Patrick Kelly's remarks at press briefing teleconference on Tier 3 letter

As prepared for delivery

Press briefing teleconference on Tier 3 letter
Patrick Kelly, API senior policy advisor for downstream and industry operations
Tuesday, May 7, 2013

Opening statement:

Good afternoon everyone. Thanks for calling in.

API is sending a letter to EPA today urging the agency to propose its Tier 3 rule according to Clean Air Act procedures: namely, to publish the proposal in the Federal Register, to start the comment period clock upon publication, and to hold a properly scheduled public hearing. The rushed review process EPA has in mind is unnecessary and invalid.

Respecting the statutory rulemaking process in this case is particularly important because the proposal is hard to justify and potentially very harmful. The massive refinery investments it would require could drive up the cost of making gasoline and weaken the nation’s energy security without producing much, if any, environmental benefit. Most sulfur in gasoline has already been removed. There’s 90 percent less in gasoline today than a decade ago, and the current Tier 2 standards are still generating environmental benefits as the U.S. vehicle fleet turns over.

An analysis for API by Baker and O’Brien shows the proposal would impose new capital costs on the industry of nearly $10 billion dollars. That could increase the marginal cost per gallon of manufacturing gasoline by between six and nine cents. Implementing the new sulfur standards could actually increase refinery CO2 emissions because of the need to use energy-intensive hydro treating equipment to reduce sulfur to minimal levels.

Unfortunately, Tier 3 is not the only rule EPA has in mind for our nation’s refineries. EPA also is considering gasoline vapor pressure reductions, which could increase gasoline costs an additional 16 cents per gallon beyond the Tier 3 costs, and increasingly burdensome RFS requirements, which, according to NERA Economic Consulting, could increase gasoline costs by 30 percent and result in rationing and other serious disruptions in the transportation sector and severe economic damage. On top of that, other regulations affecting refineries – rules whose costs have not yet been fully analyzed – could add substantially to this burden. They include greenhouse gas rules, new source performance standards, and more stringent ozone standards. As the studies show, this is a recipe for disaster for American consumers.

This tsunami of refinery rules also could put refineries out of business, reduce U.S. fuel manufacturing capacity, and increase our reliance on imported fuels.

OMB has warned agencies to “take into account…the costs of cumulative regulations.” If ever there was a moment for EPA to take this advice to heart, it is now.

EPA needs to allow for a full review provided by a 90-day comment period and an appropriately scheduled public hearing. Allowing stakeholders to provide meaningful input on the true costs and marginal benefits of this proposal are key elements of transparency in the rulemaking process.

Refineries and their products are already heavily regulated. These regulations are contributing to a cleaner environment and safer workplace, but, unnecessary, inefficient, and excessively costly requirements hamper our ability to provide and distribute fuels to America, while also employing hundreds of thousands of people and enhancing our national security.

We urge the administration to follow the procedural requirements of the Clean Air Act for its Tier 3 rule and make decisions based on sound science and good economic analysis. That’s how to protect the environment and the economy, while allowing U.S. refiners to remain competitive, preserve good paying refinery jobs, and protect America’s energy security.

Thank you. And now I’ll be happy to answer your questions.