# Assessment of Clean Gasoline in

the Northeast and Mid-Atlantic

States

White Paper

Prepared by Northeast States for Coordinated Air Use Management

(NESCAUM) 89 South Street, Suite 602 Boston, MA 02111

www.nescaum.org



## November 21, 2011

### Members of Northeast States for Coordinated Air Use Management

Arthur Marin, Executive Director Northeast States for Coordinated Air Use Management

Anne Gobin, Bureau Chief Connecticut Department of Energy & Environmental Pr otection, Bureau of Air Management

Melanie Loyzim, Bureau Director Maine Department of Environmental Protection, Burea u of Air Quality

Nancy L. Seidman, Deputy Assistant Commissioner Massachusetts Department of Environmental Protectio n, Bureau of Waste Prevention

Robert Scott, Director New Hampshire Department of Environmental Services, Air Resources Division

William O’Sullivan, Director New Jersey Department of Environmental Protection, Office of Air Quality Management

David Shaw, Director New York Department of Environmental Conservation, Division of Air Resources

Douglas L. McVay, Chief Rhode Island Department of Environmental Management , Office of Air Resources

Richard A. Valentinetti, Director Vermont Department of Environmental Conservation, A ir Pollution Control Divisionii 

# Assessment of Clean Gasoline in

the Northeast and Mid-Atlantic

States

White Paper

Prepared by

NESCAUM



## November 21, 2011iii



# ASSESSMENT OF CLEAN GASOLINE IN THE

NORTHEAST AND MID-ATLANTIC STATES

Principal Contributors

Arthur Marin, NESCAUM Executive Director

Leiran Biton

Andrew Dick

Paul Miller

Laura Shields

Eric Skelton

Matt Solomoniv



## About NESCAUM

NESCAUM is a 501(c)(3) nonprofit association of air quality agencies in the Northeast.

NESCAUM’s Board of Directors consists of the air di rectors of the six New England states (Connecticut, Maine, Massachusetts, New Hamp shire, Rhode Island, and Vermont), New Jersey, and New York. Its purpose is to provide scientific, technical, analytical, and policy support to the air quality a nd climate programs of the eight Northeast states. A fundamental component of NESCA UM’s efforts is to assist its member states in implementing national environmenta l programs required under the Clean Air Act and other federal legislation.



## Acknowledgments

NESCAUM gratefully acknowledges the funding support provided for this study by the Energy Foundation, the International Council on Cle an Transportation (ICCT), and the Mid-Atlantic/Northeast Visibility Union (MANE-VU).

NESCAUM thanks staff from the state air quality age ncies in the Northeast for providing helpful comments and input for this report.

Printed: November 2011v TABLE OF CONTENTS

About NESCAUM......................................

................................................... .................... iv

Acknowledgments....................................

................................................... ....................... iv

Executive Summary..................................

................................................... ...................... ix

ES-1. Overview....................................

................................................... .................... ix

ES-2. Public Health and Environmental Need for Red ucing NOx Emissions from Light-duty Vehicles ................................

................................................... .................. ix ES-3. Contribution of Cars and Light Trucks to NOx Emissions in MidAtlantic/Northeast States ..........................

................................................... ................. x ES-4. Emission Reductions from 10 ppm Gasoline Sul fur Standard .......................... x ES-5. Cost-effectiveness of 10 ppm Gasoline Sulfur Standard ................................. xii ES-6. Economic Impact of a 10 ppm Gasoline Sulfur Standard...............................xiii

ES-7. Conclusion ..................................

................................................... ................. xiv

1. Introduction....................................

................................................... ......................... 1-1

2. Background Context ..............................

................................................... ................. 2-1

2.1. Overview of Benefits ..........................

................................................... .......... 2-1 2.2. State Authority under the Clean Air Act.......

................................................... 2-1

2.3. Current State Efforts .........................

................................................... ............ 2-2

3. Public Health and Environmental Need............

................................................... ...... 3-1 3.1. Adverse Impacts of NOx Emissions.............. .................................................. 3 -1

3.1.1. Ozone .......................................

................................................... ............. 3-1

3.1.2. Particulate Matter..........................

................................................... ........ 3-4 3.2. Adverse Environmental Impacts of NOx Emissions ....................................... 3-5 3.2.1. Acid Deposition .............................

................................................... ....... 3-5 3.2.2. Coastal Marine Eutrophication ............... ................................................. 3- 5 3.2.3. Visibility Impairment.......................

................................................... ..... 3-6

4. Mobile Source Emissions Impacts.................

................................................... ......... 4-1 4.1. Contribution of Cars and Light Trucks to NOx E missions in MidAtlantic/Northeast States ..........................

................................................... .............. 4-1

4.2. Contribution of Source Sectors to Ozone Nonatt ainment................................ 4-1 4.3. Emission Reductions from 10 ppm Gasoline Sulfu r Standard ........................ 4-4

5. Impact of Predicted Pollution Reductions on Publ ic Health ..................................... 5-1 5.1. Baseline for Estimating Health Benefits of Low Sulfur Gasoline................... 5-1 5.2. Methods for Estimating Air Quality Impacts of Low Sulfur Gasoline in the

OTR ..............................................

................................................... .................... 5-3

5.3. Estimated Health Benefits of Low Sulfur Gasoli ne in OTR............................ 5-4

6. Cost and Benefits of Tier 3 / Gasoline Sulfur Pr ogram............................................. 6 -1

6.1. USEPA Cost Estimates for Lower Sulfur Gasoline ......................................... 6-1

6.2. ICCT Cost Estimates...........................

................................................... .......... 6-1

6.3. Cost-Effectiveness ............................

................................................... ............ 6-1

6.4. Relative Emission Reduction Potential and Cost -effectiveness of Low Sulfur

Gasoline ..........................................

................................................... ........................ 6-2vi

7. Projecting the Cost of Environmental Regulations

................................................... . 7-1 7.1. Previous National Fuel Sulfur Regulations..... ................................................. 7- 1 7.1.1. “Tier 2” Gasoline Sulfur Regulation (2000).. .......................................... 7-1 7.1.2. Highway Diesel Ultra-Low Sulfur Regulation ( 2001)............................. 7-1 7.1.3. Non-Road Diesel Ultra-Low Sulfur Regulation (2004)........................... 7-1 7.2. Regulatory Flexibilities Offered to Refiners.. .................................................. 7 -2 7.3. Concerns Raised by Petroleum Refining/Marketin g Industry during Rulemakings ........................................

................................................... ................... 7-2 7.4. Actual Impact on Numbers and Capacities of Ref ineries................................ 7-5 7.5. Refinery Operating Costs and the Price of Gaso line ....................................... 7-6 7.6. How Refiners Are Meeting the Low Sulfur Fuel R ules .................................. 7-7 7.7. Effect of Low Sulfur Fuel Rules on Product Sup ply ....................................... 7-7

8. Conclusion ......................................

................................................... ........................ 8-1

Appendix A: Tables of Avoided Incidences and Moneti zed Health Benefits in OTR Jurisdictions from Introduction of 10 ppm Low Sulfu r Gasoline....................... A-1vii FIGURES Figure 3-1. Modes of Air Pollution Transport into a nd within the OTR......................... 3-2 Figure 3-2. Projected Nonattainment & Maintenance C ounties for 0.075 ppm ozone NAAQS in 2014 after CSAPR Implementation........... ......................................... 3-3 Figure 3-3. Projected Nonattainment & Maintenance C ounties for Hypothetical 0.070 ppm ozone NAAQS in 2014 after CSAPR Implementation. ................................ 3-4 Figure 3-4. Coastal Marine Eutrophication Condition s and Trends in Middle Atlantic Region. ............................................

................................................... ................... 3-6 Figure 3-5. Winter Pollution Haze Layer over Boston , MA on January 14, 2010. ......... 3-7 Figure 3-6. Comparison of a clear day on February 22, 2008 (left) and a hazy polluted day on August 17, 2009 (right) in Acadia National P ark, ME.............................. 3-7 Figure 4-1. 2015 Average Contribution (%) by State/ Sector to Exceedance-level Ozone in the New York City Nonattainment Area............... ................................................ 4-2 Figure 4-2. 2015 Average Contribution (%) by State/ Sector to Exceedance-level Ozone in the Philadelphia Nonattainment Area. ...............

................................................... 4-3 Figure 4-3. 2015 Average Contribution (%) by State/ Sector to Exceedance-level Ozone in

the Baltimore Nonattainment Area. ..................

................................................... . 4-4 Figure 7-1. Components of U.S. Gasoline Prices. ....

................................................... .... 7-6

TABLES

Table ES-1. Relative Source Contributions of NOx Em issions in the OTR, 2007 ............ x

Table ES-2. On-road Gasoline Vehicle Emissions and Estimated Reductions Based on

MOVES Estimates for 2017 ...........................

................................................... .... xi

Table ES-3. Estimated Annual Monetized Health Benef its

Due to Low Sulfur Gasoline in OTR .................. .................................................. x ii

Table ES-4. Estimated Cost-Effectiveness of Tier 3 Low Sulfur Gasoline Requirements................... .................................................. x iii Table ES-5. Comparison of Estimated Low Sulfur Gaso line Program Costs and

Monetized Health Benefits for the Mid-Atlantic and Northeast Region ............. xiii

Table 3-1. Adverse Public Health and Environmental Impacts of NOx in the OTR....... 3-1

Table 4-1. Relative Source Contributions of NOx Emi ssions in the OTR, 2007. ........... 4-1

Table 4-2. On-road Gasoline Vehicle Emissions and E stimated Reductions Based on

MOVES Estimates for 2017. ..........................

................................................... ... 4-6 Table 4-3. Regional Gasoline Vehicle Emissions and Estimated Reductions Based on

MOVES Estimates for 2017. ..........................

................................................... ... 4-7 Table 4-4. Comparison of NOx Reductions from CSAPR and 10 ppm S Gasoline in OTR.

................................................... ................................................... ......................... 4-8

Table 5-1. Estimated Annual Monetized Health Benefi ts in 2018 Due to Low Sulfur

Gasoline in OTR. ...................................

................................................... ............ 5-5

Table 6-1. Estimated Cost-Effectiveness of NOx Redu ctions from Low Sulfur Gasoline Requirements.......................................

................................................... ............... 6-2

Table 6-2. Emission Reductions and Cost-effectivene ss of Existing and Potential NOx

Control Measures. ..................................

................................................... ............ 6-3viii

Table 6-3. Comparison of Estimated Low Sulfur Gasol ine Program Costs and Monetized

Health Benefits for the Mid-Atlantic and Northeast Region. ............................... 6-4 Table 7-1. Price Impact Estimates on Low Sulfur Fue ls (cents per gallon). ................... 7-5 Table A-1. Summary of 2018 Monetized Health Benefit s from Reduced Ozone During

Ozone Season Due to Low Sulfur Gasoline in OTR Juri sdictions ..................... A-2 Table A-2. Summary of the 2018 Annual Number and Mo netized Value of Avoided

Incidences from Reduced PM2.5 Due to Low Sulfur Gas oline in OTR

Jurisdictions ......................................

................................................... ............... A-3 Table A-3. Summary of Avoided Incidences During Ozo ne Season in 2018 from

Reduced Ozone Due to Low Sulfur Gasoline in OTR Jur isdictions .................. A-4 Table A-4. Summary of 2018 Annual Avoided Incidence s from Reduced PM2.5 Due to

Low Sulfur Gasoline in OTR Jurisdictions........... .............................................. A-5

Table A-5. Monetized Value in 2018 of Annual Avoide d Morbidity and Mortality from

Reduced PM2.5 Due to Low Sulfur Gasoline in OTR Jur isdictions [Millions of 2006$] .............................................

................................................... ................. A-8ix



## Executive Summary

ES-1. Overview

This White Paper summarizes the results of an asses sment by the Northeast States for Coordinated Air Use Management (NESCAUM) of the need for, and the costs and benefits associated with, lowering gasoline sulfur content to an average of 10 parts per million (ppm) as part of the U.S. Environmental Pro tection Agency’s (USEPA’s) Tier 3 rulemaking for cars and light-duty trucks. This ru le is expected to be proposed in late 2011 or early 2012 and finalized in 2012. This rep ort is intended to inform state

environmental officials in the Northeast and Mid-At lantic about the public health and environmental benefits of lower sulfur gasoline in the region and cost of achieving them.

Lowering the sulfur content of gasoline allows poll ution control equipment on cars and trucks to operate more effectively and can significantly reduce oxides of nitrogen (NOx) and other emissions from gasoline-po wered vehicles. The emission

reductions from the in-use fleet would be achieved concurrent with the introduction of the cleaner fuel, without the need for fleet turnov er. The combined reductions from the

Tier 3 vehicle emission standards and fuel sulfur r equirements could be a significant component in the reduction of ambient levels of air pollutants known to have adverse public health and environmental impacts. Similar g asoline sulfur requirements are currently in place in California, Europe, and Japan

.



### ES-2. Public Health and Environmental Need for Redu cing NOx Emissions from Light-duty Vehicles

NOx emissions contribute to a number of adverse pub lic health and environmental outcomes within the Ozone Transport R egion (OTR), which extends from northern Virginia to Maine along the Eastern Seaboa rd. NOx is the most important contributor to elevated regional ozone concentratio ns and an important precursor to fine particulate matter (PM2.5) formation. These two po llutants are responsible for tens of thousands of premature deaths, hospital admissions, and lost work and school days in the U.S. annually. NOx is also a key factor in a numbe r of environmental problems that affect the Northeast and Mid-Atlantic region, inclu ding acid rain, coastal marine eutrophication, and regional haze.

During severe ozone and fine particulate matter eve nts, the geographic scale of the problem can extend beyond the OTR’s borders and include over 200,000 square miles across the eastern United States. Local and region al sources as well as air pollution transported hundreds of miles from distant sources outside the OTR contribute to elevated ozone and fine particle concentrations in the region.

National and regional NOx controls, including those for motor vehicles, have proven to be extremely effective in lowering ambien t levels of ozone in the eastern U.S.

NOx emissions and ambient ozone concentrations in t he OTR have dropped significantly since 1997, along with the frequency and magnitude of exceedances of the health-based national ambient air quality standard (NAAQS) for o zone. However, even with the projected benefits associated with the USEPA’s Cros s-State Air Pollution Rule, many ofx

the most populous areas of the OTR are predicted to be nonattainment for the current 0.075 ppm ozone NAAQS in 2015. Attaining the stand ard in these areas will require significant additional NOx reductions within the OT R and in upwind areas that contribute to the pollution burden in the region. The Clean A ir Scientific Advisory Committee (CASAC) has recommended that the ozone NAAQS be low ered to within a range of 0.060 to 0.070 ppm, which would create a further ne ed for NOx reductions to better protect public health. Reductions not achieved thr ough the Tier 3 program and other

federal measures would have to come from additional controls on local sources.

