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OAR Box 1140 

Prepped by RyanDugan 

Document Number: 

40) IV-F-1 

Docket Number: 

A-86-03 

Printed 4/23/2008 7:58:42 AM Sheet 40 of 48 
T2.-F-/ 

UNITED STATES OF AMERICA 

ENVIRONMENTAL PROTECTION AGENCY 

In the Matter of: Docket No. A-86-03 

Regulation of Fuels and Fuel Additives: 

Fuel Quality Regulations for Highway Diesel 

Fuel Sold in 1993 and Later Calendar Years 

/ 

PUBLIC HEARING 

PROCEEDINGS HAD in the above-entitled matter 

before the Environmental Protection Agency, CHARLES 

L. GRAY, JR., Hearing Officer, at the Motor Vehicle 

Emission Laboratory, Ann Arbor, Michigan, commencing 

at 10:05 a.m., October 11, 1989. 

APPEARANCES: 

MR. CHARLES L. GRAY, JR. 

Director, Emission Control Technology 

Division 

MR. JOHN F. ANDERSON, 

Senior Project Manager, SDSB 

MR. CHARLES MOULIS, 

Chemical Engineer, SDSB 

MR. STEVE HOOVER, 

Chief, Plans and Program Section, FOSD 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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WITNESSES 

Mr. John G. Buckley 

Page 8 

Mr. Brian W. Taylor 

Page 27 

Mr. Jed R. Mandel 

Page 38 

Mr. Dave Millerick 

Page 43 

Mr. Jack Freeman 

Page 46 

Mr. Donald E. Weinberg 

Page 51 

Mr. Craig Moyer 

Page 74 

Mr. Steve Piatek 

Page 106 

Mr. Jeff Kramer 

Page 109 

. Mr. Stan Piorek 

Page 122 

. Mr. Macie L. LaMotte 

Page 131 

Independent Fuel Terminal 

Operators Association 

API/NPRA/NCFC 

Engine Manufacturers 

Association 

Ford Motor Company 

Sun Refinery & Marketing 

Company 

Golden Bear Division of 

Witco Corporation 

AIRA 

Huntway Refinery 

Frontier 

Princeton Gamma-Tech 

Colorado Department of 

Health 

12. 

13. 

14. 

Ms. Vera Haskins 

Page 143 

Mr. Robert D. Lynch 

Page 17 9 

Mr. Richard Shepherd 

Page 2 00 

PMAA 

Empire State Petroleum 

Association 

Buckeye Pipeline 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 
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DOCKET NO. A-86-03 

1 Ann Arbor, Michigan 

2 October 11, 1989 

3 10:05 a.m. 

5 MR. GRAY: Good morning, My name is 

6 Charles Gray. I'm Director of the Emission Control 

7 Technology Division in EPA's Office of Mobile 

8 Sources. 

9 On behalf of the Environmental Protection 

10 Agency I'd like to welcome all of you to this public 

11 hearing on the Notice of Proposed Rulemaking that 

12 appeared in the August 24, 1989 edition of the 

13 Federal Register. 

14 The notice proposed the establishment of 

15 sulfur and cetane index specifications for 

16 on-highway diesel fuel along with other related 

17 regulatory provisions. 

18 EPA's intention to hold this hearing was 

19 announced in the Federal Register on Monday, 

20 September the 25th, 1989. 

21 That notice designated Richard Wilson, the 

22 Director of our Office of Mobile Sources, as 

23 the Hearing Officer. However, Mr. Wilson isn't able 

24 to be here today and has designated me to act as 

25 Hearing Officer in his place. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 4 

Representing EPA with me today on the 

Hearing Panel are Charles Moulis at the far right 

from our Standards Development Branch, John Anderson 

to my immediate right, Senior Manager in the 

Standards Development Branch, and Steve Hoover on 

the left, who's Chief of the Plans and Programs 

Group within our Enforcement Division, responsible 

for fuel programs enforcement. 

We are conducting this hearing in 

accordance with Section 307 (d)(5) of the Amended 

Clean Air Act which requires EPA to provide 

interested persons with an opportunity for the oral 

presentation of data, views or arguments in addition 

to an opportunity to make written submissions. This 

hearing provides the opportunity for such oral 

presentations. 

The official record for this hearing will 

be kept open for 30 days as provided for in the Act 

for the submission of rebuttal and supplemental 

testimony. This means that written comments will be 

accepted through Friday, November 10th, 1989. 

The hearing will be conducted informally, 

and formal Rules of Evidence will not apply. 

The Presiding Officer is authorized, 

however, to strike from the record statements which 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 

1 are deemed irrelevant or needlessly repetitious, and 

2 to enforce reasonable limits on the duration of the 

3 statement of any witness. 

4 Witnesses are reminded that any false 

5 statement or false response to questions may be a 

6 violation of law. 

7 Witnesses will be allowed to make oral 

8 statements which they may later expand in writing 

9 for the record. 

10 Witnesses are requested to state their 

11 names and affiliations prior to making their 

12 statements. 

13 When a witness has finished his or her 

14 presentation, members of the panel will be given an 

15 opportunity to ask that person questions concerning 

16 issues raised in the testimony. 

17 If anyone in the audience desires to 

18 question a witness, please write out the question 

19 and submit it to the panel and then a decision will 

20 be made about the appropriateness of asking the 

21 question. 

22 We're having this hearing recorded, and a. 

23 transcript will be made available for public 

24 inspection and copying in the Central Docket 

25 Section, and the docket number is A-86-03, and 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 6 

that's located in Room M-1500 at Waterside Mall in 

Washington, D.C. 

Anyone wishing to purchase copies of the 

transcript directly from the court reporter should 

make individual arrangements with the reporter 

before the close of the hearing. 

That would probably expedite your obtaining 

a copy of the record. 

We'll now proceed to hear testimony from 

the witnesses. 

Our plan is to go in the order of the 

sign-up sheet, this morning's sign-up sheet. I will 

go over that list at this point, and if that poses 

any hardship on any of you please let us know and 

we'll have some discussion and try to accommodate 

your hardship if possible. 

So far we have 14 people and organizations 

signed up to testify this morning; looks like about 

half of the people here, almost. 

First of all let me mention the 

organizations and then go from there. 

First, Independent Fuel Terminal Operators 

Association; 

Second, API, NPRA and NCFC I guess 

together represented in that statement; 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 

1 Three is PMAA, and then somebody marked a 

2 name out; 

3 Next is the Engine Manufacturers 

4 Association; 

5 Next would be Ford Motor Company; 

6 Then Sun Refining and Marketing Company; 

7 Then the Golden Bear Division of Witco 

8 Corporation; 

9 Then the American Independent Refiners 

10 Association; 

11 Then Huntway Refining; 

12 Then Frontier; 

13 I think that's Lucas Indus — well, the 

14 first name would be Lucas I think; 

15 Then Princeton Gamma-Tech; 

16 Then finally the Air Pollution Control 

17 Division of the Colorado Department of Health. 

18 Is there anyone else that would like to be 

19 included on the list of people making statements 

20 that's not included? 

21 UNIDENTIFIED SPEAKER: Would you please 

22 strike out Lucas? I thought I was just signing up , 

23 for the meeting. 

24 MR. GRAY: Okay. 

2 5 Any other corrections to the list? 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 8 

UNIDENTIFIED SPEAKER: Could you please put 

the Petroleum Marketers Association of America, 

PMAA, at the bottom of the list? Because Vera 

Haskins is not here yet, the person that's going to 

be testifying for us. 

MR. GRAY: Certainly. 

Any other suggested changes? Okay. If 

not, let's proceed and ask John Buckley to come 

forward and present his statement on behalf of the 

Independent Fuel Terminal Operators Association. 

MR. BUCKLEY: Thank you, Mr. Chairman. 

MR. GRAY: Mr. Buckley, do you have a copy 

of your statement? If you have an extra copy for 

the hearing panel or copies that would be 

appreciated, and probably for the court reporter, 

too. 

MR. BUCKLEY: Thank you, Mr. Chairman. 

My name is John Buckley. I have been in 

the oil business for 34 years, the last 21 of which 

I've been associated with the independent marketing 

sector with particular emphasis on home heating 

fuels. 

I currently am Vice President of Marketing 

for the Gulf Oil Division of Cumberland Farms. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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Cumberland Farms is a family-owned 

convenience store chain that acquired the marketing 

assets of Gulf Oil at the time of the Chevron-Gulf 

merger. 

We market in 11 states in the northeast 

from Maine to Ohio. I'm formerly Chairman of the 

Department of Energy Fuel Oil Advisory Committee 

during the late '70's period of petroleum 

regulations, former Chairman of the Petroleum 

Marketers Association of the American Fuel Oil 

Committee at the time of the embargo in 1973, a 

member of the Board of New England Council of 

Associated Industries in Massachusetts. 

I'm here today to speak for IFTOA, the 

Independent Fuel Terminal Operators Association. 

That is a group of 21 companies who own terminals 

that are capable of taking tanker load deliveries of 

petroleum products. 

My own company owns and operates 20 

terminals in the northeast from Columbus, Ohio to 

Bangor, Maine. We move approximately 160,000 

barrels a day of petroleum products, of which 90,000 

a day is gasoline through 5,000 Gulf stations, and 

the balance of 60,000 middle distillate supply, home 

heating oil, jet fuel, diesel fuel. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 10 

I certainly thank you for inviting us to 

testify today and for inviting comments on your 

proposed regulations to go to 0.05 percent sulfur 

with a 40 minimum cetane index and your proposal to 

dye home heating oil to differentiate it from the 

new proposed very low sulfur diesel fuel. 

You have a copy of my statement, which I 

would like to insert for the record, and instead of 

reading it I would like to make a number of points 

orally that I think are most important points that 

need to be covered. 

First of all, we do believe that your 

analysis to date has been focused too narrowly and 

should be broadened to examine the economic, 

competitive and international supply consequences of 

implementing the proposed regulation. 

Secondly, I would like to stress that to 

the extent that you have a liability for failure to 

perform, that that liability should not be a slap on 

the wrist. It should be important enough to insure 

compliance. 

With respect to segregated systems, most of 

the companies in the association that I speak for 

today have sufficient flexibility to establish a 

segregated system for diesel. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 11 

Oh, we'll have to make some investment in 

pipeline connections and perhaps designate certain 

rack distribution nozzles for diesel which today 

can carry diesel or No. 2 heating oil, but most of 

our members will not have to make significant 

investment. Some will. 

I think what you have to look at, 

obviously, is not so much at the terminal operators 

but at what happens to some of the smaller retail 

distributors. 

My testimony does not address that. 

Others who will testify here today will address 

that. You have to look at how serious a problem 

that is, how many companies are involved, how much 

volume is affected. 

Next I think you need to look at sources of 

supply. Today most imports of home heating 

oil/diesel fuel from foreign refiners typically runs 

close to three-tenths of one percent. Most domestic 

refined product is closer to two-tenths of one 

percent. 

You've made a study of refiners which 

indicates that domestically they can within this 

timeframe make enough of an investment in middle 

distillate desulfurization, which is the easiest 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 12 

1 type of desulfurization in a refinery compared to 

2 the heavy ends, and most of the new distillate 

3 desulfurizing units, you know, can take out 

4 something like 90 percent of the sulfur. 

5 So if you have a two-tenths pool you can 

6 certainly desulfurize it down to something like two, 

7 three one-hundredths, which is within your five 

8 one-hundredths. 

9 Foreign refiners, however, may not want to 

10 make that investment. Certainly the informal talks 

11 we've had with some of our foreign refining sources 

12 would not at least initially plan to make the 

13 investment because they would still have the 

14 seasonal home heating oil market to shoot at, and 

15 that's what most of them do shoot at. 

16 Most of the foreign refiners look at that 

17 winter heating season, and as prices for heating oil 

18 • rise in the United States east coast and they are 

19 able to sell into this market after paying for the 

20 cost of moving the product here, they become 

21 significant suppliers during the winter months. 

22 That market would still be available to 

23 them, and I hope they would focus on that rather 

24 than worrying about capturing some marginal or 

25 incremental share of the diesel market which would 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 13 

be primarily supplied from domestic refining 

sources. 

Still, I think it is important to 

recognize, you know, the way the foreign market does 

interact today. You have to remember that in the 

nine northeast states from Pennsylvania, New York, 

New Jersey and up through New England you're getting 

close to about 60 percent of the entire nationwide 

use of heating oil; it's that concentrated. So 

terminal operators who bring in product from abroad 

and from domestic sources play a major role. 

Our members supply about 25 percent of the 

heating oil in the east coast and about 50 percent 

in New England. 

At the present time we do buy a lot from 

abroad, and if heating oil is kept at current sulfur 

levels — and I've seen nothing to suggest that 

there's anything unhealthy about that because it is 

widely dispersed, it's scattered primarily to 

individual, private homes. No single point is 

enough to cause a public health hazard. It's 

dispersed easily, it burns efficiently, it's clean 

fuel. 

And with foreign refiners not supplying 

diesel but focusing all of their additional capacity 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 14 

— and it exists in the Caribbean and in Canada and 

in Europe and in the Middle East and in Africa, 

I would see a very salutary effect on home heating 

oil prices. More supply is competing for the same 

market, in effect. 

So that one of the fallouts from this 

proposal would be from my standpoint the possibility 

of lower heating oil prices which politically I 

think is important, which economically is important 

to home heating oil dealers and to their suppliers, 

such as our company, because we have to do battle 

with natural gas, and the lower price we have, the 

better. 

That's not the intention of your proposal, 

to make heating oil more competitive, but I think 

it's one of the things that will happen. 

Next I think you need to focus on something 

that has nothing to do with environment but is 

nonetheless a major problem, and that's the 

prospect for cheating. Diesel fuel carries 15 cents 

tax per gallon. That's $6.30 a barrel. That's a 

lot of money. 

There has been cheating, as you know, on 

the gasoline side. 

Congress just a year-and-a-half, two years 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 15 

ago changed the point of collection of tax from the 

retail station up to the terminal level in order to 

lessen the number of taxpayers, to better audit the 

taxpayers and to prevent some of the cheating that 

has gone on on the gasoline side. 

Now if I am right about the impact on home 

heating oil prices, namely that they're likely to 

fall, obviously diesel prices with the investments 

that are going to be made at the refinery level in 

new desulfurization and the necessity for segregated 

storage, those investments will have to be 

recovered, so you would expect diesel prices to 

go up. 

The difference between these two will add 

to the temptation to cheat. If you can pick up $6 

on the tax differential and a couple more dollars on 

the price differential you're looking at large 

numbers, and that's why I said earlier you need 

to be very careful about your sanctions. Make sure 

they're viable, enforceable and stiff enough to 

prevent cheating. 

One way that can be done, that you've 

covered in your regulations perhaps for other 

purposes, is to require dyeing of the home heating 

oil, the non-tax product. That would create a clear 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 16 

physical trail as well as a clear audit trail, and 

I think make it possible to ferret out cheating more 

easily by the enforcement arm of IRS. 

I think it's essential that you dye, and 

if you don't dye you're asking for real trouble 

in the area of cheating. 

And I think if you dye you need to dye at 

the terminal level. That doesn't mean that a 

refiner selling at his rack into trucks shouldn't 

also dye, he should, that really is like a terminal, 

but on pipeline deliveries out of the refinery or 

cargo deliveries out of the refinery, you don't want 

to dye at the refinery level. As we know from your 

study of pipelines, slugs go through that line. 

You often don't get the product you put in. 

It needs to be done at the terminal level, 

where it's very easy. You just add the dye at the 

rack, and and as you discharge into a truck that's 

where you add the dye, and it's a relatively easy 

step. 

We've been studying various dyeing 

techniques used today by people who dye diesel and • 

by provinces in Canada that dye heating oil, and we 

will be submitting more data on that before the end 

of the comment period. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 17 

As I mentioned, the gasoline tax has been 

moved to the terminal as a point of taxation, and I 

think dyeing should also be put at the terminal 

level for ease in monitoring. 

One other point I'd like to raise before I 

summarize is the question that has been proposed by 

others of lowering the sulfur level of the whole 

distillate pool; in other words, not only 

require five one-hundredths sulfur for diesel fuel 

but also for home heating oil. 

Certainly that would eliminate the need 

for segregated storage, it would solve some of the 

marketing problems that small retail distributors 

have. 

The question I have about it is, what 

level of sulfur would you need to achieve the 

results you're looking for on the clean air side? 

If you tell me that instead of the current 

two tenths-three tenths you'd go to, say, 1.5 for 

the whole pool I probably would favor that. 

But if you tell me that to achieve the end 

results you want from the emission from trucks 

that you've got to go pretty close to where you want 

to go, namely five one-hundredths for the whole 

pool, then I think you will be imposing a very 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 18 

severe penalty on home heating oil. 

It would be a bigger problem for refiners 

to meet that kind of sulfur level for the entire 

distillate stream. It will virtually shut out at 

least initially most foreign refiners, who as I 

mentioned earlier are significant suppliers of 

heating oil on the east coast where most of it is 

consumed. 

It will drive up heating prices, heating 

oil prices unnecessarily. I think politically in 

Congress that will be not viewed very favorably. I 

don't believe heating oil — nor have I seen any 

studies that indicate that heating oil in any way 

poses health problems. It's a clean-burning fuel at 

two-tenths sulfur, which most of it is. As I 

mentioned, no single point causes problems because 

they're very small and it's dissipated in the air 

before it causes any problems. 

If the whole pool has to be dropped to 

those low levels I think it's going to be a very 

severe penalty for home heating oil and hurt its 

competitive position with natural gas unnecessarily. 

So I would, therefore, not favor that, 

nor would our association favor it if you are going 

to demand a level that is very, very low, close 

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BRIGHTON (313) 229-8238 

ANN ARBOR (3131 995-9545 
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DOCKET NO. A-86-03 19 

to five one-hundredths, like seven one-hundredths or 

something of that sort. 

If you're going to come in at 150 — 15 

parts instead of 20 then we might, we might have a 

different view. 

In conclusion I think you need to closely 

analyze the impact on the marketplace, including the 

impact of segregated storage complications and the 

impact on availability of foreign source material. 

You should require dyeing at the terminal 

level of distribution. 

And if this rule is adopted our members 

will comply. For the most part we do now have the 

flexibility to establish segregated storage, and 

when we do not, we shall make the necessary capital 

and operational expenditures to insure that we can 

deliver diesel fuel that fully meets your new 

proposed specifications. 

I thank you again for inviting me. 

I'll be happy to answer any questions to 

the best of my ability. 

MR. GRAY: Thank you, Mr. Buckley. 

Let me ask first about the last concept 

that you mentioned in your statement about the 

broader distillate sulfur level, as you used the 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 20 

phrase .15 pool level. 

MR. BUCKLEY: 15 one-hundredths instead 

of five. 

MR. GRAY: I'm wondering, when you say 

pool, would that still be a maximum level or an 

average? 

MR. BUCKLEY: You would establish a new 

proposed regulation that said that sulfur levels in 

all diesel fuel and home heating oil, all middle 

distillates in effect, would henceforth be required 

by October 9th, 1993 to have no greater than 15 

one-hundredths parts — instead of five 

one-hundredths. 

MR. GRAY: I understand. 

MR. BUCKLEY: I mean, if you're at 5, 10 

or 20, you know, very close to what we can buy 

now, 20, then obviously that would be something that 

would ease all of the other problems you're going to 

hear about today with independent retail marketers. 

If, on the other hand, to meet the 

standards, air standards, air quality standards 

that currently impact from truck traffic, on-highway 

diesel use, if you have to make the entire pool 

instead of five one-hundredths let's say seven 

one-hundredths, very close to five one-hundredths, 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (3131 995-9545 

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DOCKET NO. A-86-03 21 

1 then I think that will impose severe penalties in 

2 terms of cost on the homes that heat with oil and 

3 the retail dealers that distribute that oil, because 

4 they will be shut off from one of the most 

5 significant sources of supply that they currently 

6 draw on: the foreign refiners who come in in the 

7 wintertime and provide substantial volumes of home 

8 heating oil that meet current standards for home 

9 heating oil but will not meet something very, very 

10 low. 

11 That will force the entire distillate 

12 market back on the US domestic refiner who, A, will 

13 have to make a lot more investment to desulfurize 

14 his entire distillate stream instead of just the 

15 diesel portion and will give you limited supply 

16 availability, and when the weather gets cold, you 

17 know, you get price spikes, things of that sort 

18 happening where heating oil goes up 10 cents in 

19 three weeks, and that's politically very difficult 

20 for us to live by as suppliers of home heating oil 

21 and it's even more difficult for the small 

22 independent retail distributor of heating oil who 

23 has to answer questions that his neighbors raise. 

24 MR. GRAY: I'm sure you'll later be hearing 

25 from those companies representing the diesel engine 

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DOCKET NO. A-86-03 22 

manufacturers of the necessity to insure that 

highway diesel fuel is below .05 in order for them 

to comply with the 1994 EPA standards, so — 

MR. BUCKLEY: If that's what the pool had 

to be, I'm saying that — 

MR. GRAY: I understand. 

MR. BUCKLEY: — is a very serious problem. 

MR. GRAY: And certainly that's a major 

consideration that was associated with the EPA 

decision to propose the regulations only affecting 

highway diesel fuel, was the impact that it might 

have if it were applied more broadly. 

But I also wanted to understand your 

sense of the level that might feasibly reasonably be 

expected if at some later point Congress or other 

motivation has EPA look at all distillate fuel for 

sulfur control. So I appreciate that. 

Just as you suggested in your statement, it 

is important to insure that such a regulation 

provide for ready enforceability and, of course, 

that was the principal reason for the dyeing 

suggestion which originated from the industry folks 

that were investigating this issue. 

I guess my question there is, you stress 

the need to focus the dyeing at the terminal level. 

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DOCKET NO. A-86-03 23 

1 Is it your sense that our proposed 

2 regulations would require or force the dyeing 

3 upstream of the terminal? 

4 MR. BUCKLEY: No, I just — you know, as 

5 you get into the nitty-gritty and all the 

6 regulations that go into implementing the proposed 

7 regulations that's an issue you're going to have to 

8 look at. 

9 I just think that the logical and easiest 

10 place to get total compliance is to do it at the 

11 terminal level, when there are sales out of a 

12 refinery, at the refinery level when it goes into a 

13 truck, because it's easy to dispense an additive or 

14 a dye into the truck along with the fuel. 

15 You can build those into your terminals at 

16 fairly modest cost and without a long lead time 

17 whether you're at a refinery or a terminal. If you 

18 required it all at the refinery level so tankers got 

19 loaded with dyed material and pipeline slugs went 

20 through with dyed material I think we'd have some 

21 real problems. 

22 MR. ANDERSON: I just have a couple 

23 questions related to this topic of dyeing. 

24 If we did that that way would the terminal 

25 be the place that would assume the principal 

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ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 

-.,.-. T r ...,,,.. 

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1 liability for when we started looking for dyed 

2 versus undyed fuel? 

3 MR. BUCKLEY: Yes. As I mentioned, 

4 Congress did move the gasoline tax collection point 

5 and liability point to the terminal level two years 

6 ago in order to get better compliance on that 

7 crucial issue, so that the terminal both in terms of 

8 paper audit trail and physical trail would certainly 

9 have to take the liability associated with the 

10 distribution of dyed and undyed material as it 

11 leaves the terminal gate. 

12 MR. ANDERSON: One other question 

13 concerning your comments about desulfurizing the 

14 entire fuel pool. I wanted to make sure I 

15 understood. 

16 Your opinion is that if the entire fuel 

17 pool was required to be desulfurized to some 

18 level, .07 or below .1, that the foreign suppliers 

19 would abandon the home heating market rather than 

20 desulfurize? 

21 MR. BUCKLEY: I don't think they would all 

22 abandon it. Each would look at how much volume they 

23 move to this market. 

24 I think a lot of foreign refiners and 

25 foreign storage facilities — there are big ones at 

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ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 25 

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Rotterdam, for example, they generally run their 

refineries to meet local European demand, let's say, 

and European storage requirements. 

But if it happens to be much colder in the 

United States or if a couple of refineries go down 

with fires or we have a hurricane that knocks out a 

major supply source like the refinery in the 

Virgin Islands and you see prices move to reflect 

both the fact of physical constraints and the 

perception of physical constraints so you get a gap 

between the European value for heating oil and the 

US value for heating oil, you'll see those tankers 

start getting loaded over there and come over here 

to capture that extra economic return that they can 

get. 

And I'm not sure they'll make the 

necessary investment if you change the entire pool 

to a very low level for -— if all they're going to 

lose is the occasional opportunity cargo. 

Other suppliers that regularly supply the 

market may look at it differently, particularly 

those in eastern Canada and some of those in the 

Caribbean. 

But it may be more difficult for the 

Caribbean refiners, particularly those in Venezuela, 

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ANN ARBOR (313) 995-9545 
P.27 

DOCKET NO. A-86-03 26 

1 because they're running crudes that are medium and 

2 high sulfur crudes rather than sweet crudes from the 

3 North Sea or Nigeria or Algeria, and you know the 

4 more sour the crude, the more desulfurization you 

5 need, the more intense desulfurization you need of 

6 the distillate stream in order to get down to these 

7 very, very low levels. 

8 They'd have to look at making the required 

9 investment and decide whether it's worth their while 

10 or whether they should just focus on selling heating 

11 oil into the European market where they have 

12 refining and marketing outlets, the Venezuelans I 

13 mean. 

14 Certainly the total amount of foreign 

15 refining capability available would be diminished, 

16 at least initially. 

17 Obviously if the return is strong enough 

18 long enough you'll see people making the 

19 investments, and don't forget what you do here 

20 sooner or later — and in this era of global 

21 communications speed usually sooner rather than 

22 later — happens abroad, too. 

23 I mean, you started desulfurizing heavy 

24 fuel and requiring three-tenths, five-tenths, one 

25 percent sulfur in No. 6 residual fuel back when the 

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DOCKET NO. A-86-03 27 

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Clean Air Act was initially forced through by 

Senator Muskie in the late '60's, early '70's, and 

Europe was very concerned about that. 

