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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Message CountDecember 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.pdfare in addition to the 66 refineries that have closed in the last 20 years that U.S. Department of

Energy determined 2were 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 2could increase by 1% to 2.3% at refineries that continue to operate. While some reports 3 ' 4have cited a MathPro study 5 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. tAny 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, 2011Refinery 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 bedeveloped 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 Quality70%

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# 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