The Obama administration today rolled out a controversial new regulation for gasoline that could raise costs at the pump"”only slightly, but enough to ignite immediate pushback from Republicans and the oil industry.
The regulation will require oil refineries to install new equipment to strip gasoline blends of sulfur, which when burned forms a smog-producing chemical that is linked to respiratory diseases. It's also expected to raise the cost of gasoline by 1 to 6 cents per gallon, according to early estimates.
EPA actually finished writing the regulation over a year ago. But it sat on the rule throughout the 2012 presidential campaign. After it came under attack from Republican presidential candidates"”including former House Speaker Newt Gingrich, R-Ga., in an appearance on NBC's Meet the Press"”plans to roll out the rule were put on ice until after November's elections. None
Any new regulation that will raise the price of gasoline"”even by a few pennies a gallon"”will fuel political fires.
The rule's also likely to become a flash point of contention in the confirmation hearing of Gina McCarthy, President Obama's pick to lead EPA in his second term. The ranking Republican on the Senate Environment and Public Works Committee, which will hold that hearing, is Sen. David Vitter of Louisiana, a major oil-producing and refining state. Last month, Vitter wrote a letter to Obama urging him not to move forward with the regulation, known as Tier 3. "The price of gasoline at the pump spiked upwards in the last few weeks, and EPA's Tier 3 proposal"”if implemented"”could drive prices up even further without explanation," Vitter wrote.
Clean-air advocates say the new rule will have major health and environmental benefits for a low cost. Today, regular gasoline contains 30 parts per million of sulfur, which when burned produces the toxic compound sulfur dioxide. The new rule will limit sulfur in gasoline to 10 ppm, reducing the production of smog and soot from burning gasoline.
"When this takes effect, you will literally see overnight emissions reductions," said William Becker, executive director of the National Association of Clean Air Agencies. "There is not a single air-pollution strategy that we know of that will give you as substantial, expeditious, and cheap emissions reductions."
Studies by Becker's group and the economic consulting firm Navigant estimate that the sulfur rules will increase the cost of gasoline at the pump by no more than a penny per gallon. However, an oil-industry-funded study by the consulting firm Baker and O'Brien found that the rules could raise prices as much as 6 cents per gallon.
Frank O'Donnell, president of the advocacy group Clean Air Watch, said, "In our view, it's a vital tool for attacking smog levels."
Oil refiners protest that the new rule will put an undue burden on their industry. Charles Drevna, president of the American Fuel and Petrochemical Manufacturers, which lobbies for the oil-refining industry, said that the new regulation comes on top of a series of additional burdensome regulations. A decade ago, U.S. gasoline contained 300 ppm of sulfur, but a series of earlier rules required refiners to mix cleaner and cleaner blends, reducing the sulfur content by 90 percent. "We've seen no evidence from EPA that further sulfur reduction is needed," Drevna said.
The new regulation, he said, will require refiners to invest heavily in expensive equipment to remove the additional sulfur from gasoline blends. The process requires technology to heat oil to high temperatures under high pressure and blast it with hydrogen, and then to dispose of the sulfur.
"It's a very expensive process. It's really going to have an impact on refineries," Drevna said. "Every time we take a step forward towards a manufacturing renaissance, the EPA comes out with a new regulation."
The American Petroleum Institute, which lobbies for the oil industry, has released a study saying the rule will force U.S. refineries to spend $10 billion in order to comply.
Meanwhile, the prospect of a new EPA rule from the Obama administration that will further boost already-high gas prices has Republican campaign operatives licking their chops. "That's like a Republican fundraising e-mail," said Andrea Bozek, as spokeswoman for the National Republican Congressional Committee. "This would be something we can really take advantage of. Little stuff like this can blow up if they don't handle it right."
CLARIFICATION: It was a study funded by the oil industry, and not by Navigant and the National Association of Clean Air Agencies, that estimated that a forthcoming EPA regulation could raise the price of gasoline as much as 6 cents per gallon.