What  Can  We Make? “Retooling” for Renewables Transportation Fuels Regulations Update and Tutorial
Session Overview Regulations Tutorial <ul><li>U.S. Regulations current status </li></ul><ul><ul><li>Gasoline fuels </li></...
<ul><li>Summary and outlook </li></ul><ul><li>Implications for the future </li></ul>Session Overview  “What Can We Make?”
Regulations Tutorial Overview of Current Regulatory Environment
<ul><li>Rationale for regulations </li></ul><ul><ul><li>Concern over air quality and impact of increasing numbers of autom...
<ul><li>Enforcement </li></ul><ul><ul><li>Customer complaints and random sampling of fuels can result in litigation and im...
<ul><li>EPA and State Interface </li></ul><ul><ul><li>States must file a “State Implementation Plan” (SIP) with the EPA te...
<ul><li>Why states agree to Federal regulation </li></ul><ul><ul><li>States that do not meet compliance targets for air qu...
Current Regulations – U.S. Gasoline
<ul><li>1973 – ban on lead </li></ul><ul><ul><li>Initial regulations targeted elimination of TEL (tetraethyl lead)  </li><...
<ul><li>1989 Regs – Summer Volatility Standards </li></ul><ul><ul><li>Imposed to reduce ozone formation in summer  </li></...
<ul><li>Oxygenated fuels programs </li></ul><ul><ul><li>Begun by states to reduce formation of carbon monoxide in winter <...
Current Regulations – U.S. Gasoline – Pre and Post RFG Fuel Parameter Values (national basis)        Conventional Gasoline...
<ul><li>Dramatic reduction in sulfur in total pool </li></ul><ul><ul><li>From 1170 to 106 ppm in conventional by 2005 </li...
<ul><li>“ Tier 2 and Gasoline Sulfur Program” </li></ul><ul><ul><li>Required changes in vehicles for model year 2004 and l...
<ul><li>The “MSAT” Regulations </li></ul><ul><ul><li>Establishes an Exhaust Toxics Standard for conventional gasoline  </l...
<ul><li>Also known as the “anti backsliding” regulation </li></ul><ul><ul><li>Performance in 2000 was better than what the...
<ul><li>Followed a review of toxics in fuels as of mid decade </li></ul><ul><ul><li>Affects gasoline, passenger vehicles, ...
<ul><li>Other provisions of MSAT 2 </li></ul><ul><ul><li>Refiners/blenders can meet the standard by buying credits until 2...
<ul><li>Forecast impact </li></ul><ul><ul><li>Refiners/blenders in Pacific NW, AK and Rockies, others with higher than ave...
<ul><li>Early credits </li></ul><ul><ul><li>Early credits can be generated from 2007 through 2010 </li></ul></ul><ul><ul><...
<ul><li>20 years after the Clean Air Act </li></ul><ul><ul><li>Elimination of lead </li></ul></ul><ul><ul><li>The rise and...
Current Regulations – U.S. Diesel
<ul><li>Diesel fuel quality </li></ul><ul><ul><li>Has been regulated since 1993 with introduction of “LSD” (Low Sulfur Die...
Source: U. S. Environmental  Protection Agency (EPA) Distillate Regulations –  Regulated Categories (to date)
Source: U. S. Environmental  Protection Agency (EPA) Diesel Regulations – On Road Fuel Performance Targets
Source: U. S. Environmental  Protection Agency (EPA) Diesel Regulations – Off Road Fuel Performance Targets
“ NR” = Non Road  “LM”= Locomotive/Marine Source: U. S. Environmental  Protection Agency (EPA) Diesel Regulations Summary ...
<ul><li>Billions in hydrotreating investments </li></ul><ul><ul><li>Needed to produce initial LSD (Low Sulfur Diesel) and ...
<ul><li>Dramatic reductions in allowable sulfur content beginning with low sulfur diesel in 1993 </li></ul><ul><li>Reducti...
<ul><li>http://www.dieselnet.com </li></ul><ul><ul><li>Technical research library on diesel fuels emissions and control te...
Current Regulations – U.S. The Rise of Renewable Fuels
<ul><li>A new type of regulation </li></ul><ul><ul><li>Energy Independence and Security Act of 2007 </li></ul></ul><ul><ul...
<ul><li>Current regulations “RFS 1” </li></ul><ul><ul><li>“ Renewables” defined as produced from plant or animal products ...
<ul><li>“ RFS 1” impacts to date </li></ul><ul><ul><li>Consumer resistance in some regions due to lowered mileage </li></u...
<ul><li>“ RFS 2” rules proposed early 2009 </li></ul><ul><li>Resets the minimum gallon target from 5.4 billion in 2008 to ...
Source:  U.S. Environmental Protection Agency (EPA) RFS 2 – Volume Targets 2015-2023+ New Targets for “Nonconventional” Bi...
a – target not yet known; minimum 1 billion gals.  b – not yet determined  Source:  U.S. Environmental Protection Agency (...