The lead time between this kind of action 

and what subsequently happens in Europe is likely to 

be a lot less than that, maybe a matter of three, 

four years, but generally we live on one planet that 

generally is known more and more, and I think to the 

extent that steps are taken by this government in 

this era of clean air there's going to be a good 

deal of pressure to take the same kind of steps in 

other industrialized countries, which of course 

would make them make the investment in 

desulfurization, and then we'd be back to where we 

started from today. There will be some lag time, 

that's all. 

Buckley. 

NCFC. 

MR. ANDERSON: Thank you. 

MR. GRAY: Thank you very much, Mr. 

Brian Taylor, representing API, NPRA and 

MR. TAYLOR: Thank you, Mr. Chairman. 

My name is Brian Taylor. I'm Vice 

President of Products Research for Chevron Research 

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DOCKET NO. A-86-03 28 

Company. 

My statement today is on behalf of the 

American Petroleum Institute, the National Petroleum 

Refiners Association and the National Council 

of Farmer Cooperatives. 

These organizations represent virtually all 

refiners, large and small, in the United States. 

Their members are also engaged in all 

aspects of the oil industry, including exploration, 

production, refining, marketing and transportation. 

API, NPRA and NCFC member companies have a 

substantial interest in matters relating to 

manufacturing diesel fuel and distributing it to the 

motoring public. 

We appreciate this opportunity to 

participate in this public hearing on proposed 

regulations for highway diesel fuel. 

I'll be making a brief oral statement today 

for the record. 

We plan to submit detailed written 

comments on the issues raised by EPA in your August 

24th Federal Register Notice before the close of the 

comment period. 

As you know, in July of 1988 with the 

encouragement of EPA representatives of the 

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DOCKET NO. A-86-03 29 

petroleum refining and the heavy-duty diesel engine 

manufacturing industries developed a systematic 

approach for improving highway diesel fuel quality 

which will assist engine manufacturers in meeting 

EPA's 1991 and 1994 particulate standards. 

At the outset I would like to say that 

we're encouraged that EPA took into consideration 

many of the joint recommendations submitted to EPA 

last summer by the API, NPRA, NCFC and the Engine 

Manufacturers Association. We commend the Agency 

for its diligent and thorough technical analysis of 

the elements of its diesel proposal. 

We believe the Agency's adoption of sulfur 

and cetane index limits as proposed would be the 

most cost-effective and environmentally beneficial 

approach to regulating diesel fuel quality. 

To summarize, we ask the following: 

First, we encourage EPA to promulgate the 

final rule promptly so as to give refiners 

sufficient lead time to comply. Speedy EPA action 

is necessary to allow refiners to plan investments 

so they can produce the required fuels by 1993. 

Speedy EPA action also will provide heavyduty diesel engine manufacturers with information on 

diesel fuel specifications that is necessary for 

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ANN ARBOR (313) 995-9545 
P.31 

DOCKET NO. A-86-03 30 

1 engine and after-treatment designs to meet the 

2 particulate standards. 

3 Second, we strongly recommend that EPA 

4 adopt the joint industry recommendations on diesel 

5 fuel quality. 

6 As stated in those recommendations, a .05 

7 weight percent sulfur specification will allow 

8 engine manufacturers to use a full range of engine 

9 and after-treatment technology to meet design target 

10 levels. 

11 In addition, with these technologies 

12 aromatics reduction from current levels is not 

13 needed to meet the exhaust standards. 

14 However, by specifying a minimum cetane 

15 index of 40 aromatics content will be prevented from 

16 increasing significantly in the future. This 

17 specification will maintain the ignition quality of 

18 diesel fuel, a factor which is more important from 

19 an emissions standpoint than aromatics content. 

20 Cetane index is a widely accepted industry 

21 standard and is the most practical means to 

22 characterize diesel fuel-burning quality. 

23 We agree with the EPA that reducing 

24 aromatics below current levels is not 

25 cost-effective. 

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DOCKET NO. A-86-03 31 

Third, we believe that fuel specifications 

should apply uniformly to all suppliers and that all 

on-highway diesel fuel should comply with these 

specifications. 

Finally, we believe that enforcement of the 

fuel specifications should focus on potential 

misfuelers. While we recognize that product 

certification and some amount of compliance testing 

by refiners and importers will be necessary, we are 

disappointed that EPA does not include in the Notice 

of Proposed Rulemaking any enforcement mechanisms 

for reducing intentional misfueling. 

EPA does not address what enforcement 

action it plans to take when a party purposely 

introduces noncomplying dyed material into highway 

vehicles. 

Dyeing of noncomplying material by fuel 

suppliers coupled with strict enforcement action by 

EPA against misfuelers will be a very effective way 

of insuring that the environmental benefits 

envisioned as a result of regulating highway diesel 

fuel will be realized. 

In addition, strict enforcement against end 

user misfueling could reduce loss of federal tax 

revenues. 

PATRICIA MURRAY & ASSOCIATES 

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ANN ARBOR (313) 995-9545 

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P.33 

DOCKET NO. A-86-03 32 

1 Again we appreciate this opportunity to 

2 participate in this public hearing on EPA's proposed 

3 regulation for highway diesel fuel. 

4 We are preparing more comprehensive 

5 information on many of these issues for submission 

6 to the Docket before the close of the proceedings. 

7 The submission will respond to the specific 

8 questions raised by EPA in the Federal Register 

9 Notice and comment on some of the findings contained 

10 in the Draft Regulatory Impact Analysis accompanying 

11 the Notice. 

12 In the interim I'll be pleased to answer 

13 any other questions you may have. 

14 Thank you, Mr. Chairman. 

15 MR. GRAY: Thank you, Mr. Taylor. 

16 Do you have an opinion about the logical 

17 point where dyeing should occur? 

18 Do you think there's any circumstances 

19 where a fuel distribution company or retailer or 

20 refiner would prefer to dye it upstream of the 

21 terminals, more specifically? 

22 MR. TAYLOR: I think having the 

23 flexibility to dye, I think dyeing will occur where 

24 refiners can most easily offset and reduce any 

25 liability that they have, and having the flexibility 

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BRIGHTON (313) 229-8238 

ANN ARECR (313) 995-9545 
DOCKET NO. A-86-03 33 

1 to dye at refineries for the truckloading situation 

2 or at terminals I think was a part of the thinking 

3 behind the joint proposal. 

4 MR. GRAY: So the basic concept of adding 

5 the dye when its committed to an off-highway 

6 application, wherever that is, is a flexibility that 

7 you see still desired? 

8 MR. TAYLOR: (Nodding) 

9 MR. GRAY: It's my impression that some 

10 off-highway diesel fuels maybe for special purpose 

11 applications are dyed even now. 

12 If that impression is correct, do you 

13 foresee with your experience with fuel dyes and 

14 technology, if you will, any possibility of 

15 retaining two dyes, so to speak; one color for 

16 off-highway and maybe another color for a premium 

17 on-highway diesel fuel, or do you think that the dye 

18 chemistry would be such that, you know, mixes could 

19 be very difficult to distinguish from an 

20 enforceability standpoint? 

21 Do you have any comments in that area? 

22 MR. TAYLOR: No, I don't think I do. 

23 I think the dyeing you're referring to at 

24 this point is designed to segregate premium diesel, 

25 identify premium diesel fuel from the so-called 

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DOCKET NO. A-86-03 34 

common No. 2 pool. 

I suspect those who choose to market a 

premium diesel fuel, whatever that might be, will 

have their own ways of either distinguishing it or 

not, depending on their particular interest. 

MR. GRAY: But with the EPA proposal that 

on-highway premium diesel fuel would not be allowed 

to have a dye, I'm asking, do you see that as posing 

any special hardships from your perspective of the 

industry? 

MR. TAYLOR: I can't, I can't speak for the 

industry members on that issue. 

From a Chevron point of view, we don't 

market premium diesel fuel so it would certainly not 

— at this point anyway not have any impact on us. 

MR. GRAY: Mr. Anderson says that his 

impression is that it could still have a different 

dye, but that gets back to the fundamental initial 

part of my question. 

If you had more than one dye, do you have 

a sense of whether or not that would complicate the 

enforcement approach? 

MR. TAYLOR: I can't answer that. 

MR. HOOVER: I just would like to clarify 

your comments on enforcement for intentional 

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ANN ARBOR (313) 995-9545 

P.35 

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DOCKET NO. A-86-03 35 

1 misfueling. 

2 I presume what you would like to see in 

3 that enforcement area would be something similar to 

4 what the current unleaded fuels regulations have 

5 which prohibit introduction into unleaded vehicles, 

6 with that liability accruing at the retail level or 

7 wholesale purchaser. 

8 MR. TAYLOR: Yes. 

9 MR. HOOVER: Because one thing that we did 

10 get into the regulations in terms of — or the 

11 proposed regulation here under prohibited activities 

12 is the word dispense, and I think that was put in 

13 there aimed at that, even though there's not a 

14 specific section that defines that as being a 

15 prohibited act. With the affirmative defenses 

16 attached to it, our intention was that the 

17 dispensing of an improper fuel would also constitute 

18 a violation, and that could be construed to carry 

19 into individual vehicles. 

20 But we'll take a look at whether that's 

21 appropriate in terms of the same as we have on the 

22 unleaded fuel regulations. 

23 MR. TAYLOR: I think from previous 

24 testimony here it's fairly clear that there would be 

25 a significant economic incentive for misfueling. 

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DOCKET NO. A-86-03 36 

MR. ANDERSON: I'd like to ask a couple of 

questions that are related to the first testimony we 

heard, and which I think we'll hear more about in 

subsequent testimony, about issues related to first 

of all desulfurizing potentially the entire 

distillate fuel pool rather than just on-highway 

fuel, and I wonder if you'd comment on the ability 

of your members to comply with that kind of a 

provision, or what kind of view you have on it as 

representing your associations. 

MR. TAYLOR: Well, I think desulfurizing 

the entire distillate pool would put undue economic 

stress on a large number of small refineries — not 

just small refiners, but small refineries because 

the capital investment required for desulfurization 

is very much dependent on the size of the refinery, 

and so I think it would put undue economic pressure 

on the small refineries to desulfurize the whole 

pool. 

MR. ANDERSON: Aside from that issue do 

you perceive any lead-time issues related to doing 

that in the deadline, the timeframe of the proposed 

rules? 

MR. TAYLOR: Well, I think one of the 

things we urge is that the final rule be promulgated 

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DOCKET NO. A-86-03 37 

promptly, because there clearly is going to be a 

significant amount of investment and associated 

construction, refinery construction activity 

associated with meeting these requirements, and 

that's going to put pressure on the A and E firms in 

the country, because in the last several years 

there's been relatively little investment and many 

of those companies are not staffed up to the levels 

that they were a number of years ago when refinery 

expansions and chemical plant expansions were more 

common. 

So I think a crucial issue is availability 

of A and E and construction firms to carry out the 

necessary expansions. 

MR. ANDERSON: Okay. Another important 

question for us is going to be the amount of 

segregation of regulated fuel from other fuels, and 

I wonder if you would comment a little bit on what 

the industry foresees happening in terms of change 

in segregation patterns in response to having to 

lower the sulfur content. 

MR. TAYLOR: I think that's something 

frankly that will be addressed more effectively than 

I can address it in the written comments that we 

plan to submit. 

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DOCKET NO. A-86-03 38 

1 MR. ANDERSON: You do plan to address that 

2 topic in those comments? 

3 MR. TAYLOR: (Nodding) 

4 MR. ANDERSON: Okay. 

5 MR. GRAY: Thank you, Mr. Taylor. 

6 Okay. Jed Mandel now representing the 

7 Engine Manufacturers Association. 

8 

9 MR. MANDEL: I believe you already have 

10 copies of my statement. 

11 Good morning. I'm Jed Mandel, General 

12 Counsel for the Engine Manufacturers Association. 

13 Today marks another important milestone on 

14 the road to the adoption of the landmark Diesel Fuel 

15 Quality Rule. 

16 During the rulemaking proceedings leading 

17 up to the March 1985 final rule adopting tough new 

18 NOx and particulate emissions standards for 

19 heavy-duty diesel engines, engine manufacturers 

20 first expressed their concerns regarding the sulfur 

21 content of diesel fuel. 

22 Generally, manufacturers were concerned 

23 that fuel sulfur would inhibit the effectiveness of 

24 after-treatment control technology and in general 

25 would contribute substantially to the particulate 

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DOCKET NO. A-86-03 39 

1 emissions from heavy-duty diesel engines. 

2 Thereafter, with EPA's encouragement the 

3 engine manufacturing and the petroleum refining 

4 industries met to discuss and if possible agree on 

5 the solution to the emission problems associated 

6 with the sulfur content of diesel fuel. 

7 In an historic cooperative effort, the two 

8 industries jointly recommended to EPA in July of 

9 1988 a program to reduce the sulfur content of 

10 diesel fuel for the on-highway market to a maximum 

11 of .05 percent by weight effective nationwide on 

12 October 1, 1993. 

13 Also included in the program were proposals 

14 to control the aromatic content of diesel fuel at 

15 current levels by specifying a cetane index of no 

16 less than 40 to enable engine manufacturers to use a 

17 low sulfur certification fuel for model years 1991 

18 through 1993, and to provide a means of enforcing 

19 the proposed new fuel specifications. 

20 On August 24, 1989 EPA issued its proposed 

21 diesel fuel quality rule which essentially 

22 incorporates all of the elements of the joint 

23 proposal. 

24 The Engine Manufacturers Association 

25 strongly supports the proposed rule, applauds EPA 

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DOCKET NO. A-86-03 40 

for its efforts and urges the Agency to swiftly 

promulgate a final rule. 

The sulfur content of diesel fuel 

contributes substantially to the particulate 

emission of diesel-fueled engines. The more 

stringent the emission standard the higher 

percentage of sulfur-derived particulate matter to 

total particulate emissions. 

Without low sulfur fuel, heavy-duty diesel 

engines will not be able to achieve compliance with 

either the 1991 or the 1994 particulate emissions 

standards. 

Certification for 1991 model year engines 

is just around the corner. Immediately upon us is 

certification of 1990 engines which some 

manufacturers would like to certify to the 1991 

emissions standards. 

It is critically important that EPA move 

quickly through this rulemaking process and 

promulgate the proposed rule in final form by the 

end of 1989. • Otherwise manufacturers face great 

uncertainty as to their ability to have products 

available to meet the 1991 standards. 

It would be a sorry conclusion to see all 

of our cooperative efforts wasted because of 

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DOCKET NO. A-86-03 41 

1 unnecessary administrative delays. 

2 EPA's proposed rule and this hearing are 

3 important steps. But the culmination of our efforts 

4 will be the timely promulgation of a final rule. 

5 Towards that end, EMA will submit for the record 

6 a more detailed written statement before the close 

7 of the comment period. 

8 In the meantime, if you have any 

9 questions I will attempt to answer them now. 

10 MR. GRAY: Thank you, Mr. Mandel. 

11 I note this is an important milestone for 

12 a couple reasons: This is probably the shortest 

13 statement EMA's represented to one of our hearings 

14 and — 

15 MR. MANDEL: I learned I wasn't paid by the 

16 word any longer. 

17 MR. GRAY: — and the other one I just have 

18 to highlight here is probably the most significant 

19 milestone, the statement — and I noticed you choked 

20 on it a little bit when you were presenting your 

21 testimony — which says, and it's worth repeating: 

22 The Engine Manufacturers Association applauds EPA 

23 for its efforts, and — 

24 MR. MANDEL: It wasn't hard for us to say, 

25 it really wasn't. 

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DOCKET NO. A-86-03 42 

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MR. GRAY: But in all seriousness I think 

it's probably an appropriate time for us to again 

state that this was a rather historic 

precedent-setting, hopefully, effort on the part of 

the industries that often we regulate with an 

adversarial relationship, and we have really 

felt that these two major industries should be 

commended for their efforts, and we appreciate your 

continued constructive assistance in our efforts to 

insure that 1991 and 1994 diesel engines are able to 

comply with the very strict standards in those 

years. 

So again we appreciate your efforts and 

we'll move as swiftly as we can to resolve the 

remaining issues, some of which we'll be hearing 

today, of course, and make a final decision as 

quickly as possible. 

Another milestone. 

MR. MANDEL: That also is a first. 

John, go ahead. 

MR. ANDERSON: This hopefully is an easy 

question. 

certify 

You mentioned 

1990 

Do 

engines to 

some manufacturers 

the 

I presume that 

1991 standards. 

want 

to mean they wanted 

to 

to 

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DOCKET NO. A-86-03 43 

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be able to use the proposed .1 sulfur fuel to do 

that certification? 

MR. MANDEL: Well, it all depends how you 

end up issuing your final rule on expanded averaging 

and banking, but depending on thought now that might 

be finally promulgated and the need to perhaps do a 

paper certification again for 1990, it's uncertain 

whether we would need to have that .1 sulfur fuel 

for certification purposes available. 

I think the main point here is that to 

avoid the uncertainty that is still over engine 

manufacturers' heads for 1991 we need to know really 

now — and I guess now is at least defined to the 

balance of this year — what the final rule for 

sulfur is going to be, because it is upon us. 

So my comments with respect to 1990 are 

somewhat contingent on what your final rule would 

read for banking and trading. 

MR. ANDERSON: Okay, thanks. 

MR. GRAY: Thank you, Mr. Mandel. 

MR. MANDEL: Thank you very much. 

MR. GRAY: The Ford Motor Company is next 

on the agenda. 

MR. MILLERICK: Good morning. 

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DOCKET NO. A-86-03 44 

1 My name is Dave Millerick, and I represent 

2 Ford Motor Company and Ford New Holland. 

3 I appreciate the opportunity to testify 

4 today and provide input to the Environmental 

5 Protection Agency regarding its proposed rule on 

6 fuel quality regulations for highway diesel fuel 

7 sold in 1993 and later calendar years. 

8 My comments are based on Ford New Holland's 

9 current position as a manufacturer of heavy-duty 

10 diesel engines. 

11 In my brief statement this morning — and 

12 I'll underline brief because we have a lot of people 

13 here this morning — I will highlight the difficult 

14 position Ford will be in if this rule is not 

15 adopted. 

16 As is discussed in the proposed rule, the 

17 sulfur content of diesel fuel contributes 

18 substantially to the particulate emissions of 

19 diesel-fueled engines. The more stringent the 

20 emission standard, the higher the percentage of 

21 sulfur-derived particulate matter to total 

22 particulate emissions. 

23 In fact, without low sulfur diesel fuel 

24 Ford heavy-duty diesel engines will not be able to 

25 meet either 1991 or 1994 particulate emissions 

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DOCKET NO. A-86-03 45 

1 standards. 

2 Ford expects to be able to certify its 

3 heavy-duty diesel engines near or below the 

4 particulate standard of .25 grams per brake 

5 horsepower for years 1991 through '93. However, 

6 Ford must take into consideration deterioration and 

7 engine and test variability to assure compliance 

8 with emission standards over the engine's useful 

9 life. 

10 Therefore, Ford must design its engines to 

11 meet emission levels substantially below the actual 

12 standard. 

13 Without low sulfur fuel, Ford will not be 

14 able to produce engines which will meet the 

15 requisite low emission design target levels 

16 necessary to assure compliance with the 1991 

17 particulate standards over the useful life of the 

18 engine. 

19 In order to meet the 1994 particulate 

20 standard Ford will have to develop and 

21 commercially produce engines with after-treatment 

22 control technology. Such after-treatment hardware, 

23 whether catalytic or regenerative traps, will not 

24 function for the requisite durability period with 

25 the current sulfur content of diesel fuel. 

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DOCKET NO. A-86-03 46 

As mentioned by Jed Mandel, EMA and the 

petroleum refining industries worked to find a 

solution to the sulfur problem. The result was a 

jointly-recommended program to EPA to reduce the 

diesel sulfur fuel for on-highway use to a maximum 

of .05 by weight effective nationwide October 1st, 

1993. 

Given the above, it is extremely important 

that EPA move through the rulemaking process quickly 

so Ford and other diesel manufacturers do not 

experience delays in development, certification or 

possibly production. 

Thank you very much for allowing me to 

testify. 

MR. GRAY: Thank you. 

No questions. Thank you very much. 

MR. MILLERICK: Thank you. 

MR. GRAY: Sun Refining and Marketing 

Company, Jack Freeman. 

MR. FREEMAN: Good morning, gentlemen. 

And good morning, ladies and gentlemen. 

My name is Jack Freeman. I'm Manager of 

Technical Liaison for Fuels Development, Sun 

Refining and Marketing Company, which is a unit of 

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DOCKET NO. A-86-03 47 

1 Sun Company. 

2 Sun refines and markets fuels under the 

3 Sunoco brand in 28 states east of the Rockies with a 

4 concentration in the northeast, as well as under the 

5 Atlantic brand in New York, New Jersey and 

6 Pennsylvania. 

7 As you know, Sun was actively involved in 

8 the negotiations of what's been generously described 

9 as the landmark initiative by the diesel engine 

10 manufacturing and petroleum refining industries 

11 which led to the joint proposal for on-highway 

12 diesel fuel, a modification that you have seen. 

13 Naturally, that being the case, we're 

14 pleased to note that EPA has now seen fit to use 

15 that joint proposal as the core for regulation. 

16 In addition I should mention that Sun was 

17 first to announce a field test involving a highway 

18 diesel fuel which would comply with these proposed 

19 regulations starting on or about November 1st of 

20 this year. 

21 Now while this test will be confined to 

22 current production heavy-duty truck engines it 

23 nonetheless will provide us with experience 

24 in lubricating oil formulation development and 

25 also in engine emissions factor deterioration 

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DOCKET NO. A-86-03 48 

patterns which we feel will be valuable in designing 

fuels and lubricants for these future low emission 

engines. 

So my purpose really is to speak on behalf 

of Sun in support of these EPA regulations as 

proposed and also to register Sun's support for the 

statements being made by parties to the joint 

proposal, some of which you have already heard, 

including those of the American Petroleum Institute, 

the National Petroleum Refiners Association and the 

National Council of Farmer Cooperatives. 

Now this is not to imply that we believe 

the regulations being proposed are perfect, nor do 

we suggest that they are absent of numerous 

technical questions which still remain to be 

resolved during the implementation process. 

At the same time we believe they address 

their objective in a cost-effective manner, sharing 

the burden of compliance with fairness to all of the 

stakeholders. 

So in conclusion, we urge the Agency 

to promptly promulgate a final rule, but to do so 

only after a thorough consideration of written 

comments to be submitted by API before the close of 

the proceedings. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARECR (31*3) 995-9545 
DOCKET NO. A-86-03 49 

1 Finally we urge the agency to work closely 

2 with API and also the American Society for Testing 

3 and Materials in the resolution of the sometimes 

4 numerous technical problems that inevitably arise 

5 during implementation of fuel regulations, that 

6 always seem to. 

7 So that concludes my brief statement. 

8 MR. GRAY: Thank you, Mr. Freeman. 

9 Maybe at this point since you've 

10 highlighted "after a thorough consideration of 

11 written comments submitted by API" to ask both 

12 yourself and Mr. Taylor to review the comments from 

13 probably in particular some of the marketers that 

14 we'll hear today in regard to concerns that they 

15 raise to try to maybe make suggestions to us as to 

16 ways that those concerns might be allayed or at 

17 least partially alleviated so we can have as 

18 constructive a process as we can from here to sort 

19 of final promulgation. 

20 So if I could make that request to both 

21 of you in your final comments — 

22 MR. FREEMAN: We certainly intend to do 

23 that. 

24 MR. ANDERSON: I would just like to ask if 

25 you could talk about how you expect the introduction 

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DOCKET NO. A-86-03 50 

1 of the low fuel specs to affect segregation 

2 practices in the products you distribute. 

3 MR. FREEMAN: Well, I think it's clear from 

4 our field tests that we are seriously interested in 

5 the highway diesel fuel. This is not a market that 

6 Sun has been prominent in in the past. 

7 I wish I could outline for you our 

8 two oil strategy for the middle '90's. I can't do 

9 that because, quite frankly, it doesn't exist, and I 

10 suspect that's the case with a lot of companies. We 

11 generally do not segregate our 2 oil in Sun Company. 

12 Obviously we will be doing some 

13 segregation, but I really can't enlighten you as to 

14 what the nature of that is going to be. I just 

15 can't do that at this point. 

16 MR. ANDERSON: Okay. If there's any more 

17 that you can say on that in your final — 

18 MR. FREEMAN: On segregation. I understand 

19 from your previous question that you're interested 

20 in that. I suspect that's going to be one of the 

21 more difficult questions for us to address, because 

22 it's going to vary by company. It's going to be 

23 difficult to address that question for the industry. 

24 MR. ANDERSON: Sure. On the other hand, if 

25 people are already facing capital expense in 

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DOCKET NO. A-86-03 51 

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operations for it they must have ideas how much 

fuel they're going to produce, and that's got to 

involve some evaluation of how much segregation is 

going to go on. 

MR. FREEMAN: Surely. 

MR. GRAY: Thank you very much, Jack. 

Next we have the Golden Bear Division of 

Witco Corporation. 

MR. WEINBERG: My oral testimony will not 

be exactly the same as what is written; it will 

expand on that. 

First of all, a little bit about my 

company. Witco Corporation is a multi-divisional 

company dealing primarily in chemicals, specialty 

chemicals, specialty oils, a billion-and-a-half 

dollars in sales. 

We employ, I think the handout says, about 

7,600 people. 

In the 21 operating divisions that Witco 

has they have two refineries, one in Bradford, 

Pennsylvania and one in Bakersfield or Oildale, 

California. 

The refineries are primarily lube oil 

refineries, and when we get into talking about 

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ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 52 

diesel fuel I'm going to be talking about a 

byproduct. 

The Bradford refinery, because it works 

from a superior crude oil, Pennsylvania crude oil, 

really doesn't have much problem with the 

regulations that you proposed. 

The Bakersfield or Oildale refinery, 

because it works from a naphthenic crude oil does 

have somewhat of a problem, which I'll expand on. 

My name is Donald Weinberg. I am the Vice 

President and General Manager of the Golden Bear 

Division. I'm a Witco Corporate Vice President. 

I've been in the oil business for about 32 years, 

and primarily in the lube oil section of the 

business. 

The Golden Bear Division runs about 250 

barrels per stream day of diesel fuel. Now that's a 

miniscule amount, and you might wonder why I came 

all the way to Detroit to talk to you about it. 