Atmospheric sources of nitrogen can be key contribu tors to acidification of forest soils and fresh water ecosystems in the eastern Uni ted States. Atmospheric deposition of nitrogen also plays an important role in degraded w ater quality in economically important

marine estuaries of the Eastern Seaboard due to exc ess nutrient loads. In addition, NOx emissions are transformed in the atmosphere to form nitrates that contribute to hazy views of urban skylines as well as scenic vistas in protected national parks and wilderness areas, especially during winter months.



### ES-3. Contribution of Cars and Light Trucks to NOx Emissions in MidAtlantic/Northeast States

Gasoline-powered cars and light-duty trucks emitted about 29 percent of all NOx in the Mid-Atlantic/Northeast region in 2007 (Table ES-1). Air quality modeling suggests motor vehicles (gasoline and diesel) opera ting within and outside the OTR are the most significant contributors to ozone concentr ations on days that exceed the NAAQS in the largest nonattainment areas in the region, w hich speaks to the importance of further lowering NOx emissions from motor vehicles in the O TR and in adjacent regions.

Table ES-1. Relative Source Contributions of NOx Em issions in the OTR, 2007.

Source NOx Emissions (%)

HIGHWAY VEHICLES 52

ON-ROAD GASOLINE LIGHT-DUTY

VEHICLES 29

ON-ROAD DIESEL VEHICLES 22

OFF-HIGHWAY 13

FUEL COMB. ELEC. UTIL. 13

FUEL COMB. RESIDENTIAL 5

OTHER INDUSTRIAL PROCESSES 4

FUEL COMB. INDUSTRIAL 2

OTHER MISCELLANEOUS (sum of source sectors contributing <1.7% each to total NOx) 11

Source: MANE-VU 2007 Inventory provided by the Mid- Atlantic Regional Air Management Association (November 2011). Note that t his table covers all jurisdictions of the OTR except Virginia.



### ES-4. Emission Reductions from 10 ppm Gasoline Sulf ur Standard

A l0 ppm sulfur gasoline standard would reduce NOx emissions by approximately 25 percent from the existing fleet of gasoline-powered vehicles. The estimated per statexi

and aggregate regional reduction benefits for gasol ine-powered on-road vehicles are presented in Table ES-2. Based on the preliminary regional mobile source inventory for 2017, as calculated by NESCAUM with the USEPA’s MOV ES model, a 10 ppm average gasoline sulfur requirement could reduce NOx emissi ons in the OTR by over 51,000 tons per year, or 141 tons per day.

As shown in Table ES-2, the low sulfur gasoline com ponent of the Tier 3 program would reduce NOx emissions by more than 60,000 tons per year in eight Midwest states and almost 65,000 tons per year in 10 southeastern states that abut the OTR. These reductions will benefit air quality in the OTR by: (1) lowering the “ozone reservoir” that forms in the eastern U.S., (2) reducing the amount of low-level NOx emissions and pollutants derived from NOx (e.g., nitrates) that a re transported into the OTR, and (3) ensuring that vehicles registered in other stat es but operating in the OTR emit less

NOx.

As indicated in Table ES-2, light-duty vehicles in the three regions are predicted to emit over 1,100,000 tons of NOx in 2017 absent t he low sulfur gasoline standard. A 10 ppm average sulfur gasoline requirement could re duce NOx emission from this sector by nearly 180,000 tons per year, or almost 500 tons per day in the eastern U.S.

Table ES-2. On-road Gasoline Vehicle Emissions and Estimated Reductions

Based on MOVES Estimates for 2017.

**Est. NOx Reductions from 10 ppm S State/DC/Region**  **2017 Gasoline**

**On-road Base NOx (tpy)**  **(tpy) (tpd)** 

Connecticut 20,700 -3,100 -8
Delaware 5,400 -800 -2
District of Columbia 2,000 -300 -1

Maine 10,000 -1,500 -4
Maryland 32,600 -5,000 -14
Massachusetts 35,100 -5,300 -15
New Hampshire 8,400 -1,300 -4

New Jersey 44,300 -6,700 -18
New York 88,600 -13,500 -37
Pennsylvania 70,500 -10,700 -29
Rhode Island 5,600 -900 -2

Vermont 5,000 -800 -2
Virginia OTR Counties 11,300 -1,700 -5

**OTR Total 339,500 -51,600 -141**

**Midwest States Total 1**  **402,300 -61,000 -167**

**Southeast States Total 2**  **427,800 -64,900 -178**

**3 Region Total 1,169,600 -177,500 -486**

1 IL, IN, IA, MI, MN, MO, OH, WI.

2 AL, FL, GA, KY, MS, NC, SC, TN, VA (not including counties in OTR), WV.xii NESCAUM used the USEPA’s Environmental Benefits Mod eling and Analysis Program (BenMAP) 3 to estimate the annual number of avoided adverse h ealth events (e.g., emergency room visits) and their monetized v alue within the OTR that would be associated with the implementation of a federal low sulfur gasoline program. Table ES-3 shows BenMAP estimates of avoided health impacts in the OTR in 2018 in the range of $234 million to $1.2 billion (in 2006$). The centr al value of this range is approximately $710 million. The health benefits valuation is dom inated by avoided premature mortality, which ranges between 29 and 158 incident s in the OTR. Most of the

mortalities avoided are due to lower ozone levels r esulting from reduced NOx emissions by on-road gasoline vehicles. Modeled health benef its from PM2.5 reductions associated with lower sulfur gasoline are more modest due to t he small relative contribution of gasoline combustion to total emissions of sulfur di oxide, which leads to secondary PM2.5 formation. The values presented in this paper are derived from a conservative approach

and demonstrate that there will be immediate and si gnificant health benefits in the OTR from lowering sulfur in gasoline for the on-road ve hicle fleet in 2018. This assessment does not account for the monetary benefits associat ed with environmental improvements that would accrue from reduced nitrogen emissions r elated to the low sulfur gasoline

program.

Table ES-3. Estimated Annual Monetized Health Benef its

Due to Low Sulfur Gasoline in OTR. Value [Millions of 2006$]

Ozone PM2.5 Total Morbidity $19.5 $3.9 $23.4 Mortality $196 - $877 $15 - $285 $210 - $1,162
**Total Avoided Health Incidence $215 - $896 $19 - $2 89 $234 - $1,186** 

Note: Monetized benefits include all of Virginia.



### ES-5. Cost-effectiveness of 10 ppm Gasoline Sulfur Standard

Cost estimates for 10 ppm sulfur gasoline derived f rom two studies and emission reduction estimates from MOVES runs conducted by NE SCAUM were used to assess the

costs-effectiveness of NOx reductions from the Tier 3 low sulfur gasoline program. To capture the range of potential cost-effectiveness v alues, cost estimates from the USEPA’s Mobile Source Air Toxics (MSAT) notice of proposed rulemaking and a recent study sponsored by the International Council on Clean Tra nsportation (ICCT) were used to calculate the potential cost per ton of NOx reduced

.

3 USEPA. 2010. Environmental Benefits Mapping and Analysis Program (BenMAP) , BenMAP 4.0.35, US Version (September 2010). Available at http://www.epa.gov/air/benmap/download.html

.xiii Table ES-4. Estimated Cost-Effectiveness of Tier 3 Low Sulfur Gasoline Requirements

**Cost Cost-Effectiveness** 
**($/ton NOx)**

0.5 cents/gal (USEPA MSAT) $2,500

0.8 cents/gal (ICCT) $4,000

1.4 cents/gal (ICCT) $7,000

As shown in Table ES-4, the cost-effectiveness of l ower sulfur gasoline is estimated at $2,500 per ton NOx reduced, based on t he USEPA MSAT cost estimate of 0.5 cents per gallon. The ICCT-sponsored study pro vides a conservative cost estimate of 1.4 cents per gallon, which translates to a cost-ef fectiveness of around $7,000 per ton in the OTR. The ICCT also provides a sensitivity case cost estimate of 0.8 cents per gallon that accounts for refineries capable of producing 1 0 ppm sulfur gasoline at lower capital expenditure and assumes a lower target return on in vestment (7 percent instead of 10 percent). Using the sensitivity case cost of 0. 8 cents per gallon, the estimated costeffectiveness of the overall program is $4,000 per ton of NOx reduced. The costeffectiveness of low sulfur gasoline compares favor ably to a number of other emission reduction strategies that are already in place or a re being considered in the OTR. Many

of the most cost-effective NOx reduction measures h ave already been implemented.

Based on the total NOx reductions estimated for the OTR and all of Virginia resulting from 10 ppm low sulfur gasoline, the tota l program cost in 2017 for this region would be in the range of $143 – $400 million (Table ES-5) using the USEPA MSAT and ICCT gasoline cost range of 0.5 – 1.4 cents per gal lon. This compares favorably to the total monetized program health benefits in 2017 der ived from BenMAP, which are in the range of $234 – $1,186 million. The estimated mone tized benefits are based on public health benefits solely from lowering exposure to oz one and sulfate PM2.5, and do not include benefits from lowering other pollutants or benefits to the environment, such as decreases in acid rain and eutrophication.

Table ES-5. Comparison of Estimated Low Sulfur Gaso line Program Costs and

Monetized Health Benefits for the Mid-Atlantic and Northeast Region.

**Total Low Sulfur Program Costs Monetized Health Ben efits** 

$143 – $400 million $234 – $1,186 million

Note: Total costs and benefits estimates are for th e OTR plus all of Virginia.



### ES-6. Economic Impact of a 10 ppm Gasoline Sulfur S tandard

The expected 10 ppm sulfur gasoline proposal would represent the latest in a series of regulatory initiatives to remove sulfur f rom transportation fuels. The USEPAxiv

previously established a 30 ppm sulfur standard for gasoline as part of the Tier 2 motor vehicle rulemaking (2000), a 15 ppm sulfur limit fo r highway diesel (2001), and a 15 ppm sulfur limit for non-road diesel (2004). Ad ditionally, many states in the OTR have already or are in the process of establishing low sulfur standards for distillate oil used for heating. To comply with these rules, U.S. refiners have invested significant capital to add and enhance desulfurization capacity

. During past low sulfur fuel rulemakings, refiners r aised a set of consistent concerns: (1) the requirements went too far, too f ast; (2) they would result in fewer operating refineries; (3) they would lead to fuel s hortages; and (4) the refining costs would be excessively high. The final rules provide d for regulatory flexibility, which along with industrial innovation to meet the new re quirements, resulted in manageable implementation of the rules. In retrospect, both U SEPA and industry estimates of the predicted costs for complying with federal fuel sul fur standards were found to be typically higher than actual costs as refiners foun d innovative and less costly ways to achieve these standards. Original estimates of the cost of lowering sulfur in transportation fuels were principally based on the assumption that refiners would continue to deploy traditional conventional technol ogy to achieve compliance. In actual practice, refiners opted for a combination of techn ology and facility efficiency improvements to cost-effectively remove sulfur.

In addition, early compliance was widespread as ref iners generated a surplus of credits under the rules with the flexibility provid ed by the averaging, banking, and trading programs. The USEPA built considerable reg ulatory flexibilities into the fuels standards to ease the regulatory burden on refiners , including: (1) providing several years

of lead time for all refiners to add or enhance des ulfurization capabilities; (2) averaging, banking, and trading programs to encourage early co mpliance where possible and provide means for extending compliance dates where needed; (3) provisions for smaller and geographically isolated refiners to further extend compliance deadlines and credit generation opportunities; (4) opportunities for ref iners to integrate their desulfurization infrastructure planning processes across all three fuels programs; (5) interim sulfur limits to allow refiners to phase their operations into co mpliance with the final standards; and (6) various hardship waiver provisions to provide a means to address unexpected

circumstances.



### ES-7. Conclusion

The results of this analysis indicate that lowering the sulfur content of gasoline to an average of 10 ppm would cost-effectively reduce NOx emissions from cars and light trucks. Low sulfur gasoline could be one of the mo st significant strategies available to address ground-level ozone pollution in the OTR. T he projected NOx reductions associated with the Tier 3 / low sulfur gasoline pr oposal would also help mitigate fine particle concentrations, acid rain, waterbody eutro phication, and regional haze – all significant challenges in the Northeast and Mid-Atl antic region.

A key advantage to lowering sulfur in gasoline is t hat the emission reductions will occur immediately and come from all gasoline vehicl es equipped with catalytic converters, regardless of the vehicle’s model year. As a federal requirement, the low sulfur gasoline rule would result in very significa nt NOx reductions across the entirexv

domain in the eastern U.S., thus diminishing the ad verse public health and environmental

outcomes in the OTR related to NOx emissions.

Given the stringency of existing state controls in the OTR, federal constraints on state regulation of motor vehicle fuels, and the fa ct that the OTR is significantly affected by pollution transport from sources outside the reg ion, national emission control measures for light-duty vehicles are critical to ac hieving further improvements in air quality. Without the mobile source and other feder al measures, emission reductions will have to be accomplished by further controlling loca l sources in the OTR in order to compensate for the foregone national measures. Whi le local controls remain necessary,

some of the additional measures will be above and b eyond what otherwise would be needed, and at greater cost.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 1-1



## 1. INTRODUCTION

The U.S. Environmental Protection Agency (USEPA) is scheduled to propose new emission standards for model year 2014 and late r light-duty motor vehicles in early 2012 (Tier 3 standards). The Tier 3 proposal is ex pected to include a 10 parts per million (ppm) limit on the average fuel sulfur content of g asoline. Similar sulfur requirements are currently in place in California, Europe and Ja pan. Lowering gasoline sulfur content allows pollution control equipment on cars and truc ks to operate more effectively and can significantly reduce nitrogen oxides (NOx) and othe r emissions from all gasolinepowered vehicles. Unlike vehicle emission standard s that require the fleet to “turnover” before the full emission benefits are realized, fue l quality programs provide reductions

concurrent with the introduction of the cleaner fue l. NOx emissions are important contributors to ozone and fine particle pollution, which pose a significant public health threat in the Northeast and Mid-Atlantic region. T hese emissions also contribute to regional environmental problems including acid rain , eutrophication of waterbodies, and regional haze.