<ul><li>Renewables producers must determine lifecycle GHG impact of their fuels </li></ul><ul><li>Lifecycle includes produ...
Source: NPRA Summary of Regulatory Impacts
Current Regulations The Rest of the World Euro V and Asia
<ul><li>Applies to vehicles sold and emissions standards applicable to European Union member states  </li></ul><ul><li>Ret...
European Fuels – Gasoline/Petrol “Euro” Standards
European Fuels – Diesel  “Euro” Standards
<ul><li>Current standard for 2009 is Euro 5 </li></ul><ul><li>Sulfur cap - gasoline </li></ul><ul><ul><li>From 500 ppm for...
<ul><li>http://www.dieselnet.com/standards/eu/fuel.php </li></ul>European Standards References
<ul><li>Began emissions regulations in 1983 </li></ul><ul><li>Imposes fuel economy standards on new vehicles </li></ul><ul...
Vapor pressure controls imposed during summer season Mandatory detergent additives Future reductions in sulfur and toxics ...
Currently not compliant with U.S. and Euro V Sulfur standards for on road fuel Source: Chinese Ministry of Environmental P...
<ul><li>Association of Southeast Asian Nations </li></ul><ul><li>Includes </li></ul><ul><ul><li>Brunei, Cambodia, Indonesi...
<ul><li>Targeting agreement on emissions reductions as a bloc by 2012 </li></ul><ul><li>Promoting common standards for veh...
On the Horizon Marine Bunker Fuels Changes MARPOL VI
<ul><li>Regulations developed by “MARPOL” </li></ul><ul><ul><li>Discharge into the air and water from marine vessels in th...
<ul><li>MARPOL </li></ul><ul><ul><li>International MARine POLlution Convention (document) created by the United Nations in...
<ul><li>Annexes I and II – applies to all subscribers </li></ul><ul><ul><li>Set agreed limits on discharges of oil/oily wa...
<ul><li>Annex VI – air pollution controls </li></ul><ul><ul><li>Covers emissions of SoX, NoX & VOC’s from marine vessels  ...
<ul><li>Limits already imposed on sulfur in many ports </li></ul><ul><li>Baltic Sea and North Sea established as Sulfur Em...
<ul><li>Pressure is mounting for a global reduction from 4.5% to 1.5% on all marine fuels </li></ul><ul><li>Proposed reduc...
<ul><li>EU fuels standards already more stringent than U.S. on sulfur; fewer restrictions on RVP and aromatics </li></ul><...
Summary and Outlook “What  Can  We Make?” Scenario for the Future
<ul><li>Continued pressure to remove sulfur from transportation fuels </li></ul><ul><ul><li>“ Nowhere to run, nowhere to h...
<ul><li>Low sulfur fuels </li></ul><ul><li>Low RVP blendstocks for oxygenate blending </li></ul><ul><li>Asphalt (considere...
<ul><li>Outcome of GHG regulations for motor fuels – ongoing status of the Sept 2009 proposal for carbon emissions limits ...
Presenter Bio Anne B. Keller <ul><li>President of Midstream Energy Group, consultancy and asset development company specia...
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What Can We Make Now Motor Fuels Regulations Update

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Update of Global Petroleum Based Transportation Fuel Quality Regulations Fall 2009

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What Can We Make Now Motor Fuels Regulations Update

  1. 1. What Can We Make? “Retooling” for Renewables Transportation Fuels Regulations Update and Tutorial
  2. 2. Session Overview Regulations Tutorial <ul><li>U.S. Regulations current status </li></ul><ul><ul><li>Gasoline fuels </li></ul></ul><ul><ul><li>Diesel fuels </li></ul></ul><ul><li>Rise of renewables – regulations recap </li></ul><ul><li>The rest of the world – Euro 5 and Asia </li></ul><ul><li>On the horizon – MARPOL (Bunker Fuel Regs) </li></ul>
  3. 3. <ul><li>Summary and outlook </li></ul><ul><li>Implications for the future </li></ul>Session Overview “What Can We Make?”
  4. 4. Regulations Tutorial Overview of Current Regulatory Environment
  5. 5. <ul><li>Rationale for regulations </li></ul><ul><ul><li>Concern over air quality and impact of increasing numbers of automobiles on public health </li></ul></ul><ul><ul><li>Legislation gives U.S. Environmental Protection Agency (EPA) authority to regulate emissions into the atmosphere </li></ul></ul><ul><ul><li>Fuels regulations are designed to improve air emissions from “mobile sources” (vehicles) </li></ul></ul><ul><li>Background information – regulatory framework </li></ul><ul><ul><li>Requires product registration for all gasoline, diesel and fuel additives </li></ul></ul><ul><ul><li>Applies to manufacturers (refiners), blenders and importers </li></ul></ul><ul><ul><li>EPA requires testing of some fuels and additives </li></ul></ul><ul><ul><li>EPA required certified detergent additives for gasoline </li></ul></ul>Current Regulations – U.S.
