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New EPA Tier 3 Regulations Threaten to Drive Up Gas Prices

"The Obama Administration is modeling our regulations after California, which has the worst economy in the nation."

by
Bridget Johnson

Bio

March 29, 2013 - 4:03 pm

WASHINGTON — Claiming its new rule will save some 2,400 lives a year, the Environmental Protection Agency today introduced requirements for major cuts to sulfur in gasoline.

Energy industry insiders, though, said the new Tier 3 regulations are already in force in California — and part of the reason why the Golden State’s gas prices are 40 cents a gallon above the national average.

“The Tier 3 rule is one more example of the administration’s desire to increase energy prices for Americans,” American Energy Alliance Director of Regulatory and State Affairs Daniel Simmons said. “It is never ‘common sense’ to drive up gasoline prices when so many Americans are struggling to make ends meet.”

EPA said in its announcement that seven dollars in healthcare will be saved for every buck spent to meet the new standards, and claimed sulfur regulations would cost refineries less than a penny per gallon on average “once the standards are fully in place.” New proposed vehicle standards will have an average cost of about $130 per vehicle in 2025.

“The Obama Administration has taken a series of steps to reinvigorate the auto industry and ensure that the cars of tomorrow are cleaner, more efficient and saving drivers money at the pump and these common-sense cleaner fuels and cars standards are another example of how we can protect the environment and public health in an affordable and practical way,” said EPA Acting Administrator Bob Perciasepe.

“Today’s proposed standards – which will save thousands of lives and protect the most vulnerable — are the next step in our work to protect public health and will provide the automotive industry with the certainty they need to offer the same car models in all 50 states.”

The rule proposes a 70 percent tighter particulate matter standard and slashing “smog-forming volatile organic compounds and nitrogen oxides” by 80 percent.

House Science, Space, and Technology Committee Chairman Lamar Smith (R-Texas) warned the EPA’s reach here could cause refinery closures and hike gas prices.

“I am also troubled that the EPA ignored the law and is several years late in releasing a mandatory study to examine potential adverse air quality impacts of renewable fuels and determine if the rule is even necessary,” Smith said.

“I share the concerns expressed by Senate Democrats that EPA has not provided clear scientific justification that Tier 3 regulations are necessary or will benefit public health. Despite knowing the potential adverse effects these regulations could have on the economy, the EPA continues to press forward with its activist agenda. The Obama administration must consider the negative economic consequences before moving forward,” Smith added, vowing his committee will closely review any science the EPA puts forth to back up the rule.

Once published in the Federal Register, the proposal will be available for public comment and public hearings will be scheduled. The rule is expected to be finalized later this year.

Sen. Kirsten Gillibrand (D-N.Y.), a member of the Environment and Public Works Committee, claimed the new regulations would have “practically no effect” on the cost of gas.

“The implementation of Tier 3 emission standards is a big step forward for Americans,” Gillibrand said. “More stringent emission standards would significantly decrease air pollution, create new jobs and increase workers’ economic productivity by reducing the number of sick days they take from lung and heart related ailments. We’ve cleared a crucial step in the process, and I will continue to urge the Administration to move quickly to finalize the rule this year.”

But the top Republican on the Senate Environment and Public Works Committee warned that drivers will likely feel pain at the pump.

“The EPA continues to disregard the facts and potential economic costs of Tier 3, when consumers and our economy can’t afford gas prices going up even further,” said Vitter. “The ignored consequences of Tier 3 include importing more foreign energy, increasing our trade deficit, and reducing our energy security.”

“This move signals a frightening flood of new rules under the potential Gina McCarthy led EPA and represents one of a litany of likely regulations that require transparency to justify both the costs and the benefits,” he added.

In early February, Vitter and Sens. Heidi Heitkamp (D-N.D.), John Hoeven (R-N.D.), James Inhofe (R-Okla.), and Mary Landrieu (D-La.) urged President Obama to back off the push for Tier 3 regulations.

“The planned regulation could impose capital costs on the industry approaching $10 billion, corresponding to a recurring annual cost of $2.4 billion. That translates to an increase in gasoline manufacturing costs up to nine cents per gallon,” the letter stated.

In addition, the senators noted, Tier 2 standards already reduced sulfur in gas by 90 percent — and Tier 3 standards could have an unintended consequence that isn’t very environmentally friendly.