The thing is, it's the toehold. If we 

don't move that product into the best market it 

upsets the economic viability of our refinery. 

Let me tell you a little bit about the 

products we make. We make primarily naphthenic lube 

oils. About 60 percent of our barrel — actually 

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ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 53 

less than that, about 45 percent of our barrel comes 

out as naphthenic lube oils which are used in the 

chemical process industries used for making rubber, 

plastics, printing ink and so forth. 

About 40 percent of our barrel comes out 

as asphalt, road asphalt, and the rest of it, the 

other 15 percent, 250 barrels per stream day finds 

its way into the diesel fuel market. 

I'd like to proceed on this. I hesitated 

giving you a chemistry lesson today, but in order 

to develop my point I really have to do that, so I 

hope you will bear with me, especially the Vice 

President of Research from Chevron who will find 

this infinitely boring. 

I'll need the overhead for this. 

I'll need my notes here. 

Let me say this: I'm going to keep my 

comments on only one item, and that is cetane index. 

You've asked in your Federal Register for 

comments on cetane index and whether or not that is 

a good measure of aromatics. 

That's all I want to talk about today, is' 

cetane index. 

Cetane index, as you know, is a 

calculation from gravity and from the midpoint 

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ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 54 

1 of the diesel fuel. It says in the ASTM manual that 

2 all cetane index is is a way of estimating what the 

3 cetane number is. 

4 The cetane number — and we do this 

5 regularly with our diesel fuel — can be improved 

6 with cetane improvers. 

7 Cetane index, you're stuck with it. You 

8 can't improve it. It's whatever it comes out based 

9 on the gravity and the midpoint. 

10 Actually, it's probably more based on the 

11 gravity because the midpoint is determined by the 

12 fact that it has to function as a diesel fuel. 

13 So you've pretty well got a fixed midpoint. 

14 So gravity is the determining factor you 

15 could have, or API, NPRA and EMA simply could have 

16 put as an aromatic control gravity. It would have 

17 given the same control and would have put me into 

18 the same pickle that I'm in currently. 

19 Okay, let's talk about the naturally 

20 occurring hydrocarbons that occur in crude oil and 

21 that occur in the finished products that come out of 

22 the crude oil, and what I want to do is relate these 

23 to cetane index. 

24 First of all, there are normal paraffins. 

25 That is a straight chain hydrocarbon. That's what 

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ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 55 

1 our Bradford division has, Pennsylvania crude oil, 

2 and there's iso-paraffins, which is a straight chain 

3 with some branch chains. 

4 Those products exhibit a high gravity, a 

5 low density, a high gravity, because API gravity is 

6 inversed to density, and as a result the cetane 

7 index of diesel fuel that is distilled out of 

8 paraffinic crude is rather high. The gravity's 

9 high, the cetane index is high. 

10 And the people who are operating from 

11 normal paraffinic or iso-paraffinic crudes have no 

12 problem meeting the 40 cetane index that is in 

13 your regulation. 

14 Next we have two additional types of 

15 hydrocarbons that occur. We have naphthenes, and 

16 that is a saturated ring-structured hydrocarbon. 

17 Some people call those cyclo-paraffins. 

18 And we have aromatics. Aromatics are 

19 unsaturated ring-structured hydrocarbons. Aromatics 

20 are what you're trying to control, for some pretty 

21 good, valid reasons. 

22 No one's ever had problems with 

23 naphthenes. Naphthenes are not carcinogens. 

24 They're fine products. As a matter of fact, they 

25 have high BTU content per gallon of diesel fuel. 

PATRICIA MURRAY & ASSOCIATES 

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ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 56 

1 The diesel fuels have a high BTU content, which 

2 would indicate you get more power, better diesel 

3 fuel mileage, which is desirable from an emissions 

4 viewpoint. 

5 In any event, a naphthene is not an 

6 aromatic and an aromatic is not a naphthene, but 

7 both of these products exhibit a low API gravity 

8 because they are dense molecules, they're compact 

9 molecules, and as a result neither of these products 

10 will exhibit a high cetane index. 

11 Okay. I've shown each of these 

12 hydrocarbons as separate and distinct hydrocarbons, 

13 but actually the way that everything occurs is that 

14 you've got mixtures. You'll have some straight 

15 chains in there, you're going to have a few 

16 aromatics floating around, you'll have some branch 

17 chains coming off, and that shows structurally what 

18 would normally occur in crude oil. 

19 However, you'll find that when you go to 

20 the different pools of crude that are available one 

21 type of structure usually predominates. So we call 

22 a paraffinic crude one that's mostly paraffinic 

23 and a naphthenic crude one that is mostly 

24 naphthenic. 

25 So then you can have a paraffinic group — 

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DOCKET NO. A-86-03 57 

1 a paraffinic crude containing naphthenic groups, 

2 you can have a paraffinic containing aromatic groups 

3 and you can have a naphthene containing some 

4 aromatic rings. 

5 Now I'm still going to stay on the theory, 

6 but I'm going to bring you some data in a minute. 

7 You can have a naphthenic oil that has the 

8 same or less aromaticity than in paraffinic oil. 

9 Paraffinic is going to meet the cetane. The 

10 naphthenic will not. 

11 So really what you are measuring by cetane 

12 index, if you think about it, you're not measuring 

13 the aromaticity, you're measuring the type of 

14 saturated structure that's attached to that 

15 aromatic. So you're really not controlling the 

16 aromaticity. 

17 Let me show you some good examples. 

18 There was a paper that was published 

19 by General Motors Research. They didn't have cetane 

20 index in that paper, but they did have the 

21 mid-boiling point in the paper, in the table, and 

22 they also had the aromatics in the table — I'm 

23 sorry, they didn't have — they had the mid-boiling 

24 point and they had the gravity and they had the 

25 aromatics, so from the mid-boiling point and from 

PATRICIA MURRAY & ASSOCIATES 

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DOCKET NO. A-86-03 58 

1 the gravity we figured out what the cetane index 

2 was. It was just a calculation. 

3 And there are some, you know, surprising 

4 things in here. Here is a product that is 54 

5 percent aromatic by FIA, and it meets — it would 

6 pass. It would be okay. 

7 On the other hand, here's a product that 

8 is 38 percent aromatic and it wouldn't be okay. 

9 The purpose of a test is to separate the 

10 good guys from the bad guys. It's to reject those 

11 products with aromatics and accept those products 

12 that don't have aromatics, and this shows that — 

13 and remember this was only, what, about ten 

14 different diesel fuels. It didn't do that on two of 

15 them. 

16 Let me show you what it does to us. When 

17 this thing first came out we started doing some work 

18 in our laboratory. We have a hydrotreater, and we 

19 knew we'd have to lower the sulfur, and our 

20 hydrotreater will do some mild saturations, so we 

21 started hydrotreating. We also started recutting 

22 and refractionating, because you can sometimes 

23 separate out some aromatics that way; aromatics tend 

24 to boil lighter. And we took various fractions 

25 that had been hydrotreated and we measured the 

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DOCKET NO. A-86-03 59 

aromatics by FIA, and then we calculated the cetane 

index. 

The amazing part of this is it runs the 

reverse of what you think it would run. As the 

aromatics went down ~ or as they went up I guess, 

the cetane, the cetane index went up. 

Now we can only speculate on the reasons 

why that happened. A naphthenic molecule has 

additional hydrogen, it might be denser, and if 

it's denser it might be doing that. Also the 

midpoint of the boiling range was floating around as 

we recut. 

But in any event, there isn't much we can 

do on the 40 cetane — to reach a 40 cetane index. 

I think we can turn this off. I've 

finished the slides. 

Now why is this important and why should 

you be concerned? 

Well, I could speak on the basis that I've 

been in the business for 32 years and I have ten 

years to go to retirement and I'd like to be in the 

business for 42 years and not be ruled out because . 

of an inappropriate test. 

But let me also put it in the terms of the 

environment and also the economy. 

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DOCKET NO. A-86-03 60 

1 San Joaquin Valley crude oil supplies 70 

2 percent of California crude oil, and it's 13 percent 

3 of the US domestic supply. We're importing over 

4 half of our crude oil right now. 

5 You certainly don't want to by virtue of 

6 choosing an inappropriate test rule out 13 percent 

7 of the US domestic supply of crude oil and end up 

8 importing even more crude oil. 

9 And environmentally when you import more 

10 crude oil you put a burden, an environmental burden 

11 on the harbors. We don't want Long Beach to become 

12 known as Valdez II. 

13 The crude oil in the San Joaquin Valley I 

14 guess I should have said is naphthenic aromatic 

15 crude oil. It's that ring-structured crude oil. 

16 There's no way that's going to change. And if 

17 that's going to be used something has to be done 

18 with your specification. 

19 As I said in the beginning, to take the 

20 diesel and downgrade it, I noticed in the study that 

21 you did ~ in July '89 there was a statement that 

22 small refiners may not be able to make diesel fuel. 

23 That's like telling a cattle rancher to raise cows 

24 that don't have any hooves because there's no sale 

25 for them. 

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DOCKET NO. A-86-03 61 

1 The diesel fuel's going to come up. That 

2 cut comes up from the well, so something has to be 

3 done with it, and if it's sold into the bunker fuel 

4 market, we don't have a home heating oil market on 

5 the west coast, or an insignificant one. If 

6 something is going to be done with that it has to go 

7 into the bunker market, and it changes the whole 

8 economic viability of our refinery. 

9 What about hydrocracking? When you do a 

10 billion-and-a-half dollars in sales, my company is 

11 not exactly strapped for capital to put in a 

12 humongous hydrocracker and crack open those rings. 

13 The problem is, when you crack open the 

14 rings you also crack chains, and when you crack 

15 chains we end up in a business where — we end up in 

16 the gasoline business, we end up in the propane 

17 business. You get all kinds of sidestrearns that 

18 you never intended to get, and you put an 

19 environmental burden on the northeast corner of 

20 Bakersfield because you've got volatile 

21 hydrocarbons there that you didn't have 

22 previously. 

23 Hydrocracking also is not economically 

24 viable. If I have to sit and hydrocrack San Joaquin 

25 Valley crude while somebody sitting over on the 

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DOCKET NO. A-86-03 62 

1 coast brings in Alaska North Slope crude and they 

2 only have to distill it, I may make diesel fuel but 

3 I can't sell it because I have too much cost in it. 

4 After we went through a lot of laboratory 

5 work and a lot of thinking as to what our 

6 alternatives were, we realized that the overriding 

7 question in this whole thing is, why do we have to 

8 come up with a solution for a problem that's caused 

9 not by the aromatics content but by a poor way of 

10 measuring the aromatics? 

11 That's really the rub. That's where the 

12 problem is. It's really not an environmental 

13 problem. It's a problem that is in your rule. 

14 The question is, we spend a lot of money on 

15 environmental matters right now, a great deal of 

16 our capital budget goes into it, and does it seem 

17 reasonable that we should commit a big portion of 

18 that environmental budget to — for the purpose of 

19 accommodating a test that really isn't appropriate 

20 for measuring the environmental impact? It seems 

21 ludicrous to do that. 

22 We have a solution as to how to get around 

23 this. There's two possibilities. One is for EPA to 

24 recognize that naphthenic diesel fuels are not 

25 paraffinic diesel fuels and allow for a lower cetane 

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DOCKET NO. A-86-03 63 

1 index for — and I don't have the detail, I haven't 

2 thought through it. I could come up with the detail 

3 on it. But allow for a lower cetane index for 

4 ring-structured diesel fuels. 

5 And the other way to do it is to simply 

6 level the playing field. Just control aromatics. 

7 Just say if, you know, if cetane index doesn't work 

8 go back to controlling aromatics for everybody. 

9 Those people that have paraffinic oils are going to 

10 have to have an aromatic control. Those people with 

11 naphthenics are going to have to have an aromatic 

12 control. 

13 That would put I think a burden on 

14 everybody, probably isn't the best conclusion, but 

15 it does keep the playing field level. 

16 That's it. 

17 MR. GRAY: Since we are doing a little 

18 chemistry lesson, if you could maybe help me, was 

19 naphthenic cetane value — how does that compare to 

20 the cetane value of an aromatic of the same 

21 molecular weight? 

22 For example, I assume it's higher, but I 

23 wonder if you could — 

24 MR. WEINBERG: It is. You mean the cetane 

25 index? 

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value, number. 

MR. WEINBERG: Number. 

MR. GRAY: Its characteristic to 

automatically ignite when you inject the fuel in a 

diesel engine is the cetane number. 

MR. WEINBERG: I don't have the information 

in front of me, but I suspect maybe it is slightly 

higher. 

MR. GRAY: But it's not a major 

factor? 

MR. WEINBERG: I don't think so. 

MR. GRAY: So the product of your 

California refinery, although low in aromatics — 

MR. WEINBERG: No, I wouldn't call it 

particularly low in aromatics. 

MR. GRAY: Could you give me a feel for the 

distillate that comes — 

MR. WEINBERG: I think we measured our 

distillate, and it was around 30, somewhere between 

30, 35 percent aromatic. 

MR. GRAY: Okay. You mentioned earlier in 

your statement that you sometimes have to add cetane 

improvers. 

Is the distillate fairly low cetane-number 

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1 distillate? 

2 MR. WEINBERG: Yes, it is. It's a low 

3 cetane number. It runs 30 to 35, and to meet the 

4 ASTM spec as well as State of California spec it 

5 has to go up to 40 if it's going to be sold for 

6 truck diesel. So we — if we're going to sell it 

7 for truck diesel it has to be sold as 40. 

8 I'm sure there are people that are buying 

9 it and using it for truck diesel without telling 

10 us, but if we know that it's going to go for truck 

11 diesel the only way we can do it is to add cetane 

12 improver. 

13 MR. GRAY: Okay. It seemed like one of 

14 your options that you recommended for consideration 

15 was, though, a control on aromatics. 

16 If your distillate cut is 30, 35, which 

17 you suggest is not low, at least, aromatics, what 

18 type of level would you be suggesting? 

19 MR. WEINBERG: Well, the thing is if we — 

20 you mean on cetane index? 

21 MR. GRAY: No, on aromatics. 

22 MR. WEINBERG: On aromatics? Well, I think 

23 I read in your Federal Register that your aim is to 

24 control aromatics at present levels rather than to 

25 reduce it, don't let it rise up, and if that's what 

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1 your goal is, if — and I didn't comment on it 

2 because it did say that that was the goal, then I 

3 would leave it as it is. You know, it's only 250 

4 barrels per stream day. It doesn't amount to a hill 

5 of beans as far as the total amount of diesel used 

6 in California goes. 

7 MR. GRAY: Of course the principal problem 

8 is a way to apply a regulation that still is 

9 equitable among all the folks that are in the 

10 market, and of course that's why we're trying to 

11 better understand your concern, your issue, and that 

12 leads sort of to a different area of thought. 

13 Considering the size of that distillate 

14 output, why wouldn't it be feasible for you to 

15 market into the off-highway diesel market? 

16 MR. WEINBERG: We do some of that, but we 

17 expect that once your rules go in that market is 

18 going to be flooded. That market — I mean, 

19 everybody's talking about where they're going to 

20 dump their product, and again I'm looking at 

21 economic viability for the entire refinery. 

22 That's certainly, I mentioned, the bunker 

23 market, bunkering ships. That certainly is an 

24 alternative. 

25 There are a number of alternatives that we 

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DOCKET NO. A-86-03 67 

1 have, but there's going to have to be some entry 

2 into the diesel market. 

3 Some of the off-highway markets are under 

4 pressure to buy low sulfur, low aromatic diesel 

5 fuels even though it's not — doesn't come under the 

6 law. 

7 When I talk with buyers in those markets 

8 they have emissions requirements and they're being 

9 told if they use a low sulfur, low aromatic diesel 

10 they'll control their emissions, so that off-highway 

11 market may not continue to be an off-highway market, 

12 and if it is, if it ends up a dumping place it's 

13 going to be an uneconomical market. 

14 MR. GRAY: Wouldn't you think it's more 

15 economical than the bunker? I mean, that would 

16 suggest that off-highway diesel fuel would get 

17 pretty, pretty inexpensive if it's — if everybody 

18 is competing with that market, wouldn't it? 

19 MR. WEINBERG: That's right. 

20 MR. GRAY: Okay. What's going on in 

21 California, the California Air Resources Board? 

22 Certainly they're exploring diesel fuel 

23 and petroleum fuel quality standards. 

24 What's your projection of the action they 

25 might take in this regard? 

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1 Do you see it being compatible with your 

2 concerns, or — 

3 MR. WEINBERG: Well, I'll tell you, I would 

4 like to defer to the next speaker on that, who is 

5 AIRA, a board member of AIRA, who I think is going 

6 to speak more completely on that. He's certainly 

7 more knowledgeable than I am. 

8 MR. GRAY: So in sum your recommendation is 

9 — as I understand it is that there may be two 

10 measures, for example, that the diesel fuel would 

11 have to meet either a cetane index or a maximum 

12 percent aromatics, is that what — 

13 MR. WEINBERG: No, no, I think that you 

14 take either one or the other and impose it. You've 

15 — you can't let certain people in the industry meet 

16 a cetane index and others meet an aromatic, because 

17 it gives an economic advantage to one over the 

18 other. 

19 MR. GRAY: Does it give more of an economic 

20 advantage over the way we propose the rule, which is 

21 a cetane index, though? 

22 MR. WEINBERG: I have not really assessed 

23 what our economic disadvantage will be. It's very 

24 difficult to do that because you're looking at 

25 alternative markets. You're looking at running 

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DOCKET NO. A-86-03 69 

1 different crudes. 

2 I think also you want to — you certainly 

3 want to focus on the alternatives that the other 

4 refiners in California will be facing, those that 

5 can swing between California crude oil, San Joaquin 

6 Valley crude oil and Alaska North Slope, mainly the 

7 people on the coast. They're all going to buy 

8 Alaskan North Slope. 

9 You put a tremendous burden on the harbors 

10 for that, where there's, oh, about eight or nine 

11 small refiners in the LA basin where they draw 

12 substantial amounts of their crude oil from the 

13 San Joaquin Valley by pipeline, they've simply said 

14 that they'll buy ANS through the harbor. You have a 

15 tremendous environmental hazard doing that. 

16 MR. GRAY: Well, notwithstanding that 

17 concern, I'm still trying to probe, you know, what 

18 might be some options that we can consider, because 

19 we do have — as you heard from some of the 

20 just-preceding witnesses, there's a lot of effort 

21 invested in trying to find a means to let us move 

22 forward toward, you know, the diesel engine 

23 standards which has prompted this proposal, and the 

24 cetane index certainly has been strongly supported 

25 by a lot of the representatives of the petroleum 

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DOCKET NO. A-86-03 70 

1 industry, and so at this point in time to totally 

2 abandon that concept in favor of something new would 

3 at minimum delay the final action of this rulemaking 

4 which would impact the heavy-duty engine industry, 

5 et cetera and have environmental implications 

6 potentially. 

7 So what I'm asking basically is if you 

8 could maybe suggest some options, some way of 

9 approaching this that would be reasonably responsive 

10 to your concern without, you know — 

11 MR. WEINBERG: I would propose that anyone 

12 working from San Joaquin Valley crude be allowed to 

13 meet a 30 minimum cetane index. I think that's in 

14 my written proposal. 

15 MR. GRAY: Is there some other way than 

16 cetane index that that could be expressed that maybe 

17 is more responsive to your situation? That's why I 

18 suggested maybe the aromatics level. 

19 Could you also raise that possibility? 

20 MR. WEINBERG: Well, raise the aromatics 

21 level if everyone is on the — if everyone is on an 

22 aromatics basis, because if I am put on a low 

23 aromatics level and everyone else is on a 40 cetane 

24 level they're going to make distillate and I have to 

25 make hydrotreated product, hydrosaturated product. 

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DOCKET NO. A-86-03 71 

1 I'm trying to keep the playing field 

2 level. 

3 MR. GRAY: What about the idea of an option 

4 for a minimum cetane number? 

5 I think California already has a minimum 

6 of 40 cetane number. 

7 MR. WEINBERG: That would be fine, that's 

8 fine, if you want a 40 cetane number, as long as 

9 you understand I'm going to take that product and 

10 improve it with cetane improver. 

11 MR. GRAY: What's your judgment of the 

12 implication that that might have if there were an 

13 option of a minimum of 40 cetane index or a minimum 

14 of 40 cetane value number? Do you think that would 

15 result in an increase in aromatic level of diesel 

16 fuel?. 

17 MR. WEINBERG: No. I think the aromatic, 

18 you know, the aromatic level is a function of the 

19 crude oil, and in our case at least I don't know — 

20 you know, other people have options on crude oil. 

21 My crude oil is going to come from the San Joaquin 

22 Valley no matter what you do, and there is a certain 

23 aromaticity in that crude oil, and it's going to 

24 stay the same day after day. 

25 MR. GRAY: I understand your situation. 

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So you really don't have a sense of what 

that might do to overall diesel fuel aromatic levels? 

MR. WEINBERG: No, I think each company 

produces differently and you'd really have to find 

out what each company is going to do. 

MR. ANDERSON: Maybe you've already 

answered this question, but if you had an option, 

being either the cetane index or an aromatics that 

— I think the level we said, current level is 

around 35, meet either specification, would that 

similarly meet your need? 

MR. WEINBERG: It depends, of course, what 

the numbers are. 

MR. ANDERSON: Well, if it was around the 

35 range? I don't know what it would be, but that's 

I think in the neighborhood of current numbers that 

we've been dealing with. 

MR. WEINBERG: Around a 35 range, that 

probably would. I would want the chance to review 

our lab data on that and make a further comment. 

Just off the top of my head that might do it. 

Again, I go back to what it said in the 

Federal Register. You were not looking to reduce 

aromatics as much as you were to capping it. 

MR. ANDERSON: But if we provide an 

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DOCKET NO. A-86-03 73 

1 alternative to people it's got to be something 

2 similar to an average level so we don't find 

3 everybody moving up to some higher level, or it 

4 might have to be even lower than that. It's not 

5 something we really thought about yet. 

6 Maybe you can give us some more comment in 

7 that area in your final comments. 

8 MR. WEINBERG: Okay. As I said, I'll have 

9 to review some laboratory data in order to put a 

10 final comment on that. 

11 MR. ANDERSON: Probably we'd also be 

12 interested in hearing from API and other interested 

13 parties on these kinds of options, too. 

14 MR. HOOVER: Since your output in terms of 

15 diesel fuel seems to be fairly small, and you 

16 identified that, does most of it or all of it go 

17 towards on-road diesel fuel at this time? 

18 MR. WEINBERG: Most of it right now goes 

19 for off-road. 

20 MR. HOOVER: Oh, okay. Because I guess I 

21 was under the impression, obviously incorrectly, 

22 that most of it was on-road, and I was curious about 

23 how you would perceive the dyeing of that from a 

24 control standpoint being done at the refinery. 

25 MR. WEINBERG: Dyeing and segregating is 

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DOCKET NO. A-86-03 74 

1 absolutely no problem for us because we're a lube 

2 oil refinery. We have a zillion tanks and our 

3 business is making specialties, so that isn't a 

4 problem at all. 

5 I'm only looking at the — to answer your 

6 question more fully, I look for the off-highway 

7 diesel market to become a sloppy market, a terrible 

8 market as people dump into it in order to avoid the 

9 on-highway rules. So our strategy is to move into 

10 the on-highway market. 

11 MR. GRAY: Okay. Thank you very much. 

12 The American Independent Refiners 

13 Association is next. 

14 

15 MR. MOYER: Good morning. My name 

16 is Craig Moyer. I am General Counsel to the 

17 American Independent Refiners Association. 

18 AIRA is pleased to to have the opportunity 

19 to submit these comments. 

20 As you can see, I've also handed out 

21 written comments. 

22 AIRA is a national trade association made 

23 up of small and independent refiners. It is the 

24 only national trade association which speaks 

25 exclusively for small and independent refiners. 

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1 The Notice of Proposed Rulemaking regarding 

2 this matter and testimony you have heard today 

3 referred to a landmark initiative in which members 

4 of the diesel engine manufacturing and petroleum 

5 industries submitted a joint proposal for on-highway 

6 diesel fuel modification to the Environmental 

7 Protection Agency. 

8 AIRA wishes to make it clear that all of 

9 the elements of this joint proposal are not 

10 supported by all members of the petroleum refining 

11 industry. 

12 My comments today will briefly discuss the 

13 importance of small refiners to the consumer and to 

14 our economy. I'll then discuss the significant 

15 adverse impact of the proposed regulations to small 

16 refiners, and finally I will set forth AIRA's 

17 proposal for a three-year extension beyond the 

18 October 1, 1993 deadline for compliance by small 

19 refineries with the sulfur content aspect of the 

20 proposed rulemaking. 

21 It is our belief that this three-year 

22 extension for small refiners would achieve 

23 substantially all of the air quality benefits sought 

24 by the EPA without implementing measures that would 

25 eliminate many small refiners from the diesel fuel 

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DOCKET NO. A-86-03 76 

market. 

Unlike major oil companies, small refiners 

do not have access to substantial amounts of funds. 

A credit line of a small refinery is almost always 

fully utilized.just to purchase crude oil and to 

keep up with day-to-day requirements. 

Accordingly, even if small refiners 

attempt to retrofit their refineries so that they 

can achieve the specs in the Notice of Proposed 

Rulemaking they may be unable to obtain the 

financing to pay for such changes. 

In light of the unavailability of credit 

these refineries would have to shut down since they 

do not have sufficient retained earnings or 

alternative means to undertake the substantial 

costs which will be a part of any proposal to change 

diesel fuel specifications. 

If, however, a small refiner can show that 

it would not be economically disadvantaged and 

instead would be able to pass through the costs of 

the refinery modifications necessary to achieve the 

standards of a rule on diesel fuel specifications it 

might be possible to persuade a financial 

institution to provide the necessary financing. 

This is why we seek regulations which will 

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DOCKET NO. A-86-03 77 

1 not put small refiners at an economic disadvantage 

2 compared to large refiners. In any case, the 

3 financing process generally will take longer for 

4 small refiners than for large refiners. 

5 Diesel fuel is a particularly important 

6 product to most small refiners. As a primarily 

7 straight-run product, motor vehicle diesel fuel does 

8 not require a high level of refinery complexity and, 

9 therefore, historically has been an extremely 

10 important part of each small refiners product slate. 

