Message Information

2011 DEC 2

71^M 7: 34 Date 12/22/2011 09:22 AM 

From Patrick Kelly <kellypapi.org > 

To LisaP Jackson/DC/USEPA!US@EPA 

Gina McCarthy/DCIUSEPNUS@EPA; Margo Oge/DC/USEPA/USEPA; 

'Lisa_mjonesombeop.gov' <Lisa_mjones@omb.eop.gov >; 

cc 'csunstein@omb.eop.gov <csunstein©omb.eop.gov >; 

"dmanciniomb.eop.gov "<dmanciniomb.eop.gov >; 

kneylandomb.eopgov" <kneyland@omb.eop.gov > 

Subject API-NPRA Letter Regarding Refinery Rules 

Message Body 

Dear Administrator Jackson, 

Please see the attached letter from Jack Gerard, API and Charles Drevna, NPRA. 

Sincerely, 

Patrick Kelly 

API-NPRA letter re Refinery Rules 12 22 11 .pdf 

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December 22. 2011 

The Honorable Lisa P. Jackson 

Administrator 

U.S. Environmental Protection Agency 

Arid Rios Building 

1200 Pennsylvania Avenue, NW 

Washington, DC 20460 

RE: API and NPRA Concerns with a Tier 3 Rulemaking and Refinery Sector Rulemaking 

Dear Administrator Jackson: 

America's petroleum refining industry is a strategic and valuable asset for the United States. It 

provides secure supplies of products to American consumers and to the industries which depend on 

these products. Maintaining a strong domestic refining industry is critical to the nation's economic 

security. The American Petroleum Institute (API) and the National Petrochemical and Refiners 

Association NPRA) are writing to express our concerns over two major regulations EPA plans to 

propose that could have serious negative impacts on the domestic refining industry: Tier 3 

Gasoline Standards, and the Refinery Sector Rulemaking. Together, these initiatives could have 

serious implications for U.S. energy security and the refining industry's competitiveness in the 

global marketplace. 

EPA needs to re-evaluate the science used to develop the proposals and make the relevant data and 

conclusions available for public scrutiny. The Agency should allow an appropriate amount of time 

for public review and stakeholder input before proceeding with proposed rules. 

Our members firmly support the principle that no Tier 3 regulation should be proposed without 

first providing a thorough science-based justification that demonstrates the health benefits along 

with a rigorous economic and supply impact analysis that assesses fundamental cost and energy 

security consequences related to the viability of a domestic refining industry. 

The potential costs of a Tier 3 rule are significant. Baker and O'Brien determined 1 that new 

standards on sulfur and RVP reductions being considered by the Agency could result in initial 

aggregated capital investment costs of$lO to $17 billion or, when combined with operating 

costs, result in recurring annual costs between $5 and $13 billion. These impacts translate to a 

cost increase between 12 and 25 cents per gallon of gasoline produced. The study also projects 

that the additional economic pressure would likely cause 4 to 7 refineries to shut down, These 

Baker & O'Brien, Potential Supply and Cost Impacts of Lower Sulfur, Lower RVP Gasoline, July, 2011. 

http://www.api.org/Newsroom/upload/l 1071 5LowerSulfurLowerRVPFinal.pdf
are in addition to the 66 refineries that have closed in the last 20 years that U.S. Department of 

Energy determined2 were in part due to the compounded burden of various regulations and 

economic pressure. In addition to the cost to refiners, supplies of domestic gasoline production 

were projected to decline by 8% to 19% in the summer, and CO 2 could increase by 1% to 2.3% 

at refineries that continue to operate. 

While some reports 3 '4 have cited a MathPro study5 concluding lower cost impacts, the Baker and 

O'Brien modeling methodology employed a much more robust data set with a higher level of 

granularity. Baker and O'Brien modeled every individual U.S. refinery, rather than just 4 

hypothetical refineries representing the production of an entire PADD, a technique which does 

not even allow for refinery shutdowns, a very real possible outcome that deserves serious 

consideration. 

While the costs of a Tier 3 proposal are understood, no benefit has been demonstrated. Until 

EPA makes data and analysis available demonstrating a benefit, a comprehensive assessment of 

the proposed standard cannot be evaluated. The Anti-Backsliding study should be completed 

and made available prior to issuance of any proposed rule to change fuel quality. Congress 

mandated the study, which is now more than two years overdue. EPA also has indicated to 

industry that testing and data have been initiated on sulfur impacts to the existing fleet of 

vehicles. These data and analysis need to be made publicly available prior to the issuance of a 

proposed rule. Absent this information and a demonstration that fuel changes will achieve cost 

effective emissions reductions that would improve air quality or have other health benefits, EPA 

should not propose a Tier 3 Rule. By moving forward with a Tier 3 proposal, EPA is making 

conclusions based on an incomplete set of data and/or is allowing scant time for scrutiny from 

interested stakeholders. 

Policies and programs designed to reduce the environmental impacts associated with 

transportation must evaluate changes from a systems perspective. API recently wrote to you 

expressing concerns with technical justifications provided by the Alliance of Automobile 

Manufacturers for a Tier 3 sulfur standard maximum of 10ppm. t Any proposed changes to fuel 

specifications should be justified on sound science in order to accommodate vehicle technologies 

that automakers will commercialize in significant volumes within the same timeframe required 

of fuel providers. EPA has yet to identify automotive technologies that would be utilized to 

comply with increased CAFE standards or a Tier 3 standard that would benefit from lower sulfur 

gasol inc. 