“If imposed, Tier 3 would increase refinery greenhouse gas emissions at a time when EPA signaled that the Agency wants to reduce these emissions,” the senators wrote. “Specifically, a study by energy consulting firm Baker and O’Brien found that additional hydrotreating, necessary to comply with more stringent Tier 3 requirements, would increase emissions of greenhouse gases from the refineries themselves.”

White House spokesman Josh Earnest, gaggling aboard Air Force One en route to Miami today, claimed automakers as well as state and local governments “strongly support” the rule.

“Now, the cost that’s estimated with this — again, according to analysis done by the EPA — is that this could have an impact of about a penny or even less than a penny per gallon of gas,” Earnest said, brushing off the higher estimates as coming from the energy industry.

“There is plenty of evidence to indicate that the impact on prices is pretty small, the impact on the industry is limited, but the health benefits that would be enjoyed if a rule like this is put in place are significant,” he said.

Republican Study Committee Chairman Steve Scalise (R-La.) noted people are already paying four bucks a gallon across much of the country, “and this latest EPA regulation will only drive the price of gas even higher as the Obama Administration continues to pursue their radical tax, regulate, and spend agenda.”

“The Obama Administration is modeling our regulations after California, which has the worst economy in the nation, and today’s announcement is essentially a guaranteed energy tax hike and unfortunately is just one of many radical policies coming out of this Administration that will deal a heavy blow to middle-class families and small businesses,” Scalise said.

“Instead of focusing on handcuffing families and small businesses to higher energy and gas prices and Middle Eastern countries for our oil, President Obama’s time would be better spent encouraging American energy development, creating American jobs and helping to pay down our debt through cutting wasteful Washington spending and economic growth.”

Bridget Johnson is a veteran journalist whose news articles and opinion columns have run in dozens of news outlets across the globe. Bridget first came to Washington to be online editor at The Hill, where she wrote The World from The Hill column on foreign policy. Previously she was an opinion writer and editorial board member at the Rocky Mountain News and nation/world news columnist at the Los Angeles Daily News. She is an NPR contributor and has contributed to USA Today, The Wall Street Journal, National Review Online, Politico and more, and has myriad television and radio credits as a commentator. Bridget is Washington Editor for PJ Media.

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Top Rated Comments   
Hellllloooo! They WANT to drive up the price of gasoline. This is a feature not a bug with the new standards. We're living inside a poorly made remake of "1984". Enjoy it, you morons who voted this fascist back into office.
1 year ago
1 year ago Link To Comment
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All Comments   (23)
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California is the role model for the democratic party. I've lived here all my life and this state is more like a third world country now than it was when I was a kid. Just wait (and wait and wait and wait) until we get our high (wink, wink...nudge, nudge) speed rail running as well as amtrak runs, complete with massive subsidies and a state bankruptcy.
1 year ago
1 year ago Link To Comment
In all the states and areas of those states we operate farms and ranches the agri and farm classified price of diesel is the same as unleaded gasoline fuel at a retail pump and less from a bulk distributor depending on gallons purchased pricing points. Without getting into the weeds, we also get state and federal IRS considerations for all fuels used for farm and ranch classifications. That said, it is higher than need be and for those operating on close operating budget constraints, its more of a problem when pricing fluxuates arbitraily upward. The sad thing about our industry is that we're not able to directly 'pass-through' a lot of the costs of doing business like other industry sectors because we're a heavily 'commodity-market' driven industry.
1 year ago
1 year ago Link To Comment
oooops! was respond to Thane36425 way down at the bottom but it posted way up here!
1 year ago
1 year ago Link To Comment
What really influences and drives up the price gasoline, is profit and monoply protectionism! Take a look at the number of oil companies with domestic exploration, extraction and refinery capabilities. Now look at the limited number of those who have expanded global exploration, global extraction, global shipping, global refineries and global marketing capabilities. IF all the companies were on 'equal' playing ground, we have more refineries and a far more competitive industry sector driving prices down -- like back in the old days when it was virtually all domestic activity.