11 Accordingly, the small refiners who are 

12 forced out of the diesel fuel business may be forced 

13 out of the refining business altogether. 

14 The Federal Trade Commission and the 

15 Attorney General of California have acknowledged the 

16 important influence of small and independent 

17 refiners in mitigating the anti-competitive effects 

18 of concentrating the supply of petroleum products in 

19 the hands of just a few companies. 

20 As the Federal Trade Commission found in 

21 its September 1982 study entitled Mergers in the 

22 Petroleum Industry, the independent refiners provide 

23 assurance that the market will continue to behave 

24 competitively by virtue of their selective presence 

25 in the market. They act as a check on the ability 

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DOCKET NO. A-86-03 78 

1 of major integrated oil companies to manipulate the 

2 price and supply of various petroleum products 

3 including diesel fuel, thus exerting a strong 

4 downward pressure on petroleum prices to the benefit 

5 of consumers. 

6 Although each small refiner individually 

7 represents a small share of the market, cumulatively 

8 their influence is substantial and decidedly 

9 pro-competitive. For example, in California small 

10 refiners produce about 15 percent of the diesel fuel 

11 sold, a substantial amount of the gasoline and 

12 military jet fuel sold, virtually all the asphalt 

13 sold in southern Colorado and 50 percent of the 

14 asphalt sold in northern California. 

15 Nationally independent refiners supply 50 

16 percent of all defense fuel needs of defense fuel 

17 supply center facilities. 

18 As to other products nationally we would 

19 estimate about 15 to 20 percent of fuels are 

20 supplied by small and independent refiners. 

21 As shown on the overhead Scott's about to 

22 put up here, in recent times small refiners have 

23 been decimated by unprecedented bankruptcy and 

24 departures from the marketplace. 

25 The data you see here is subsequent to 

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elimination of the Entitlements Program which got 

rid of a lot of the uneconomic small refineries and, 

therefore, compensates for the Entitlements Program. 

Notwithstanding that compensation, the 

number of small refiners has continued to decline 

over time until today, when they represent about 

9.3 percent of the national refining capacity. 

Congress and the EPA previously have 

repeatedly acknowledged the importance of small 

refiners in the marketplace. That precedent will be 

discussed briefly later. 

I would urge today that nothing has 

occurred which would alter that conclusion. If 

anything, the pro-competitive impact of the 

small refiners is more important to consumers now 

than at any time in the past because of continuing 

concentrations of petroleum supply. 

As large oil companies trade operations 

and acquire reserves, regional concentration of 

supplies is increasing. Now this regional 

concentration is occurring even though perhaps on a 

national level market share may not change much. 

As this local and regional concentration 

increases the pro-competitive impact of the small 

refiner becomes even more important. 

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DOCKET NO. A-86-03 80 

1 Regional refiners also serve nearby markets 

2 and generally have a local source of raw material. 

3 Individually these refiners serve local, 

4 specialty markets with minimal transportation costs 

5 on both crude oil and products. Each has its own 

6 niche and economic situation which is difficult to 

7 address in the aggregate. 

8 Processing local crude oils to supply 

9 local markets clearly provides a competitive 

10 advantage in transportation costs compared to 

11 shipping crude oils to distant refining centers and 

12 then shipping products back. 

13 Generally designed in the oil fields to 

14 process indigenous production, regional refineries 

15 may have special processing capabilities that 

16 provide greater economic upgrading capabilities for 

17 the particular crude oils being processed than 

18 would be feasible after commingling such crude oils 

19 for shipment elsewhere. 

20 Also, since they can be designed for a 

21 specific crude oil mix capital costs can be 

22 minimized, as you heard from Mr. Weinberg 

23 previously. 

24 Proximity to the market served may provide 

25 the regional refinery with competitive advantage in 

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DOCKET NO. A-86-03 81 

1 identifying and supplying unusual local product 

2 demands and should provide an advantage in 

3 responding more rapidly to changing local market 

4 conditions. 

5 In summary, then, small refiners are 

6 important for both their impact individually as 

7 regional refineries serving local and specialty 

8 markets and in the aggregate for their ability to 

9 control a large enough cumulative share of the 

10 market to insure that competitive forces can work. 

11 But not only is there a consumer-oriented 

12 reason for encouraging the continued existence of 

13 small refiners, but also an air quality rationale. 

14 On a barrel-per-barrel basis, small 

15 refiners as stationary sources generally emit less 

16 pollutants than large refineries. 

17 For example, small refineries are 

18 generally more efficient at controlling NOx 

19 emissions than large refineries based on a 

20 throughput of a barrel of oil because they do less 

21 downstream processing than large refineries. 

22 In order to compare refineries of 

23 different sizes they must be reduced to some common 

24 basis of comparison. 

25 I'd like to show you the next overhead, 

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DOCKET NO. A-86-03 82 

1 which summarizes data for refineries in the south 

2 coast air basin in southern California, showing 

3 crude oil throughput NOx emissions and a NOx control 

4 efficiency factor for large refineries, which is 

5 defined here as more than 50,000 barrels a day, 

6 simple topping refineries, many of which make mostly 

7 asphalt, and more complex small refineries. 

8 The lower the NOx controlled efficiency 

9 factor, the less NOx emissions per barrel of crude 

10 oil throughput. 

11 Therefore, the lower the number in that 

12 third column, the better. 

13 As you can see from this overhead, which 

14 relies exclusively on data from South Coast Air 

15 Quality Management District documents, small 

16 refineries in that basin almost uniformly emit 

17 less NOx per barrel than refineries owned by major 

18 oil companies. 

19 Now although I've based this document on 

20 refineries in the south coast air basin, I have done 

21 that because the data is readily available from the 

22 district, which has done a tremendous amount of data 

23 gathering. 

24 The conclusion, however, is applicable to 

25 refineries nationwide. Small refineries are 

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DOCKET NO. A-86-03 83 

generally more efficient at controlling NOx 

emissions because they do less downstream processing 

than large, complex refineries. 

We believe this factor viewed along with 

the important pro-competitive impact of small 

refiners more than justifies a regulatory scheme in 

which the small refiners would not be competitively 

disadvantages vis-a-vis large refiners. 

The small refiners acknowledge their 

obligations as good corporate citizens to do 

whatever they can to assist in improving air 

quality. 

I'd like the opportunity to continue 

working with your staff to construct a regulatory 

scheme where the air quality benefits sought by this 

proposed regulation are substantially achieved 

without placing small refiners at an unbearable 

economic disadvantage compared to large refiners. 

We believe the three-year extension we 

have proposed accomplishes these goals. 

Our proposals involve a great deal of 

sacrifice for the small refiners. What we have 

tried to accomplish is a regulatory scheme where the 

air quality benefits sought are substantially 

achieved without causing small refiners to curtail 

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DOCKET NO. A-86-03 84 

1 or cease operations. 

2 In the Preamble to the Notice of Proposed 

3 Rulemaking EPA states that the proposal, quote, 

4 should not have, close-quote, a significant impact 

5 on a substantial number of small refineries. 

6 In this regard EPA states its assumption 

7 first that the cost per gallon of sulfur removal is 

8 generally the same for both small refineries and the 

9 industry as a whole and, second, that some small 

10 refineries unable to comply with the regulation will 

11 find alternative off-highway use for their diesel 

12 fuel. 

13 I would urge you today to reconsider these 

14 conclusions and the assumptions on which they are 

15 based as unsupported by the facts. 

16 It appears that these conclusions are 

17 based on the Sobotka Company report titled Cost and 

18 Feasibility of Lowering Diesel Fuel Sulfur and 

19 Aromatic Content, Impact on Small Refiners, which 

20 I'm referring to today as the Draft Report. 

21 That Draft Report, however, provides that 

22 its analysis, quote, will provide the initial basis 

23 for a review of the special situation of small 

24 refiners. 

25 The Draft Report also acknowledges that 

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DOCKET NO. A-86-03 85 

its conclusions may grossly underestimate the impact 

on small refiners. 

A similar effort to determine cost in the 

State of California which has already visited this 

issue, as you're well aware, shows costs between 

13.6 cents per gallon and 17.5 cents per gallon for 

small refiners to reduce the sulfur content of 

diesel fuel to .05 percent by weight. 

The variation depended upon the survey and 

the assumptions used in that survey. 

Even at the low end, however, 13.6 cents 

per gallon, that's several times more than the 

one to two-and-a-half cents per gallon estimated for 

the industry as a whole to obtain equivalent 

reductions in sulfur content. 

Other commenters and our association will 

submit in writing more detail on the Draft Report 

and on the impact of the proposed regulation on 

small refiners. 

In summary, however, data presented to EPA 

in the Draft Report and in NPRA's 1986 survey 

entitled US Refining Industry Capability to 

Manufacture Ultra Low Sulfur Diesel Fuels indicates 

clearly that all of the refineries which are topping 

refineries and some unspecified but potentially 

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DOCKET NO. A-86-03 86 

1 large portion of the remaining small refiners may be 

2 unable to comply with the proposed regulation. 

3 In a situation such as this, where 

4 regulation would impose a disproportionate burden on 

5 one segment of an industry, the Regulatory 

6 Flexibility Act requires that EPA examine the 

7 impacts of its regulations on small entities and 

8 consider whether the goals of the regulation can be 

9 achieved by a means that does not have an adverse 

10 economic impact on a substantial number of small 

11 entities. 

12 Since a large number of small refineries 

13 would suffer a substantial adverse economic impact 

14 from the regulation of sulfur in diesel fuel, EPA 

15 must examine this impact before adopting any such 

16 regulations. 

17 Nothing in the Notice of Proposed 

18 Rulemaking or in the underlying documentation meets 

19 the statutory requirement. 

20 Neither does it satisfy the Regulatory 

21 Flexibility Act to allege as EPA does in its Notice 

22 of Proposed Rulemaking that those refineries which 

23 may be unable to comply with the proposed 

24 requirements, quote, should be able to shift their 

25 product slates to meet off-highway distillate needs 

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DOCKET NO. A-86-03 87 

1 in their geographic area, close quote. 

2 There is no information in the Docket on 

3 the actual ability of small refiners to find 

4 alternate markets. 

5 As previously indicated in these comments, 

6 many small refiners are niche refineries of regional 

7 importance and are unable to find alternate markets 

8 quickly, if at all. 

9 We'll hear from just a few of these 

10 regional refiners today. Others will submit 

11 written comments on their own particular situations, 

12 detailing the difficulty of finding those 

13 alternative markets economically. 

14 In fact, however, data available to EPA 

15 indicates that its proposal would result in an 

16 unachievable quantity of on-highway diesel fuel 

17 being forced into the off-highway market. 

18 Data presented to EPA in the NPRA study 

19 — or survey, rather, indicates that 37 of the 

20 plants that were surveyed representing 17 percent of 

21 the diesel fuel capacity in the United States would 

22 be unable to comply with the proposed regulations. 

23 These facilities and others not included within the 

24 NPRA survey would be attempting to find off-highway 

25 markets for their diesel product. 

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DOCKET NO. A-86-03 88 

1 Although EPA states that they should be 

2 able to find alternate markets, this hope is 

3 unsupported by any data showing that the market can 

4 accommodate this tremendous influx of product and 

5 provide an adequate return to the refineries. 

6 It must be remembered that approximately 

7 70 percent of the market for home heating oil, a 

8 major portion of the off-highway diesel market, is 

9 in the northeast. 

10 EPA to my knowledge has no data showing 

11 that refineries in the western or southern areas of 

12 the United States will be able profitably to find 

13 alternative markets for their product. 

14 We turn now to our proposal, then, for how 

15 to resolve this difficulty. 

16 I would urge that EPA grant to small 

17 refiners at least three additional years beyond the 

18 deadline imposed for large refiners to meet the 

19 reduction of diesel fuel sulfur content to the level 

20 of 500 parts per million by weight. 

21 This extra time is necessary for existing 

22 small refiners to obtain financing either 

23 individually or cooperatively to obtain required 

24 environmental and construction permits, and to 

25 engineer, finance and construct necessary processing 

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DOCKET NO. A-86-03 89 

1 units. 

2 During the three-year extension period all 

3 of the diesel fuel not produced by small refiners 

4 would be subject to the 500 parts per million 

5 by weight standard. 

6 The implication of the Draft Report is that 

7 small refiners account for only approximately 

8 8.5 percent of the total refined on-highway diesel 

9 fuel. 

10 We do not have detailed data on each small 

11 refiner's production. Conservatively, however, I 

12 would estimate that substantially less than 20 

13 percent of the diesel fuel sold during this 

14 three-year period would be subject to the exemption 

15 that we propose. 

16 Accordingly, it is clear that during the 

17 proposed three-year extension only a small 

18 percentage of fuel would be exempted from the ultra 

19 low sulfur requirement. After the three-year period 

20 100 percent of the highway diesel fuel sold would be 

21 subject to the 500 parts per million by weight 

22 standard. 

23 Thus, EPA could secure substantially all 

24 the air quality benefits sought without placing the 

25 continued existence of a large number of small 

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DOCKET NO. A-86-03 90 

1 refiners in jeopardy. 

2 There's a great deal of precedent for 

3 separate treatment of small refiners — or smaller 

4 entities in general, and small refiners in 

5 particular. 

6 We've written, and other commenters have 

7 written in detail, and so I won't discuss or revisit 

8 that issue here. 

9 Some examples of separate treatment are 

10 set forth on the overhead that you're looking at, 

11 however. 

12 The Regulatory Flexibility Act which I 

13 briefly touched upon, EPA previously had an 

14 exemption for small refiners for the lead reduction 

15 requirement. Even thereafter there was subsequent 

16 EPA regulations on lead reduction. The Clean Air 

17 Act itself in Section 2 (11)(g) discusses the lead 

18 requirement, Emergency Petroleum Allocation Act, the 

19 — there's just so many of them I could go on and 

20 on. 

21 The point here is that there is ample 

22 precedent both from Congress, from the Agency and 

23 from perhaps the strictest state in the nation on 

24 air quality standards, California, for a small 

25 refinery bias. Each of these entities has 

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DOCKET NO. A-86-03 91 

1 acknowledged the importance of small refiners, the 

2 importance of maintaining their presence in the 

3 marketplace, and made some accommodation for them. 

4 I would also urge you that the Regulatory 

5 Flexibility Act not only authorizes such separate 

6 treatment but requires EPA to support any 

7 determination not to provide separate treatment with 

8 detailed evidence and findings, which based on the 

9 record to date EPA cannot make. 

10 Nor can it be claimed that a small refinery 

11 exemption would prevent engine manufacturers from 

12 achieving the 1994 heavy-duty diesel emissions 

13 standards. Certification still would be on the 

14 ultra low sulfur diesel for diesel fuel. 

15 Moreover, small refiners make up so little 

16 of the market that it is unlikely most truckers 

17 would be exposed to much high sulfur diesel fuel at 

18 all after 1993. 

19 In any event, many diesel fuel suppliers 

20 blend on-highway diesel fuel with either jet fuel or 

21 kerosene, No. 1 diesel fuel, at high elevations 

22 during winter to improve pour point and/or cloud 

23 specification. There is no requirement to reduce 

24 the sulfur content of this blending fuel. 

25 In fact, in the California Air Resources 

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DOCKET NO. A-86-03 92 

1 Board regulation on this matter, for example, such 

2 blends were exempt from the 500 parts per million by 

3 weight sulfur content standard. 

4 Thus, it cannot be legitimately claimed 

5 that exposure to occasional tanks of diesel fuel 

6 containing in excess of 500 parts per million sulfur 

7 will permanently defeat the emission control 

8 mechanisms of the engine manufacturers. 

9 I'd like to make two brief final points not 

10 specifically related to the plight of small 

11 refiners. 

12 First, AIRA and its members are seriously 

13 concerned about the aspect which would require 

14 distinguishing highway diesel fuel from off-highway 

15 diesel fuel use by use of a colored dye. 

16 We would support the comments of the 

17 independent terminal operators in this regard that 

18 dyeing be done at the terminal level. 

19 Finally, I'd like to discuss expedited 

20 permitting. Although we've sought here today only a 

21 three-year extension, small refiners are extremely 

22 concerned about the difficulty of obtaining permits 

23 for construction of the units necessary to make low 

24 sulfur diesel fuel. 

25 For example, cities and local sanitation 

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DOCKET NO. A-86-03 93 

1 districts must approve plans before these units may 

2 be constructed. 

3 Often the regulatory agencies are hostile 

4 to refiners. Accordingly, permitting of changes to 

5 existing refineries has become a major undertaking 

6 in both time and expense. 

7 We're particularly concerned about the 

8 ability and willingness of the Air Pollution Control 

9 districts in non-attainment areas to issue permits 

10 timely to construct the units needed to comply with 

11 the proposed rulemaking. 

12 Accordingly, we'd urge that language be 

13 included in the proposed regulation requiring the 

14 local agencies to expedite review of permit 

15 applications. 

16 If the permits to construct or permits 

17 required by other agencies cannot be timely issued 

18 despite due diligence by the companies seeking 

19 permits, the applicable deadline should be extended 

20 until permits can be obtained and units can be 

21 built. 

22 I will again take the opportunity to thank 

23 you for allowing us to present these comments. 

24 We think that we've worked very hard to 

25 propose a regulatory scheme that will result in 

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DOCKET NO. A-86-03 94 

1 substantial improvements in air quality without 

2 implementing measures that unfairly disadvantage one 

3 sector of the affected industry. 

4 I would be happy to respond to any 

5 comments or questions you have at this time, 

6 gentlemen. 

7 MR. GRAY: Thank you for your statement. 

8 Let me first ask what your definition of 

9 small refinery is. 

10 MR. MOYER: There's ample precedent for a 

11 definition of small refiners. We have not addressed 

12 that in our comments and would leave it to the 

13 Agency's discretion. 

14 Previously the Agency has used a 50,000 

15 barrel a day number with — that's by refinery, and 

16 no more than 175,000 barrels in total capacity. 

17 I should mention that very few of our 

18 members have more than one refinery, but I think if 

19 you look at a less than 50,000 barrel a day refinery 

20 that number works very well. 

21 MR. GRAY: Do you have any idea of what 

22 percentage of the diesel fuel or distillate would 

23 come from refineries that are less than 50,000 

24 barrels per day? 

25 MR. MOYER: Well, the first overhead I 

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DOCKET NO. A-86-03 95 

showed you shows nine percent. The number I used in 

my comments are less than 20. I suspect it is a lot 

closer to nine percent. It might be slightly above 

nine percent since some of the larger refineries — 

that is nine percent being the total refining 

capacity in the country that represents small 

refiners, assuming that all refineries have more or 

less equivalent diesel fuel production. You look at 

9.3, you're looking at nine percent. 

I suspect that small refiners have a 

greater portion of their capacity devoted to 

the motor vehicle diesel fuel market than some of 

the larger refineries and, therefore, it might be 

somewhat above nine percent, but certainly less than 

20. Probably somewhere between 10 and 15 percent. 

That's based on what we've done in 

California. 

MR. GRAY: The previous witness spoke of 

the cetane index as being the limiting factor, not 

the sulfur level. 

Could you give us a better sense of how 

that might vary among the member companies? 

MR. MOYER: It varies tremendously. I 

think the issue that the previous speaker addressed 

was a unique type of feedstock which led to a 

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DOCKET NO. A-86-03 96 

1 particular problem for their facility. That 

2 obviously is a problem with anyone who runs San 

3 Joaquin crude oil. 

4 I think that, however, there are others 

5 who run non-naphthenic crude oils or low naphthenic 

6 crude oils who don't have any kind of problem with . 

7 cetane index and yet may have a relatively high 

8 aromatic content by FIA or some other standard. 

9 MR. GRAY: What about the sulfur, though, 

10 more specifically? Do you have a feel for what, 

11 you know, what fraction of your companies would — 

12 you know, are limited by the sulfur level as opposed 

13 to the cetane? 

14 MR. MOYER: You mean how many people have 

15 desulfurization capacity today, you're asking? 

16 MR. GRAY: How many? 

17 MR. MOYER: Hydrotreating capacity? 

18 MR. GRAY: How many could comply with the 

19 sulfur requirement but not the cetane index or 

20 aromatic level? 

21 MR. MOYER: Very few. Most of the other. 

22 Exactly the opposite. Most cannot comply with the 

23 sulfur content but could readily meet a 40 cetane 

24 index. 

25 MR. GRAY: So you think the previous 

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DOCKET NO. A-86-03 97 

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speaker represented a very special circumstance in 

representing very minimal — 

MR. MOYER: Certainly not unique, but 

somewhat limited. 

MR. GRAY: Earlier I think maybe Mr. 

Buckley mentioned potential for a 1.5 percent level. 

Do you have a comment on that? 

MR. MOYER: That really doesn't do much 

good for our small — the smaller refiners since 

most of them to get down to a 1.5 would still have 

to install desulfurization equipment. 

If you're going to install desulfurization 

equipment we'd much prefer to see a three-year 

extension on that requirement rather than some type 

of a phase-in or immediate reduction to some lower 

number between current levels and .05. In for a 

penny, in for a pound. 

MR. GRAY: What fraction of your members 

are in California? 

MR. MOYER: More than half of our members 

are in California. 

MR. GRAY: You had mentioned that 

California had provided special treatment for small 

refineries. 

Have they begun a process to phase that 

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DOCKET NO. A-86-03 98 

out with respect to their — 

MR. MOYER: Not that I'm aware of. I think 

I'd be — no, there is a — perhaps what you're 

referring to is, there was a three-year extension in 

the south coast air basin in Ventura County, there 

was a three-year extension to go down to the .05 

level, and that ended as of January 1 of this year, 

but that — many of our members, even those in the 

south coast air basin still have a lot of the air 

basin market to which they can supply. That's a 

substantial amount of the market available to our 

California refiners. 

MR. GRAY: And you're not — 

MR. MOYER: However, I should mention 

there is a statewide level also, state, a new state 

regulation governing both aromatics content and 

sulfur content to impact sulfur content statewide. 

Both of those have small refinery — treat small 

refiners separately from large refiners as well. 

MR. GRAY: And how do they treat small 

refiners? 

MR. MOYER: For the small refiners they 

have a permanent higher level of aromatics. The 

large refiners are required to reduce aromatic 

content to 10 percent by October 1, 1993 or achieve 

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p.1 

DOCKET NO. A-86-03 99 

1 some alternative fuel spec; in other words, show 

2 that their emissions from their fuel are equivalent 

3 or better than a reference fuel, and the small 

4 refiners have a 20 percent level, twice as much, and 

5 also a slightly higher reference fuel 

6 specification. 

7 Turning to the sulfur content, they have a 

8 full year extension until October 1, 1994 to get 

9 to the .05 level in the State of California. 

10 MR. GRAY: What is unique about the members 

11 outside of California then that would suggest they 

12 need an additional two years? 

13 MR. MOYER: Well, I'm not sure that it's 

14 unique to the out-of-state refineries. Many — I 

15 think we came up with something like 30 percent of 

16 the diesel fuel which is refined in the State of 

17 California goes out of the state. That means that 

18 our small refiners, even if they choose in that year 

19 to make the changes and still have some out-of-the 

20 state market for an additional couple of years, 

21 this proposal would not only preempt the 

22 CARB regulation which obviously causes problems to 

23 our California members but also eliminate the 

24 out-of-state market for California refiners and 

25 impact the east-of-the-Rockies members as well. 

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DOCKET NO. A-86-03 100 

1 MR. HOOVER: Actually I have a couple 

2 questions and a comment. In your statement you make 

3 the comment particularly with respect to blending 

4 diesel fuel and jet fuel that there's no 

5 requirements on sulfur content; I think that's 

6 probably incorrect. 

7 The proposed regulations apply to sulfur 

8 limits to anything that's sold, dispensed, offered 

9 for sale, transported and all the rest of the levels 

10 that are contained in the proposed regulation, 

11 and that would include any fuel that was blended. 

12 So the regulations as proposed do not contain any 

13 waiver, you might say, for blends of kerosene and 

14 No. 2 diesel fuel. 

15 The same standards would be applicable to 

16 that fuel at any point in the distribution chain as 

17 the regs are currently proposed. 

18 MR. MOYER: Let me, if I may, respond to 

19 that. That's news to me. That is not the way 

20 that I interpreted the regulation, and as I 

21 mentioned before that is different from the way the 

22 California Air Resources Board looked at that issue, 

23 and I don't know whether NPRA addressed that issue 

24 with you or not. 

25 MR. HOOVER: I'm aware that that's how 

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DOCKET NO. A-86-03 101 

1 California has interpreted it, and they're aware 

2 that's not how we're interpreting it because it 

3 clearly requires that the fuel at all levels meet 

4 the same standard. There's no difference in terms 

5 of — if you take a sample at a retail facility it 

6 has to meet the .05 regardless of where it came 

7 from if it's being sold as on-highway diesel fuel. 

8 And relative to some of the suggestions 

9 you make on enforcement strategies, one of them is 

10 to have the — I guess the end user certify how he 

11 plans to sell the fuel. 

12 If you had that sort of system would you 

13 still have the refiners remain liable for misuse or 

14 misselling of that fuel? 

15 MR. MOYER: Certainly. 

16 MR. HOOVER: And another I guess question 

17 really from an enforcement standpoint, if the 

18 regulations are promulgated as they're proposed, 

19 where there was a requirement that fuel at all 

20 levels meet the appropriate sulfur standard, and if 

21 a small refinery exemption was made and they could 

22 produce a higher sulfur content fuel, how would you 

23 foresee EPA being able to enforce the standard 

24 nationwide when I presume that that small-volume 

25 - fuel would probably end up commingled at some point 

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DOCKET NO. A-86-03 102 

1 downstream in terms of the Agency being able to 

2 define liability or to trace who may have actually 

3 violated the standards, particularly since you 

4 recommend against dyeing of fuel? 

5 MR. MOYER: Well, let me backtrack and say 

6 that I don't recommend against dyeing the fuel if 

7 you agree that — if you would agree that the 

8 independent terminals' position is correct and that 

9 you decide not to dye at the refinery. If you then 

10 decide to dye the fuels someplace after the refinery 

11 you don't have nearly the problem with dyeing. 