This White Paper summarizes the results of an asses sment by the Northeast States for Coordinated Air Use Management (NESCAUM) of the need for, and the costs and benefits associated with, lowering gasoline sulfur content to 10 ppm as part of the USEPA’s Tier 3 rulemaking. It is intended to infor m state environmental officials in the Northeast and Mid-Atlantic region about the public health and environmental benefits of lower sulfur gasoline. This analysis focuses on th e Ozone Transport Region (OTR) that extends from northern Virginia to Maine, 4 but evaluates the potential benefits that might be realized in the region as a result of Tier 3 NOx reductions in adjacent regions that affect air quality in the OTR. This paper provides information on: (1) the public health and environmental need for reducing light-duty vehi cle NOx emissions in the OTR; (2) the impact that lower sulfur gasoline would have on emission inventories, air quality, and public health; (3) the estimated cost-effectiveness of this strategy; (4) the relative benefits and cost of this measure compared to other possible NOx control strategies; and (5) insight about the potential economic impacts of this program based on previous environmental fuel quality regulations.

4 The OTR includes Connecticut, Delaware, the Distri ct of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and the northern Virginia counties in the DC metropolitan area.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 2-1



## 2. BACKGROUND CONTEXT

The USEPA committed to proposing Tier 3 standards i n 2008 to help states meet the National Ambient Air Quality Standard (NAAQS) f or ozone and is late in delivering the much needed reductions from the light-duty vehi cle sector, which is the largest source of ozone-forming pollutants in the OTR. The Tier 3 program would: (1) ensure less polluting cars to help the states meet the 0.075 pp m ozone health standard; and (2) mitigate any adverse impacts on air quality from th e implementation of the “Renewable Fuel Standard 2” (RFS-2). 5

The California Air Resources Board (CARB) is also p reparing a proposal for new light-duty motor vehicle standards (LEV III), with the goal of harmonizing with the

Tier 3 federal standards. Both CARB and the USEPA are considering stringent fleet average tailpipe standards for NOx, volatile organi c compounds (VOCs), and particulate matter (PM), as well as near-zero evaporative emiss ions. As part of the proposed Tier 3 rulemaking, the USEPA is also expected to set an av erage sulfur content requirement of 10 ppm for gasoline. Federal standards currently r equire gasoline suppliers to meet an average sulfur standard of 30 ppm and cap the maxim um sulfur content at 80 ppm. California already caps sulfur at 30 ppm, and the a verage sulfur content of gasoline in that state is about 9 ppm. The European Union and Japan allow a maximum of 10 ppm sulfur in gasoline. 6



### 2.1. Overview of Benefits

The low sulfur gasoline standard is expected to red uce NOx emissions by approximately 25 percent from the existing fleet of light-duty vehicles by enabling catalytic converters to operate more effectively. 7 The emission reductions from the inuse fleet would be achieved upon introduction of th e cleaner fuel, without the need for

fleet turnover. The combined reductions from the n ew vehicle emission standards and fuel sulfur requirements could be a significant com ponent in the reduction of ambient levels of air pollutants known to have adverse publ ic health and environmental impacts. Reductions not achieved through this and other fede ral measures would have to come

from additional controls on local sources in the re gion.



### 2.2. State Authority under the Clean Air Act

The Clean Air Act (CAA) limits state authority to r egulate emissions from motor vehicles and fuels. The CAA preempts state and loc al governments from adopting or enforcing emission standards for new motor vehicles . However, California can receive a

5 The Energy Independence and Security Act of 2007 ( EISA) requires the USEPA to revise the Renewable Fuel Standard program to incorporate greater amount s of renewable fuels into transportation fuels. Th e USEPA expects that the increased renewable fuel con tent of RFS-2 will result in higher emissions of NO x, hydrocarbons, ethanol, and acetaldehyde. [USEPA. 2009. Fuels and Fuel Additives: EPA Proposes New Regulations for the National Renewable Fuel Standar d Program for 2010 and Beyond , USEPA, EPA-420- F-09-023 (May 2009). Available at http://www.epa.gov/oms/renewablefuels/420f09023.htm (accessed September 2, 2011).]

6 Ober, J.A. 2003. “Sulfur,” in U.S. Geological Survey Minerals Yearbook – 2003 , United States Geological Survey. Available at http://minerals.usgs.gov/minerals/pubs/commodity/su lfur/sulfumyb03.pdf

. 7 See discussion in Section 4.3.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 2-2

waiver of preemption from the USEPA for its emissio n standards and enforcement procedures. Section 177 of the CAA allows other st ates to adopt the California vehicle

standards in lieu of the federal standards. Ten No rtheast and Mid-Atlantic states and the District of Columbia have adopted California’s low emission vehicle standards. Section 211(c) of the CAA limits states, except for California, from further regulating constituents of gasoline, including sulfur, that ar e already regulated by the federal government. Therefore, states in the OTR must rely on federal action on gasoline sulfur content to further reduce NOx from the existing fle et of cars and light trucks.



### 2.3. Current State Efforts

Individually, the states in the OTR are implementin g some of the most health protective air pollution control programs in the na tion. Collectively, they have implemented a host of regional NOx, VOC, and sulfur dioxide (SO 2 ) control measures, including the first regional cap and trade program for NOx, adoption of the California low emission vehicle standards, and consumer produc ts and architectural coatings standards to reduce VOCs. These initiatives, combi ned with federal measures, including the Federal Motor Vehicle Emission Control program, have led to important air quality and public health improvements in the OTR. Given t he stringency of existing state controls, federal constraints on state regulation o f motor vehicle fuels, and the fact that the OTR is significantly affected by pollution tran sport from sources outside the region, national control measures for light-duty vehicles a re critical to achieving further improvements in air quality.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 3-1



## 3. PUBLIC HEALTH AND ENVIRONMENTAL NEED

The OTR, home to over 62 million people, is subject to episodes of poor air quality resulting from ground-level ozone and fine particle pollution. During severe events, the scale of the problem can extend beyond the OTR’s borders and include over 200,000 square miles across the eastern United Stat es. Local and regional sources as well as air pollution transported hundreds of miles from distant sources outside the OTR contribute to elevated ozone and fine particle conc entrations in the region.

This section summarizes the air quality challenge f acing the OTR, with a focus on ozone. It describes the contribution of light-duty vehicles to the NOx emission

inventories in the Northeast and Mid-Atlantic state s.



### 3.1. Adverse Impacts of NOx Emissions

As indicated in Table 3-1, NOx emissions contribute to a number of adverse public health and environmental outcomes. NOx is t he most important contributor to regional ozone concentrations and an important prec ursor to fine particulate matter formation. These two pollutants are responsible fo r tens of thousands of premature deaths, hospital admissions, and lost work and scho ol days in the U.S. annually. NOx is also a key factor in a number of environmental prob lems that affect the Northeast and Mid-Atlantic region.

Table 3-1. Adverse Public Health and Environmental Impacts of NOx in the OTR.

**Ozone and PM2.5**

• Reduces lung function, aggravates asthma and other chronic lung diseases

• Can cause permanent lung damage from repeated expos ures

• Contributes to premature death

**Acid Deposition**

• Damages forests

• Damages aquatic ecosystems, e.g., Adirondacks and G reat Northern Woods

• Erodes manmade structures

**Coastal Marine Eutrophication**

• Depletes oxygen in the water, which suffocates fish and other aquatic life in

bays and estuaries, e.g., Chesapeake Bay and Long I sland Sound

**Visibility Impairment**

• Contributes to regional haze that mars vistas and v iews in urban and

wilderness areas



### 3.1.1. Ozone

Ozone remains a persistent regional pollution probl em in parts of the OTR during

warm weather months. The evolution of severe ozone episodes in the OTR often begins with the passage of a large high pressure area from the Midwest to the middle or southern Atlantic states. As depicted in Figure 3-1, there are three primary pollution transport mechanisms that affect air quality in the OTR: long -range, mid-level, and near-surface.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 3-2

One transport mechanism that can play a key role in moving pollution long distances along the Eastern Seaboard is the “nocturnal low le vel jet” (NLLJ). The NLLJ is a regional-scale phenomenon of higher wind speeds a f ew hundred meters above the surface, just above the stable night-time (nocturna l) boundary layer. The jet has been observed just before or during ozone events and can convey air pollution several hundred miles overnight from the southwest to the northeast , directly in line with the major population centers of the Northeast Corridor. 8

During severe ozone episodes associated with high p ressure systems, multiple transport features are embedded within a large ozon e reservoir arriving from source regions to the south and west of the OTR. A severe ozone episode can contain elements of long-range air pollution transport from outside the OTR, regional scale transport within the OTR, and local transport along coastal s hores due to bay, lake, and sea

breezes. 

## 3 Types of Transport Contribute to

Ozone Problem

• Westerly, local and southerly/night-time low level jet (NLLJ) transport converge on the Mid-Atlantic area.

• Sea and bay breezes act as a barrier or wall and fu nnel ozone and other air pollutants up the Northeast Corridor.

• On bad air days, 60-100 ppb of ozone comes into the OTR as a result of transport

• Need comprehensive, strong federal measures to meet attainment

Figure 3-1. Modes of Air Pollution Transport into a nd within the OTR.

Collectively, NOx emissions and ambient ozone conce ntrations in the OTR have dropped significantly since 1997, along with the fr equency and magnitude of ozone

exceedances of the health-based ozone national ambi ent air quality standard (NAAQS). 9
Despite this demonstrated progress, Figure 3-2 show s that even with the projected

benefits associated with the USEPA’s Cross-State Ai r Pollution Rule (CSAPR), many of

8 Philbrick, C.S., W. Ryan, R. Clark, P. Hopke, and S. McDow. 2003. Processes controlling urban air pollution in the Northeast: Summer 2002 . Final Report for the Pennsylvania Department of E nvironmental Protection (July 25, 2003).

9 NESCAUM. 2010. The Nature of the Ozone Air Quality Problem in the Ozone Transport Region: A Conceptual Description , prepared for the Ozone Transport Commission by NE SCAUM, Boston, MA (August 2010). Available at http://www.nescaum.org/documents/2010_o3_conceptual _model_final_revised_20100810.pdf/

.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 3-3

the most populous areas of the OTR will continue to violate the current 0.075 ppm ozone NAAQS (8-hour average). 10 Attaining the standard in these areas will requir e significant additional NOx reductions within the OTR and in upw ind areas. Federal measures such as the Tier 3/low sulfur gasoline program will sign ificantly reduce NOx emission and help states achieve the requisite reductions.

Based on CAMx modeling results for CSAPR [USEPA, Air Quality Modeling Final Rule Technical Support Document , June 2011, http://www.epa.gov/airtransport/pdfs/AQModeling.pdf ].

Figure 3-2. Projected Nonattainment & Maintenance C ounties for 0.075 ppm ozone

NAAQS in 2014 after CSAPR Implementation.
Looking toward the future, additional NOx reduction s will be critical to ozone

attainment in a broader swath of the OTR if the USE PA were to adopt a more health protective ozone NAAQS in the range recommended by the USEPA’s Clean Air Scientific Advisory Committee (CASAC). Figure 3-3 shows the predicted expansion of

10 Note that the figure only highlights counties that have ozone monitors located within them that are projected to be nonattainment or maintenance areas for the ozone standard. Additional counties within the same metropolitan areas will also be affected by hi gh ozone pollution. 

#  Maintenance



#  Nonattainment

2014 Post-CSAPR

Ozone NAAQS = 0.075 ppmAssessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 3-4

nonattainment areas in the OTR based on a more stri ngent ozone NAAQS of 0.070 ppm (8-hour average), which is at the upper end of CASA C’s previously recommended range of 0.060 – 0.070 ppm.

Based on CAMx modeling results for CSAPR [USEPA, Air Quality Modeling Final Rule Technical Support Document , June 2011, http://www.epa.gov/airtransport/pdfs/AQModeling.pdf ].

Figure 3-3. Projected Nonattainment & Maintenance C ounties for Hypothetical 0.070 ppm ozone NAAQS in 2014 after CSAPR Implement ation.



### 3.1.2. Particulate Matter

Scientific evidence has established a solid link be tween cardiac and respiratory health risks and transient exposure to ambient fine particle pollution that is capable of penetrating deep into the lungs. 11 Exceedances of the fine particle NAAQS can occur at any time of the year, with some of the highest leve ls often reached in the winter. There are important differences in the chemical species r esponsible for high fine particle levels during summer and winter in the OTR. Regional fine particle formation in the eastern

11 USEPA. 2005. Review of the National Ambient Air Quality Standard s for Particulate Matter: Policy Assessment of Scientific and Technical Information , USEPA OAQPS Staff Paper, EPA-452/R-05-005a, (December 2005). 

#  Maintenance



#  Nonattainment

2014 Post-CSAPR

Ozone NAAQS = 0.070 ppmAssessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 3-5

United States is primarily due to SO 2 , but NOx is also important because of its influenc e on the chemical equilibrium between sulfate and nit rate pollution during winter when nitrates can be a relatively greater contributor to urban PM2.5 levels.



### 3.2. Adverse Environmental Impacts of NOx Emissions

3.2.1. Acid Deposition

Atmospheric sources of nitrogen are a primary contr ibutor to acidification of forest soils and fresh water ecosystems in the Nort heast and Mid-Atlantic region. Nitrogen saturation results in a number of importan t changes in forest ecosystem functions, including: (1) increased acidification o f soils and surface waters; (2) depletion of soil nutrients and the development of plant nutr ient imbalances; and (3) forest decline and changes in species composition. More than 30 p ercent of the lakes in the Adirondacks and at least 10 percent of the lakes in New England are susceptible to the effects of acidic episodes that include long-term i ncreases in mortality, emigration, and reproductive failure of fish, as well as short-term acute effects. Acidic episodes can occur at any time of the year but typically are mos t severe during spring snowmelt, when biological demand for nitrogen is low and saturated soils exhibit lower nitrogen

retention. 12



### 3.2.2. Coastal Marine Eutrophication

Airborne nitrogen is an important contributor to eu trophication, the process by which a body of water acquires a high concentration of nutrients that promote excessive growth of algae. As the algae die and decompose, h igh levels of organic matter and decomposing organisms deplete the water of availabl e oxygen, causing the death of other organisms, such as fish. Atmospheric nitrogen is a major contributor to eutrophication of key coastal resources in portions of the OTR, inclu ding Chesapeake Bay, Delaware inland bays, Barnegat Bay in New Jersey, and Long I sland Sound (Figure 3-4). 13

The Chesapeake Bay watershed is the largest estuary in the U.S. and stretches across more than 64,000 square miles, encompassing parts of six states — Delaware, Maryland, New York, Pennsylvania, Virginia and West Virginia — and the entire District of Columbia. Since the 1950s, the Bay has experienced a decline in water quality

due to over-enrichment of unwanted nutrients such a s phosphorus and nitrogen. The major contributors to nutrient discharge in the Bay are wastewater effluent, urban and agricultural runoff, and air deposition. 14

12 Driscoll, C.T., G.B. Lawrence, A.J. Bulger, T.J. B utler, C.S. Cronan, C. Eagar, K.F. Lambert, G.E. Likens, J.L. Stoddard, and K.C. Weathers. 2001. Acidic deposition in the northeastern United States : Sources and inputs, ecosystem effects, and manageme nt strategies , BioScience 51, 180–198.