Far better than being diverted from fact by self serving...... it would be better to find the underlying facts and which party drives the protectionism by favored legislation of the select big boys and their wealthy lobbyists corrupting the government processes and the industry sector. Federal legislation prevents 'fair' industry wide competition protecting the selected few -- so we have domestic and global 'manipulation' of pricing within the exploration, extracting, refining, marketing, distribution and retail chain.
1 year ago
1 year ago Link To Comment
Zeke you are wrong. Fuel pricing is relatively transparent and very competitive. Gas stations put their prices on signs that can be read as one drives by. If the price is too high, you don't stop there. Even at the wholesale level pricing is fairly transparent and lower price wins. Energy companies have high profits in absolute dollar terms because they supply enormous quantities of a product people want. In percentage terms energy company profits don't stand out from the average.

While there are a small number of major energy companies with balanced upstream and downstream operations, there are a bunch of independent companies that specialize in parts of the industry. http://en.wikipedia.org/wiki/Category:Oil_companies_of_the_United_States Mitchell Energy figured out how to make hydraulic fracturing cheap enough to get natural gas out of shale, got bought by Devon who added horizontal drilling, and the supply of recoverable natural gas went way up. Other small independent oil companies applied similar technology to oil production in the Bakken Formation and now North Dakota is a major source of US oil.

Imagine if other industries had transparent pricing like the energy industry. Doctors and dentists offices would list the cost of services on a sign by the street. Consumers would price shop among competing suppliers and pay directly with their own money. What do you think that would do to healthcare costs?
1 year ago
1 year ago Link To Comment
How tiresome to take at face value the claims of potential lives saved and healthcare dollars saved. What a boatload of crap! EPA analyses should be lumped on the same pile of pseudo-scientific fecal matter as Michael Mann's corrupt hockey stick data.

How's about we calculate how many children will go without food because of the increases in gas prices their single mom has to pay to get to her second job?
1 year ago
1 year ago Link To Comment
In my middle class mid-peninsula neigborhood half way between SF and SJ, a three bedroom two bath house is listed at $1,220,000. You don't have the worst economy in the country to have prices like this. California is a sick and deranged place but the economy isn't bad.
1 year ago
1 year ago Link To Comment
That's because liberal California is feeding off the last of the wealth built up by previous decades of hard workers and other doers. High property values come from the laws liberals have passed to squeeze out the undesirables like minorities and working class people, and the real middle class.

Anyway, California can't hide its troubles much longer.
1 year ago
1 year ago Link To Comment
What about the domestic and global 'dumping' of monetary investments in the California based techonology boom that has since largely diversified and decentralized from California, leaving behind its grossly arbitarily inflated economic standard? Not to say they didn't have their problems before, but take a good look at their economic and inflation data charts from the boom era forward. They are a good case study for the rest of the nation of the consequences of circular, 'arbitrary' inflation and its eventual unsustainability.
1 year ago
1 year ago Link To Comment
"Sen. Kirsten Gillibrand (D-N.Y.), a member of the Environment and Public Works Committee, claimed the new regulations would have “practically no effect” on the cost of gas."

-------------------

Yeah right! Just like the huge savings from the 'Afordable' Health Care Act eh? Stupid cow! Is she jockeying for position with Sen Patty Murray for stupidest senator?
1 year ago
1 year ago Link To Comment
"EPA said in its announcement that seven dollars in healthcare will be saved for every buck spent to meet the new standards..."

This is in keeping with the Pelosi proclamation that every dollar doled out by the administration in welfare would result in a corresponding increase in favorable economic activity of a dollar and seventy cents.

If the administration used just negative economic proposals for all the nations business, why, I do declare, we would soon be out of debt and on the road to staggering prosperity. Why can't we see that? Huh?
1 year ago
1 year ago Link To Comment
I don't know if you're old enough to remember when doctors suggested to their severe respitory patients moving the the beautiful valley below the Sandia mountains of Albuquerque, NM in the 1950s to benefit from the therapeutic benefit of it 'clean' crisp air qualities. They did, from all over the country and especially the east and west and some from the grainbelt plains states.

Albuquerque benefited greatly economical from their moving there and the people benefited greatly from its clean air -- many after acculmating to the higher altitude ceased the need for constant medical care and other greatly reduced their need for medical care.

But that all chained in time. Albuquerques landscape (literally) begin to change with people bringing in non native plant materials raising pollen counts, But that not the worst part of the story! Albuquerque began to industrialize! Within a few short years, Albuquerque gained status in the top ten places in the United States with the most polluted air quality list and became federally and state monitored. Today, because of federal and state laws enacted, it is much better though, not anything as it once used to be back in the '50s.