12 Secondly, if we get down to the point 

13 where the only issue is enforcement I'll be happy to 

14 suggest to you some of the strategies. 

15 Let me just tell you here briefly that it 

16 has not been a problem. We would be happy to test 

17 all the material that we have, tell you who are the 

18 people that we're selling it to. When you find a 

19 noncompliant fuel, it will not be at all difficult 

20 to trace back the suppliers of that fuel, and we'd 

21 be happy to provide batch testing on fuels or 

22 whatever is necessary to comply. 

23 As I say, if that's the only remaining 

24 hurdle, let's jump on it. 

25 MR. HOOVER: Are the fuels produced by 

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DOCKET NO. A-86-03 103 

1 these small refiners just generally introduced into 

2 the distribution system and commingled with the 

3 products? 

4 MR. MOYER: I suspect not. I think you're 

5 going to find it's sold to a -- sometimes, yes, 

6 certainly that will happen, but often times it is 

7 sold to a particular terminal operator for 

8 distribution to a particular fuel marketer and is 

9 not commingled except perhaps in the tank of the 

10 truck. 

11 MR. HOOVER: So it sounds like there would 

12 be the possibility that under that scenario you 

13 could end up with, shall we say, areas around small 

14 refineries where the heavy-duty diesel engines there 

15 may be subject to higher sulfur levels under that 

16 exemption almost exclusively. 

17 MR. MOYER: I don't know of anywhere where 

18 the — even in regional refineries where you might 

19 find a higher level, anywhere where you would find 

20 such a penetration that you would find most of the 

21 diesel fuel more than high sulfur diesel fuel 

22 — let's call it higher sulfur diesel fuel. I don't 

23 think anywhere, even our regional refineries have 

24 that type of market penetration. 

25 MR. HOOVER: Okay. 

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DOCKET NO. A-86-03 104 

1 MR. GRAY: Would you see it feasible to 

2 during the transition period as you suggest have the 

3 higher sulfur diesel fuel maybe dyed a different 

4 color and intentionally kept segregated? 

5 That would impose certainly some 

6 additional cost, but it, you know, it might 

7 facilitate the enforcement concerns. 

8 MR. MOYER: In all candor, Charles, I 

9 haven't thought about that, how that would play. I 

10 certainly don't think a different color of dyeing is 

11 going to be a problem, that's fine, keeping it 

12 segregated. Through the whole — down through the 

13 whole stream that might be a problem. That might be 

14 a problem. 

15 MR. GRAY: That's the major uncertainty, I 

16 guess. Then it really relates back to the nature of 

17 the small refineries that are most — that would be 

18 most impacted and whether or not, you know, 

19 realizing the effort to try to address the concern, 

20 you know, whether or not that might be one 

21 way of dealing with it, representing some, some 

22 greater compromise than just the general 

23 exemption, but — 

24 MR. MOYER: It beats a sharp stick in the 

25 eye. 

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DOCKET NO. A-86-03 105 

1 MR. GRAY: Maybe you could have that 

2 further pursued. 

3 MR. MOYER: I'll be happy to do that with 

4 my members. 

5 MR. GRAY: Thank you very much for your 

6 comment. 

7 We have an important decision to make I 

8 think about now. We have five additional 

9 organizations that have expressed interest in 

10 providing testimony. It's approaching 12:30. We 

11 can break now and come back and finish up or we 

12 might find ourselves another couple hours away from 

13 lunch if we stay with it. 

14 Do we have a preference? 

15 UNIDENTIFIED SPEAKER: Stay with it. Keep 

16 going. 

17 MR. GRAY: Does anyone strongly prefer a 

18 normal lunch break? 

19 UNIDENTIFIED SPEAKER: The attention span 

20 would be improved, any break. 

21 MR. GRAY: Should we take a 15 minute break 

22 and come back; is that the consensus of the group? 

23 Let's break for 15 minutes then; it seems 

24 to be the broad consensus. 

25 

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DOCKET NO. A-86-03 106 

1 (A recess was taken from 12:25 to 12:55 p.m.) 

2 MR. GRAY: As soon as everyone can take 

3 their seat we'll begin again with Huntway Refining. 

4 

5 MR. PIATEK: Good morning. My name is 

6 Steve Piatek. 

7 I am the Environmental Manager of Huntway 

8 Refining Company. I'm here representing Sunbelt 

9 Refining Company, which Huntway is a general partner 

10 of. 

11 Sunbelt is a small independent regional 

12 refinery located in Coolidge, Arizona. Its facility 

13 refines approximately 15,000 barrels per day, and it 

14 produces approximately 2,800 barrels of diesel per 

15 day. 

16 Sunbelt would like to express its support 

17 for the American Independent Refiners Association 

18 testimony. 

19 I have prepared written comments which I 

20 have passed out today. However, I'd like to focus 

21 my oral testimony on one aspect of the EPA's 

22 regulatory analysis. That aspect deals with topping 

23 facilities. Sunbelt is such a facility. 

24 In EPA's regulatory analysis you assume 

25 that all refineries in the topping category would 

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DOCKET NO. A-86-03 107 

have to enter the off-highway diesel market. This 

alternative is not practical for many regional 

facilities or refiners, particularly those in the 

west where there is a small off-highway market. 

Because of our location Sunbelt must — 

needs access to the highway market in order to sell 

its products. 

We are hoping to install the necessary 

equipment to meet the sulfur standard. However, we 

cannot do it under the proposed regulatory 

framework. 

We request that you strongly consider the 

three-year compliance extension as requested by 

AIRA. 

Thank you. 

MR. GRAY: Okay. That was a quick summary. 

MR. PIATEK: I figured you didn't want to 

hear all of it again. 

MR. GRAY: Okay. How large is your 

refinery? 

MR. PIATEK: 15,000 barrels. We have three 

refineries, two in California from which we sell our 

distillate to majors for reprocessing, and an 

Arizona facility, and due to its location we have to 

use the highway market. 

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DOCKET NO. A-86-03 108 

1 MR. GRAY: All three of the refineries are 

2 about the same size? 

3 MR. PIATEK: 10,000 and 15,000 barrels a 

4 day. They're principally asphalt facilities. 

5 MR. GRAY: Do you see any other options 

6 available in a situation such as yours other than 

7 the one you've recommended, which is to allow you 

8 for a three-year period to continue to put high 

9 sulfur diesel fuel into on-highway diesel 

10 markets? 

11 MR. PIATEK: As we were talking a little 

12 bit earlier today, I haven't thought through the 

13 process, but we'll be exploring those options and 

14 seeing if there are any other options other than 

15 possibly indexing maybe depending on the location or 

16 the diesel market share, but that's a possibility. 

17 Say the refinery penetration or independent refinery 

18 penetration is 10 percent. Maybe you could index it 

19 it depending upon the amount of high sulfur diesel 

20 entering that local market. 

21 MR. GRAY: What's the outlet for your 

22 distillate now? 

23 MR. PIATEK: At the California facilities 

24 we sell back to major refineries for reprocessing. 

25 The Arizona facility basically sells to terminal 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.11 

DOCKET NO. A-86-03 109 

1 companies and they redistribute it. 

2 MR. GRAY: So as far as — 

3 MR. PIATEK: No retail outlets ourselves. 

4 MR. GRAY: Your anticipation is that the 

5 terminals just mix it with other distillates? 

6 MR. PIATEK: That would be my guess, yes, 

7 currently. 

8 MR. GRAY: We have no further questions. 

9 Thank you. 

10 Next would be Frontier. 

11 

12 MR. KRAMER: My name is Jeff Kramer. 

13 I'm President and Chief Executive Officer 

14 of Frontier Refining Company. 

15 MR. GRAY: Mr. Kramer, do you have any 

16 copies of your — 

17 MR. KRAMER: No, I'm sorry, I don't. With 

18 the time constraints and all I did my comments on 

19 the plane, and I have no notes. I wouldn't even 

20 mind having copies of what I'm saying also. It's 

21 always good to know. I apologize for that. 

22 Also, we definitely will be submitting 

23 written comments, very definitely. 

24 Frontier's sole asset is a 38,000 barrel a 

25 day refinery located in Cheyenne, Wyoming, although 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.12 

DOCKET NO. A-86-03 110 

1 the company is headquartered in Denver and we market 

2 in the Rockies, northeast Colorado and a good part 

3 of Wyoming, southeast and part of western Nebraska. 

4 We are truly an independent refiner in 

5 the definition of the word, small and independent, 

6 independent particularly in the sense that not only 

7 do we not have any crude oil, we also do not have 

8 any service stations. So we're one of the remaining 

9 independent refiners left in the country. 

10 We typically run around 32- or 33,000 

11 barrels a day of crude oil, and approximately 11- to 

12 12,000 barrels a day of the output is diesel, so it 

13 is an extremely important product for us. 

14 We don't have exact figures, but 

15 approximately 25 to 30 percent of our output goes as 

16 railroad diesel, about 10 percent to the 

17 agricultural market and the balance is highway 

18 diesel. 

19 We have absolutely no heating oil market 

20 whatsoever in the Rockies. Natural gas is the 

21 primary source for heat, and coal is somewhat 

22 secondary, but other than perhaps in most extreme 

23 weather conditions there is no heating oil market in 

24 the Rockies. 

25 We also do run a heavy proportion of sour 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.13 

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DOCKET NO. A-86-03 111 

crude. Approximately 75 percent or so of our input 

is sour crude and almost all of it is produced in 

the State of Wyoming, so again we have ties to the 

independent producers in Wyoming. A great deal of 

the sour crude is typically shipped east, and in 

this particular case because of our — we are an 

independent refinery in the area we typically do buy 

from independent producers there. 

To give a little more background, too, 

there are several other independent refiners in the 

Rockies. There are a couple of others of varying 

sizes. Some of our customers interestingly like 

buying from us just because we are one of the few 

independent refiners that are left. 

We have probably taken on the role as the 

premier ethanol blender in the Denver area in 

particular partly because of the mandate, of course, 

but it's even true on more of a year-round basis as 

well. 

It's not really a program we promoted per 

se because quite frankly I have mixed emotions about 

the ADM subsidy and the — the ethanol program in 

general because it certainly hurts refiners, it 

takes output away from refiners, but on the other 

hand because we are a true independent we must 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

:'!'" 
DOCKET NO. A-86-03 112 

1 supply what our customers want, and they do 

2 definitely get some savings, and I think the quality 

3 of the blending operation is good. 

4 So as a result we are in the market 

5 supplying customers and we indeed are the premier 

6 blender, and have been recognized by the Governor 

7 for that. 

8 To give a little other background of the 

9 company, I've only been with Frontier a couple of 

10 years. We have good units at the refinery. We 

11 have a lot of diversity of units which we have to 

12 have for upgrading the sour crude and turning it 

13 into finished product. 

14 We're catching up, though, because the 

15 plant had several years of neglect where there was 

16 not a lot of capital put into it, so we are in a 

17 very intensive capital program right now where 

18 we're trying to upgrade our facilities to more 

19 modern standards. 

20 That includes environmentally. We're under 

21 consent decree that was actually formed in one of 

22 the changes of ownership about four or five years 

23 ago, and we're making very serious progress in that 

24 consent decree over these last few years because we 

25 do take our environmental responsibilities 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.15 

DOCKET NO. A-86-03 113 

1 seriously. Very seriously. 

2 So we have a fairly intensive capital 

3 program, is really the main thing. 

4 My main point for being here today and 

5 wanting to comment is that indeed the impact of 

6 environmental regulations such as the .05 sulfur 

7 have got a very major impact on small refiners in 

8 general, and I think that it's something that has to 

9 be somehow recognized in the regulations, and indeed 

10 there is some precedence, as was discussed 

11 previously, for certain types of special treatment. 

12 We as a board in direction of the company 

13 consider ourselves to be very environmentally 

14 conscious, but we're also a financially-oriented 

15 board as well, and serious financial burdens and 

16 serious additional capital requirements definitely 

17 will have an impact on what we ultimately do at the 

18 plant. 

19 We've had an extensive study done, and it 

20 indicates that we're talking like around a 16 to 20 

21 million dollar project for the additional 

22 hydrotreating and for — it's not just the 

23 hydrotreating, unfortunately, it's also the 

24 associated infrastructure, because we're talking as 

25 well about a sulfur plant that would be required as 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.16 

DOCKET NO. A-86-03 114 

1 part of it. 

2 And you put all that together and you 

3 look and compare it to the study that was done, the 

4 Sobotka report, it seems to put — you know, it's 

5 totally out of line. I mean, the cost recovery for 

6 instance that is reflected in the Sobotka report 

7 provides a totally inadequate return for us. 

8 If the assumptions are accurate about the 

9 way the price will change, we have a project that is 

10 really not financeable, particularly in light of the 

11 other aspects of our capital program that we're 

12 doing. It's definitely a sub-rate of return. 

13 I can't say that the plant would close 

14 certainly, because I think we've done a lot of 

15 things and we do have a good niche in that area. 

16 On the other side of the coin, if you have 

17 any kind of a financially-oriented board they have 

18 to really always be considering their alternatives, 

19 and additional environmental burdens that are 

20 disproportionate to small refiners definitely take 

21 their toll in time. 

22 Economically the cost of construction of 

23 anything these days is going through the roof, and 

24 to argue that a refinery of 38,000 barrel-a-day 

25 capacity, which even is bigger than a lot of smaller 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.17 

DOCKET NO. A-86-03 115 

1 ones, does not suffer more economically from a large 

2 cost project like that is just totally missing the 

3 point. 

4 One of the other concerns that I had from 

5 the nature of the report is that we are indeed a 

6 regional refinery. We do not really have any other 

7 alternatives to the highway diesel market. We are 

8 an important supplier of diesel in the area. The 

9 railroad diesel market is extremely competitive and 

10 potentially will become even moreso because of 

11 the .05 reg, and I think that that poses problems. 

12 It's difficult to say if you could really 

13 count on that market at all, and beyond that we have 

14 no alternatives except to ship our diesel to very 

15 far places, and there again you're talking about the 

16 economic and competitive viability of the plant. 

17 One other side impact, too, I suppose, is 

18 it has the long-term effect of backing out sour 

19 crude from Wyoming, too. I mean, we could probably 

20 come closer to the regs by running more sweet, but 

21 that also has an economic impact on the area because 

22 the sour crude is the lifeblood of the independent 

23 producers in Wyoming. 

24 There was also a comment made, you know, 

25 where, on the sulfur, what would be our 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 116 

recommendation, would it be for an extension of 

time or for the amount of sulfur. We may have a bit 

of a unique situation. We do have hydrotreating 

facilities now, and as a result of that it 

is conceivable that something like a permanent .15 

sulfur or something might give us a significant 

amount of relief, because we may be able to avoid 

— not all, I'm sure, but at least a good portion of 

that 16 to 20 million dollar capital expenditure. 

So that may put us in a unique situation 

relative to other small refiners. To be honest, I 

have not looked at that as an alternative because 

this is the first that I thought that that might 

even be a possibility today, but we have a 

consulting firm that we use a lot and we would 

certainly want to have them, you know, run some 

additional studies for us to see if that might fit. 

Beyond that, certainly and clearly an 

extension of time would certainly be a plus, there's 

no question, because it will give us the time to 

take care of, you know, the other things that we're 

trying to do and will definitely help us to reserve 

cash flow for the ultimate capital expenditure that 

will be needed. 

I do have a few summary comments, too, 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 117 

that were basically only part of our written 

comments that were drafted up before, and I think 

they do summarize our situation well. 

For one, I think overall, I think 

definitely the EPA has underestimated the impact of 

the proposal on small refiners. In particular, 

there's a comment about relying on an analysis that 

is going to be the, quote, initial basis for review 

on the impact of small refiners. 

Secondly, that report does acknowledge 

that the entire topping subcategory refiners will 

be driven from the diesel market, and I think that 

does have definite economic consequences. 

EPA also acknowledges that a certain 

number of small refiners in hydrotreating and 

-cracking data categories will be driven from the 

diesel market. 

I think that is a real impact, a real 

consumer impact due to the competitive nature of 

independent refiners. 

Also, there is no data that really 

supports a conclusion that it would be easy to find 

alternate off-highway markets for the diesel 

products, and in particular as well, no 

consideration of where that product may have to go, 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

P.19 

"n 
DOCKET NO. A-86-03 118 

1 and that's extremely important for any refinery that 

2 is counting on a third of the barrel winding up in 

3 the diesel market. 

4 And also I think that the general 

5 assumption that the cost per gallon of sulfur 

6 removal is the same for the industry as a whole is 

7 just wrong, it's just not an accurate statement. 

8 There are definitely significant 

9 differences, as proven by some of the other studies. 

10 I do want to iterate as well the AIRA 

11 comment that there is certainly a lot of legal 

12 justification for separate regulatory treatment as a 

13 result of the problems of small refiners. 

14 One certainly is the Regulatory 

15 Flexibility Act which actually mandates special 

16 consideration and documentation of the impact of 

17 regulations on small entities such as small 

18 refiners, and also the Clean Air Act itself has a 

19 history of special consideration for the needs of 

20 small refiners. 

21 Certainly California and CARB have 

22 implemented special provisions with small refiners 

23 with the regulation of sulfur removal and diesel as 

24 well, and there are a lot of regulatory programs 

25 that have shown special concern for small refiners 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.21 

DOCKET NO. A-86-03 119 

1 in general. 

2 Also the other important point, and 

3 hopefully this is something we can work towards 

4 trying to figure out the way to come up with a 

5 logical compromise, is that hopefully the EPA can 

6 achieve the objectives of the proposed regulation 

7 without imposing substantial impacts on small 

8 refiners. 

9 The EPA should have some available options 

10 that would minimize the impact on small refiners 

11 in achieving those objectives. The one logically 

12 . would be certainly the lead time question, the 

13 other might be a possible higher sulfur limit that 

14 might be acceptable, and I should dare to even 

15 mention this one but, you know, it is even 

16 conceivable that there could be a banking and a 

17 trading of sulfur rights concept, too. 

18 I'm not in any way, shape or form in favor 

19 of additional regulatory messes like that because I 

20 think that it's something that everyone should 

21 probably strive to avoid if possible, but if it came 

22 to that it might have some merit and certainly 

23 might be better than the other alternatives. 

24 Thank you. 

25 MR. GRAY: What is the sulfur level of the 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
--J7T—. - r ^ ^ • 

-T 

DOCKET NO. A-86-03 120 

1 distillate diesel fuel that you're producing now? 

2 MR. KRAMER: We go to the .5 limit. 

3 MR. GRAY: So it's up against the .5? 

4 MR. KRAMER: Yes, that is quite frequently 

5 our limit, you know, in the plant at the moment. 

6 MR. GRAY: So you do have some 

7 hydrotreating capacity. Is that on-stream and — 

8 MR. KRAMER: That is on-stream, and 

9 fortunately we did just complete an expansion with 

10 it that put us in better position. 

11 MR. GRAY: You mentioned the .15. 

12 How would you — if you have that capacity 

13 being utilized now and you're frequently bumping 

14 against the .5 percent, would you have to increase 

15 the severity or add more capacity or both to achieve 

16 the lower level? 

17 MR. KRAMER: I think we'd have to primarily 

18 increase the capacity, but that might be a lot less 

19 expensive than the other alternatives, considerably 

20 so, because we may be able to do that much more 

21 economically than going out and just building 

22 another unit, which is probably what it would take 

23 if we had to go to .05 across the board. 

24 MR. GRAY: So capacity means severity? 

25 MR. KRAMER: Well, severity would probably 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 121 

1 be also increased, too. It would definitely be a 

2 tougher operation, but we think that the .15, again 

3 it's hitting me cold and perhaps I can make some 

4 more comments on that in time for the actual comment 

5 period to see if that would be practical, but I — 

6 my feeling is that that would probably be of quite a 

7 bit of help in our case. 

8 I can't in all honesty say that across 

9 the board for other small refiners, though. 

10 MR. GRAY: You said your principal market 

11 off-highway now is the railroad industry, I believe. 

12 MR. KRAMER: Yes. 

13 MR. GRAY: All right. Do they have a 

14 maximum requirement for those engines for sulfur? 

15 MR. KRAMER: I think it's sort of a 

16 self-imposed one. I think it's — they can run 

17 like .75, but I think some of them run less and I 

18 understand some run more, so it just depends on the 

19 particular company. 

20 MR. GRAY: Do you foresee that they may 

21 relax that even further as the competition for or 

22 availability of local high sulfur decreases? 

23 MR. KRAMER: It would certainly be tempting 

24 for them, but I think they have their own engine 

25 requirements and suggestions so, you know, naturally 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.24 

DOCKET NO. A-86-03 122 

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we've talked to them about it from time to time and 

they don't seem to be willing to budge. In fact, 

primarily it's almost all at .5 sulfur. There's 

only one railroad I know that uses the higher 

sulfur and — 

MR. GRAY: There's the concern about 

increased wear characteristics of the — 

MR. KRAMER: I think that's our main 

concern. 

questions. 

MR. GRAY: I guess we have no further 

Thank you. 

MR. KRAMER: Thank you. 

MR. GRAY: Next is — I think it's 

Princeton Gamma-Tech. 

MR. PIOREK: Good afternoon. 

Mr. Chairman, my name is Stan Piorek. I'm 

with Princeton Gamma-Tech in New Jersey, in 

Princeton. 

I am heading their Applications and 

Development in X-ray Industrial Products. 

My experience in X-ray applications is 

about 20 years long now, and the reason I came up 

here is the fact that the regulation or proposed 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 123 

1 regulation specifies the method, how to analyze for 

2 sulfur content of diesel fuel, and it says that it 

3 will use the method which has been approved by ASTM, 

4 good several years ago, and in particular that 

5 method specifies that we have to use wavelength 

6 dispersive method. 

7 I don't know that everybody realizes that 

8 that is quite a costly equipment, wavelength 

9 dispersive spectrometer. Especially that will refer 

10 to smaller refineries, and I think down the road 

11 when requirements for analysis will be enforced the 

12 smaller or further down the road in the chain of 

13 analysis for that particular item will be quite a 

14 major point. 

15 I think that right now we have enough 

16 technological advancement which lends to the 

17 manufacture of energy dispersive equipment which 

18 can easily meet requirements of ASTM method. 

19 Unfortunately, ASTM method just doesn't 

20 specify the instrument, X-ray instrument, it just 

21 specifies wavelength dispersive and doesn't allow in 

22 its wording for any other instrument. 

23 I would think that it would be worthwhile 

24 for EPA to consider a way of avoiding committing 

25 ourselves totally to wavelength dispersive method. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.26 

r 

DOCKET NO. A-86-03 124 

1 I'd say that wavelength dispersive equipment on 

2 average would run to put it in the laboratory at 

3 least 80,000-and-up dollars investment, whereas 

4 energy dispersive equipment which can meet easily 

5 the requirements of ASTM method can be bought for 

6 18,000 to $22,000. 

7 There are several manufacturers of this 

8 equipment on the market, and pretty much all of them 

9 would provide performance which would meet ASTM 

10 specifications. 

11 Therefore I think that before the final 

12 word is said on this regulation that we could 

13 somehow devise a way of allowing for energy 

14 dispersive equipment to be used as well. 

15 I am saying this, of course, from the 

16 point of my company, who manufacturers equipment as 

17 such, but I think that a difference in price and 

18 also technological advancement in the meantime 

19 justifies the statement, my statement also as being 

20 quite objective, not just only subjective, so to 

21 speak. 

22 And I'd like to maybe reverse a little bit 

23 the table and ask Mr. Hoover how we would expect to, 

24 you know, to enforce .05 percent down to the very 

25 last level? How would it be in a practice? 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 125 

MR. HOOVER: You mean in terms of whether 

we would look at .05 as the cut limit? 

MR. PIOREK: At how many points on the road 

from the moment fuel is made until it's burned? 

MR. HOOVER: Okay. The way the regulations 

are currently proposed, it could be enforced at any 

level in the distribution chain starting from the 

refinery or importer terminal down to a wholesale 

purchaser, consumer or a retailer, and that approach 

is basically identical to what we're using in our 

current Volatility Program and also quite similar to . 

what is used in the Analytic Gasoline Program. 

So what EPA would be likely to do would be 

to take samples of fuel at all points in the 

distribution chain and have those samples analyzed 

for compliance with the requirements. 

Clearly, the testing methodologies that we 

usually use for enforcement purposes are those 

which are defined in the Federal Register. 

Considering how many samples we take, 

whether there's any sort of screening test that 

could be used, for instance there may be a screening 

methodology that you could run samples through and 

find ones that need further testing according — for 

enforcement purposes to the ASTM methodology that's 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

1 
DOCKET NO. A-86-03 126 

1 proposed then that would be likely to occur. 

2 In all likelihood the samples that will be 

3 obtained for the enforcement program will probably 

4 be obtained either by EPA personnel themselves or 

5 contractors operating under EPA guidance, and again 

6 that is currently how the program works, and for our 

7 Volatility Program for instance all of the samples 

8 were obtained around the country, and I forget the 

9 exact number, I'm not sure I'm aware of it yet, but 

10 I think we did over 3,000 inspections and I think we 

11 probably took 6- or 7,000 samples as probably an 

12 approximation. 

13 All of those samples were sent here to 

14 this facility for testing. So all the testing, no 

15 matter where the sample is collected in the country, 

16 was analyzed here, and I suspect that this program 

17 will probably work in a similar nature. 

18 Since it's at a minimum four years off, we 

19 obviously have some time to see if things change or 

20 if there's some other way to do that, but at this 

21 point I would think that would be the general 

22 approach we would take. 

23 It's not unusual when we propose 

24 regulations or even adopt regulations for sampling 

25 for enforcement purposes that we amend those 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.29 

DOCKET NO. A-86-03 127 

1 regulations on testing methodology. 

2 This has occurred with the lead in 

3 gasoline. We used X-ray and atomic absorption and 

4 also promulgated regulations to automate the X-ray 

5 methodology, and so it's not inconceivable that even 

6 if regulations were promulgated with one specific 

7 sort it does not preclude having a different set of 

8 regulations or an amendment done to change what's an 

9 acceptable methodology. 

10 Other ways of handling that conceivably 

11 include looking at the feasibility of some 

12 language in the regulations about this methodology 

13 or any other methodology which the administrator 

14 may consider to be equivalent or things like that. 

