Michael P. Walsh

International Consultant

February 17, 2014

Refinery Lead Time Assessment

Summary: Even without the flexibilities provided by the Tier 3 Rule, most refineries 

should have no difficulty complying with the sulfur standard by January 1, 2017 or 

earlier. The various flexibilities that the Tier 3 rule provides to refiners - the ABT 

program, the small refiner delay provisions and the hardship provisions - assures for 

those limited instances where needed that there is additional time for complying. 

Lead Time is More Than Sufficient for Most Refineries to Comply by January 1, 

2017 or Earlier

As noted by EPA in its proposal, six main planning and action steps are required for

refiners to comply with the Tier 3 sulfur standards:

1. the completion of scoping studies

2. process design for new or revamped refinery units or subunits

3. permitting

4. detailed engineering based upon the process design

5. field construction of the gasoline sulfur reduction facilities, and

6. Start-up and shakedown of the newly installed desulfurization equipment.

Because of refinery modifications that were made to comply with EPA’s Tier 2 

requirements, EPA estimates that 17 refineries are either already in compliance with the 

10-ppm standard or expected to comply with simple process changes. In addition, many 

refineries will only need to revamp their existing FCC postreaters to comply with Tier 3. 

EPA estimates that there are 66 such refineries and their revamps can be completed 

within two years or less. If these refiners begin each of these revamps in 2014, these 

refineries could be producing Tier 3 gasoline by 2016 if they choose to and could 

potentially begin generating early credits during 2016 or before.

Estimated Compliance Timelines (Months)

0-3 3-6 6-9 9-12 12-15 15-18 18-21 21-24

Scoping 

Studies

Process 

Design

Permitting

Detailed 

Engineering

Field 

Construction
Michael P. Walsh

International Consultant

February 17, 2014

Startup/Shakedown

EPA estimated that 16 refineries would likely require the construction of new grassroots 

FCC postreaters to provide Tier 3 fuel. These grassroots FCC postreaters, however, are 

expected to be in a moderate to light desulfurization mode because the refineries they 

will be installed in will already be complying with Tier 2 using an FCC pretreater. FCC 

naphtha from a refinery with an FCC pretreater is expected to only contain about 100 

ppm sulfur. To comply with Tier 3, refiners installing these grassroots FCC postreaters 

would only need to desulfurize the FCC naphtha down to 25 ppm (about a 75% 

reduction). In comparison, a single-stage FCC postreater would have to desulfurize

FCC naphtha from as high as 2400 ppm sulfur down to 25 ppm, a 99% sulfur reduction. 

The more moderate desulfurization service of the grassroots FCC postreaters needed 

to comply with Tier 3 would be expected to streamline the scoping and design work.

In addition, only 2 of the 16 refineries which are projected to install grassroots units 

were projected by EPA to exceed particular permitting limits, and these solely did so

based on the most conservative assumption that each would produce all the additional 

hydrogen on site using hydrogen plants (as opposed to using existing reforming 

capacity) and produce the electricity on site, to satisfy the needs of the new 

desulfurization equipment. When EPA provided a second heat demand estimate which 

assumes that refiners purchase their hydrogen and electricity from third parties, none of 

these refineries was projected to have emission increases which would require offsets. 

Thus, many of the grassroots units that EPA projected would be installed may end up 

with a streamlined permitting process.

Finally, in its proposal, EPA highlights its view that in reality, less lead time than 

estimated would actually be necessary. EPA noted that it held discussions with many 

refiners during most of 2011, and they have therefore been well aware of Tier 3 and are 

familiar with the likely requirements. During EPA’s subsequent discussions with 

technology vendors and engineering firms, they explained to EPA that many refiners 

had already initiated, and by now, likely completed their scoping studies. Thus, actual

time needed for designing, installing and starting of new desulfurization equipment for

Tier 3 times would even be less than what was projected because many refineries may 

have already completed required scoping studies in anticipation of the Tier-3 standards. 

Moreover, lead times for those refineries that have yet to start the scoping process can 

also be expected to decrease, since fewer refineries will be competing for the services 

of the desulfurization vendors.

Three Years Lead Time Was Adequate For Tier 2 and Tier 3 Requires Much Less 

Investment

For the Tier 2 analysis, EPA assumed that refiners would solely install low-pressure

FCC postreaters, which it believed could be scoped out, designed, installed and started 

up within a 3 year time period. However, For Tier 2 virtually all refiners installed both
Michael P. Walsh

International Consultant

February 17, 2014

grassroots FCC pretreaters and postreaters. Also many refiners installed highpressure FCC pretreaters which required longer lead times for the procurement of the 

required equipment than the low pressure equipment estimated by EPA. Furthermore, 

those refiners that did not install high-pressure FCC pretreaters instead installed 

grassroots FCC postreaters, many of which were designed for severe desulfurization 

service. The demands on the desulfurization vendors for scoping studies, and on the E 

& C industry for design and construction, and on the refiners to train their operations 

staff and start up the new units, was a lot greater for Tier 2 than what one would expect 

for Tier 3. 

The total estimated investment cost for Tier 2 versus Tier 3 also highlights the 

difference in investment demands. The total investment for Tier-2 desulfurization 

processing units was estimated by EPA to be about $6.1 billion, while the total 

investment for Tier-3 desulfurization processing units is estimated by EPA to be about 

$2.1 billion. This simple comparison indicates that the Tier 3 lead time should be 

substantially less for most refineries to obtain necessary permits, secure engineering 

and construction (E&C) resources, install new desulfurization equipment and make all 

necessary retrofits to meet the proposed sulfur standards.

EPA Provides Broad Flexibilities Should Any Refiner Have Lead Time Challenges

These flexibilities include the ABT program, the small refiner delay provisions and the 

hardship provisions. The ABT program allows a refiner, either within its own company or 

by purchasing credits on the open market, to have additional time for installing 

grassroots FCC postreater units. This would occur if refiners would reduce the sulfur 

levels of their gasoline through operational changes or revamps of their existing FCC

pretreaters and postreaters when the ABT Program begins in 2014. Potentially every 

refinery with either an FCC pretreater or an FCC postreater may be capable of 

generating early credits.

EPA estimated that sufficient credits could be generated early to allow many refineries 

to delay compliance until as late as 2020. The quantitative early credit analysis that EPA

conducted showed that if refiners with an existing pretreater or postreater would 

generate early credits by lowering their gasoline sulfur down to 20 ppm starting in 2014 

and if revamps were started up in 2016, one year before the program start date, that 

almost 6 times more credits would be available to offset the early credit demand by the 

refiners installing grassroots postreater units, assuming that they start up those units in 

2018. Even if all grassroots postreaters were assumed to not start up until 2020, there

would be almost 4 times more early credits available to those refiners installing 

grassroots postreaters assuming that the same early credit generation scenario would 

occur

Additional flexibility is also provided by the small refineries provisions which delays

compliance for the refineries which refine less than a net of 75,000 barrels of crude oil 

per day until 2020. Three of the 16 FCC postreater grassroots units that EPA projects
Michael P. Walsh

International Consultant

February 17, 2014

will be installed would be by small refineries. However, small refineries could also 

decide to comply early and generate credits starting as early as 2014.

As in previous fuel programs, EPA is also proposing hardship provisions to 

accommodate a refiner’s inability to comply with the proposed standard at the start of 

the Tier 3 program, and to deal with unforeseen circumstances that may occur at any 

point during the program. These provisions would be available to all refiners though 

relief would be granted on a case-by-case basis following a showing of certain 

requirements; primarily that compliance through the use of credits was not feasible.