EPA to Propose Ozone Standard of 65-70 ppb, High End of Expectation

Source: Kevin Adler, OPIS • Posted: Monday, December 1, 2014

EPA announced this morning that it is proposing to reduce the National Ambient Air Quality Standard (NAAQS) for ozone to a range of 65 to 70 parts per billion

(ppb) from the current standard of 75 ppb. EPA also said that it would seek comment on reducing the NAAQS to as low as 60 ppb.

The long-anticipated announcement would leave the standard on the higher end of the expected range, as the Clean Air Scientific Advisory Committee (CASAC) recommended to EPA earlier this year that the new NAAQS be 60-70 ppb. EPA has been under a court order to either propose a new standard or retain the current standard by Dec. 1, 2014.

The impact on the fuels industry could be significant, depending how many new areas are found to not be in compliance with a tougher standard. At 60 ppb, OPIS reported earlier this year that 46 of the 48 contiguous states would have some non-compliance areas. Fewer areas would be affected if the standard is 65 ppb or

70 ppb, but industry representatives said the impact would still be immense.

“This regulation promises to be the most expensive in U.S. history, while providing little benefit to the environment and consumers,” said American Fuel & Petrochemical Manufacturers President Charles Drevna in a press statement.

“Studies have shown that, if enacted, the standard could lead to millions of jobs lost and could cost U.S. business hundreds of billions of dollars every year, yet this administration doesn’t seem to care.

“In addition, today’s ozone proposal is almost comical, given the Administration’s extensive public focus on reducing greenhouse gas emissions, because any process to achieve such stringent ozone requirements will require more energy and increase greenhouse emissions, in direct conflict with other EPA regulations,” he continued.

RFG and low-RVP gasoline are two of the common transportation strategies that have been implemented to reduce ozone concentrations. States could require expanded supply of RFG, low-RVP gasoline or even lower-RVP gasoline in the summer, when ozone concentrations typically reach their peak.

For the biofuels industry, the impact of a lower ozone standard is hard to determine, but it’s potentially negative. On the one hand, the ozone standard would not affect the biofuels blending mandate of the Renewable Fuel Standard (RFS). It might create more non-attainment areas that would have to use RFG, but the burden would fall on refiners to supply the right blendstock; most likely, ethanol blending would continue as it has previously.

However, there’s a potential for the impact on biofuels to come in more subtle ways. E15 is one example.

E15 does not receive the 1-lb. psi RVP summertime waiver that is available to blends of 9% to 10% ethanol. If that waiver is not available, the new ozone standard could make it more difficult to sell E15 blends in non-attainment areas because refiners would be reluctant to produce a special ultra-low-RVP blendstock.

One possible solution could be to take ethanol content even higher. Above 20%, the RVP of ethanol-gasoline blends begins to fall, and it reaches the level of neat gasoline at about 30% ethanol. In that sense, an E30 blend would appear to be an attractive solution — although coming with its own unresolved issues. In short, E30 is not a near-term answer, either.

Regardless of the impact in the future, it’s important to note that nothing will happen quickly. EPA stated that its goal is to finalize the rule by Oct. 1, 2015. If that goal is met, people familiar with rulemaking procedures say that the agency would need one to two years to announce the non-attainment areas, and then those areas would be given two more years to develop their plans for compliance. Then, those plans would be implemented over many years.

To provide some perspective, the 75-ppb ozone standard, which was set in 2008, has not yet been fully implemented in all non-attainment areas, pointed out Howard Feldman, American Petroleum Institute’s director of regulatory and scientific affairs, in a press briefing prior to EPA’s announcement.