15 So we do not usually promulgate a testing 

16 methodology and then maintain that it is forever 

17 cast in concrete and the only way. I think we like 

18 to keep attuned to changes in technology and cost 

19 efficiency and so forth as well. 

20 MR. PIOREK: Thank you for your 

21 explanation. I understand, of course, that this is 

22 what the Agency does for itself, but I think that 

23 people who deal with a product, they would do this 

24 kind of test on their own. I'm looking at this 

25 point, from this point of view. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 128 

1 MR. HOOVER: Yes. Let's assume that the 

2 proposed regulations contained the ASTM methodology 

3 and that's what the Agency would use for actual 

4 enforcement purposes, and 27 small refineries or 

5 large refineries or whatever the facilities may be 

6 would use let's say the type of equipment you're 

7 proposing. 

8 If they were to use that type of equipment 

9 in a quality control program and in terms of their 

10 oversight and then we found a violation that was 

11 enforcement-based I think you're really getting at 

12 how would we view their results if it was done on 

13 eguipment that was not what was specifically 

14 prescribed in the regulation in terms of, would we 

15 bring enforcement action. 

16 The proposed regulations have defenses 

17 built into them in terms of a party establishing 

18 that they're not liable, and part of that is an 

19 oversight testing program, and I think what we would 

20 likely do would be to look at how companies were 

21 testing, what type of equipment they were using, 

22 what their correlation factors were, what the 

23 quality assurance programs were in fact on those 

24 instruments before we would decide that right 

25 offhand we would say, no, you can't use that because 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.31 

DOCKET NO. A-86-03 129 

1 it's not the same equipment. 

2 Withholding judgment right now on giving 

3 you a final answer those are the types of issues 

4 that when we get to the enforcement standpoint 

5 generally either get brought up after because nobody 

6 thought of it up front, or if we look at it up front 

7 we generally discuss it and try to come to a 

8 policy decision on what makes sense, and I think 

9 that's the bulk of enforcement, is to get the 

10 industry to comply, and I think the Agency likes to 

11 be reasonable in terms of how it does that. 

12 So it's possible that the industry could 

13 use a device that is not identical to that contained 

14 in the ASTM which we will use for enforcement 

15 purposes, but one that may give equivalent 

16 performance and use that as a quality control tool 

17 at their level. 

18 I think the ASTM methodology that's 

19 proposed really only applies to our enforcement 

20 cases. Prudent companies may say, well, I want to 

21 use the same equipment that they do. But if there 

22 is equipment out there that performs basically at 

23 the identical level of guality, then that may be 

24 acceptable in terms of supporting a defense of an 

25 enforcement case really hinged on that. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 130 

1 Our experience in the past I.think has 

2 probably been that not too many cases really get 

3 down to whether my test results are different from 

4 your test results. 

5 That may not be the case with volatility, 

6 but I know with respect to lead in gasoline it to my 

7 awareness never really became an issue. 

8 MR. PIOREK: Would it be possible to 

9 sponsor or to authorize kind of a study which would 

10 show up the outcome of it, or compare both methods? 

11 Would the Agency consider that? 

12 MR. HOOVER: I think probably the best 

13 thing to do is to look at the separate issue of 

14 testing technology, which is really I think what 

15 your area of interest is, is to get in touch with us 

16 separately outside of this hearing and then we can 

17 discuss what would be an appropriate approach to 

18 take to handle that. 

19 MR. PIOREK: Thank you. 

20 UNIDENTIFIED SPEAKER: John Charsin (ph) 

21 from the Penzoil Program. 

22 There is an ASTM method accorded to '94 

23 which is a specific method for sulfur analysis of 

24 petroleum products that actually would meet the .05 

25 percent specification. 

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DOCKET NO. A-86-03 131 

MR. HOOVER: Okay. 

UNIDENTIFIED SPEAKER: I don't know if 

you're aware of it or not. 

MR. HOOVER: Since we're an enforcement 

office — and literally that's.primarily what we do, 

we actually sue you folks, as some of you may be 

aware, we don't ordinarily get real involved in the 

technical details, and we do tend to rely on the 

staff here in Ann Arbor and deal with California Air 

Resources Board, so the ASTM methodologies we've 

probably selected have stemmed from those sources. 

I know for the sulfur there were a number 

of methodologies that were available to use and the 

one that we proposed was the one that was 

recommended, so we can look at that and see. 

MR. PIOREK: Thank you very much. 

MR. GRAY: Next we have the Air Pollution 

Control Division of the Colorado Department of 

Health. 

MR. LA MOTTE: Good afternoon. 

I'm Macie LaMotte of the Air Pollution 

Control Division of the Colorado Department of 

Health. 

My objective in attending this hearing is 

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ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 132 

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to present some general support for the EPA's 

proposed rulemaking on diesel fuel quality. 

I would also like to express some concerns 

we have with the proposal as it exists at this time. 

My input into this hearing will chiefly 

consist of two letters from officials in the State 

of Colorado. One is the Governor, Governor Roy 

Romer, and the other person is Mr. Bradley Beckham, 

Director of the Air Pollution Control Division of 

the Colorado Department of Health. 

As many of you are aware, the State of 

Colorado has been very aggressive in the area of 

controlling and decreasing the pollutants from all 

sources. 

The emissions from mobile sources such as 

automobiles, trucks and buses have garnered 

considerable attention. Many studies and programs 

have been instituted in order to address the 

reduction of emissions from those sources. 

At this time I'd like to present to the 

hearing the contents of the two letters. I'll begin 

with the first letter, which is from the Governor, 

Governor Roy Romer. 

Colorado strongly supports the 

Environmental Protection Agency's proposal to 

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ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 133 

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regulate the quality of diesel fuels in the United 

States. 

We urge EPA to set feasible but stringent 

standards for the sulfur and aromatics content 

of these fuels. 

Diesel emission are a significant problem 

along the Front Range of Colorado. The 1987-88 

Metro Denver Brown Cloud Study, a one-and-a-half 

million dollar effort which I organized in 

cooperation with Colorado business interests and 

environmental groups and academic institutions 

suggested that diesel emissions at times were 

responsible for up to 25 percent of our winter 

visibility problems. 

In 1987 I also appointed the Blue Ribbon 

Diesel Task Force to find ways to reduce diesel 

emissions in Colorado. 

We are implementing the recommendations of 

that task force, including a mandatory diesel 

inspection and maintenance program, establishment of 

a heavy-duty high-altitude emissions laboratory, 

tighter enforcement of opacity and idling laws and 

alternative fuels demonstrations. 

A major recommendation of this task force 

was that either the state or federal government 

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BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 134 

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establish stringent diesel fuel quality standards. 

I am prepared to recommend that Colorado 

establish its own standards. However, I believe 

federal standards are preferable because they would 

be more cost-effective and less disruptive to the 

regional economy. 

I, therefore, strongly support the EPA's 

efforts to establish national fuel quality 

standards. 

Specifically, I endorse my task force 

recommendation of a diesel fuel sulfur content of 

.05 percent by weight. 

Diesel fuel in Colorado averages .29 

percent sulfur by weight, so such a standard would 

be of great assistance. 

I also urge EPA to establish as stringent 

a standard as is feasible for aromatics in these 

fuels. 

Finally I agree with my task force that 

these standards should be cost-effective and allow 

industry sufficient time for implementation. 

Colorado and the nation have made great 

progress ih reducing air pollution because of the 

efforts of automobile manufacturers, industries, 

utilities and all levels of government. Through our 

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BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 135 

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oxygenated fuels program Colorado has shown that the 

fuels industry also can help improve air quality. 

Therefore, Colorado strongly endorses 

EPA's efforts to establish national diesel fuel 

quality standards. 

I have asked Mr. Brad Beckham, Director of 

the Air Pollution Control Division of the Colorado 

Department of Health to provide you with more 

detailed comments on EPA's proposal. 

I appreciate your attention to our 

concerns. 

Sincerely, Roy Romer, Governor. 

At this time I'd like to read the letter 

from Mr. Brad Beckham to the hearing, and before I 

begin I will make some comments that there are some 

references here to off-road diesel fuel. I think 

this was done in looking to the possibility that 

that sort of equipment could become a dumping ground 

for lesser quality fuel than now exists. 

As Director of the Air Pollution Control 

Division, Colorado Department of Health, and on 

behalf of the division I wholeheartedly support the 

EPA's efforts to regulate diesel fuel quality. 

Due to their significant contribution to 

the emission of harmful pollutants from diesel 

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BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.38 

DOCKET NO. A-86-03 136 

1 vehicles the sulfur and aromatics content of diesel 

2 fuel must be controlled through the establishment of 

3 the most stringent standards feasible at the 

4 national level. 

5 The issue of diesel emission continues to 

6 gain prominence after many years of relative 

7 obscurity from stringent controls and regulations. 

8 The emphasis on controlling exhaust emissions has 

9 been largely directed toward gasoline fuel vehicles. 

10 Recent revelations of the harmful 

11 consequences of the increased ambient levels of 

12 sulfur oxides, nitrogen oxides and particulates 

13 which come from diesel exhaust has caused concern 

14 and interest in controlling these emissions. 

15 Although the increasingly stringent EPA 

16 certification standards for new diesels will provide 

17 emissions reduction benefits in the future, they do 

18 not address excessive pollutants that are being 

19 emitted from the current population of diesel 

20 vehicles which will continue in future years. 

21 State and local public information, 

22 vehicle maintenance and emissions inspection 

23 programs with strong enforcement are effective means 

24 of control, but an equally important effective 

25 strategy which impacts all diesel vehicles equally 

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BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 137 

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with immediate emissions benefits is a regulation of 

diesel fuel quality. 

The Colorado Department of Health Air 

Pollution Control Division has reviewed the 

NPRM Regulation of Fuels and Fuel Additives; Fuel 

Quality Regulations for Highway Diesel Fuel Sold in 

1993 and Later Calendar Years, as published in the 

Federal Register August 24th, 1989. 

The Division would like to offer the 

following comments: 

Enthusiastic support for the .05 

percent sulfur by weight standard for on-highway 

vehicles. 

Also concern for the omission of a sulfur 

standard for diesel fuel consumed by non-highway 

vehicles. 

Recent studies investigating the emissions 

contributions of non-highway vehicles demonstrate 

that these contributions are substantial and would 

suggest that those vehicles would also share in the 

benefits that lower sulfur diesel fuel would offer. 

Proposal: Establish a cap on the maximum 

sulfur content of non-highway diesel fuel at a level 

equal to the current average sulfur content of 

on-highway diesel fuel. 

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BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 138 

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In lieu of a cap, a standard of .30 

percent sulfur by weight should be implemented for 

non-highway vehicles. 

This action would thwart the strong 

possibility that sulfur levels of non-highway diesel 

fuel would increase beyond average levels. 

A review of the State of California's 

prior experience with fuel regulations demonstrate 

this is a genuine concern. 

Also concern for the lack of a stringent, 

effective and meaningful aromatic standard. 

Proposal: Establishment of an aromatic 

standard that is at least equal to the aromatic 

standard that the State of California has proposed 

for small refiners. 

As you're aware, the State of California 

has completed an in-depth study of the aromatics 

content influence upon exhaust emission issue and 

has based on that study established a stringent 

aromatics limit: 10 percent aromatics by volume for 

large refiners and a variance of 20 percent 

aromatics by volume for small refiners. 

Concern for the minimum cetane approach to 

aromatics control. 

Diesel fuel with a 40 cetane index is 

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BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 139 

1 below or at the very least equal to the minimum 

2 cetane specifications set forth by the American 

3 Society for Testing and Materials for diesel fuel 

4 No. 2. 

5 Currently there is commercial diesel fuel 

6 being sold with a cetane significantly above 40, yet 

7 the aromatics content measures approximately 40 

8 percent by volume. 

9 This serves to point out there are flaws 

10 in the cetane approach to insuring low aromatic 

11 content. 

12 If the EPA is persistent in the minimum 

13 cetane approach to control aromatics, the EPA should 

14 set a minimum cetane of 50, index of 50 to be of any 

15 value. 

16 Concern that the proposed lower sulfur, 

17 .10 percent weight diesel certification fuel for the 

18 1991 vehicle model year will weaken the emission 

19 reduction benefits of the 1991 heavy-duty diesel 

20 certification standards. 

21 Certifying engines on fuel which is not 

22 readily and commercially available would appear to 

23 be largely devoid of any immediate in-service 

24 emissions reduction benefits. 

25 However, when consideration is given to the 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 140 

1 phase-in complexities of low sulfur diesel fuel, 

2 stringent certification standards and the strong 

3 possibility of particulate trap adaptation, the 

4 .10 sulfur weight certification fuel may well 

5 represent the best approach. 

6 In summary, the EPA is to be commended for 

7 proposing diesel fuel regulations, but we firmly 

8 believe that certain provisions of the proposed 

9 regulation should be revisited and revised in order 

10 that the most stringent, effective fuel regulations 

11 are adopted. 

12 I respectfully ask that you consider the 

13 comments that are contained herein. 

14 Sincerely, Bradley J. Beckham, Director, 

15 Air Pollution Control Division, Colorado Department 

16 of Health. 

17 That is the extent of my presentation. 

18 MR. GRAY: Thank you. 

19 I'm sure you're aware that current Agency 

20 authority doesn't allow regulation of off-highway — 

21 MR. LA MOTTE: Yes, the Clean Air Act. 

22 MR. GRAY: Clean Air Act amendments may 

23 change that, but at least currently we couldn't 

24 respond to that proposal even if we were so inclined 

25 under existing constraints. 

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BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 141 

1 The aromatics standard that you proposed, 

2 as you also know the principal reason for proposing 

3 these particular diesel fuel quality standards 

4 addressed the feasibility of diesel engine 

5 manufacturers to comply with ih particular 1994 

6 standards, and while aromatics control is projected 

7 to reduce particulate emissions from existing diesel 

8 engines and could have some beneficial toxic aspects 

9 as well, the diesel engine industry suggested that 

10 the 40 cetane index was sufficient in terms of fuel 

11 quality to allow them to comply with the '94 and 

12 later standard. 

13 So the conclusion was if they are willing 

14 to be held accountable to end-use performance at 

15 that level with that quality diesel fuel then the 

16 principal purpose of the regulation would have been 

17 served, and the further question of additional fuel 

18 changes to impact existing engines that are toxic 

19 even though treated wasn't the principal focus of 

20 the activity, and probably at this stage will have 

21 to be considered in some subsequent rulemaking 

22 simply because of how far along we are in the 

23 process, of course, with having already proposed a 

24 specific program. 

25 Even though you expressed another concern 

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BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.44 

DOCKET NO. A-86-03 142 

1 about the 1991 certification fuel, it seemed like 

2 you said, however, it's — 

3 MR. LA MOTTE: We realize there are 

4 compromises, but an ideal situation — when those 

5 standards were promulgated, at that time the 

6 certification fuel was probably .23, which is kind 

7 of the norm. 

8 Well, they remained in effect but they're 

9 given the benefit of using a higher quality fuel, so 

10 in essence you might say it was watered down 

11 slightly. 

12 MR. GRAY: There are definitely two 

13 perspectives on that. I think probably the industry 

14 perspective was during the rulemaking activity in 

15 the early '80's they suggested that the feasibility 

16 of the standard could in fact — would likely be 

17 impacted by the sulfur level of the fuel, so there's 

18 at least two sides of that issue, and you're right, 

19 this particular level was a result of some 

20 compromise perspective in trying to reach a 

21 reasonable resolution of the transition period. 

22 MR. LA MOTTE: We realize it's necessary to 

23 have available a lower sulfur fuel so that the 

24 manufacture and development of traps will become, 

25 you know, insured. 

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ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 143 

MR. GRAY: Do you have any questions? 

Thank you very much for coming. We 

appreciate your being here. 

Is a representative from the Petroleum 

Marketers Association that we were waiting on here 

yet? 

MS. HASKINS: I'm here. 

MR. GRAY: Okay. Do you want to go now? 

Actually we've had one other person that would like 

to testify, so I can either let you go now, or if 

you still want to be last that's — 

MS. HASKINS: I'll go ahead. 

Good afternoon. 

I just want to make one correction. I 

can't help but say something. The first line in 

here — my name is Vera Haskins, but as of yesterday 

I'm the Vice President of my company rather than 

General Manager, so I can't help but make that 

correction. 

MR. ANDERSON: Congratulations. 

MS. HASKINS: We are a motor and heating 

fuels marketing company located in Frazer, 

Pennsylvania, a suburb of Philadelphia. 

I'm here today representing the Petroleum 

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ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 144 

1 Marketers Association of America, PMAA, a federation 

2 of 43 state and regional trade associations 

3 representing more than ten thousand independent 

4 petroleum marketers throughout the United States. 

5 These marketers sell approximately 50 

6 percent of the gasoline, 75 percent of the home 

7 heating oil and 60 percent of the diesel fuels sold 

8 in this country annually. 

9 89 percent of PMAA member companies are 

10 classified as small businesses under Small Business 

11 Administration-size standards. 

12 PMAA appreciates this opportunity to 

13 express its views on the Environmental Protection 

14 Agency's proposal to lower the sulfur content and 

15 cap aromatics in on-highway diesel fuel. 

16 Our comments today will focus on the 

17 impact of this proposal on independent petroleum 

18 marketers. 

19 For the most part petroleum marketers 

20 operate family businesses. Many companies have been 

21 in business for 50 years or more and are in their 

22 second, third and even fourth generation of family 

23 leadership. 

24 As a result, there is a strong sense of 

25 continuity among petroleum marketers and a desire to 

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ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 145 

perpetuate a sound social, economic and ecological 

environment in which they and their heirs will be 

able to operate well into the future. 

For this reason, PMAA does not oppose the 

intent of EPA's proposal to lower the sulfur level 

of on-highway diesel fuel. 

We understand that current sulfur levels 

in diesel fuel will prevent heavy-duty diesel 

manufacturers from meeting EPA's 1994 particulate 

emissions standards for heavy-duty diesel engines. 

We are encouraged by EPA's projected 

benefits resulting from the new fuel specification 

on engine wear, air quality and health effects. 

While we support the intent of EPA's 

proposal, PMAA would go further by requiring a 

single sulfur content for all distillate fuels, not 

just motor vehicle diesel fuel. Such a single 

standard should be implemented in a timeframe that 

is adequate to avoid any supply availability 

problems for diesel fuel or home heating oil. 

I will discuss in further detail our 

rationale for requiring a single sulfur content 

diesel in a moment. 

PMAA is strongly concerned, however, with 

the total lack of analysis in EPA's proposal of the 

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BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 146 

impacts of the low sulfur fuel requirement on 

independent petroleum marketers. 

Since PMAA believes that these impacts are 

likely to be significant and will alter the overall 

cost benefit analysis of the proposal, we believe 

EPA must take steps to reevaluate the true economic 

and environmental benefits of the proposed 

rulemaking. 

It should also analyze the overall 

cost-effectiveness of reducing the sulfur content of 

diesel fuel for all uses. 

Although EPA admits it did not study the 

impact of the proposal on marketers, and in spite of 

requests to do so by PMAA and the Small Business 

Administration it has informed PMAA it does not plan 

to conduct a full study of the impacts unless it is 

convinced by the end of the comment period that the 

proposal has a potential to have significant 

economic impact downstream from bulk terminals. 

To meet this burden of proof, PMAA is in 

the process of conducting a survey. The results 

will be incorporated into our written comments. 

As a prelude to what these results may 

show we are attaching as appendices to this testimony 

a series of case studies evaluating the impact of 

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BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 147 

1 the proposed rule on five individual marketing 

2 companies. 

3 PMAA hopes these studies will convince EPA 

4 that it should be collecting data of its own on the 

5 impact of its proposal on the nonrefining industry. 

6 Turning now to the impacts of the proposal 

7 on the petroleum marketers, PMAA believes that by 

8 creating a two diesel fuel system this proposal will 

9 result in significant increased storage, 

10 transportation and marketing costs, disruptions in 

11 supply and in many cases a reduction in availability 

12 of products. 

13 The costs and loss of business occasioned 

14 by such a program will principally fall on the backs 

15 of local independent marketers that currently serve 

16 over 60 percent of the total distillate market. 

17 We are part of the petroleum industry, 

18 though not considered to be in the report. 

19 As bulk storers, transporters and 

20 distributors of both on- and off-highway diesel 

21 fuels, the independent petroleum marketers PMAA 

22 represents are extremely concerned about a proposed 

23 rule that will require the separate storage and 

24 distribution of on- and off-highway distillate 

25 fuels. 

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BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 148 

Many marketers, particularly those 

operating in rural areas, commonly store on- and 

off-highway diesel fuels and distillate burner fuels 

in the same bulk storage tanks. 

If a two fuel system is carried out, bulk 

plant operators will need to have segregated storage 

for on-highway fuel if they're to continue to market 

both categories of diesel fuel. 

Most of the bulk plants that are currently 

operated by marketers today do not have separate 

storage capacity to carry these two categories of 

fuel. In addition, construction of additional 

capacity poses major problems. 

In many cases, the land is simply not 

available for additional tanks. In others, permits 

may be impossible to obtain due to state and local 

government restriction which prohibits the 

construction of additional storage. 

Finally, the economics of additional 

tankage almost certainly will not warrant the 

investment. 

PMAA currently is in the process of 

acquiring cost estimates on new tankage, new lines, 

valves, fittings, pumps and trucks. 

However, it is quite clear from talking to 

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BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 149 

marketers and reading through the attached case 

studies that acquiring new equipment or retrofitting 

existing equipment is an expensive proposition and 

one that will only be chosen as a last resort. 

In addition, marketers who choose to add 

to storage will need to factor in the cost of having 

another product tied up in inventory. It can be 

assumed that with every additional tank an 

additional inventory of approximately 50 percent of 

the tank's capacity will be required. The cost of 

this product inventory will dramatically affect not 

only the marketer's cash flow but also his overall 

costs of doing business. 

Marketers will also be faced with higher 

distribution costs because they will no longer be 

able to maximize the use of their delivery eguipment 

and personnel. 

Segregated transportation will mean more 

part-load deliveries, more miles traveled because 

some routes will have to be retraced, and more time 

spent making deliveries and in handling undelivered 

products. 

PMAA is also concerned that after a 

delivery of a dye product is made the tank truck 

will in many cases still contain about 20 gallons of 

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ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 150 

dye product. PMAA has learned that to remove 

these gallons from the truck would be quite costly. 

Although this amount of product may not be 

enough to contaminate a subsequent load of nondyed 

fuel in a transport vehicle of 8,000 gallon capacity 

it may be enough to affect a subsequent load in a 

tankwagon normally having capacity of less than 

3,500 gallons. 

This means that marketers will need to use 

separate trucks to transport each category of diesel 

to prevent contamination of the lower sulfur 

product. 

The cost of a two-truck system will be 

substantial. To prevent this from happening, EPA 

should consider establishing a dilution factor for 

testing the new fuel, and/or allow an acceptable 

amount of dye in the on-highway fuel. 

As EPA is aware, most refineries and most 

marketers will find that the cost of adding storage 

or segregated transportation will be so uneconomical 

that they will choose to discontinue handling a 

product. 

EPA is under the assumption that this 

specializing by marketers is a simple and acceptable 

proposition. Let me assure you it is not. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 151 

1 Although PMAA does not have data to 

2 present to EPA at this time we are sure that the 

3 lost sales occasioned by this proposition will be 

4 significant. In some cases marketers have reported 

5 the loss of sales to be as much as 25 percent of a 

6 marketer's annual net profits. 

7 EPA further assumes that marketers will be 

8 able to pick up the volumes that they lose from 

9 discontinued sales by simply increasing sales of 

10 other products. 

11 This is a naive and simplistic assumption. 

12 In all likelihood only large terminal operators 

13 capable of storing an additional grade of distillate 

14 without additional cost will be able to pick up lost 

15 volumes of other marketers. 

16 There will be a shifting of market share 

17 from small independent marketers to large refiner 

18 operated and independent terminals. 

19 The creation of a two-fuel system will in 

20 some cases limit product availability. 

21 To the extent that the extra tankage 

22 required for segregated product storage requires 

23 extra minimum working inventories, this product 

24 volume will not be available in areas where it is 

25 most needed. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.54 

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DOCKET NO. A-86-03 152 

In times of tight supply, product 

availability could be even more adversely affected. 

Shifting of heating oil to be used as diesel fuel as 

demand varies would no longer be possible and the 

reverse would probably not be practical depending on 

the cost of the low sulfur fuel. 

In addition, if marketers discontinue 

certain sales it is the consumer who will lose some 

freedom of choice in the marketplace and who may be 

severely inconvenienced. In some cases it means 

that nonpriority customers would lose their present 

source of supply. 

Even if a new source of supply is obtained 

it could necessitate longer hauls, higher prices for 

the customer, and of course loss of business for 

the former supplier. 

If the rule is promulgated as proposed, 

PMAA would support strong enforcement by EPA of 

the low sulfur on-highway diesel requirement. Such 

enforcement, however, should not be based on methods 

that are unenforceable or which place unfair 

economic burdens on independent petroleum marketers. 

PMAA opposes EPA's adoption of the 

liability and enforcement provisions of its RVP and 

lead regulations on this proposal. Unlike the 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

''HI 
DOCKET NO. A-86-03 153 

1 leaded and unleaded fuel and RVP situations, EPA is 

2 proposing to dye the unregulated fuel. This 

3 provides EPA with automatic evidence of 

4 noncompliance which it does not have in the other 

5 two enforcement systems. 

6 Vicarious liability places undue burden on 

7 the whole distribution system. Marketers, carriers 

8 and refiners may find that they will have to spend 

9 enormous amounts of time and money defending 

10 themselves against spurious claims that they were 

11 the ones that contaminated or marketed a 

12 nonconforming fuel. 

13 Therefore, PMAA believes each entity must 

14 be charged with a violation based on probable cause 

15 that the entity has committed a violation. 

16 In addition, PMAA strongly opposes the 

17 adoption by EPA of some kind of oversight program as 

18 part of a defense to an alleged violation. 

19 As the RVP program has already shown, 

20 oversight programs are extremely costly ventures and 

21 are not necessary if dyeing is imposed and the 

22 proposal is amended to require refiners to test 

23 their product and certify sulfur and cetane levels 

24 on their invoices. 