13 Bricker, S.B., C.G. Clement, D.E. Pirhalla, S.P. O rlando, and D.R.G. Farrow. 1999. National Estuarine Eutrophication Assessment: Effects of Nutrient Enri chment in the Nation’s Estuaries , NOAA, National Ocean Service, Special Projects Office and the Nati onal Centers for Coastal Ocean Science. Silver Spri ng, MD: 71 pp.

14 Maryland Department of the Environment, Chesapeake Bay Restoration

, http://www.mde.state.md.us/programs/Water/Pages/wat er/bayrestoration.aspx (accessed September 1, 2011).Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 3-6

Figure from Bricker, et al. ( see footnote 13).

Figure 3-4. Coastal Marine Eutrophication Condition s and Trends

in Middle Atlantic Region.



### 3.2.3. Visibility Impairment

Regional haze is a form of air pollution that obscu res the views of city skylines (Figure 3-5) as well as “pristine” scenic vistas () . It is caused by fine particle air pollution and can cover hundreds of square miles in the East. Natural visibility

conditions in the East are estimated at over 60 to 80 miles in most locations. Under current polluted conditions, average visibility ran ges from 20 to 40 miles. On the worst days, regional haze can reduce visibility to just a few miles.

Outdoor recreation is a multi-billion dollar indust ry in the U.S. and is of particular economic importance to communities near protected f ederal lands. Surveys indicate visitors have rated “clean, clear air” as among the most important features of national parks and have overwhelmingly ranked scenic views a nd clean air as “extremely” or “very” important. Studies have yielded estimates i n the billions of dollars for the visibility benefits associated with substantial nat ional pollution reductions. 15 While

15 NESCAUM. 2001. Regional Haze and Visibility in the Northeast and M id-Atlantic States , NESCAUM, Boston, MA (January 31, 2001). Available at http://www.nescaum.org/documents/regional-haze-andvisibility-in-the-northeast-and-mid-atlantic-states /

.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 3-7

sulfate, formed from SO 2 emissions, is the most important particle constitu ent of regional haze, reductions in other local and distant polluta nt emissions, including NOx, will be necessary to achieve the nation’s long-term goal of restoring pristine visibility conditions year-round in national parks and wilderness areas. 16

Photo from CAMNET: Realtime Air Pollution and V isibility Monitoring Network, www.hazecam.net

.

Figure 3-5. Winter Pollution Haze Layer over Boston , MA on January 14, 2010.

Photos from CAMNET: Realtime Air Pollution and Visi bility Monitoring Network, www.hazecam.net

. Figure 3-6. Comparison of a clear day on February 22, 2008 (left) and a hazy polluted day on August 17, 2009 (right) in Acadia N ational Park, ME.

16 In 1999, the USEPA promulgated the Regional Haze R ule in pursuit of the national visibility goal crea ted by Congress in the Clean Air Act to ultimately rest ore natural visibility conditions in 156 national p arks and wilderness areas across the country (called “Cl ass I” areas).

Clear DayAssessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 4-1



## 4. MOBILE SOURCE EMISSIONS IMPACTS

This section explains the continued importance of a ddressing emissions from the on-road vehicle fleet in the OTR, and quantifies th e expected emission reductions from the existing fleet associated with the introduction of 10 ppm sulfur gasoline.



### 4.1. Contribution of Cars and Light Trucks to NOx Emissi ons in MidAtlantic/Northeast States

As shown in Table 4-1, on-road gasoline-powered car s and light-duty trucks emitted about 29 percent of all NOx in the Mid-Atla ntic/Northeast region in 2007. This sector is the largest source of NOx emissions in th e region in 2007.

Table 4-1. Relative Source Contributions of NOx Emi ssions in the OTR, 2007.

Source NOx Emissions (%)

HIGHWAY VEHICLES 51.76

ON-ROAD GASOLINE LIGHT-DUTY

VEHICLES 29.28

ON-ROAD DIESEL VEHICLES 22.48

OFF-HIGHWAY 13.39

FUEL COMB. ELEC. UTIL. 13.41

FUEL COMB. RESIDENTIAL 4.59

OTHER INDUSTRIAL PROCESSES 3.82

FUEL COMB. INDUSTRIAL 1.82

OTHER MISCELLANEOUS (sum of source sectors contributing <1.7% each to total NOx) 11.21

Source: MANE-VU 2007 Inventory provided by the Mid- Atlantic Regional Air Management Association (November 2011). Note that this table covers all jurisdictions of the OTR except Virginia.



### 4.2. Contribution of Source Sectors to Ozone Nonattainme nt

The following figures show the predicted relative c ontributions of various source

sectors to 2015 exceedance-level ozone concentratio ns in three large metropolitan areas within the OTR – New York City (Figure 4-1), Philad elphia (Figure 4-2), and Baltimore (Figure 4-3). 17 These indicate the proportional contributions fro m various source sectors during periods of peak ozone concentrations. These charts assume super-regional controls on power plants based on the USEPA’s court -remanded Clean Air Interstate Rule (CAIR). Although CSAPR has now replaced CAIR, these figures provide a reasonable approximation of source contributions to these nonattainment areas under peak ozone conditions. These predictions do not in clude Tier 3 vehicle standards. Motor vehicles (gasoline and diesel) are the most signifi cant contributors to elevated ozone

concentrations in all three of these nonattainment areas. Modeling suggests that emissions from motor vehicles operating within and outside these nonattainment areas

17 USEPA. 2005. Results of 2010/2015 Post-CAIR Ozone Source Apporti onment Modeling (August 2005).

Available at http://www.epa.gov/ttnnaaqs/ozone/o3imp8hr/document s/materials/CAIR_2010_2015_SA_summary_final.ppt

.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 4-2

are responsible for approximately one-third of the ozone formed. This speaks to the importance of further lowering NOx emissions from t he existing fleet of vehicles.

Figure 4-1. 2015 Average Contribution (%) by State/ Sector to Exceedance-level

Ozone in the New York City Nonattainment Area.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 4-3

Figure 4-2. 2015 Average Contribution (%) by State/ Sector to Exceedance-level

Ozone in the Philadelphia Nonattainment Area.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 4-4

Figure 4-3. 2015 Average Contribution (%) by State/ Sector to Exceedance-level

Ozone in the Baltimore Nonattainment Area.



### 4.3. Emission Reductions from 10 ppm Gasoline Sulfur Sta ndard

Reducing the average sulfur content of gasoline fro m the current average of 30 ppm to 10 ppm will provide significant and immediat e emission reductions from the existing vehicle fleet. Sulfur in gasoline inhibit s the effectiveness of the catalytic

converters used to reduce NOx and other emissions f rom vehicles. When exposure to sulfur is minimized, the performance of these devic es improves dramatically. Numerous studies have documented this effect. For example, Ball et al. (2011) 18 compared NOx emissions from a late-model vehicle operating on tw o types of gasoline, one with 30 ppm and one with 3 ppm sulfur. They found that tailpip e NOx emissions were around 40

18 Ball, D., D. Clark, and D. Moser. 2011. Effects of Fuel Sulfur on FTP NOx Emissions from a PZEV 4 Cylinder Application , SAE Technical Paper 2011-01-0300, doi:10.4271/201 1-01-0300.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 4-5

percent lower with the 3 ppm sulfur fuel. 19 For additional analysis and discussion of the effect of fuel sulfur on catalyst performance, see MECA (2011). 20

NESCAUM used the USEPA’s MOVES model 21 to calculate baseline light-duty vehicle NOx emissions for the projection year 2017. NOx reduction estimates for the 10 ppm sulfur gasoline component of the expected fe deral Tier 3 proposal were taken from a recent report by the National Association of Clean Air Agencies (NACAA). 22

The estimated per state and aggregate regional redu ction benefits for gasolinepowered on-road vehicles are presented in Table 4-2 . Based on this preliminary regional inventory for 2017 calculated with MOVES, a 10 ppm average gasoline sulfur requirement could reduce NOx emissions in the OTR b y over 51,000 tons per year, or 141 tons per day.

As shown in Table 4-2, the low sulfur gasoline comp onent of the Tier 3 program would also significantly reduce NOx emissions in ei ght Midwest states, with fleetwide reductions of over 60,000 tons per year. Similar r eductions are also projected for ten southeast states, with NOx reductions of almost 65, 000 tons in 2017. These reductions will benefit air quality in the OTR by: (1) loweri ng the transported “ozone reservoir” that forms in the eastern U.S., (2) reducing the amount of low-level NOx emissions and pollutants derived from NOx (e.g., nitrates) that a re transported into the OTR, and (3) ensuring that vehicles registered in other states b ut operating in the OTR emit less NOx.

As indicated in Table 4-3, light-duty vehicles are predicted to emit over 1,100,000 tons of NOx in 2017 absent the low sulfur gasoline standard. A 10 ppm average sulfur gasoline requirement could reduce NOx emission by n early 180,000 tons per year, or almost 500 tons per day in the eastern U.S.

19 Sensitivity to fuel sulfur will vary with catalyst design and placement, duty cycle, and other parame ters. Less advanced catalyst formulations found on older cars and heavy-duty vehicles could exhibit lesser o r greater NOx impacts compared to the advanced emissi on control system studied by Ball et al.

20 Manufacturers of Emission Controls Association (ME CA), 2011. Clean Air Facts: Cleaner Fuels for

Cleaner Motor Vehicles . Available at http://meca.org/galleries/defaultfile/fuelsfact%200811%20FINAL.pdf

. 21 The MOtor Vehicle Emission Simulator (MOVES) mode l was developed by USEPA’s Office of Transportation and Air Quality to estimate emission s for mobile sources, including cars, trucks, and motorcycles.

22 National Association of Clean Air Agencies (NACAA) . 2011. Cleaner Cars, Cleaner Fuel, Cleaner Air: The Need for and Benefits of Tier 3 Vehicle an d Fuel Regulations , NACAA, Washington, DC (October 2011), p. 16 (citing M. Walsh). Available at http://www.4cleanair.org/documents/NACAATier3Vehand FuelReport-EMBARGOED-Oct2011.pdf

.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 4-6

Table 4-2. On-road Gasoline Vehicle Emissions and E stimated Reductions Based on

MOVES Estimates for 2017.

**Ozone Transport Region**

**Est. NOx Reductions from 10 ppm S State/DC**  **2017 Gasoline**

**On-road Base NOx (tpy)**  **(tpy) (tpd)** 

Connecticut 20,700 -3,100 -8

Delaware 5,400 -800 -2

District of Columbia 2,000 -300 -1

Maine 10,000 -1,500 -4

Maryland 32,600 -5,000 -14

Massachusetts 35,100 -5,300 -15

New Hampshire 8,400 -1,300 -4

New Jersey 44,300 -6,700 -18

New York 88,600 -13,500 -37

Pennsylvania 70,500 -10,700 -29

Rhode Island 5,600 -900 -2

Vermont 5,000 -800 -2

Virginia OTR Counties 11,300 -1,700 -5

**OTR Total 339,500 -51,600 -141**

**Midwest States**

**Est. NOx Reductions from 10 ppm S**

**State 2017 Gasoline** 

**On-road Base NOx (tpy)**  **(tpy) (tpd)** 

Illinois 70,300 -10,700 -29

Indiana 48,900 -7,400 -20

Iowa 20,500 -3,100 -8

Michigan 67,200 -10,200 -28

Minnesota 36,600 -5,600 -15

Missouri 45,000 -6,800 -19

Ohio 73,800 -11,200 -31

Wisconsin 40,000 -6,000 -16

**Total 402,300 -61,000 -167**Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 4-7

**Southeast States**

**Est. NOx Reductions from 10 ppm S**

**State 2017 Gasoline** 

**On-road Base NOx (tpy)**  **(tpy) (tpd)** 

Alabama 34,800 -5,300 -15

Florida 95,600 -14,500 -40

Georgia 64,000 -9,700 -27

Kentucky 32,700 -5,000 -14

Mississippi 23,100 -3,500 -10

North Carolina 56,300 -8,500 -23

South Carolina 27,900 -4,200 -12

Tennessee 43,500 -6,600 -18

Virginia 23 36,900 -5,600 -15

West Virginia 13,000 -2,000 -5

**Total 427,800 -64,900 -178**

Table 4-3. Regional Gasoline Vehicle Emissions and Estimated Reductions

Based on MOVES Estimates for 2017.

**Est. NOx Reductions from 10 ppm S**
**Region 2017 Gasoline** 

**On-road Base NOx (tpy)**  **(tpy) (tpd)** 

Ozone Transport Region Total 339,500 -51,600 -141

Midwest States Total 402,300 -61,000 -167

Southeast States Total 427,800 -64,900 -178

**3 Region Total 1,169,600 -177,500 -486**

To provide additional context for the scale of NOx reductions possible from low sulfur gasoline, Table 4-4 shows that the reduction s would be about three times greater

than what will be achieved in the OTR in 2014 from the Cross-State Air Pollution Rule.

23 The NOx emissions for Virginia in the table of sou theast states do not include emissions from the VA counties in the OTR. That portion of VA’s gasoline vehicle NOx emissions appear in the Ozone Transpor t Region table.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 4-8

Table 4-4. Comparison of NOx Reductions from CSAPR and

10 ppm S Gasoline in OTR.

**State/DC CSAPR NOx Reductions**  **(tpy) Est. NOx Reductions from 10 ppm S**  **(tpy)**

Connecticut 6 -3,100

Delaware 15 -800

District of Columbia 0 -300

Maine 0 -1,500

Maryland -375 -5,000

Massachusetts 41 -5,300

New Hampshire -156 -1,300

New Jersey -286 -6,700

New York -1,160 -13,500

Pennsylvania -15,110 -10,700

Rhode Island 0 -900

Vermont 0 -800

Virginia OTR Counties -43 -1,700

**OTR Total -17,068 -51,600**

Note: Negative values are projected NOx reductions . Positive values are projected NOx increases.

