WATCHING GOVERNMENT FUELING WORRY

Refiners are concerned that the Environmental Protection Agency's proposal for a "49 state" low emission vehicle (LEV) program will backfire on the U.S. industry.

Robert Campbell, chairman, president and CEO of Sun Co. Inc., testified last week for the National Petroleum Refiners Association at an EPA hearing on the issue.

He said refiners want assurances that the LEV program is not accompanied by a requirement for a new fuel. And EPA's experience with reformulated gasoline should have taught it to sell the voluntary program first to Congress, governors, state legislators, and consumers.

WHAT REFINERS WANT

Campbell said, "What we petroleum refiners want to avoid is setting the table for later insistence on a companion initiative to require new costly national motor fuel specifications.

"We're particularly concerned that in using California Phase II gasoline as the certification test fuel for LEV standards, the results could unnecessarily lead to a new national fuel standard comparable to California gasoline.

"The California fuel has an average sulfur content of 30 ppm. The conventional gasoline used in the rest of the country has an overall average sulfur content of perhaps 300-400 ppm. And please believe me, reducing sulfur content in gasoline is an exceedingly expensive proposition."

Although EPA says it has no plans for new fuel requirements "now," Campbell said, "That word 'now' is fragile and to refiners intimidating.

"Please do not dismiss this as petroleum paranoia. We are talking about billions of dollars of potential industry investment here. In some instances we are talking about 'bet your company' type of expenditures to produce gasoline that does not provide measurable air quality benefit."

For example, he said, the 18 small refineries serving the U.S. Rocky Mountain states are less complex than most and therefore have fewer options for meeting new fuel requirements.

"A national fuel requiring major renovations in refineries would put an unprecedented financial burden on these companies," Campbell said. "Loss of these 18 refineries would strip the Rocky Mountain region of more than 50% of its transportation fuel capacity."

SUN'S EXPERIENCE

Campbell also was speaking from the perspective of Sun's bout with RFG in the U.S. Northeast.

After Sun spent nearly $50 million to meet RFG specifications, Pennsylvania quit the program because "consumers did not want to pay an extra 5-10/gal for what they felt was a nonmeasurable improvement in the air."

Campbell said Sun did not recover the cost. When it later had to find $100 million in savings, it laid off 800 employees.

"Not all of that downturn was attributable to our RFG investment," Campbell said. "But there is no question that our economics would have been much different if it had been determined in advance that the public wasn't going to buy in to the new gasoline."

Campbell urged EPA to declare beforehand that the 49 state cars must meet emission requirements using fuels currently on the market, including conventional gasoline as well as federally required RFG.