25 Testing the sulfur content and cetane 

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BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 154 

index of diesel fuel is an even more sophisticated 

and expensive laboratory testing procedure than RVP 

testing, which is currently creating numerous 

problems. 

EPA admits in its Preamble that this 

complicated testing procedure makes field compliance 

testing impossible, yet EPA requires distributors 

and resellers to provide EPA with evidence of an 

oversight program to defend themselves against an 

alleged violation. 

There's simply no justification for this 

requirement and it should be eliminated. 

In conclusion, PMAA believes that the 

impacts of the proposal on independent petroleum 

marketers will be significant and must be considered 

by EPA in its overall cost benefit analysis of the 

low sulfur diesel fuel. 

EPA conducted several studies of the cost 

of the proposal to the refining industry. We are 

asking that one study be done on the cost of the 

proposal to the marketing and retail segment of the 

industry. 

Finally, in light of the fact that EPA may 

get additional authority to regulate off-highway 

diesel fuel and possibly home heating oil as a 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 155 

result of the passage of the Clean Air Act 

amendments this year, PMAA believes EPA should 

consider postponing action on this rulemaking until 

passage of these amendments has taken place. It 

would obviously be more cost-effective and better 

for both the economy and the industry to regulate 

the entire distillate pool all at once than to do it 

in a piecemeal fashion. 

As EPA is aware, PMAA supports the 

reduction of the sulfur content not only of motor 

vehicle diesel fuel but also of diesel fuel used for 

other purposes including home heating oil. 

PMAA believes the reduction in sulfur 

content in home heating oil can have significant 

benefits not only from an environmental standpoint 

but also in the useful life of the furnaces and 

burners. 

PMAA does, therefore, support a single 

sulfur content for all distillate pools, not just 

motor vehicle diesel fuels. However, such a single 

standard should be implemented in a sufficient 

timeframe so as to avoid any supply availability 

problems for diesel fuel or home heating oil. 

The benefits of such an approach are 

numerous. Overall sulfur emissions would be reduced 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

"( 
P.58 

DOCKET NO. A-86-03 156 

1 for all distillate fuels. Diesel engines as well 

2 as heating oil furnaces and burners would have a 

3 longer useful life, and dyeing and segregated 

4 storage would be avoided. 

5 Maintaining a single low sulfur distillate 

6 fuel would deal with each of these problems. 

7 Thank you for the opportunity to testify 

8 today, and if there are any questions you have I'd 

9 . be glad to try to answer them. 

10 MR. GRAY: Thank you. 

11 As I'm sure you're aware, the principal 

12 motivation for this particular rulemaking was to 

13 insure the feasibility and enforceability of 1994 

14 on-highway diesel engine standards. 

15 As we've heard today that industry is very 

16 much depending on the availability of low sulfur 

17 fuel to allow compliance in 1994, so I suggest to 

18 delay the implementation of low sulfur fuel for 

19 those engines in effect would raise questions about 

20 the implementation ability, enforceability of the 

21 highway vehicle standards, so we would potentially 

22 be foregoing a very significant environmental 

23 benefit that we're now anticipating. 

24 So how would you respond from an 

25 environmental perspective? 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.59 

DOCKET NO. A-86-03 157 

1 How would the merits of that be able to be 

2 rationalized, the availability of that low sulfur 

3 fuel? 

4 MS. HASKINS: Well, I think on the other 

5 side of that coin the impact on our segment of the 

6 industry has got to be looked at. There's a 

7 tremendous amount of financial burden that's going 

8 to be placed on us. It could have significant 

9 effect on the economy. 

10 I think that when we're dealing in terms 

11 of 10-day, 30-day, 60-day timeframes, the major oil 

12 companies were given an opportunity and extensive 

13 time for studies to be done. I think it's necessary 

14 that those same opportunities be given to us and 

15 that a study be done on that impact. 

16 On the environmental side of it, I have no 

17 problem with the need for this in the lowering of 

18 sulfur content. I think maybe our position may even 

19 be a little stronger than the EPA's in the 

20 consideration of across-the-board lowering of sulfur 

21 content. 

22 It's been said numerous times today that 

23 the jurisdiction does not lie with you. We're aware 

24 of that. 

25 All we're asking for is a delay for two 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.60 

DOCKET NO. A-86-03 158 

1 purposes: an opportunity to see what happens with 

2 the amendments to the Clean Air Act, and at the same 

3 time an opportunity for an impact study to be done 

4 on our industry; those two things to happen. I 

5 think they're both equally important. 

6 I don't think we can afford to go into a 

7 regulation which is done in a piecemeal form and we 

8 turn around and have to make major changes. 

9 MR. GRAY: You indicated that you had 

10 attached some case studies of — is that something 

11 still being put together? Because it's not attached 

12 to what you handed out to us. 

13 MR. ANDERSON: Yes, it is. 

14 MS. HASKINS: Everybody's but yours, maybe. 

15 I have a complete set here. 

16 MR. ANDERSON: The ones you just gave us 

17 were not complete sets. 

18 MS. HASKINS: I have another one here. 

19 MR. GRAY: Okay. 

20 MS. HASKINS: Sorry. 

21 MR. GRAY: Could you give us a basic feel 

22 for what kind of impact you're concerned about? 

23 MS. HASKINS: The five studies that are 

24 attached go into particular case studies of 

25 individuals, and they vary somewhat depending upon 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 159 

the type of operation that they have. 

I can speak for my own business, and my 

area's not technical and it is not scientific as a 

lot of what you've heard today. I'm an operations 

and distribution expert, and that's where my areas 

of concern are. 

Our deliveries are made in sizes as low as 

150 gallons all the way up to a full truckload. We 

are in a major metropolitan area on one side of us 

and we have a rural area to the west of us, so we 

have both types of markets. 

We deliver three types of product all 

in one truck. Currently we're delivering home 

heating oil possibly to the building to heat it for 

a construction company, he's got a tank where he's 

got on-highway and he's got another tank that he's 

using off-highway. So we're filling all three of 

those tanks at one time. It will now necessitate us 

to send two trucks out. 

When you get into the storage area, it's 

not uncommon for a company to have — as an example, 

a company that's very close to us, he has one single 

million-gallon tank. All of his No. 2 product is 

stored in that. He's in an area where no tank 

installations whatsoever are allowed, none. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

P.61 
P.62 

DOCKET NO. A-86-03 160 

1 The closest that he's going to be able to 

2 get a tank to his business will be 50-plus miles 

3 away, so he's going to have to dedicate that million 

4 gallons of storage to a product and he's going to 

5 have to sacrifice a part of his business. 

6 I'm trying — you can go very specific on 

7 this. But those are two key areas actually in the 

8 delivery process and in the storage process. 

9 MR. GRAY: Maybe I can pursue the storage 

10 and come back to delivery and better understand it. 

11 In storage, are these companies companies 

12 that only sell"distillate? 

13 MS. HASKINS: No. Our companies 

14 are involved in all areas of bulk products, 

15 gasoline, kerosene. 

16 MR. GRAY: So then there's usually more 

17 than one tank, so it's a question of priority for 

18 the tankage? 

19 MS. HASKINS: We have two different types 

20 of companies. We have companies within our 

21 association that do not store product that pull 

22 directly from the terminal and deliver to the 

23 location. Then we have customers that only store 

24 distillate and pull all of their gasoline from 

25 the terminals. So you could have any combination of 

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BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 161 

that. 

Storage of gasoline in some areas is 

getting more difficult and for that reason the 

requirements aren't as tight on distillate, as you 

may find storage of distillate but no gasoline 

storage at a particular location. So you may only 

have one tank strictly a distillate tank, possibly a 

kerosene tank. 

MR. GRAY: So the impact is going to be 

very specific to the nature of the company as it 

relates to the storage issue? 

MS. HASKINS: That is one of the reasons 

it's been a little more difficult for us to gather 

information, because you don't have an identical 

scenario across the board with all marketers. 

Each one of us is unique in the 

methodology that we use and the way that we store. 

So impact is — impacts vary, though I can't think 

of a scenario that would not impact unless you were 

strictly a gasoline distributor. 

MR. GRAY: Certainly. Would you consider 

your companies to be supplied principally by large 

refiners or by small refiners, or just a mix? 

MS. HASKINS: Are you talking about the 

petroleum marketers or myself specifically? 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 162 

MR. GRAY: Either one. I'm just trying to 

get some idea of — 

MS. HASKINS: I don't think I can answer 

that question. I would be glad to include that 

information in our written comments. As far as the 

entire nation goes I can't answer that. 

Our company is supplied by 12 different 

companies in the Philadelphia area, and that goes 

the full gamut from the major oil company down to 

small refiners. We're supplied by anyone that's 

located in the Philadelphia area. 

MR. GRAY: So do you consider yourself an 

independent petroleum marketer? I mean, I'm trying 

to get some idea, because your association — 

MS. HASKINS: We're the guy — I guess the 

best way to put it is, we're in between — the word 

terminal has been used here several times today, you 

know, and there needs to be some definition of some 

of these terms because I think everyone uses them 

differently. 

We normally operate smaller bulk terminal 

operations where we're pulling with our own trucks, 

loading our own and delivering to the customer on 

location, the most common scenario, rather than 

someone pulling to then go into a bulk terminal. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313J 229-8238 

ANN ARBOR (313) 995-9545 

P.64 
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DOCKET NO. A-86-03 163 

We're the one downstream from the 

terminal, bulk terminal down to the customer 

location. 

We drew a diagram of this when we were up 

here meeting before and it would probably do us 

good, because people are having trouble grasping 

this, what all the different levels are. 

MR. GRAY: Are you independent marketers, 

is what I'm really trying to — in other words, do 

you market for major — I mean, would you be a 

Chevron company or — 

MS. HASKINS: No. In the area of 

distillate fuel we deliver no branded product. 

MR. GRAY: But would you deliver to like a 

Chevron station or do you just deliver to 

independents, is what I'm trying to — 

MS. HASKINS: Our diesel fuel is purchased 

from us by anyone. That could possibly be a major 

oil company, a major oil company's station, 

but understand, not a major oil company-owned 

station, but you said a Chevron station and that 

could be owned by several different people; it could 

be directly owned by Chevron or it could be owned by 

a dealer. 

MR. GRAY: One of the main concerns you 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 164 

seem to have is that there could be a shifting 

of the market share from small independent 

marketers, I assume the group that you represent, 

that's what I'm — to large refinery-operated and 

independent terminals. 

I'm trying to better understand how the 

relationship is established there between a large 

refinery-operated terminal, which is where you think 

the business will go, from the small independent 

marketers, and — 

MS. HASKINS: It's a possibility. I mean, 

it is one of the questions that we ask. 

Right now we're dealing in a lot of 

suppositions; what's going to happen to the 

marketplace, what's going to happen as far as supply 

of the product, the price of the product. There's a 

lot of ifs here. 

I mean, if we had a crystal ball and could 

say for sure it would be a lot easier to answer the 

questions. 

It's a concern that we have that there 

will be an entry into the marketplace where lower 

sulfur product could be controlled and the 

availability of it controlled, which is a problem 

that we are not dealing with currently. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

P.66 
DOCKET NO. A-86-03 165 

1 I understand back in the '70's when the 

2 Philadelphia and New Jersey areas lowered their 

3 sulfur content there was a problem in that area, and 

4 that's a concern that we have now, that that could 

5 happen again. 

6 MR. GRAY: Let me try this understanding a 

7 little bit differently. 

8 MS. HASKINS: I'm sorry. 

9 MR. GRAY: What I'm really trying to drive 

10 at with this question is, is your independence 

11 somehow related to independent or small refiners? 

12 Because that's another — 

13 MS. HASKINS: No, there's no relationship 

14 between the two. 

15 MR. GRAY: You're not normally, or 

16 the majority of your work is not to really market 

17 the product of small refiners? 

18 MS. HASKINS: You know what I think would 

19 be best and — I think it would come better in a 

20 written explanation of that included in our 

21 comments. I think we could address it better than 

22 me trying to explain it. 

23 MR. GRAY: I think we're just about there. 

24 I think you were saying that while you do 

25 market from independent small refiners — 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 166 

1 MS. HASKINS: We buy our product — 

2 MR. GRAY: You buy your product from 

3 whomever you can get the lowest-priced product from, 

4 is what I'm really hearing, and that doesn't 

5 necessarily always mean small or large companies, 

6 there's a mix? 

7 MS. HASKINS: No, no, no, it could be --

8 MR. GRAY: You're totally independent? 

9 MS. HASKINS: We are totally independent in 

10 the area — 

11 MR. GRAY: From refineries? 

12 MS. HASKINS: — in the area of diesel fuel, 

13 MR. GRAY: Okay, and so in that context it 

14 seems to really be principally an issue of — 

15 MS. HASKINS: It may not stay that way, 

16 though. 

17 MR. GRAY: Okay. You may take over some 

18 small refineries, or vice-versa? 

19 MS. HASKINS: No, the potential is there 

20 that it is possible that diesel fuel would become a 

21 product that had to be pulled by brand, which it is 

22 currently not. That possibility is there. It does 

23 not exist today in our marketplace, and I'm not 

24 aware of all of the major oil companies and how they 

25 function. All I can discuss are the ones that I 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 167 

deal with, but that possibility is there. 

MR. GRAY: Okay. 

MS. HASKINS: I didn't mean to confuse you 

at the end just as you were beginning to understand. 

MR. GRAY: With the basic structure it 

seems like your principal concern would focus around 

storage capacity to handle distillate in more than 

one classification. We've had some discussion today 

of possibly a — forgive me, but yet another diesel 

fuel or distillate classification to handle some of 

the small refinery concerns, and then a suggestion 

of maybe some higher sulfur on-highway fuel for a 

limited period to minimize the impact on small 

refiners who are small business people as well. 

That's one of the other major issues that 

seems to be surfacing. 

MS. HASKINS: I would hope an impact study 

on our industry would be done before a consideration 

of anything like that would be done. 

MR. GRAY: So I guess the main point is 

whether it's two or three. The basic concern is 

that you feel that you would be disadvantaged 

compared to other marketers in having to — 

MS. HASKINS: No, no, no, no. Our primary 

concern is it's going to cost us a tremendous amount 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 168 

of money over and above what we're spending today to 

do business. 

Our companies are not big companies. 

Understand that we are not multi-million-dollar 

companies. A lot of us are small independent 

marketers, just as we say. 

We are going to have to sacrifice a part 

of our business because of our inability to store 

dual product. Those of us that can store dual 

product are going to then take on a major expense, 

which is going to be very difficult for us to bear. 

Or competitive ability is not the key 

concern right now. It is a question only, something 

that needs to be considered. 

There are going to be much larger factions 

that will be able to handle this much better. 

Speaking just in our industry I think the concerns 

are whether we're going to sacrifice part of the 

profits of our company, and as I said a little 

while ago those numbers have been running as high as 

25 percent in our discussions with people. 

We'd like the opportunity to get that data 

specifically for you so you have numbers to look at, 

so you can — and these five case studies give 

you a general idea of the kind of data we're 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 169 

beginning to gather, but we need the time to do 

that. 

MR. GRAY: You're competing with larger 

companies that you think will have the capacity to 

add or have the ability to add the additional 

storage capacity more easily than you for more 

products? 

MS. HASKINS: No, and I feel uncomfortable 

in a discussion like this. We have fairly strict 

requirements in our area of discussions on 

competition and pricing and so forth. I really 

don't feel real comfortable with this conversation. 

I really would like tp address it in writing, where 

I do feel more comfortable. 

MR. GRAY: Okay. 

MS. HASKINS: If you have no objection to 

that. 

MR. GRAY: I'm just trying to better 

understand where you felt — 

MS. HASKINS: I understand that, but I 

would feel more comfortable in a written comment on 

that. We're getting into an area that I just don't 

feel real good about talking about. 

MS. HASKINS: If you will as you put those 

comments together try to help us understand, because 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

P.71 
DOCKET NO. A-86-03 170 

1 if it's an additional cost and everyone bears it 

2 that will be competing with you, then the — you 

3 know, your customers will cover the cost, you will 

4 recover the increased cost associated with two 

5 delivery trucks or compartmented delivery trucks or 

6 more tankage at your terminal, and so one of the key 

7 aspects would be if some of your member companies 

8 are disadvantaged compared to a big company or a 

9 major terminal, or give us some feel for why you 

10 feel that you would not be able to recover the 

11 cost of an investment that you would need in order 

12 to retain that 20 percent of your business that 

13 you're fearful you would lose. 

14 MS. HASKINS: I do understand, and we will 

15 do that. I'm sorry that I'm passing on that for 

16 right now, but I would feel better about that. 

17 MR. GRAY: All right. Very good. 

18 MR. ANDERSON: I just have one question 

19 that's on a slightly different topic. 

20 One of the things you talked about was the 

21 enforcement aspects and the dyeing requirements and 

22 your belief that wouldn't necessarily need to go 

23 through the whole enforcement program, and you said 

24 the refiners should have to certify the cetane and 

25 the sulfur index and such on these invoices. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 171 

I would take that to mean that you think 

that the refinery is the one that ought to do the 

dyeing also? 

MS. HASKINS: Yes, I think it should be. 

That's a personal comment from me. On behalf of 

PMAA, they would have to state their position after 

we've talked about that, and I'd like to delay that, 

but for our company, that would be a much better 

procedure. 

MR. ANDERSON: Okay. 

MR. HOOVER: I know one of your concerns on 

the delivery was the dual truck system and so forth, 

and you also say that you deliver a lot of gasoline 

and that you generally have two or three or four 

different products and use compartmentalized trucks. 

Wouldn't the same be applicable to 

distillates? 

MS. HASKINS: But I'd have to buy those new 

trucks. I don't currently have compartmentalized 

trucks for distillate for No. 2 delivery. My 

fleet's in good shape now and I would hope to think 

that I didn't have to buy more trucks just so I can 

have compartmentalized trucks. 25 years from now 

it's a little bit different, but that initial 

expense may be something that some of us won't be 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

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P.74 

DOCKET NO. A-86-03 172 

1 able to incur. 

2 MR. HOOVER: One thing I would like to 

3 make, it's a comment on something you say. You say 

4 — and this is on the enforcement provision: Unlike 

5 the leaded-unleaded fuel and RVP situations, EPA is 

6 proposing to dye the unregulated fuel. This 

7 provides EPA with automatic evidence of 

8 noncompliance which it does not have in the other 

9 two enforcement systems. 

10 Basically, that's basically not correct. 

11 The fact that the fuel is dyed or undyed says 

12 nothing about compliance of that fuel with the 

13 standard. It's merely there to make the 

14 determination of what will be considered on-highway 

15 diesel fuel. 

16 You may have diesel fuel that has dye in 

17 it, that if you tested it it would not exceed the 

18 standards and would not be in violation, and 

19 likewise you may have diesel fuel that's sold as 

20 on-highway diesel fuel that has no dye in it 

21 whatsoever that has never been added anywhere in the 

22 chain that exceeds the standards. 

23 So the presence or absence of dye is not 

24 an absolute automatic compliance mechanism. 

25 MS. HASKINS: Isn't that the purpose of the 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.75 

DOCKET NO. A-86-03 173 

1 dye, though? 

2 MR. HOOVER: The purpose is to segregate 

3 out into what you consider to be on-highway diesel 

4 fuel and other. That's the problem, is that we have 

5 to segregate down to the portion that we can 

6 regulate. 

7 MS. HASKINS: I mean, if — 

8 MR. HOOVER: The purpose is to ensure that 

9 there is an impetus on the industry to segregate the 

10 two and to make it visible to all segments of the 

11 industry and the users, whether the fuel that 

12 they're getting is in fact low sulfur appropriate 

13 cetane index diesel fuel. It's not an automatic 

14 indicator. 

15 Clearly, if the dye is added somewhere 

16 because they determine this is going to be used 

17 off-highway, that doesn't guarantee that all clear 

18 diesel fuel is going to meet the standards. 

19 MS. HASKINS: I'm currently distributing 

20 four grades of gasoline and I am able to track which 

21 is which. So if the sole purpose of dye is for our 

22 sake, you don't have to do it. 

23 MR. GRAY: The main point is that if the 

24 distillate is dyed, then whether it has higher or 

25 lower than the nondyed fuel becomes a non-issue from 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
DOCKET NO. A-86-03 174 

1 an enforceability standpoint. 

2 You know, our enforcement folks won't 

3 really worry about that unless someone dispenses a 

4 dyed fuel into an on-highway vehicle. Then that 

5 person becomes responsible for a prohibited act and, 

6 you know, and then by seeing a dyed fuel go into 

7 that vehicle then the enforcement case will be 

8 fairly straightforward. They can't be expected to 

9 know if it's clear its sulfur or its cetane index 

10 value, but they can clearly be held responsible for 

11 dispensing of a dyed fuel. 

12 And so the real focus is to try to ensure 

13 that a high sulfur fuel wouldn't find its way into 

14 an on-road diesel engine, especially in '94 and 

15 later engines which may have problems actually 

16 using a high sulfur fuel. 

17 So we have to both have a means of 

18 insuring that people don't dispense the wrong fuel, 

19 and that becomes very tricky unless we get into 

20 nozzles like we did with leaded versus leaded, 

21 because the owner could only be — or the service 

22 station could only be held accountable for 

23 dispensing the fuel based upon nozzles and 

24 mechanical restrictions. 

25 The dye in effect has the same benefit. I 

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BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.77 

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DOCKET NO. A-86-03 175 

think Steve was only saying that if it's — it has 

to be clear to be put in the trucks, but — 

on-highway trucks, but that isn't enough. Then that 

clear fuel has to also meet the specifications 

for an on-highway fuel, and if it's found in a truck 

then we have to find out where, who was responsible 

for the high sulfur level and, you know, if a 

marketer blended — well, supposedly if the dye as 

you recommend is put in at the refinery level that 

will lessen the chances that competitive pressures 

will force someone to take a nondyed home heating 

oil and mix it with a nondyed on-road fuel and 

market it as an on-road fuel, but that's — you 

probably heard earlier some of the terminal and 

refining people were concerned about adding dyes at 

the refinery, so that's another issue we have to 

struggle with. 

MS. HASKINS: I think it's extremely 

important that a certification come from the 

refinery. Otherwise, it's virtually — it would be 

an overwhelming project for us to police that from 

that point on. We have to have some type of 

certification that what we're pulling out of that 

terminal meets the specifications. Otherwise, we'd 

be testing every load that we picked up, is the only 

.PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 176 

way we could be sure, and I think that's very, very 

important here. 

MR. HOOVER: I think the refineries 

probably can provide whatever type of certification 

they deem appropriate to you from an enforcement 

standpoint with the experience we had with the 

leaded-unleaded gasoline scenario where the price 

differential at the various levels in the 

distribution chain was not anywhere nearly as large 

as what you're looking at here with the heating oil 

to on-highway diesel fuel in terms of the taxes and 

the cost between the high and low sulfur processing. 

There's going to be such an economic 

incentive to commingle and switch that we believe 

that you really need something that makes it as 

visible as possible to all levels of the chain that 

that's not occurring, and that includes right down 

to the trucker who is going to be putting fuel in 

there. 

He doesn't know if he has high or low 

sulfur fuel or heating oil or whatever, but if he 

looks in and says it's purple or blue or some 

other color than what he knows it should be, then he 

may report that he's gotten fuel at such-and-such a 

station that is in violation. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.79 

DOCKET NO. A-86-03 177 

1 And some of your comments go to a workable 

2 enforcement scenario. Fortunately we've had 15 

3 years of experience with gasoline and a lot of 

4 what's in the proposal is based on that experience 

5 in terms of what does work and what just doesn't 

6 work, and also what provides an incentive for the 

7 industry at all levels to comply. 

8 MS. HASKINS: Were you not expecting cost 

9 differentials on RVP that did not actually 

10 materialize? 

11 I mean, you know, the actual differences 

12 that were expected to happen did not materialize in 

13 our market. 

14 MR. GRAY: I think since all the gasolines 

15 had to meet the volatility we wouldn't see in a 

16 given market a cost differential from one gasoline 

17 to the other. 

18 One of the issues was, you know, would we 

19 see a northeast state higher cost than the rest of 

20 the country because of the higher volatility in the 

21 summer of '89? 

22 There were a lot of strange things 

23 happening with gasoline prices beginning in March. 

24 They went up very rapidly, they oscillated, actually 

25 had gone down and maybe gone back up again, so it's 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.80 

DOCKET NO. A-86-03 178 

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going to be very difficult in those major shifts to 

establish a direct answer to your question. 

But we wouldn't have expected within a 

given market there to be a difference associated 

with RVP. 

MS. HASKINS: I was thinking of markets 

that came up against each other where the standards 

vary. 

MR. GRAY: There should have been a cent or 

so, but I'm not sure if we'll be able to 

statistically determine that with the fluctuation 

that occurred this past summer. 

MR. HOOVER: There's no tax difference, 

though, between the gas. 

MS. HASKINS: But that's not a concern of 

EPA's, is it? The taxes don't — I mean, that is an 

IRS question, not an EPA problem. 

MR. HOOVER: That's correct, but if that 

incentive leads to fuel switching that's where the 

environmental concern is. The cause is not relevant 

but the reaction of it is. That has to be a 

concern. 

MR. GRAY: For the distillate. 

MR. HOOVER: Right. I was wondering if at 

any point in your system do you handle any dyed 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.81 

DOCKET NO. A-86-03 179 

1 products already, say, for instance aviation 

2 gasoline? 

3 MS. HASKINS: No — I'm sorry. I'm 

4 answering that question for myself. I can't answer 

5 that. I do know there are dyed products on the 

6 market from some of the major oil companies. I 

7 really don't know specifics on that. I know there 

8 are such things. I don't handle anything like that. 

9 MR. GRAY: Thank you very much. 

10 We will look forward to reading and trying 

11 to better understand this complex issue. 

12 MS. HASKINS: I apologize for passing on 

13 that. 

14 MR. GRAY: I understand the reasons. 

15 MS. HASKINS: We will answer and address 

16 that. 