On the other hand, I can agree that there is always a 'point' in which tips the scales of long term need for some legislations of clean air and water preservation. Buut again, it seems that human nature is to abuse freedoms and responsibilities -- thus, the need for enacting laws.

1 year ago
1 year ago Link To Comment
Hellllloooo! They WANT to drive up the price of gasoline. This is a feature not a bug with the new standards. We're living inside a poorly made remake of "1984". Enjoy it, you morons who voted this fascist back into office.
1 year ago
1 year ago Link To Comment
Dave, the problem, and it is a genuine problem, is that the morons probably will enjoy it. That's why they are called "morons".

1 year ago
1 year ago Link To Comment
Oh, I'm sure the true believers will, Yooper. It will give them something else to feel morally superior about. You can't reason with people who are, de facto, mentally ill. But, I'm hoping (though it is a faint hope, I'll grant you) that, at some point, a lot of the "Honey Boos Boos" and LIVs who voted for Barky out of complete cluelessness will stop and go, "Hey, what the hell! Why is gas $2/gallon higher!?!? We can't afford to go screw around at the beach today!" and gradually direct their anger at the guy who made it $2/gallon higher. Like I said, it's a faint hope, but it's about all I have left for this country.
1 year ago
1 year ago Link To Comment
As the gasoline price goes up Big Oil will have greater gross profits. The media will report “record profits” while conveniently leaving out the term “gross”. Obama will shout “it’s all the fault of the Big Oil companies and the Republicans refusal to levy more taxes on their obscene profits”. The morons will buy it.
1 year ago
1 year ago Link To Comment
Exxon Mobil, U.S. recorded a net profit of 41.1 billion for 2012

Conoco Phillips after spinning off its refining entities and restructuring, their net income was still $2.27 billion for 2012.

Chevron reported a net income of 26.2 billion for 2012
1 year ago
1 year ago Link To Comment
Not included is their market value or their cash reserves.
1 year ago
1 year ago Link To Comment
Well, Yooper, I did say it was a faint hope. :-)
1 year ago
1 year ago Link To Comment
Comparison of wholesale price of gasoline before taxes are added.

California: http://www.eia.gov/dnav/pet/pet_pri_refmg_dcu_SCA_m.htm

Texas: http://www.eia.gov/dnav/pet/pet_pri_refmg_dcu_STX_m.htm

Sure looks like more than a penny per gallon difference in price. Not sure how much low sulfur gasoline gasoline will cost, but the rise in diesel prices relative to gasoline suggests this will be expensive.

Add in the cost of taxes and the retail gasoline prices diverge further.
http://www.gasbuddy.com/gb_gastemperaturemap.aspx
Must really suck to have to buy gasoline in California.
1 year ago
1 year ago Link To Comment
Yep--diesel used to be much less expensive that gasoline. Now its more. Much more. And considering the Obama administrations track record on any kind of economic forcast I have a feeling this is going to be a lot worse.

And just what kind of modifications to the refineries will this take, and how long and how expensive is this going to be? I smell something bad and it isn't sulfur in the air.
1 year ago
1 year ago Link To Comment
And that high cost of diesel is hitting farmers, loggers and others in the primary industries hard. Then there are the increased transportation costs for trucks and trains running up the price of everything. But do the politicians take steps that would be helpful like cutting the taxes on diesel? Of course not. They might set up some clunky federal "emergency" program that takes a year to get going, by which time many who needed help have folded, and is nearly impossible to actually get help from.
1 year ago
1 year ago Link To Comment
In Kalifornia, we always hear about the high value of our crops. Too bad they don't include the punishing high cost of growing those crops. Having said that one way we have decreased the cost is to mechanize crop harvesting but there are still some crops that must be hand harvested. Mechanize the harvest, drive up the cost of fuel. Now sacramento would rather supply water to the delta to sustain "smelt" that are not indigenous to the area rather than to give it to farmers to grow their crops. Ever tried to grow something without water? This is the way we roll in Kalifornia. To democrats, there are only a limited number of areas that are important in Kalifornia: San Francisco, LA basin, San Diego. The rest can dry up and blow away. All the rest of the state is good for is to put high speed rail through it.
1 year ago
1 year ago Link To Comment
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