Source for CSAPR NOx reductions in 2014: USEPA. 201 1. Regulatory Impact Analysis for the Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone in 27 States; Correction of SIP Approvals for 22 States , Docket ID No. EPA-HQ-OAR-2009-0491, USEPA Office of Air and Radiation (June 2011), p. 57, Table 3-12,. Note that the CSAPR NOx reductions to do not includ e later technical revisions by the USEPA announced in October 2011.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 5-1



## 5. IMPACT OF PREDICTED POLLUTION REDUCTIONS

ON PUBLIC HEALTH

Using the results from the inventory analysis descr ibed in Section 4, NESCAUM evaluated the potential public health impacts in th e OTR associated with the projected reduction in mobile source emissions from the propo sed Tier 3/LEV III and low sulfur gasoline rules.

A federal 10 ppm sulfur standard would reduce emiss ions from cars and light trucks in the OTR and in upwind states whose emissi ons contribute to air quality problems in the region. Ground-level emissions hel p produce the ozone “reservoir” formed upwind and outside the region that is carrie d into the OTR. Motor vehicles are also a major component of emissions within the regi on contributing to local air pollution problems and transported overnight along the Northe ast Corridor by the nocturnal low level jet.



### 5.1. Baseline for Estimating Health Benefits of Low Sulf ur Gasoline

NESCAUM used the USEPA’s Environmental Benefits Mod eling and Analysis Program (BenMAP) 24 to estimate the number of avoided adverse health e vents (e.g., premature mortality) and their monetized value with in the OTR that would be associated with the implementation of a federal low sulfur gas oline program. BenMAP applies health impact functions that relate changes in poll utant concentrations with changes in the incidence of specific health endpoints. The progra m allows users to estimate the health and economic benefits of an air quality program whi le adequately describing the uncertainty and variability in the estimates.

BenMAP uses a “damage-function” approach to estimat e the benefits associated with air quality improvements. This method assigns values to changes in individual health endpoints (specific effects that can be asso ciated with changes in air quality). Because NOx is a precursor to ozone and fine partic le formation, BenMAP was run for both types of pollution. Lowering sulfur content i n gasoline would also have an effect on sulfate fine particles, although highway vehicle em issions are a small contributor to total sulfate in the OTR (<1%). 25

The air quality changes used as inputs to BenMAP in this exercise were extrapolated from a baseline using the results of p revious air quality modeling done by NESCAUM of a future regional pollution control scen ario in 2018. 26 The 2018 future scenario incorporated “On the Books/On the Way” (OT B/OTW) control strategies and additional “Beyond on the Way” (BOTW) control optio ns that the Ozone Transport Commission (OTC) has considered for achieving regio nal ozone, particulate matter, and

24 USEPA. 2010. Environmental Benefits Mapping and Analysis Program (BenMAP) , BenMAP 4.0.35, US Version (September 2010). Available at http://www.epa.gov/air/benmap/download.html

. 25 USEPA. 2008 National Emissions Inventory, http://www.epa.gov/ttn/chief/net/2008inventory.html

. 26 NESCAUM. 2008. MANE-VU Modeling for Reasonable Progress Goals , prepared for MANE-VU by NESCAUM, Boston, MA (February 7, 2008). Available a t http://www.nescaum.org/documents/modelingfor-reasonable-progress-final-021208.pdf/

.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 5-2

visibility goals. 27 This modeled air quality baseline accounts for em ission control measures already in place as well as potential futu re control requirements that, while not final at the time of the modeling, may achieve addi tional pollution reductions by 2018.

Some of the OTB/OTW measures assumed to be in place by 2018 within the OTR

include:

• Federal Clean Air Interstate Rule (predecessor of t he Cross-State Air Pollution Rule);

• Federal Tier 2 tailpipe standards (or CA LEV standa rds in OTR states that adopted the California motor vehicle program) and l ow sulfur gasoline (30 ppm);

• Federal highway heavy-duty diesel engine standards / ultra-low sulfur diesel requirements;

• Federal non-road diesel engine standards / ultra-lo w sulfur diesel rule;

• OTR state low sulfur heating oil requirements; and

• Various state laws, regulations, and enforcement me asures in individual OTR

states.

For the BOTW measures, the OTC identified a number of source categories to

consider for additional emission reductions. Indiv idual OTR states and DC selected

which of these sectors could be candidates in their jurisdictions for further emission controls, and these were included in the 2018 air q uality modeling. 28 The source categories identified by the OTC are:

• Consumer Products

• Portable Fuel Containers

• Adhesives and Sealants Application

• Diesel Engine Chip Reflash

• Cutback and Emulsified Asphalt Paving

• Asphalt Production Plants

• Cement Kilns

• Glass Furnaces

• Industrial, Commercial, and Institutional (ICI) Boi lers

27 MARAMA. 2007. Development of Emission Projections for 2009, 2012, and 2018 for NonEGU Point, Area, and Nonroad Source in the MANE-VU Region , prepared for MANE-VU by MARAMA, Towson, MD (February 2007). Available at http://www.marama.org/visibility/Inventory%20Summar y/MANEVU_Emission_Projections_TSD_022807 .pdf

. 28 Ozone Transport Commission. 2007. Identification and Evaluation of Candidate Control Measures

, Final Technical Support Document, prepared by MACTE C Federal Programs, Inc. (Herndon, VA), February 28, 2007. Available at http://otcair.org/upload/Documents/Reports/OTC%20Co ntrol%20Measures%20TSD%20070228%20Final %20SB.pdf

.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 5-3

• Regional Fuels (extending reformulated gasoline to OTR counties that do not currently have it)

• Electric Generating Units (beyond expected federal requirements)

By including these measures in the 2018 future cont rol scenario, the BenMAP results for a 10 ppm low sulfur gasoline requiremen t provide a conservative estimate of the health benefits above and beyond those to be ga rnered from measures already expected to be in place or that are under considera tion by individual OTR jurisdictions for implementation by 2018.



### 5.2. Methods for Estimating Air Quality Impacts of Low S ulfur

Gasoline in the OTR

NESCAUM developed a first-order estimate of the air quality impacts of reduced sulfur in gasoline by applying linear reduction fac tors to the 2018 air quality model

results for ozone and sulfate PM2.5. 29 These reduction factors were applied to model results at every grid cell and time-step.

The reduction factor for ozone was developed based on an estimated 8 percent reduction in NOx emissions from all gasoline and di esel on-road mobile sources resulting from the introduction of low sulfur gasoline. 30 The 2018 inventory year was used because it is the inventory year of the projected O TB/OTW and BOTW modeled

reference case of ozone levels in the OTR. 31 For the purpose of this analysis, the original 2018 NOx emissions inventory was modified by replac ing the mobile source NOx emissions estimated by the older MOBILE6 emissions inventory model with updated

estimates from MOVES. Total on-road mobile source emissions (gasoline and diesel) are about 37 percent of all NOx emissions in the 2018 O TR inventory. On-road gasoline mobile source NOx emissions represent about 20 perc ent of the total inventory. While the NOx reduction is estimated to be about 8 percen t relative to the total on-road mobile source sector, the NOx reductions accrue from only the gasoline portion of the total onroad fleet.

The NOx-ozone response was derived from a study by Butler et al. of observed decreasing ozone trends occurring contemporaneously with historical NOx reductions in

the eastern United States from 1997 to 2008. 32 This study estimated about a 13 percent decrease in average maximum daily 8-hour ozone conc entrations during the five month ozone season (May-September) resulting from a 32 pe rcent decrease in annual total NOx

29 NESCAUM used the Community Multi-scale Air Quality (CMAQ) model, which provided hourly modeled air pollutant levels over an eastern U.S. d omain at a 12 km grid resolution.

30 National Association of Clean Air Agencies (NACAA) . 2011. Cleaner Cars, Cleaner Fuel, Cleaner Air: The Need for and Benefits of Tier 3 Vehicle an d Fuel Regulations , NACAA, Washington, DC (October 2011), p. 16 (citing M. Walsh). Available at http://www.4cleanair.org/documents/NACAATier3Vehand FuelReport-EMBARGOED-Oct2011.pdf

. 31 MARAMA. 2007. MANE-VU Future Years Emissions Inven tory. Available at http://www.marama.org/technical-center/emissions-in ventory/2002-inventory-and-projections/mane-vufuture-year-emissions-inventory (accessed October 17, 2011).

32 Butler, T.J., F.M. Vermeylen, M. Rury, G.E. Likens , B. Lee, G.E. Bowker, and L. McCluney. 2011. Response of ozone and nitrate to stationary source NOx emission reductions in the eastern USA

, Atmospheric Environment, 45:1084-1094. doi:10.1016/ j.atmosenv.2010.11.040.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 5-4

emissions in the eastern United States. This corre sponds to about a 0.4 percent reduction in average daily maximum 8-hour ozone per 1 percent reduction in total NOx emissions.

An estimated 8 percent reduction from an overall 37 percent on-road mobile source NOx share in the total NOx inventory, couple d with the 0.4 percent ozone reduction per 1 percent NOx reduction, results in a n estimated overall 1.2 percent reduction in ozone associated with introducing 10 p pm sulfur gasoline. This 1.2 percent

estimated ozone reduction in the 2018 modeled ozone concentrations is used as an input to BenMAP to generate the estimated health benefits . Ozone reductions are estimated only for the May through September ozone season and do not consider reductions below an assumed 30 ppb natural ozone background. 33

NESCAUM applied a similar methodology in developing the PM2.5 reduction factor. NESCAUM multiplied the sulfur-content redu ction (from 30 to 10 ppb in gasoline, or 67 percent) by the contribution of gas oline-powered vehicles to total sulfur dioxide emissions in OTC states, or 0.41 percent (E PA 2011), and then by the SO 2 - PM2.5 response factor. The response factor is 8 pe rcent in the winter (October through April) and 50 percent in the summer (Tsimpidi et al . 2007). 34 Therefore, the reduction factor for PM2.5 was 0.02 percent in the winter and 0.14 percent in the summer. We do not estimate nitrate PM2.5 reductions, which could be relatively important in winter

when nitrate PM2.5 is more stable at lower ambient air temperatures. Competition with relatively abundant sulfate, however, makes estimat es difficult in our approach. Additional air quality modeling could better quanti fy the potential impact.



### 5.3. Estimated Health Benefits of Low Sulfur Gasoline in OTR

By using the first-order estimate of air quality re ductions in the OTR from 10 ppm low sulfur gasoline, BenMAP provided an estimate of avoided health impacts in the OTR in 2018 in the range of $234 million to $1.2 billio n (in 2006$) annually. The central value of this range is approximately $710 million. Table 5-1 summarizes the BenMAP

monetized health benefits for ozone and PM2.5 for m orbidity and mortality health endpoints within the OTR. Appendix A provides a br eakdown of these benefits for each jurisdiction in the OTR. The health benefits valua tion is dominated by avoided premature mortality, which ranges between 29 and 15 8 incidents in the OTR. Most of

the mortalities avoided are due to lower ozone leve ls resulting from reduced NOx emissions by on-road gasoline vehicles. Health imp acts from PM2.5 reductions are more modest due to the small relative contribution of ga soline combustion to total emissions of

SO 2 , which limits secondary PM2.5 formation.

These values represent first-order estimates of the expected immediate health benefits of 10 ppm low sulfur gasoline in the OTR, and are based on a broad range of incidences from health impact studies. Therefore, the resulting health benefits are

33 USEPA. 2007. Staff Paper. Review of the National Ambient Air Qua lity Standards for Ozone: Policy Assessment of Scientific and Technical Information , OAQPS Staff Paper, USEPA Office of Air Quality Planning and Standards, Research Triangle Park, Nor th Carolina, EPA-452/R-07-007 (July 2007).

34 Tsimpidi A.P., V.A. Karydis, and S.N. Pandis. 2007

. Response of Inorganic Fine Particulate Matter to Emission Changes of Sulfur Dioxide and Ammonia: The Eastern United States as a Case Study , Journal of the Air & Waste Management Association, 57:1489-149 8. DOI:10.3155/1047-3289.57.12.1489. Table 1 (p. 1493).Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 5-5

presented as a broad range as well. Specifically m odeling a Tier 3 / low sulfur gasoline program rather than using the first-order linear re duction method applied here would provide refined estimates of expected pollutant red uctions, avoided morbidity and mortality incidences, and geographic distribution o f benefits. Notwithstanding the potential for more refined modeling, the values pre sented in this paper suggest that there will be immediate and significant health benefits i n the OTR from lowering sulfur in gasoline for the on-road vehicle fleet in 2018, and the value of those health benefits may be much greater than the program costs. This asses sment does not account for the monetary benefits associated with environmental imp rovements that would accrue from reduced nitrogen emissions related to the low sulfu r gasoline program.

Table 5-1. Estimated Annual Monetized Health Benefi ts in 2018

Due to Low Sulfur Gasoline in OTR. Value [Millions of 2006$]

Ozone PM2.5 Total Morbidity $19.5 $3.9 $23.4 Mortality $196 – $877 $15 – $285 $210 – $1,162
**Total Monetized Health Benefits $215 – $896 $19 – $ 289 $234 – $1,186** 

Note: Monetized benefits include all of Virginia.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 6-1



## 6. COST AND BENEFITS OF TIER 3 / GASOLINE SULFUR

PROGRAM

Cost estimates for 10 ppm sulfur gasoline derived f rom two different studies and

emission reduction estimates from MOVES runs conduc ted by NESCAUM were used to

assess the costs-effectiveness of NOx reductions fr om the Tier 3 low sulfur gasoline program. The cost estimates in cents per gallon co me from the USEPA’s Mobile Source Air Toxics (MSAT) proposed rule and a recent study sponsored by the International Council on Clean Transportation (ICCT).

To put this program in context, this section also c ompares the potential emission reduction and cost-effectiveness of 10 ppm sulfur g asoline to other emission control options that states might consider to achieve the N AAQS and to strategies that have already been employed.