17 MR. GRAY: We have one other organization 

18 that's requested an opportunity to appear to 

19 testify, and that's the Empire State Petroleum 

20 Association. I assume that's New York State. 

21 

22 MR. LYNCH: Good assumption. 

23 My name is Robert D. Lynch. 

24 I'm Executive Vice President of Empire 

25 State Petroleum Association, or ESPA. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.82 

DOCKET NO. A-86-03 180 

1 It's a statewide trade association 

2 representing 450 independent motor fuel and heating 

3 oil distributors in New York State. 

4 Independent marketers are responsible for 

5 the storage and distribution of more than 50 percent 

6 of the motor fuel and 80 percent of the heating 

7 fuels in that state. Approximately 75 percent of 

8 our 450 members are in both motor fuel and the 

9 heating oil businesses. 

10 Heating oil consumption in New York is 50 

11 percent greater than in the next largest user state. 

12 Almost all ESPA members are classified as 

13 small businesses according to the Federal Small 

14 Business Administration criteria. Most of our 

15 members market diesel fuel for both on-highway and 

16 off-highway uses. Very few, if any, maintain 

17 segregated storage and delivery systems for these 

18 two products, which in most respects are identical. 

19 For these reasons independent fuel 

20 marketers are very concerned that they in their 

21 representative organizations were not consulted over 

22 the three- or four-year period about the 

23 appropriateness of EPA's diesel quality proposal 

24 that would divide the traditional No. 2 distillate 

25 pool in two, require the segregation of off-highway 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.83 

DOCKET NO. A-86-03 181 

1 use by dyeing of fuel at the refinery and imposing 

2 compliance monitoring and penalties on the 

3 distributor sector of the industry. 

4 In other words, nobody could find us until 

5 it came to compliance and monitoring, and all of a 

6 sudden they had our name, date, serial number and 

7 the whole bit. 

8 Our members would be significantly and 

9 adversely affected by these regulations and believe 

10 that the regulations have been promulgated without a 

11 serious analysis of their effects on independent 

12 marketers. 

13 EPA should assess these effects and 

14 explore alternatives with less impact on marketers, 

15 competition and consumers. 

16 Now for those of you who are trying to 

17 follow me I'm going to jump forward a little bit 

18 because some of the remarks I've made in the next 

19 several pages are supportive of the remarks you've 

20 just heard from Petroleum Marketers Association of 

21 America. 

22 But I would like to add that the proposed 

23 regulation would place smaller oil marketers at 

24 a competitive disadvantage with major refinery 

25 companies. Some marketers would be forced to 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 182 

abandon the on- or off-highway diesel fuel business, 

and a few others would leave the heating oil 

business. The number of competitors in some areas 

could decline significantly. 

In many rural areas including much of 

upstate New York there are only a few marketers that 

service large regions. 

We have one in particular that we have 

queried before coming here. They have 19 bulk 

plants. 17 of them cannot expand at all because of 

local environmental limitations. 

So those of you who think that once you 

have managed to refine a certain product and somehow 

through some trickle-down effect that it's 

automatically going to reach the marketplace, that's 

not so. That's got to come down through us because 

we're the ones that are delivering all of that 

product there, and when they have — when we have 

someone with 19 bulk plants, 17 of which can't add 

storage and EPA's answer is, well, that's easy, you 

give up one of the other products that you're 

selling — I think you used the term specialization 

— that's a euphemism. 

That means get out of the business, and 

we don't think that you can do that. We don't think 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 183 

you can do it certainly without a study. 

I should add right here, we are not 

opposed to improved fuel quality. We want it, too. 

In your proposal we are treated with 

benign neglect. We are treated as a dumping ground. 

As a sink. That's unacceptable. 

Now I'll jump forward to mention a couple 

things that are of concern to us that maybe haven't 

been mentioned yet. 

EPA has not examined which domestic and 

foreign suppliers would produce low sulfur diesel 

fuel or would continue producing the higher sulfur 

fuel for off-road use. That just seems to be, well, 

they'll do that. They'll make their choices. 

Not so simple. Not so simple at all, for 

the reason that I mentioned before. We have those 

markets. We serve those markets. And if we cannot 

manage the system that you're proposing in 

isolation, then your whole program isn't going 

anywhere except in major urban areas where the 

major oil companies reside. They are in all your 

major urban areas. So if you'd like to take that as 

your program, you're home free. 

But the minute you get out of the 

metropolitan areas then you — that's business that 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

'•n 
P.86 

DOCKET NO. A-86-03 184 

1 they don't want or don't need or is too difficult 

2 for them to manage or is not profitable enough. And 

3 that is why we exist and that's where we exist, 

4 mostly where they don't want the business. 

5 Now it's been mentioned that EPA reviewed 

6 three pipelines in 1987. It's a shame we didn't 

7 know about that until three weeks ago, but you 

8 reviewed the three pipelines in 1987 and implied 

9 there might be some downstream difficulties. 

10 But EPA did not evaluate the capability of 

11 lateral pipelines. Those are those little fingers 

12 that come off the ends of the pipeline. These 

13 essential local arteries have already been 

14 confronted with substantial storage and shipping 

15 limitations as a result of EPA's Reid Vapor Pressure 

16 rules. 

17 That should be known to EPA, and it should 

18 now be obvious that significant specification 

19 changes are useful only if the products can get to 

20 the end users. And lateral pipeline shipment 

21 capability to small local terminals, inland 

22 terminals is a key question yet to be explored, let 

23 alone answered. 

24 The New York Mercantile Exchange, NYMEX 

25 some call it, provides a petroleum futures market 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 185 

covering the No. 2 distillate fuel for the purpose 

of price discovery and risk management for traders, 

blenders, utilities, industrial users and shipping 

companies. 

Fuel specifications are critical in 

maintaining the integrity of the futures prices. 

They're reflecting market value for a commodity in 

worldwide trade. 

ESPA believes EPA must contact NYMEX 

before proceeding with this proposal. 

I talked to them. They haven't heard a 

word from you. 

EPA must examine the impact of its 

segregated fuel mandate on state emergency planning. 

New York has an extensive but fragile 

network of deep water petroleum terminals, pipeline 

laterals, barge transport, bulk plants and trucks. 

Most facilities are mature, and environmental 

pressures are leading to consolidations. 

Therefore, New York's State Energy Office 

must be advised as to the additional demands that 

EPA's two-pool proposal would require which might 

disrupt in-place emergency petroleum supply plans. 

The Federal Department of Energy has been 

pursuing programs to conserve fuel use by 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

"•rc 
DOCKET NO. A-86-03 186 

1 increasing the efficiency of heating equipment. 

2 Important strides have been made under the 

3 technical guidance of Brookhaven National 

4 Laboratory, or BNL as it's called. However, many 

5 equipment manufacturers insist that unless sulfur 

6 and aromatics in distillate are reduced there cannot 

7 be further progress on particulate emissions or any 

8 lessening in S02 contributions to acid rain. 

9 Does that sound familiar? It should, 

10 because that's what you have in your Preamble about 

11 where the truck manufacturers came from. 

12 But they're not the only ones that use 

13 distillate fuel, and in fact there's more distillate 

14 fuel used for other purposes than there is for that, 

15 and they have these emission problems and they have 

16 faced these barriers not being able to proceed any 

17 further because of sulfur and aromatics. 

18 What has EPA done to look at that 

19 situation which also requires serious attention? 

20 In addition, EPA's declaration that the 

21 existing distillate pool may engender adverse health 

22 effects raises very serious concerns for 13 million 

23 space heating consumers, not including the millions 

24 of off-road diesel users. 

25 You say the stuff could cause cancer. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.89 

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DOCKET NO. A-86-03 187 

It's strongly implied. Not quite, but, you know, ' 

it's another good reason why this needs to be done. 

We don't disagree, but if you're going to 

say that the distillate pool that's left is not 

improved, is going to carry these adverse health 

effects, you're terribly negligent in your 

responsibilities of deciding, I'm playing the 

almighty, we're going to save this part of the 

product pool and the rest of it, that will go down 

the tubes. 

I don't think so. I don't think that's a 

good job of evaluation on your part. 

Therefore, it's imperative that EPA contact 

heating equipment manufacturers and Brookhaven 

National Laboratory program directors about the 

substantial implications of EPA's health 

determinations and possible aggravation due to EPA's 

two-pool scenario. 

Now it also appears to us there's not been 

an adequate analysis on the role of kero in EPA's 

dual distillate pool proposal. Very low sulfur kero 

is already segregated, though in relatively small 

volumes. 

Kero has very wide application as a 

straight product use and also as a heating fuel and 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

"

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P.90 

DOCKET NO. A-86-03 188 

1 also as a motor fuel, it is both a substitute and a 

2 supplemental fuel, and exposure to compliance 

3 regulations must be clearly understood and defined, 

4 not just left hanging out there in never-never land. 

5 EPA did not evaluate alternatives to the 

6 .05 standard. EPA must examine whether another 

7 standard is appropriate and cost-efficient. 

8 Energy and Resource Consultants, one of 

9 your contractors, was commissioned to consider the 

10 effects of diesel fuel quality on engine emissions, 

11 durability and performance. This study examined the 

12 effects of .05 diesel fuel but stated that it should 

13 be clearly noted that no optimization studies were 

14 carried out in choosing this particular sulfur level 

15 and that such studies certainly should be done 

16 before any such regulation is promulgated. 

17 EPA does not disclose any technical or 

18 economic basis for the .05 by weight fuel standard. 

19 However, EPA acknowledges that smaller amounts of 

20 sulfur removal can be obtained, quote, very 

21 inexpensively, close quote. 

22 It is entirely possible that an 

23 intermediate standard of .15 or .10 would provide 

24 much wider availability of a technically acceptable 

25 fuel. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.91 

DOCKET NO. A-86-03 189 

1 This analysis must be completed to 

2 determine whether .05 is appropriate and necessary. 

3 EPA has not probably considered the 

4 effects of dyeing of off-highway fuel. We just 

5 listened to a discussion back and forth about that. 

6 Rather, EPA claims that the diesel fuel industry 

7 suggested that off-highway diesel fuel be dyed and 

8 the Agency found the industry suggestion to be a 

9 practical one. 

10 Well, we're the diesel fuel industry. You 

11 never contacted us. We didn't give you that idea. 

12 You know, who gave you that idea? Somebody way 

13 upstream from us. Somebody that thought, hey, 

14 there's a good idea, throw that one out. Probably 

15 somebody that doesn't know anything about marketing 

16 or anything about distribution. 

17 No estimates have been made about what the 

18 dye will cost. Whatever it is, we'll pay it, as 

19 you've pointed out. It will be passed right along 

2 0 through. 

21 There are logistical difficulties relating 

22 to the point in the distribution team that the dye 

23 should be added. I've listened here today that the 

24 refinery is the only place you can trust it will be 

25 all the way. That's fine. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.92 

DOCKET NO. A-86-03 190 

1 Now what do you do when the fuel comes in 

2 the New York harbor from overseas? Does that mean 

3 it's dyed and brought in? We can't move ships 

4 around that way. 

5 Have you people ever recognized what 

6 happens in the wintertime in the peak periods when 

7 you sit there praying for a ship or another 

8 delivery? And here you are talking about mucking up 

9 the whole thing with these ideas. 

10 What are we going to do with regard to 

11 tracings of this product if we were to try to clean 

12 out our trucks in between time? 

13 You have to understand these trucks don't 

14 just sit around. It's not economic to have trucks 

15 sitting around. You run the wheels off them. 

16 And if they're not compartmentalized or if 

17 — even if you build manifolds into them, what it 

18 costs and all that, how much of this dye is left in 

19 the lines that would make you subject to compliance? 

20 Roadside checks. Our livelihood exists on 

21 quick dispatch, no loitering, not hanging around; 

22 certainly not hanging around while our trucks are 

23 stopped to have somebody this, that and the other 

24 thing to find out whether you have a trace of this. 

25 We have to examine that, and this is left over from 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.93 

DOCKET NO. A-86-03 191 

1 a prior load of a dyed product, and now I'm moving 

2 the other product and there's some of this in it. 

3 And everybody can say all you want, oh, 

4 we're not going to be that way, we're not that way, 

5 we're not ogres, we don't do things like that, you 

6 know, trust us. 

7 Well, we've done that on RVP, we've done 

8 that on leaded and unleaded, and I've got news for 

9 you, there is one big load of harassment that goes 

10 on out there with people trying to make their quotas 

11 and trying to show that they're on the ball and 

12 doing a good job. 

13 And so we'd suggest if you want to have 

14 that monitoring and that compliance do it way 

15 upstream and then you have our total support. But 

16 when everybody in the industry agrees that it will 

17 be down on us, we're not happy with some of the 

18 conditions that are posed for us. 

19 I heard a man sit here before and say, 

20 well, $80,000 for a testing set-up for sulfur, but 

21 you can get a buy, get one for 18,000. 

22 When you're talking refineries or major 

23 oil companies or major terminals that may make some 

24 sense, but it's idiocy when you're talking about 

25 at the distribution level. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.94 

DOCKET NO. A-86-03 192 

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We suggest EPA should promulgate a new 

proposed segregation that takes into account all the 

effects on downstream markets. 

For the reasons discussed above EPA should 

issue a modified proposal that considers, the effects 

of diesel quality regulations on all parties, 

including downstream marketers and off-highway 

consumers. 

Many important factors have been ignored 

and must be addressed before EPA implements diesel 

fuel quality regulations. 

If after EPA properly assesses all the 

impacts and costs of diesel fuel quality standards 

and finds that such standards are necessary, ESPA 

recommends a single standard be recommended for all 

No. 2 fuels. 

It is ESPA's view that the combined costs 

associated with regulating only on-road fuel could 

be greater than the combined cost of regulating all 

No. 2 fuel. 

In addition, the environmental benefit of 

a single lower sulfur standard could be substantial, 

because it would be across the entire distillate use 

horizon. 

ESPA recognizes this alternative could 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 193 

increase the cost of all No. 2 distillate, but 

because it would reduce the problems and costs 

associated with dual storage and delivery systems it 

may not increase the ultimate price to the consumer. 

Further, the low sulfur standard for 

heating oil would reduce maintenance for furnaces 

and boilers just as the proposal says that it will 

do for truck manufacturers or for truck users; exact 

same situation. 

A single standard would also maintain 

competition within the industry because marketers 

without dual fuel storage and delivery systems could 

continue to sell both products. 

And finally, this would alleviate the real 

concerns we have regarding the possible supply 

disruptions or even shortages. 

And that completes my comments, and I'd be 

glad to answer any questions if I could. 

MR. GRAY: Thank you for sharing your views 

with us. 

Are you a member of the PMAA? 

MR. LYNCH: We are one — our organization 

of 450 members is one of 40 organizations that are 

members of PMAA, 40 similar organizations to my 

own. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 194 

MR. GRAY: So membership in the Petroleum 

Marketers Association of America is made up not 

of individual companies as much as it is groups 

such as yours? 

MR. LYNCH: State and regional 

organizations, correct, which as I say we are 

in different states, from different regions and, 

therefore, have some of the perspectives that I 

heard you treat earlier, where the people say in the 

south, in the west, well, we don't have any heating 

oil to dump this stuff, what are we going to do? 

Well, I'm from the northeast, and I fear 

for what you're going to do, because we've got lots 

of heating oil, and so that could look like a very 

attractive place to dump product, and we are not 

looking, we are not looking to save a penny, we're 

not looking to save money, we are looking to improve 

the fuel and to enjoy the environmental benefits 

that have been suggested. 

And particularly since you have now 

identified for the world and our competition in the 

natural gas business and in the electric business 

and in the solar business that oil's not only bad 

because oil's bad anyway and it's overseas so it's 

twice as bad, controlled by OPEC so three times as 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 

P.96 
DOCKET NO. A-86-03 

.„,r. 

195 

1 bad, but now the damn stuff causes cancer. 

2 Who's the authority? Our competitors? 

3 No. EPA. Thanks a bunch. 

4 So now we're going to be in that lifeboat 

5 that you guys are creating. We're going to get 

6 cleaned up, too. That's a must. 

7 MR. GRAY: Let me try to respond a little 

8 bit, if you'd like. 

9 First of all, you know, the carcinogenic 

10 character of the fuel is in the combustion products, 

11 and the combustion products are different between 

12 home heating furnaces, where it's continuous 

13 combustion, and the heterogeneous combustion 

14 characteristics of a diesel engine. 

15 MR. LYNCH: Would you explain that to me? 

16 I've been in the business 39 years and know 

17 something about it. So I'm delighted to hear that 

18 this is different. 

19 MR. GRAY: Well, the diesel combustion 

20 process requires a distillate with a certain cetane 

21 number so that it will automatically ignite at the 

22 temperatures associated with the compression ratio 

23 of a diesel engine, so that with a high compression 

24 engine the temperature of the gas, incoming air 

25 charge is heated during compression, and then when 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
P.98 

DOCKET NO. A-86-03 

js-p-- » JI Tjr.T.ir 

196 

1 the fuel is injected if it has a high enough cetane 

2 value, which is a measure of its tendency to 

3 auto-ignite, combustion will occur in a 

4 nonhomogeneous, a heterogeneous fashion. 

5 It doesn't burn with a flame across the 

6 chamber like a gasoline engine does. It burns in 

7 isolated locations as each of the little droplets 

8 can auto-ignite. 

9 So the potential for different combustion 

10 products certainly exists when you're comparing a 

11 diesel engine combustion process to a home heating 

12 furnace, which is a continuous combustion process 

13 which can produce more complete combustion, if you 

14 will. 

15 So in assessing the toxic nature of the 

16 emission products one has to look at the combustion 

17 products, that's the first point, and this 

18 particular rulemaking focuses on the particulate 

19 levels, and as you mentioned acknowledges the 

20 concern about the toxic nature of the diesel 

21 particulates which this rulemaking will help 

22 facilitate the reduction of. It doesn't really 

23 address the issue of the carcinogenic character of 

24 home heating oil. That's one point. 

25 The second point is that in a sense as I 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.99 

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DOCKET NO. A-86-03 197 

understand your association and even the PMAA's 

representation, is it principally home heating oil 

distillate producers, that you don't really supply 

natural gas or perhaps not even LPG, which would be 

another competitor? 

MR. LYNCH: Correct. Both ways, both ways. 

MR. GRAY: Both are correct? 

MR. LYNCH: We do and we don't. In rural 

communities that's marketed as well. 

MR. GRAY: Some of your members might 

market LPG? 

MR. LYNCH: Correct. 

MR. GRAY: But not natural gas? 

MR. LYNCH: Not unless you have a monopoly 

franchise. They don't give those out too readily. 

MR. GRAY: Right, to your members. So the 

price at which you receive your product has a major 

effect on your business and the competition with the 

other forms of heating fuel, electricity, natural 

gas, for example, in your area, and so this concept 

of dumping really means making available to your 

market a lower-priced product to in effect 

potentially allow you to compete with other products 

that you're now in competition with. 

I'm curious as to why you don't see that 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (3131 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET HO. A-86-03 198 

as an attractive feature. 

MR. LYNCH: And I'm amazed that you think 

that I spent 500 bucks to take this airplane out 

here, spend a day here and tell you we've got to 

have one single fuel product, when dumb as I am, I'm 

not realizing that I could save a penny-and-a-half 

or two cents a gallon maybe if I just shut up and 

let this all happen. 

Aren't you impressed with the fact that 

I'm not impressed with that? 

MR. GRAY: Well, I'm confused, I'll admit. 

MR. LYNCH: Well, if you refer to me first 

the name of the study which I can rely on to fend 

off our utility competition, how to make do with 

that four or five pages of health effects on us, but 

what study is it you were referring to that 

indicates that the health effects on diesel 

combustion are different from that in open-flame 

combustion? 

MR. GRAY: Well, for someone that's been 

working in the area for quite awhile I don't think 

that a specific study has investigated that because 

of the fundamental differences in the combustion 

characteristics. 

MR. LYNCH: Right. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

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DOCKET NO. A-86-03 199 

MR. GRAY: But certainly we could provide 

information to you on the studies that have been 

done on specific combustion products of diesel 

engines and help you identify those studies that 

have looked at distillate continuous combustion 

processes. 

MR. LYNCH: We would appreciate that, 

because that does not — that's not our information 

at all. Our information is sulfur in, sulfur out. 

In the northeast we are blamed by the 

Canadians for all of their dead forests because of 

acid rain. 

MR. GRAY: But that is, agreeably, a 

different issue. 

MR. LYNCH: I thought I mentioned, and 

if I didn't, I should have, an additional issue, 

correct, one that has not been examined either, but 

our contributions, our manufacturers of equipment 

have said that there's no way that they can further 

reduce the contributions to acid rain, S02 unless 

sulfur is reduced, sulfur in and sulfur out. 

Now with regard to the toxicity, I'm not 

going to argue the other side of that equation, but 

if EPA has reports that support your statements to 

me earlier, I'd appreciate seeing them. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313} 229-8238 

ANN ARBOR (313) 995-9545 

fi 
P.3 

DOCKET NO. A-86-03 200 

1 I would in conclusion say this once again, 

2 to repeat: We want a better fuel, too. We think 

3 that a proper investigation would have shown that a 

4 single higher quality fuel has more benefit to the 

5 environment and less impact on the total industry 

6 and total costs than your proposal, and we think 

7 that that lack of investigation in this area needs 

8 to be corrected before a final rule is promulgated. 

9 Thank you. 

10 MR. GRAY: I guess we have no further 

11 questions. 

12 Thank you very much again. 

13 Last chance. Would anyone else like to 

14 make a statement? 

15 Yes, sir. 

16 

17 MR. SHEPHERD: There's just two points, 

18 and they're real brief because I haven't — 

19 MR. ANDERSON: Identify yourself for the 

2 0 record. 

21 MR. SHEPHERD: Richard Shepherd with 

22 Buckeye Pipeline. 

23 The first point is cetane index. ASTM 

24 specifically states that the D976 is not to be used 

25 as a referee method for the cetane number. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
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DOCKET NO. A-86-03 201 

EPA on the other hand has initially 

proposed it to be not only the referee method for 

the cetane number but as a method for insuring 

compliance with the aromatic cap. 

In the past I've not.found — I'm in the 

quality control field, area. I have not found a 

good correlation between cetane index and aromatic 

content in all diesel fuels, and not even a good 

correlation between cetane index and cetane number 

between all diesel fuels. 

I would submit prior to a final decision 

on using the cetane index that some additional input 

is probably required, the least of which is maybe a 

discussion with ASTM as to the reasons why it is not 

a referee method for cetane number, and I think 

you'll find, as was pointed out earlier today, that 

— and the gentleman from California that has that 

small refinery, he's not alone. This occurs 

throughout the United States in terms of cetane 

additives and your different paraffinic and 

naphthenic crude slates. 

Cetane index is probably — or should not 

be used as a referee method. 

No. 2, we get into the clause of 

presumptive liability throughout the distribution 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 

P.4 
P.5 

DOCKET NO. A-86-03 202 

1 chain. If EPA would mandate — and there's been 

2 some excellent points made regarding storage and the 

3 handling requirements downstream, but if EPA were to 

4 mandate the dyeing of off-highway diesel that almost 

5 eliminates the potential for contamination or 

6 intentional blending downstream. 

7 The presumptive liability comes directly 

8 from the volatility regulations and it is valid in 

9 that particular regulation. There can be blending 

10 of gasolines anywhere along the distribution chain 

11 and not easily recognizable or easily discernible 

12 visually unless testing is done on — with the 

13 proposed dyeing, and of off-highway diesel that is 

14 not the situation. 

15 If there is dyed diesel in your system you 

16 assume it to be off-highway and not complying with 

17 sulfur, and if it is found to be contrary to that 

18 then you automatically have a violation if it's not 

19 labeled. 

20 Well, if it's labeled as off — as 

21 on-highway and it's dyed then you had better test it 

22 to verify that in fact it does meet the sulfur. 

23 If it is dyed and labeled off-highway then 

24 you don't have a problem. It's only if it's labeled 

25 on-highway and it's dyed you have a problem and that 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313} 229-8238 

ANN ARBOR (313) 995-9545 
P.6 

DOCKET NO. A-86-03 203 

1 would instigate some sort of testing. If it's clear 

2 diesel you're going to initially assume that it's in 

3 compliance. 

4 If EPA finds that it's not, sulfur is not 

5 the same quality spec — or quality problem as you 

6 have with volatility. Sulfur in diesel is going to 

7 be the same amount of sulfur today, tomorrow, next 

8 week or next month. Volatility is not. 

9 You have a good accountability trail, 

10 audit accountability trail through all — all the 

11 pipelines carry it, all companies, all the marketers 

12 carry it, the pipelines carry it and refineries 

13 carry it. 

14 If downstream in some clear diesel you 

15 find that it's off spec that audit trail can be 

16 verified through your retained samples. 

17 That's a much better proposal than saying 

18 for — forcing us and downstream marketers to go 

19 into the oversight programs that we've had to 

20 initiate with the gasoline. The situations are 

21 different. 

22 Those are my two points. 

23 MR. GRAY: Thank you. 

24 Anyone else? 

25 Well, we appreciate your patience, and 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545 
P.7 

DOCKET NO. A-86-03 204 

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there are a few restaurants in the area. I think I 

know where most people are going. 

Please be reminded that we are expecting 

comments within 30 days, and we would appreciate as 

much attention towards constructive suggestions as 

to how we might hopefully make progress in 

alleviating some of the concerns we've heard 

expressed today as we move toward a final 

regulation. 

Thank you again for coming and 

participating. 

(The Proceedings were concluded at 3:05 p.m.) 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313J 229-8238 

ANN ARBOR (313) 995-9545 
P.8 

DOCKET NO. A-86-03 205 

CERTIFICATE 

STATE OF MICHIGAN 

COUNTY OF LIVINGSTON 

) 

) SS: 

) 

I, SUSAN SECORD PERRISH, Certified Shorthand 

Reporter, a Notary Public, hereby certify that I recorded 

in Proceedings had in the above-entitled matter on the date 

hereinbefore set forth, and that the foregoing is/a-«fcrue, 

correct and complete transcript of (sa)Ld Proceeding?* 

SUSAN SECORD PERRISH, CSR-2528 

Notary Public, Wayne County, Michigan 

My commission expires: 5/22/90 

Dated: This 18th day of October, 1989. 

PATRICIA MURRAY & ASSOCIATES 

BRIGHTON (313) 229-8238 

ANN ARBOR (313) 995-9545