During his recent State of the Union address, President Obama cited manufacturing and energy as two cornerstones for creating American jobs and leading the country out of its economic doldrums. In a press conference Friday, officials with the American Petroleum Institute (API) warned that jobs in an industry tied to both sectors -- refining -- could be at risk if the Obama Administration implements a new wave of air quality regulations.

"America's refiners are a strategic national asset critical to our economic and energy security," said Howard Feldman, API's Director of Regulatory and Scientific Affairs. "They sustain hundreds of thousands of good-paying, highly skilled jobs across the country."

"The president himself has called on federal agencies to take into account the impact of regulations on jobs and the economy," said Feldman. "EPA should follow through by ensuring that their regulatory proposals are necessary, practical, and fair."

Under one of the U.S. Environmental Protection Agency proposals to which Feldman was referring, the agency would advance new greenhouse gas (GHG) rules for refineries under the Clean Air Act (CAA).

The greenhouse gas refinery rules are of great concern," said Feldman. "Given that the Clean Air Act was simply not designed to address greenhouse gases, if EPA is going to proceed, it is critical that the process be open and transparent."

"We are now past the date the agency said it would propose the new refinery greenhouse gas rules, but still without clarity on how the agency will proceed," continued Feldman. In addition, API contends a separate EPA proposal to regulate GHG emissions via the "GHG Tailoring Rule -- Step 3" would be a job-killer.

"[It] could impose onerous requirements on much smaller businesses and operations, stifling business expansion and job creation that America will rely on to help strengthen its economy," said Feldman.

Feldman added the Step 3 Tailoring Rule is now under review by the Office of Management and Budget (OMB) but has not been made public.

"We hope OMB will take an objective look at the jobs impact of the proposal and consider whether the limited environmental benefits are worth the costs to workers and their families," noted Feldman. "This rule is not needed at this time and should be pulled back."

Another EPA proposal would set national emission standards to control hazardous air pollutants (HAP) from new and existing industrial, commercial and institutional boilers and process heaters used in refining and other industries. The proposal, which is commonly referred to as the "Boiler MACT" rule, would amend the National Emission Standards for Hazardous Air Pollutants (NESHAP) by requiring refiners and others to use "Maximum Achievable Control Technology" to control HAPs.

"EPA is revising the regs again," Feldman said in regard to Boiler MACT. "We believe they need to accommodate gas-burning facilities, recognizing the low-emission benefits, and also make allowances for refineries located on islands, which simply don't have access to natural gas supplies."

API also urges EPA to refrain for now from setting stricter motor fuel standards to reduce ozone, particulate matter and mobile source air toxics. EPA calls the "Tier 3" vehicle emission proposal a "comprehensive approach to regulating motor vehicles for non-greenhouse gas pollutants." API, meanwhile, is not so certain.

"Although EPA maintains these changes are needed to improve air quality and fuel economy, it has not produced the data to back up its claims," said Feldman. He maintains that any Tier 3 proposal should follow "a full airing of the impacts, costs and benefits of further reductions of sulfur and vapor pressure in gasoline."

Citing a 2011 Baker and O'Brien study, API contends the new Tier 3 requirements could raise the cost of making gasoline by 12 to 25 cents per gallon and demand up to $17 billion in refinery capital costs. Moreover, the study finds that carbon dioxide emissions would actually increase and that four to seven refineries would likely close under the new Tier 3 rules.

Regarding what he termed a potential "veritable tsunami" of new regulatory requirements, Feldman said that the EPA should pursue the above policy aims by initiating an advanced notice of proposed rulemaking (ANPRM). He said that ANPRM route, unlike the current regulatory strategy, would better reflect stakeholder concerns and potential impacts on refineries and the economy.

"Four U.S. refineries closed last year," Feldman said. "Significant new compliance costs on top of what existing regulations have imposed would make a difficult operating environment even more challenging."



Matthew V. Veazey has written about the upstream and downstream O&G sectors for more than a decade. Email Matthew at mveazey@downstreamtoday.com.