### 6.1. USEPA Cost Estimates for Lower Sulfur Gasoline

National cost estimates for lowering sulfur in gaso line to an average of 30 ppm

for the 2000 Tier 2/Gasoline Sulfur Rule 35 were:

• aggregate capital costs: $4.5 billion

• average annual operating costs (over ‘lifetime’-203 0): $1.8 billion

• average per gallon costs (over ‘lifetime’-2030): 1. 5 cents

The USEPA’s MSAT rule proposal projected an average cost increase of 0.5 cents per gallon for 10 ppm sulfur gasoline. 36



### 6.2. ICCT Cost Estimates

In 2011, the ICCT sponsored a study by MathPro to p rovide an estimate of the cost of lowering gasoline sulfur to an average of 1 0 ppm. The study concluded that complying with a national 10 ppm sulfur standard wi ll cost 0.8 to 1.4 cents per gallon. 37



### 6.3. Cost-Effectiveness

To bound the range of potential cost-effectiveness of a 10 ppm sulfur standard, the cost estimates from the USEPA’s MSAT study and the ICCT-sponsored study were used to calculate the potential cost per ton of NOx reduced. To derive the dollar per ton of NOx reduced from the cents per gallon cost estim ates, the volume of gasoline

consumed in the OTR was derived from the MOVES 2017 results. Along with NOx emissions, the MOVES model can specify the energy c onsumed by vehicles as an output.

35 USEPA. 1999. Regulatory Impact Analysis-Control of Air Pollution from New Motor Vehicles: Tier 2 Motor Vehicle Emissions Standards and Gasoline Sulf ur Control Requirements , Chapter V: Economic Impact, Table V-36.

36 71 Fed. Reg. 15804. March 29, 2006. Control of Hazardous Air Pollutants From Mobile Sou rces; Proposed Rule, at p. 15904. Available at http://edocket.access.gpo.gov/2006/pdf/06-2315.pdf

. 37 International Council for Clean Transportation (IC CT). 2011. Refining Economics of a National Low Sulfur, Low RVP Gasoline Standard , prepared by MathPro Inc., West Bethesda, MD (Octo ber 25, 2011).

Available at http://www.theicct.org/pubs/ICCT04_Tier3_Report_Fin al_v4_All.pdf

.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 6-2

A fuel characteristics table in the MOVES database shows that a conversion factor of 115,000 Btu per gallon can be used to convert the e nergy consumption output into gallons of gasoline. Table 6-1 displays potential cost-effectiveness derived from the

USEPA MSAT and ICCT studies. 38

Table 6-1. Estimated Cost-Effectiveness of NOx Redu ctions from Low Sulfur Gasoline Requirements.

**Cost Cost-Effectiveness** 
**($/ton NOx)**

0.5 cents/gal ( USEPA MSAT ) $2,500

0.8 cents/gal (ICCT

) $4,000

1.4 cents/gal (ICCT

) $7,000

As shown in Table 6-1, the cost-effectiveness of lo wer sulfur gasoline is estimated at $2,500 per ton NOx reduced, based on t he USEPA MSAT cost estimate of 0.5 cents per gallon. The ICCT-sponsored study pro vides a conservative cost estimate of 1.4 cents per gallon from which NESCAUM estimates a cost-effectiveness of around $7,000 per ton in the OTR. The ICCT also provides a sensitivity case cost estimate of 0.8 cents per gallon that accounts for refineries c apable of producing 10 ppm sulfur gasoline at lower capital expenditure and assumes a lower target return on investment (7 percent instead of 10 percent). From the sensitivi ty case cost of 0.8 cents per gallon,

NESCAUM estimates the cost-effectiveness of the ove rall program to be $4,000 per ton

of NOx reduced.



### 6.4. Relative Emission Reduction Potential and Cost-effe ctiveness of

Low Sulfur Gasoline

Meeting federal air quality standards throughout th e OTR and continuing the progress that has been achieved will require new em ission reduction strategies. The 12 states and Washington, DC that constitute the OTR a re considering a portfolio of potential new or enhanced emission control measures to reduce ozone, with a focus on NOx controls. Table 6-2 presents estimated emissio n reductions for a number of potential NOx control measures along with their cos t-effectiveness. For comparative purposes, the table also shows the cost-effectivene ss of the Tier 2 regulation for lightduty vehicles and the heavy-duty highway vehicle ru le.

38 The previously cited 2011 NACAA report Cleaner Cars, Cleaner Fuel, Cleaner Airestimates a costeffectiveness of $3,300/ton using the ICCT 0.8 cent s per gallon cost. NESCAUM’s derived cost may be higher due to differences in geographic scope – the NACAA estimate is based on a national fleet mix (outside of California), while NESCAUM’s is for the OTR only. In addition, there may be differences i n the input assumptions used with MOVES to generate t he total on-road NOx emissions given by NACAA and NESCAUM. This would lead to differences in pro jected NOx emissions reduced and gasoline volume

consumed that would result in different cost-effect iveness estimates. The difference in cost-effectiv eness estimates, however, does not affect overall conclus ions from the comparison of the costs of low sulfur gasoline with other NOx measures in Table 6-2, nor the comparison of total program costs to monetized

health benefits shown in Table 6-3.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 6-3

The estimated 141 tons per day achievable from just the low sulfur gasoline provisions of the USEPA Tier 3 rulemaking suggests that this initiative has the potential to achieve greater reductions in the OTR than any o f the possible regional strategies listed in the table. Further, even greater NOx reductions would occur in the neighboring regions from this federal measure, which will reduc e the impacts of transported pollution

into the OTR.

Table 6-2. Emission Reductions and Cost-effectivene ss of

Existing and Potential NOx Control Measures.

**Source OTR Summer**

**NOx Emission**

**Reductions (tons/day)**  **39 Cost-Effectiveness**  **($/ton NOx)**

ICI Boilers (area & point sources) 40 107.2 $750 - $7,500 (Low NOx Burners) $1,300 - $3,700 (SNCR) $2,000 - $14,000 (SCR)
Combustion Turbines – SCR $2,010 - $19,120 41

Highway – Heavy-duty and Dieselfueled Vehicles / Engine Standards and

Fuel Sulfur Controls $10,561 41

Tier 2 Light-duty Vehicle Emissions and

Gasoline Sulfur Controls $6,297 41

Phase II RFG (extended to all of OTR) 4.8 $3,700 - $5,200 39
Glass/Fiberglass Furnaces 37.3 $2,150 - $5,300 39

**10 ppm Sulfur Gasoline 141 42**  **$2,500 - $7,000**

At an estimated $2,500 to $7,000 per ton NOx reduce d, as suggested by the USEPA MSAT and ICCT studies, low sulfur gasoline co mpares favorably to a number of other emission reduction strategies, including the Tier 2 and heavy-duty diesel programs, in terms of cost-effectiveness. A large portion of the most cost-effective NOx reduction measures – those associated with power plants – hav e already been implemented or are expected to accrue with the implementation of CSAPR

.

39 Ozone Transport Commission. 2007. Identification and Evaluation of Candidate Control Measures

, Final Technical Support Document, prepared by MACTE C Federal Programs, Inc., Herndon, VA (February 28, 2007). Available at http://otcair.org/upload/Documents/Reports/OTC%20Co ntrol%20Measures%20TSD%20070228%20Final %20SB.pdf

. 40 Cost numbers from literature values tabulated by A . Bodnarik, ICI Boiler NOx & SO 2 Control Cost

Estimates , NH Dept. of Environmental Services, presented at OTC Committee Meeting, Modeling/Stationary & Area/Mobile Sources, Niagara Falls, NY (September 3, 2009). Available at http://otcair.org/upload/Documents/Meeting%20Materi als/ICI%20Boiler%20Control%20Cost%20presenta tion%20090309%20long%20version.pdf

. 41 USEPA. 2006. AirControlNET Version 4.1 Development Report , prepared by E.H. Pechan & Associates (Springfield, MA), Pechan Report No. 06.05.002/9011 .002, May 2006. Available at http://www.epa.gov/ttn/ecas/models/DevelopmentRepor t.pdf

. 42 From 2017 MOVES results presented in this white pa per.Assessment of Clean Gasoline in the Northeast and M id-Atlantic States Page 6-4

The dollar per ton of NOx reduced estimates can be used to estimate a total program cost for the OTR, which compares well to th e estimated total monetized health benefits presented in Section 5. Table 6-3 present s the comparison of estimated total program costs with its projected monetized health b enefits.

Table 6-3. Comparison of Estimated Low Sulfur Gasol ine Program Costs and

Monetized Health Benefits for the Mid-Atlantic and Northeast Region.

**Total Low Sulfur Program Costs Monetized Health Ben efits** 

$143 – $400 million $234 – $1,186 million

Note: Total costs and benefits estimates are for th e OTR plus all of Virginia.

An estimated reduction in NOx emissions of 57,200 t ons in 2017 from low sulfur gasoline would be achievable in the OTR and all of Virginia 43 at a total program cost in the range of $143 – $400 million using the USEPA MS AT and ICCT cost estimates (0.5 – 1.4 cents per gallon). Total monetized program h ealth benefits in 2017 derived from BenMAP are in the range of $234 – $1,186 million, i ndicating that a program cost within the USEPA MATS – ICCT range is within or below the low end of the estimated health benefits range. The estimated monetized benefits a re based on public health benefits solely from lowering exposure to ozone and sulfate PM2.5, and do not include benefits from lowering other pollutants or benefits to the e nvironment, such as decreases in acid rain and eutrophication.

This analysis shows that 10 ppm sulfur gasoline cou ld be a very significant and cost-effective measure compared to other available NOx control options. The emission reductions will be realized immediately upon introd uction of the clean gasoline. The

benefits will accrue within the OTR and across the entire region of the eastern U. S. that contributes the pollution burden in the Northeast a nd Mid-Atlantic region.

43 NOx reductions and gasoline consumption for all of Virginia are included in this comparison to have t he same geographical coverage as the BenMAP monetized health benefits.Assessment of Clean Gasoline in the Northeast an d Mid-Atlantic States Page 7-1



## 7. PROJECTING THE COST OF ENVIRONMENTAL

REGULATIONS

This section highlights past efforts to estimate th e economic impact of environmental fuel quality regulations and compares predictions to actual experience. The focus in this section is on previous USEPA regu latory initiatives that mandated reductions in the sulfur content of gasoline and di esel fuel. Three major initiatives are

summarized in Section 7.1.



### 7.1. Previous National Fuel Sulfur Regulations

7.1.1. “Tier 2” Gasoline Sulfur Regulation (2000)

With the implementation of the Tier 2 program, 44 interim gasoline sulfur standards were phased in, beginning in 2004. The f inal gasoline sulfur standards were set at a refinery average of 30 ppm with a per gallon c ap at 80 ppm. The initial compliance year for large refineries was 2006. Small refiners were given extensions of up to two additional years (2007-2008) in certain circumstanc es.



### 7.1.2. Highway Diesel Ultra-Low Sulfur Regulation (2001)

A refiner sulfur limit of 15 ppm for diesel began o n June 1, 2006, with full implementation completed by June 1, 2010. 45 The regulation allowed for up to 20 percent of the highway diesel fuel produced to e xceed the 15 ppm sulfur cap through 2009. An averaging, banking, and trading component made it possible for some refiners to continue exclusive production of 500 ppm sulfur diesel fuel throughout the interim compliance period.



### 7.1.3. Non-Road Diesel Ultra-Low Sulfur Regulation (2004)

Under the non-road diesel rule, fuel sulfur content was phased down in two

steps. 46 Beginning June 2007, refiners were subject to a 5 00 ppm limit and by June 2010, a 15 ppm limit. For the locomotive and marine dies el fuel markets, refiners were given an additional two years, to June 2012, before the r efinery 15 ppm limit took effect. For compliance flexibility, the small refiner deadline for compliance with the 500 pm sulfur limit was June 2010, three years after the complian ce deadline for larger refiners. Similarly, the small refiner deadline for complianc e with the 15 ppm sulfur limit was June 2014, four years after the compliance deadline for larger refiners.

44 65 Fed. Reg. 6698 ff. February 10, 2000. T ier 2 Motor Vehicle Emission Standards and Gasoline Sulfur Control Requirements; Final Rule.

45 66 Fed. Reg. 5002 ff. January 18, 2001. Control of Air Pollution from new Motor Vehicles: H eavy-Duty Engine and Vehicle Standards and Highway Diesel Fue l Sulfur Control Requirements; Final Rule.

46 69 Fed. Reg. 38958 ff. June 29, 2004. Control of Emissions of Air Pollution From Non-Road Diesel Engines and Fuel; Final Rule.Assessment of Clean Gasoline in the Northeast an d Mid-Atlantic States Page 7-2



### 7.2. Regulatory Flexibilities Offered to Refiners

The USEPA built significant regulatory flexibilitie s into these fuel standards to ease the regulatory burden on refiners, including: (1) providing several years of lead time

for all refiners to add or enhance desulfurization capabilities; (2) averaging, banking, and trading programs to encourage early compliance wher e possible and provide means for extending compliance dates where needed; (3) provis ions for smaller and geographically isolated refiners to further extend compliance dead lines and credit generation opportunities; (4) opportunities for refiners to in tegrate their desulfurization infrastructure planning processes across all three fuels programs; (5) interim sulfur limits to allow refiners to phase their operations into compliance with the final standards; and (6) various hardship waiver provisions to provide a means to ad dress unexpected circumstances.



### 7.3. Concerns Raised by Petroleum Refining/Marketing Ind ustry during Rulemakings

Because of a common thread running through each of the rules (i.e., requirements for substantial desulfurization of major refined pr oducts), the petroleum refining and marketing industries raised several recurring conce rns in their comments on each set of USEPA fuel sulfur rulemakings. The following inset paragraphs draw upon industry comments and testimony on the USEPA proposals to pr ovide their perspective on the previous rulemakings.

