decisions about gasoline sulfur, which are being
informed by a thorough analysis of the impact of gasoline sulfur on vehicle emissions and 

the air quality benefits of reduced motor vehicle emissions. We are not promulgating 

standards under section 211(v) in the Tier 3 rulemaking. 

7. Please provide all documents and communications between or among EPA, NHTSA, CARB, 

and the Executive Office of the President referring to or relating to the impact of Tier 3 

gasoline standards on the development of the MY 20 17-2025 fuel economy/greenhouse gas 

emissions regulations. 

Response: As discussed in response to questions 4 and 5 above, during discussions with auto 

companies, several auto companies have told the EPA that lower sulfur gasoline could expand 

the available technologies a company could use to include lean-burn gasoline engines, which 

could provide another technology option for companies to reduce GHG emissions. However, as 

discussed in response to questions 4 and 5, the proposed MY 20 17-2025 GHG standards do not 

require or presuppose any change in gasoline fuel properties, the EPA did not propose any such 

changes, and the EPA did not project the use of any lean-burn gasoline engines as a potential 

technology companies would use to meet the proposed GHG standards. We do not recall any 

significant discussions among the federal agencies and CARB on this subject. Some information 

regarding this topic was shared by some auto companies during meetings with the EPA, and 

these meetings also usually included NHTSA, CARB, and possibly others. It is likely that most if 

not all of the information provided by auto companies was claimed to include confidential 

business information. 

In response to question 7 and 8, the EPA is performing a search for responsive documents and 

will be in touch with your staff with regard to any such documents as soon as practicable, once 

the necessary search and review is completed. 

8. Please provide all documents and communications between EPA and any auto manufacturer 

referring or relating to the impact of Tier 3 gasoline standards on the development of the MY 

2017-2025 fuel economy/greenhouse gas emissions regulations. 

Response: Please see our response to question 7. 

Attachment: Mathpro study