2 U.S. Department of Energy, Office of Policy and International Affairs, "Small Refinery Exemption Study; an 

Investigation into Disproportionate Economic Hardship", March 2011. 

Northeast States for Coordinated Air Use Management, "Assessment of Clean Gasoline in the Northeast and Mid 

Atlantic States", November 21, 2011. 

National Association of Clean Air Agencies, "Cleaner Cars, Cleaner Fuel, Cleaner Air: The Need for and Benefits 

of Tier 3 Vehicle and Fuel Regulations", October, 2011. 

MatliPro, Inc. "Refining Economics of a National Low Sulfur, Low RVP Gasoline Standard" October 25, 2011. 

'Jack Gerard API, Letter to EPA Administrator Lisa Jackson, November 11, 2011
Refinery Sector Rulemaking 

EPA also is moving forward on the Refinery Sector Rulemaking [thus far with no change from 

its public declaration of proposing a rule in December 201 11. This rulemaking encompasses a 

group of regulations including the new Greenhouse Gas New Source Performance Standards 

(N SPS) for refineries, an updated NSPS for conventional pollutants, a review and possible 

tightening of the existing National Emissions Standards for Hazardous Air Pollutants (NESHAP) 

for refineries, and establishing new uniform standards" for relevant industrial processes on a 

whole facility basis. 

This is the most comprehensive and complex rulemaking ever developed for the refinery sector. 

As of September 30, refineries have submitted over five million pieces of data and spent more 

than 70 million dollars in response to the Information Collection Request and Mandatory 

Reporting Rule that were intended to inform this rulemaking. EPA should not propose the 

refinery sector rules before thorough review of the data and verification of its analyses with 

stakeholders. 

EPA's own analysis, presented in June 2011 to the Clean Air Act Advisory Committee, shows 

that refinery emissions and risk are relatively low compared to other industry sectors and that 

GI-IG emissions are an order of magnitude less than utility emissions (see attached figure). In 

fact, EPA's initial 2009 refinery risk review resulted in a finding of"no further action" necessary 

to control refinery Flazardous Air Pollutants. Based on the information provided at the EPA 

GHG "listening session" and by EPA's initial analysis, there is little potential for increased 

efficiency controls at refineries because energy efficiency is an inherent part of the refining 

business. 

Perhaps most importantly is that unlike most rules, NSPS regulations have a unique impact on 

industry upon proposal. Proposed NSPS revisions set triggers for new, modified and 

reconstructed sources on the proposal date. Resources must be committed at that time by 

facilities to plan to comply with the most stringent requirements under consideration. Without 

having the policy choices and control options vetted by the public and regulated community prior 

to proposal, the result may be the unnecessary cancellation of projects at great expense and loss 

ofjobs. 

Therefore, we ask EPA to take the following steps: 

1. Before pursuing new rulemakings, the Agency should finalize the reconsideration of 

NSPS Subpart Ja for process heaters and flares, which was proposed in December 2008. 

This extended delay has unnecessarily complicated plans at U.S. refineries, which must 

continue to make important changes to meet America's energy needs. 

2. With respect to the rulemakings associated with the settlement agreement from December 

23, 2010, we urge the EPA to issue an Advanced Notice of Proposed Rulemaking seeking 

input on the data submitted, analyses, results, and key policy recommendations before 

taking additional regulatory action. We believe this is an appropriate step to ensure that 

these rules will be based on sound science. 

The Tier 3 and refinery sector regulatory initiatives can have serious implications for the refining 

industry and the communities in which we operate. Robust scientific justifications need to be
developed before proceeding with proposed rules. EPA should not propose a Tier 3 regulation 

without first providing a thorough science-based justification that demonstrates the health 

benefits along with a rigorous economic and supply impact analysis. Additionally, the Agency 

should not propose the refinery sector rules before a thorough review of the data and verification 

of its analyses with stakeholders. Basing the rules on sound science and avoiding unnecessary 

costs will help to ensure U.S. energy security and the refining industry's competitiveness in the 

global marketplace. 

API, NPRA and our member companies appreciate your attention to these issues. For further 

information on these comments, please contact Bob Greco at 202-682-8167 or David Friedman at 202-

552-8461. 

Jack N. Gerard 

President and Chief Executive Officer 

The American Petroleum Institute 

Charles T. Drevna 

President 

National Petrochemical & Refiners Association 

cc: Cass Sunstein, Administrator, 0MB Office of Information and Regulatory Affairs 

Gina McCarthy, Assistant Administrator, EPA Office of Air and Radiation 

Margo T. Oge, Director, EPA Office of Transportation and Air Quality
70% 

60% - 

50% 

40% 

30% 

20% 

10% 

0%

Combustion and Chemical Facilities Pose 

Highest Risks From Stationary Sources 

Cancer Tox	Noncancer Tox


Weighted Emissions Weighted Emissions 

Source: June 9, 2011 EPA CAAAC Meeting

O ResidentIal Combustion 

o Pulp and Paper 

0 Power Plants 

O Petroleum Refining 

O Other 

o Oil and Gas Production & 

Distribution 

o Minerals (Inc Cement) 

Metals (iron, Steei & NonFerrous) 

0 Crop Production 

o ConsumeriCommerclai Prod 

Mfct & Services 

Chemical Manufacturing 

0 BoIler and IC Engines