Too Far – The very low sulfur limits as proposed are unnecess arily stringent and/or place too much of the burden on th e fuels side of the equation for achieving the engine standards. The N ational Petrochemical and Refiners Association (NPRA) stated in testimony to the USEPA that a 50 ppm cap on diesel sulfur would be sufficient to meet the emission reduction goals of the highway diesel program and, “unlike the...EPA proposal, this level of sulfur reduction is sustain able.” 47 For the gasoline rulemaking, one commenter to the USEPA recommended a 150 ppm average with a 300 ppm maximum, stating that anythi ng lower was not

feasible for most refiners. 48

Too Fast – The lead time is insufficient for refiners to se cure financing, engineering design expertise, permit approvals, and construction resources in order to procure and install the additional desu lfurization units necessary to meet the stringent limits. As one indu stry representative stated to the USEPA, “Competition among U.S., Canad ian and European refiners, all trying to reduce sulfur in the same t ime frame, will be too intense to allow everyone access to the new technol ogy, which probably will result in everyone scrambling for basically wi thin a one-year time frame to achieve the proper place in the feud [ sic ] to be in compliance

47 Testimony of Robert Slaughter, General Counsel, Na tional Petrochemical and Refiners Association. USEPA Public Hearing on Proposed Heavy-duty Engine and Vehicle Standards and Highway Diesel Fuel Sulfur Control Requirements , New York City, NY (June 19, 2000). Hearing transc ript available at http://www.epa.gov/otaq/regs/fuels/diesel/nyctrans. pdf

. 48 USEPA. 1999. Tier 2 Motor Vehicle Emission Standards & Gasoline Sulfur Control Requirements: Response to Comments , EPA 420-R-00-024 (December 1999), p. 14-2.Assessment of Clean Gasoline in the Northeast an d Mid-Atlantic States Page 7-3

with the timetable which you’ve suggested.” 49 In addition, the NPRA commented that virtually all of the necessary refin ery modifications will trigger major New Source Review (NSR) due to increa ses in nitrogen oxides, volatile organic compounds, and particulate matter emissions, further complicating the permitting process. 50

Fewer Refineries – The very stringent desulfurization requirements wil l force many smaller refineries either to close or to cease making one or more of the products subject to the standards. This especially will be the case among refineries in the Rocky Mountain States (“PADD IV”) 51 that tend to be smaller, less technologically sophistica ted, and less diverse in their product streams, compared to larger refinerie s. As one industry representative stated, “For some refiners, EPA’s pr oposed regulation will

be the straw that broke the camel’s back. Faciliti es will close and jobs

will be lost.” 52

Fuel Shortages – The closure of refineries, decisions by refiners no t to produce low sulfur products, and delays in deployme nt of desulfurization technology will reduce the volume of product for sa le. The NPRA stated that “more than 30 percent of the current supply of highway diesel could

be lost” in the short term. 53 Refiners that choose to remain in the low

sulfur fuel markets will not have sufficient refini ng capacity to keep up with demand. Because demand will remain high, shor tages will result. Applying supply and demand principles, prices for l ow sulfur gasoline and diesel will rise considerably. An oil company proj ected that the supply of gasoline would be reduced by 10 to 15 percent as a result of the standards and this would increase the cost of gasoline by 10 to 15 cents per gallon. 54
A representative of the Society of Independent Gaso line Marketers of America said that if the highway diesel sulfur regu lation caused a 10 percent reduction in supply, something he charac terized as “not an unreasonable prediction,” then $2 per gallon diesel would become the

49 Testimony of Urvan R. Sternfels, President, Nation al Petrochemical & Refiners Association. USEPA Public Hearing on Proposed Tier 2 Motor Vehicle Emi ssions Standards and Gasoline Sulfur Control Requirements , Philadelphia, PA (June 9, 1999). Hearing transcr ipt available at http://www.epa.gov/tier2/nprm/t2phila1.txt

. 50 USEPA. 1999. Tier 2 Motor Vehicle Emission Standards and Gasolin e Sulfur Control Requirements: Response to Comments , EPA 420-R-99-024 (December 1999), p. 20-17.

51 The U.S. Department of Energy divides the United S tates into regional Petroleum Administration for Defense Districts (PADDs) for planning purposes. P ADD IV covers the states of Colorado, Idaho, Montana, Utah, and Wyoming.

52 Testimony of J. Louis Frank, President, Marathon A shland Petroleum LLC. Clean Air Act: Sulfur in the Tier 2 Standards for Automobiles , U.S. Senate Committee on Environment and Public W orks, Subcommittee on Clean Air, Wetlands, Private Proper ty, and Nuclear Safety, 106 th Congress, Senate Hearing 106-503, Washington, DC (May 18, 1999), p. 16. Available at http://frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=106_senate_hearings&docid=f:5 9385.pdf

. 53 Testimony of Robert Slaughter, NPRA (footnote 47).

54 USEPA. 1999. Tier 2 Motor Vehicle Emission Standards and Gasolin e Sulfur Control Requirements: Response to Comments, EPA 40-R-99-04 (December 1999), p. 14-3.Assessment of Clean Gasoline in the Northeast an d Mid-Atlantic States Page 7-4

norm. 55 At the time this comment was made, the U.S. avera ge price of a gallon of diesel was $1.42.

High Refining Costs – Conventional sulfur removal technology at the refinery is costly. New desulfurization technologi es, purported by EPA to be more cost-effective, are unproven and/or would b e unavailable within the required timeframe. 56 Rather than risk capital on unproven technologies, refiners may choose to increase their conventional capabilities at a higher cost. 57 While some refiners may be able to produce 15 ppm diesel sulfur fuel, many others would be for ced to limit or forego participation in the highway diesel market. 58 The refining industry was viewed as very short on the financial capital neces sary to comply with the series of new federal regulations mandating certain fuel characteristics, including low sulfur. 59 The implication was the operating and capital costs for refineries that survived the regulatory o nslaught would have a marked effect on industry-wide profitability. The NPRA characterized the economic impacts of the regulations in combination as a “crushing burden

on refiners and fuel distributors.” 60

Table 7-1 summarizes the USEPA and refining industr y projections on the cost of a gallon of fuel, based on increased refining costs . As illustrated, the USEPA’s refining cost projections consistently were lower or at the low end of the range cited by the industry. Note that projected fuel price increases due to supply shortages would be in addition to the price impacts in Table 7-1. Using the benefit of hindsight, a retrospective analysis by the USEPA of the costs of fuel quality regulations after their implementation found that both the USEPA and the petroleum industr y overestimated the costs of cleaner fuels prior to their introduction, with the USEPA e stimates typically being closer to

actual costs. 61

55 Testimony of Michael Ports, on behalf of the Socie ty of Independent Gasoline Marketers of America. Public Hearing: Proposal for Cleaner Heavy Duty Tru cks and Buses and Cleaner Diesel Fuel, Atlanta, GA (June 22, 2000). Hearing transcript available at http://www.epa.gov/otaq/regs/fuels/diesel/atltrans. pdf

. 56 USEPA. 1999. Tier 2 Motor Vehicle Emission Standards and Gasolin e Sulfur Control Requirements: Response to Comments , EPA 420-R-99-024 (December 1999), p. 16-4.

57 Testimony of J. Louis Frank, President, Marathon A shland Oil Company. USEPA Public Hearing on Proposed Tier 2 Motor Vehicle Emissions Standards a nd Gasoline Sulfur Control Requirements

, Philadelphia, PA (June 9, 1999). Hearing transcrip t available at http://www.epa.gov/tier2/nprm/t2phila1.pdf

. 58 Testimony of Robert Slaughter, NPRA (footnote 47).

59 National Petroleum Council. 2000. U.S. Petroleum Refining: Assuring the Adequacy and Affordability of

Cleaner Fuels (June 2000).

60 Testimony of Robert Slaughter, NPRA (footnote 47).

61 Anderson, J.F. and T. Sherwood. 2002. Comparison of EPA and Other Estimates of Mobile Sou rce Rule Costs to Actual Price Changes , SAE Technical Paper 2002-01-1980.Assessment of Clean Gasoline in the Northeast an d Mid-Atlantic States Page 7-5

Table 7-1. Price Impact Estimates on Low Sulfur Fue ls (cents per gallon).

**Fuel Type USEPA Estimate Industry Estimate**

Gasoline < 2 5 – 15

Highway Diesel 4.5 – 5 4 – 13

Non-Road Diesel 7 7 – 9



### 7.4. Actual Impact on Numbers and Capacities of Refineri es The low sulfur gasoline and diesel regulations have had little effect on the numbers or capacities of operable refineries nation ally or in the Rocky Mountain States

where refineries were deemed most at risk. Refiner y operating capacities continued to increase as did the available supply of gasoline an d diesel fuel. In 2003, the year before any of the new low sulfur fuel standards began to b e phased-in, there were 149 operable U.S. refineries. Between 2004 and the beginning of 2011, the number of operable refineries ranged between 148 and 150, finally endi ng up at 148; a net reduction of one operable refinery. 62,63 In the Rocky Mountain States (PADD IV), there was a net gain of one refinery (from 16 to 17) between 2000 and 2011. Refining activity in the U.S. increased over the same period. Desulfurization ca pacity increased by 40 percent from 2000 to 2010, indicating that the refining industry responded positively to the regulatory challenge and succeeded in dramatically reducing th e sulfur content of fuels.

PADD IV refiners realized a modest increase in thei r share of U.S. distillation capacity, from 3.3 percent in 2000 to 3.5 percent i n 2010. PADD IV refiners increased their desulfurization capacities by 55 percent from 2000 to 2010. This suggests that these refiners significantly upgraded their operations, c hoosing to stay in these markets rather than withdrawing.

Refinery closures that have occurred in recent year s appear to be due to capacity expansions at more efficient refineries and a drop in consumer demand during the prolonged economic recession. Refiners also expect that demand will not rise much after the economy recovers as a result of higher vehicle fuel economy standards and an increase in alternative fuel supplies, such as etha nol. 64

62 U.S. Energy Information Administration (EIA). 2011

. Workbook: U.S. Number of Operable Refineries as of January 1 (June 24, 2011).

63 Operable refineries include those presently in ope ration and those that are idled but capable of retu rning to production within 30 days or, if down for repair s, within 90 days. Of the 148 operable refineries at the beginning of 2011, 11 were idled for unspecified re asons but not considered to be permanently shut dow n.

64 New York Times. 2009. Chilly Climate for Oil Refiners (December 23, 2009).Assessment of Clean Gasoline in the Northeast an d Mid-Atlantic States Page 7-6



### 7.5. Refinery Operating Costs and the Price of Gasoline

As shown in Figure 7-1, refining is a relatively sm all percentage of the overall cost of gasoline. The price of crude oil is the pr imary determinant of gasoline prices. During the 12 year period covered in the graph, ref ining costs range from 3 percent to 23 percent of the total price of gasoline and averaged 14 percent. Figure 7-1 suggests that the refining component increased as a portion of to tal gasoline costs during the initial ramp-up to meet the federal sulfur requirements, bu t quickly declined and leveled off at pre-regulatory levels. Note that refining represen ted 10 percent of total price of gasoline

in both 2001 and 2011.



## Components of US Gas Prices

0.68 0.57 0.59 0.68 0.88 1.26 1.55 1.68 3.08

1.52 1.80 2.45

0.20 0.14 0.21 0.23 0.40 0.41 0.78 0.55 0.13

0.26 0.26 0.42

0.25

0.28 0.18 0.18 0.22 0.18 0.19 0.34 0.45

0.35 0.26 0.40

0.42 0.43 0.42 0.42 0.42 0.44 0.46 0.40 0.40

0.40 0.40 0.40

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

July July July July July July July July July July July JuneRegular Gasonline Prices (cents per gallon)

Crude Oil Refining Distribution & Marketing Taxes $1.55 $1.42 $1.40 $1.51 $1.91 $2.29 $2.98 $2.97 $4.06

$2.53 $2.72 $3.68

Source: EIA, http://www.eia.gov/oog/info/gdu/gaspump.html

.

Figure 7-1. Components of U.S. Gasoline Prices.

It is difficult to separate out environmental compl iance-related desulfurization costs from other operating costs. The U.S. Energy Information Administration (EIA) does not require a level of reporting detail that w ould make it easy to separate out such costs, and the refining industry has not added desu lfurization capacity solely to meet the regulatory requirements. At least some, and likely a significant amount, of the investment in desulfurization improvements have bee n made for the dual purposes of environmental compliance and enhancing the ability to process increasingly heavier and more sour (i.e., higher sulfur) crude. The shift t o heavier crudes, such as from oil sands, is to provide a more secure crude supply for refine ries as conventional supplies of lighter

crudes diminish. 65

65 See, for example, (1) BP, Whiting Refinery Facility Fact Sheet , available at http://www.bp.com/liveassets/bp_internet/globalbp/S TAGING/global_assets/bp_us_assets/downloads/a/ab p_wwd_us_whiting_refining_fact_sheet_2012_june.pdf (accessed November 16, 2011); (2) BP, Toledo Refinery Facility Fact Sheet , available atAssessment of Clean Gasoline in the Northeast an d Mid-Atlantic States Page 7-7



### 7.6. How Refiners Are Meeting the Low Sulfur Fuel Rules

Early estimates of the cost of lowering sulfur in t ransportation fuels were principally based on the assumption that refiners w ould continue to deploy traditional conventional technology to achieve compliance. In actual practice, refiners opted for a combination of technology and facility efficiency i mprovements to cost-effectively remove the additional sulfur. In addition, refiner s were able to generate a surplus of credits for compliance with the rules as a result o f the flexibility provided by the averaging, banking, and trading programs. 66,67

Refiners also made a number of process improvements ; some directly involving desulfurization technology and others that optimize d energy consumption in various refinery processes. For example ConocoPhillips Pet roleum developed an innovative sulfur removal technology known as “S Zorb.” 68 These process improvements helped

offset the cost of investment in new desulfurizatio n equipment and reduced ongoing operating costs. In addition, these improvements r educed facility-wide emissions, allowing refiners to net out of major New Source Re view (NSR) stationary source permitting that otherwise may have been required as a consequence of significant process modifications. The oil industry has historically u sed conservative (i.e., high) estimates of the predicted costs for complying with federal fuel sulfur standards, but has found innovative and less costly ways to achieve these st andards.



### 7.7. Effect of Low Sulfur Fuel Rules on Product Supply

Predicted gasoline and diesel fuel supply shortages as a result of past USEPA fuel rulemakings have not occurred. The U.S. gasoline s upply increased 9.3 percent, comparing the year 2000 to the year 2007. Over the same time period, the combined supply of 15 ppm sulfur and 500 ppm sulfur diesel f uel increased by 35.4 percent. The supply of 15 ppm sulfur diesel fuel increased almos t 7,000 percent between 2004 and 2008, as the regulations took effect and 15 ppm sul fur diesel fuel took its place as the standard highway fuel. As expected during this sam e timeframe, the supply of 500 ppm sulfur diesel fuel decreased by 92 percent as this fuel was relegated to the non-road

market. 69

http://www.bp.com/liveassets/bp_internet/globalbp/S TAGING/global_assets/downloads/A/abp_wwd_us_h usky_refining_fact_sheet_june_2011v1.pdf (accessed November 16, 2011).

66 USEPA. 2006. Summary and Analysis of the 2005 Highway and Nonroa d Diesel Fuel Pre-Compliance Reports, EPA 420-R-06-012 (June 2006).

67 USEPA. 2010. Summary and Analysis of the 2010 Nonroad Diesel Fue l Pre-Compliance Reports, EPA 420-R-10-028 (December 2010).

