New EPA Tier 3 Regulations Threaten to Drive Up Gas Prices

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.”