VIA FACSIMILE AND EMAIL
Ms. Carol Connell
U.S. Environmental Protection Agency
National Vehicle and Fuels Emission Laboratory
2000 Traverwood
Ann Arbor, MI 48105
On August 4, 2000, the EPA published a Notice of Proposed Rulemaking (NPRM), to address mobile source air toxics (MSAT) pursuant to Section 202(l) of the Clean Air Act. The proposed rule sets "anti-backsliding" standards for benzene in conventional gasoline (CG) and reformulated gasoline (RFG). The anti-backsliding standard states that, beginning in 2002, the average benzene content in gasoline produced by any refiner can no longer exceed the average content produced between 1998-1999. The rule also commits the Agency to considering more stringent standards by 2004 for benzene in the on-road market, and standards for benzene in off-road markets and for other MSATs identified in the rule in on-road and off-road markets. In the meantime, EPA will study the need for, and feasibility of, such standards.
The Office of the Chief Counsel for Advocacy of the U.S. Small Business Administration was created in 1976 to represent the views and interests of small business in federal policy making activities.(1) The Chief Counsel participates in rulemakings when he deems it necessary to ensure proper representation of small business interests. In addition to these responsibilities, the Chief Counsel monitors compliance with the Regulatory Flexibility Act (RFA), and works with federal agencies to ensure that their rulemakings demonstrate a complete analysis of the impact that their decisions will have on small businesses. The Chief Counsel is also authorized to appear as amicus curiae in regulatory appeals from final agency actions, and is allowed to present views regarding compliance with the RFA, the adequacy of the rulemaking record with respect to small entities, and the effect of the rule on small entities.
Justification for the Rule
Advocacy has serious concerns regarding this proposed rule. First, the benzene content of gasoline is already limited under reformulated gasoline and anti-dumping rules,(2) and it is not clear from the NPRM why this level of control is not sufficiently protective of public health. EPA expects the average level of over-compliance to continue and improve for the next several years.(3) By the Agency’s own estimates, the existing rules are expected to reduce benzene by 75 percent by 2020.(4) So why the need for a new rule?
Compliance Costs of the Proposal
Second, there are compliance costs associated with the rule that are not appropriately considered. EPA argues that, because the standards are set to levels already achieved in 1998-1999, it should cost refiners little, if anything, to achieve and maintain these levels into the future. However, the Agency fails to recognize that, in order to comply with the existing rules on a consistent basis, small refiners have had to over-compensate for variability inherent in production. This rule will not change the inherent variability of production (if anything, the variability would increase). This means then that the small refiners will have to adopt measures to over-comply in order to ensure compliance consistently and risk free with the new standards for 2002 (its 1998-1999 average). Otherwise, they might not be able to avoid the significant penalties associated with a violation.(5) In effect, small refiners will have to meet a more stringent standard in order to comply with the new standard and meeting the standard could involve additional costs.
Nor does EPA take into consideration the potential changes in the market that could make maintaining past levels of over-compliance more costly. For instance, the demand for gasoline is estimated to grow by at least 1 percent a year over the next twenty years.(6) To meet this increased demand, refiners will likely have to increase reformate throughput, which would reduce octane. To make up for reduced octane, refiners would have to increase reformer severity, which would increase benzene. It is unclear how a refiner would be able to increase reformer severity and still meet its 1998-1999 average for benzene, without additional equipment to accommodate the increase. There is no discussion anywhere in the NPRM as to what this projection’s impact would be on production and reduced benzene content.
It is also not clear how a small refiner would be able to comply with this rule, as well as with a phase down of methyl tertiary butyl ether (MTBE) and the gasoline sulfur rule, without acquiring additional equipment to ensure compliance with all three. Both desulfurization and MTBE removal will reduce octane, and refiners will have to make up for this reduced octane but still meet the 1998-1999 benzene average. The alternative would be for refiners to change their product mix and whether they could maintain the same profit levels would depend on the market. Finally, it is not clear how a small refiner would be able to obtain the financing for any required equipment when all such refiners would have to meet the gasoline sulfur rule and some would also need to satisfy the diesel sulfur rule in virtually the same timeframe.
The totality of the regulatory burdens, with admittedly worthwhile environmental objectives, should not be ignored. Preserving competition in the oil refining industry is also a national objective