68 Vander Laan, J. 2004. S Zorb Gasoline Sulfur Removal Technology , Refining Processes 2004, pp.237- 249. Article reprint available at http://www.icheh.com/Files/Posts/Portal1/S-Zorb.pdf (accessed September 26, 2011).

69 U.S. Energy Information Administration (EIA). 2011

. Petroleum and Other Liquids: Product Supplied

, (release date July 28, 2011). Available at http://www.eia.gov/dnav/pet/pet_cons_psup_dc_nus_mb bl_a.htm (accessed September 26, 2011).Assessment of Clean Gasoline in the Northeast an d Mid-Atlantic States Page 8-1



## 8. CONCLUSION

The results of this analysis indicate that lowering the sulfur content of gasoline to an average of 10 ppm can cost-effectively reduce NO x emissions. Low sulfur gasoline could be one of the most significant strategies ava ilable to address ground-level ozone pollution in the OTR. The projected NOx reductions associated with the Tier 3 / low sulfur gasoline proposal would also help mitigate f ine particle concentrations, acid rain, waterbody eutrophication, and regional haze; all si gnificant challenges in the Northeast and Mid-Atlantic region. A key advantage to loweri ng sulfur in gasoline is that the emission reductions will occur immediately and come from all gasoline vehicles equipped with catalytic converters, regardless of t he vehicle’s model year. As a federal requirement, the low sulfur gasoline rule would res ult in very significant NOx reductions across the eastern U.S., thus diminishing the adver se public health and environmental

outcomes in the OTR related to NOx emissions.
Given the stringency of existing state controls in the OTR, federal constraints on state regulation of motor vehicle fuels, and the fa ct that the OTR is significantly affected by pollution transport from sources outside the reg ion, national emission control measures for light-duty vehicles are critical to ac hieving further improvements in air quality. Emission reductions not achieved through this and other federal measures would have to be accomplished by further controlling loca l sources in the OTR.Assessment of Clean Gasoline in the Northeast an d Mid-Atlantic States Page A-1



# Appendix A:

Tables of Avoided Incidences and Monetized

Health Benefits in OTR Jurisdictions from Introduction of 10 ppm

Low Sulfur GasolineAssessment of Clean Gasoline in the Northeast an d Mid-Atlantic States Page A-2



## Appendix A: Tables of Avoided Incidences and Monetized

Health Benefits in OTR Jurisdictions from Introduct ion of 10 ppm Low Sulfur Gasoline

Table A-1. Summary of 2018 Monetized Health Benefit s from Reduced Ozone During Ozone Season Due to Low Sulfur Gasoline in O TR Jurisdictions.

State/DC Total Value

of Avoided Respiratory Endpoints* [Millions of 2006$] Mortality (Range

of 6 Studies) [Millions of 2006$]
CT $0.95 $9.50

- $43.0
DE $0.31 $2.85

- $13.0
DC $0.14 $1.48

- $6.77
ME $0.26 $2.48

- $11.2
MD $2.08 $20.4

- $93.0
MA $1.54 $15.3

- $68.8
NH $0.26 $3.92

- $11.6
NJ $2.81 $28.8

- $129
NY $4.15 $39.8

- $178
PA $3.76 $43.3

- $196
RI $0.31 $3.24

- $14.7
VT $0.09 $0.84

- $3.84

VA $2.86 $23.6

- $108

OTR Total $19.5 $196 - $877

Note: This table includes health benefits estimated for all of Virginia.Assessment of Clean Gasoline in the Northeast an d Mid-Atlantic States Page A-3

Table A-2. Summary of the 2018 Annual Number and M onetized Value of Avoided

Incidences from Reduced PM2.5 Due to

Low Sulfur Gasoline in OTR Jurisdictions.

OTR Total

Incidences Value [Millions of 2006$]
Mortality (Adults ages 30 and older) 2.6 - 38.6 14.6 - 285
Mortality (Infants less than 1 year of age) 0.036 0.263
Chronic Bronchitis (Adults aged 27 and older) 8.3 3.3 Acute Bronchitis (Children, ages 8-12) 16.9 0.0012

Acute Myocardial Infarctions (Adults ages 18 and older) 3.3 0.350

Hospital Admissions - Respiratory 0.0085
Hospital Admissions, Chronic Lung Disease (Adults ages 65 and older) 0.14 - 0.22

Hospital Admissions, Chronic Lung Disease (Adults ages 18 to 64) 0.087

Hospital Admissions, Pneumonia (Adults ages 65 and older) 0.59

Hospital Admissions, Asthma (Ages 64 and younger) 0.32

Hospital Admissions - Cardiovascular 0.0369

Hospital Admissions, Ischemic Heart Disease (Adults ages 65 and older) 0.21

Hospital Admissions, Dysrythmia (Adults ages 65 and older) 0.15

Hospital Admissions, Congestive Heart Failure (Adults ages 65 and older) 0.58

Hospital Admissions, All Cardiovascular not including Myocardial Infarction (Adults ages 65 and older) 0.88

Hospital Admissions, All Cardiovascular not including Myocardial Infarction (Adults ages 18 to 64) 0.45

Emergency Room Visits, Asthma (Children 17 years and younger) 3.0 0.0011

Asthma Exacerbation Symptoms, Cough, Wheeze, Shortness of Breath (Asthmatic children, 6-18) 48.0 0.0024

Lower Respiratory Symptoms (Children ages 7 to 14) 53.1 0.0010

Upper Respiratory Symptoms (Children ages 9 to 11) 40.1 0.0012

Work Loss Days (Adults ages 18 to 64) 382 0.0638 Acute Respiratory Symptoms, Minor Restricted Activity Days (Adults ages 18 to 64) 2274 0.135Assessment of Clean Gasoline in the Northeast and Mid-Atlantic StatesPage A-4Table A-3. Summary of Avoided Incidences During Ozone Season in 2018 from Reduced Ozone Due toLow Sulfur Gasoline in OTR Jurisdictions.State/DCER Visits,AsthmaHospitalAdmissions, AllRespiratoryEndpoints, >64Years and <2YearsSchool LossDaysLoss of IncomeDue toDecreasedWorkerProductivityMinorRestrictedActivityDays, 18-64Mortality(Range of 6Studies)CT 4.512.72,25736,2407,8591.2 -5.8DE 1.34.869722,2722,3230.4 -1.8DC 0.71.93641,8081,2600.2 -0.9ME 0.92.444153,4461,7310.5 -1.5MD 11.420.65,58286,65218,4112.7 -12.6MA 7.518.13,70064,72513,0492.1 -9.3NH 1.22.561220,6692,2280.3 -1.6NJ 16.333.07,29788,70824,3333.9 -17.5NY 29.245.810,559173,25836,5225.4 -24.1PA 17.151.18,496234,75929,5125.8 -26.5RI 1.53.770018,6552,5910.4 -2.0VT 0.30.816017,3016510.1 -0.5VA 12.343.36,684156,678220,2433.2 -14.6OTR Total 104.224147,549975,171360,71326.2 -119Assessment of Clean Gasoline in the Northeast and Mid-Atlantic StatesPage A-5Table A-4. Summary of 2018 Annual Avoided Incidences from Reduced PM2.5 Due toLow Sulfur Gasoline in OTR Jurisdictions.CT DE DC ME MD MA NH NJ NY PA RI VT VAMortality (Adults ages 30and older)0.17 -1.50.044- 0.390.002- 0.290.06 -0.560.78 -3.00.16 -3.70.04 -0.620.2 -5.60.38 -12.70.4 -7.00.05 -0.460.02 -0.190.2 -2.6Mortality (Infants lessthan 1 year of age)0.001 0.001 0.001 0.000 0.004 0.002 0.000 0.005 0.013 0.006 0.000 0.000 0.003Chronic Bronchitis(Adults aged 27 andolder)0.3 0.1 0.1 0.1 0.6 0.8 0.1 1.2 3.0 1.2 0.1 0.0 0.6Acute Bronchitis(Children, ages 8-12)0.6 0.2 0.1 0.1 1.4 1.6 0.3 2.5 6.2 2.4 0.2 0.1 1.3Acute MyocardialInfarctions (Adults ages18 and older)0.2 0.0 0.0 0.1 0.2 0.3 0.1 0.5 1.0 0.6 0.0 0.0 0.3Hospital Admissions -RespiratoryHospitalAdmissions,Chronic LungDisease (Adultsages 65 andolder)0.008-0.00510.0019-0.0030.0012-0.00180.0019-0.0030.0107-0.01680.0143-0.02240.0022-0.00340.0196-0.03070.0443-0.06950.0217-0.03410.0016-0.00260.0006-0.00090.0136-0.0231HospitalAdmissions,Chronic LungDisease (Adultsages 18 to 64)0.004 0.001 0.001 0.001 0.007 0.009 0.001 0.011 0.025 0.015 0.001 0.000 0.011HospitalAdmissions,Pneumonia(Adults ages 65and older)0.03 0.01 0.00 0.01 0.03 0.06 0.01 0.08 0.17 0.12 0.01 0.00 0.05Assessment of Clean Gasoline in the Northeast and Mid-Atlantic StatesPage A-6CT DE DC ME MD MA NH NJ NY PA RI VT VAHospitalAdmissions,Asthma (Ages64 and younger)0.01 0.00 0.00 0.00 0.02 0.02 0.00 0.04 0.15 0.04 0.00 0.00 0.02Hospital Admissions -CardiovascularHospitalAdmissions,Ischemic HeartDisease (Adultsages 65 andolder)0.01 0.00 0.00 0.00 0.01 0.02 0.00 0.03 0.08 0.04 0.00 0.00 0.01HospitalAdmissions,Dysrythmia(Adults ages 65and older)0.01 0.00 0.00 0.00 0.01 0.01 0.00 0.02 0.05 0.03 0.00 0.00 0.01HospitalAdmissions,CongestiveHeart Failure(Adults ages 65and older)0.02 0.01 0.00 0.01 0.04 0.06 0.01 0.09 0.19 0.10 0.01 0.00 0.05HospitalAdmissions, AllCardiovascularnot includingMyocardialInfarction (Adultsages 65 andolder)0.04 0.01 0.01 0.01 0.06 0.08 0.01 0.13 0.30 0.16 0.01 0.00 0.07HospitalAdmissions, AllCardiovascularnot including0.02 0.01 0.00 0.00 0.03 0.03 0.00 0.06 0.16 0.08 0.00 0.00 0.04Assessment of Clean Gasoline in the Northeast and Mid-Atlantic StatesPage A-7CT DE DC ME MD MA NH NJ NY PA RI VT VAMyocardialInfarction (Adultsages 18 to 64)Emergency Room Visits,Asthma (Children 17years and younger)0.1 0.0 0.0 0.0 0.3 0.2 0.0 0.4 1.4 0.3 0.0 0.0 0.1Asthma ExacerbationSymptoms, Cough,Wheeze, Shortness ofBreath (Asthmaticchildren, 6-18)1.7 0.5 0.3 0.5 3.9 4.5 0.7 7.2 17.7 6.8 0.5 0.2 3.6Lower RespiratorySymptoms (Childrenages 7 to 14)1.9 0.5 0.4 0.6 4.3 5.0 0.8 8.0 19.5 7.6 0.5 0.2 4.0Upper RespiratorySymptoms (Childrenages 9 to 11)1.4 0.4 0.3 0.4 3.3 3.7 0.6 6.0 14.7 5.7 0.4 0.1 3.0Work Loss Days (Adultsages 18 to 64)14 4 3 4 29 37 6 56 142 53 4 2 27Acute RespiratorySymptoms, MinorRestricted Activity Days(Adults ages 18 to 64)82 21 16 26 175 222 36 333 847 319 24 10 162Assessment of Clean Gasoline in the Northeast and Mid-Atlantic StatesPage A-8Table A-5. Monetized Value in 2018 of Annual Avoided Morbidity and Mortality from Reduced PM2.5 Due to Low SulfurGasoline in OTR Jurisdictions [Millions of 2006$].CT DE DC ME MD MA NH NJ NY PA RI VT VAMortality (Adults ages 30and older)1.28 -110.32 -2.90.004 -2.10.47 -4.11.39 -221.15 -270.32 -4.61.6 -412.8 -943.1 -520.38 -3.40.14 -1.41.7 -19Mortality (Infants less than1 year of age) 0.007 0.004 0.003 0.003 0.026 0.0150.003 0.035 0.096 0.043 0.002 0.001 0.025Chronic Bronchitis (Adultsaged 27 and older)0.12 0.03 0.02 0.04 0.25 0.32 0.05 0.47 1.20 0.48 0.04 0.02 0.23Acute Bronchitis (Children,ages 8-12) 0.00000.00000.0000 0.00000.00010.00010.00000.00020.00040.00020.00000.00000.0001Acute MyocardialInfarctions (Adults ages 18and older) 0.017 0.004 0.002 0.007 0.023 0.035 0.006 0.048 0.104 0.069 0.004 0.001 0.029Hospital Admissions -Respiratory 0.00030.00010.0001 0.00010.00060.00080.00010.00120.00310.00130.00010.00000.0008Hospital Admissions -Cardiovascular0.00160.00040.0003 0.00040.00260.00310.00040.00550.01280.00650.00030.00010.0029Emergency Room Visits,Asthma (Children 17 yearsand younger) 0.00000.00000.0000 0.00000.00010.00010.00000.00010.00050.00010.00000.00000.0001Asthma ExacerbationSymptoms, Cough,Wheeze, Shortness ofBreath (Asthmatic children,6-18) 0.00010.00000.0000 0.00000.00020.00020.00000.00040.00090.00030.00000.00000.0002Lower RespiratorySymptoms (Children ages 7to 14) 0.00000.00000.0000 0.00000.00010.00010.00000.00010.00040.00010.00000.00000.0001Upper RespiratorySymptoms (Children ages 9to 11) 0.00000.00000.0000 0.00000.00010.00010.00000.00020.00050.00020.00000.00000.0001Work Loss Days (Adultsages 18 to 64)0.00250.00050.0005 0.00060.00510.00660.00090.01030.02380.00790.00060.00020.0043Assessment of Clean Gasoline in the Northeast and Mid-Atlantic StatesPage A-9CT DE DC ME MD MA NH NJ NY PA RI VT VAAcute RespiratorySymptoms, MinorRestricted Activity Days(Adults ages 18 to 64)0.005 0.001 0.001 0.002 0.010 0.013 0.002 0.020 0.050 0.019 0.001 0.001 0.010