  6. 6. <ul><li>Enforcement </li></ul><ul><ul><li>Customer complaints and random sampling of fuels can result in litigation and imposition of fines </li></ul></ul><ul><ul><li>Fuel producer, blender, importer can be required to produce records showing compliance with the regulations </li></ul></ul><ul><ul><li>If out of compliance, responsible party can be fined up to $32,500 per day for each violation found </li></ul></ul>Current Regulations – U.S.
  7. 7. <ul><li>EPA and State Interface </li></ul><ul><ul><li>States must file a “State Implementation Plan” (SIP) with the EPA telling how they will meet Federal clean air standards for certain pollutants within a specified time </li></ul></ul><ul><ul><li>EPA sets a standard for the state or certain geographical areas within it that must meet specific targets </li></ul></ul><ul><ul><ul><li>Example “Severe Non-Attainment” area means an area subject to the most stringent regulations </li></ul></ul></ul><ul><ul><li>States can “opt” to meet more stringent standards than the EPA requires if they choose </li></ul></ul>Current Regulations – U.S. Federal vs. State
  8. 8. <ul><li>Why states agree to Federal regulation </li></ul><ul><ul><li>States that do not meet compliance targets for air quality by designated target dates are not eligible for Federal highway funding </li></ul></ul><ul><ul><li>Populations of large states like Texas would face significant costs to build and maintain roads without this money </li></ul></ul>Current Regulations – U.S. Penalties for Noncompliance
  9. 9. Current Regulations – U.S. Gasoline
  10. 10. <ul><li>1973 – ban on lead </li></ul><ul><ul><li>Initial regulations targeted elimination of TEL (tetraethyl lead) </li></ul></ul><ul><ul><li>Complete ban - 1995 </li></ul></ul><ul><li>Operations changes – round 1 </li></ul><ul><ul><li>Blend changes to replace octane loss </li></ul></ul><ul><ul><ul><li>Arco (BP) introduces “EC-1” with MTBE in California </li></ul></ul></ul><ul><ul><ul><li>Use of ethanol in U.S. PADDII (“Gasohol”) </li></ul></ul></ul><ul><ul><li>RVP not an issue until 1989 </li></ul></ul>Current Regulations – U.S. Gasoline – Lead Leaves the Pool
  11. 11. <ul><li>1989 Regs – Summer Volatility Standards </li></ul><ul><ul><li>Imposed to reduce ozone formation in summer </li></ul></ul><ul><ul><li>Phase I – 1989 to 1991 </li></ul></ul><ul><ul><li>Phase II – 1992 and later </li></ul></ul><ul><ul><li>Current ranges are 7.0 to 9.0 depending on the regulated area outside California </li></ul></ul><ul><ul><li>California standards are more stringent </li></ul></ul><ul><ul><li>Gasoline blended with ethanol can exceed these limits by 1.0 even though it reduces the benefit of lower RVP </li></ul></ul><ul><li>Operations changes </li></ul><ul><ul><li>Increases in low RVP blending components </li></ul></ul><ul><ul><li>Reduced ability to blend butane </li></ul></ul>Current Regulations – U.S. Gasoline – RVP Reductions
  12. 12. <ul><li>Oxygenated fuels programs </li></ul><ul><ul><li>Begun by states to reduce formation of carbon monoxide in winter </li></ul></ul><ul><ul><ul><li>Original RFG was “EC-1” introduced in California by Arco (BP) in the late 1980’s to replace leaded gasoline; contained MTBE </li></ul></ul></ul><ul><ul><li>Resulted in the first reformulated gasoline (RFG) standards at the federal level in 1995 </li></ul></ul><ul><ul><ul><li>Required in areas considered “severe” non-attainment for ozone </li></ul></ul></ul><ul><ul><ul><li>Other areas can “opt in” </li></ul></ul></ul><ul><li>RFG Phase I and II – 1995 to 2000 and 2000 to 2005 </li></ul><ul><ul><li>Established fuel performance standards </li></ul></ul><ul><ul><li>Required 2% to 2.7% oxygenate by weight </li></ul></ul><ul><ul><li>Initially allowed ethanol or MTBE to be used </li></ul></ul>Current Regulations – U.S. Gasoline – Oxygenates/RFG
  13. 13. Current Regulations – U.S. Gasoline – Pre and Post RFG Fuel Parameter Values (national basis)        Conventional Gasoline  Pre RFG Regs Gasohol  Oxyfuel (2.7 wt% oxygen) Phase I RFG  Phase II RFG 2005 Conventional Gasoline 2005   Range2  Avg  Avg  Avg  Avg Avg RVP3  6.9-15.1  9.7-S  8.7-S  7.2/8.1-S  6.9 S 8.3 - S (psi)  11.5-W  11.5-W  11.5-W  11.5-W  11.9 W 12.1 - W T50 (øF) 141-251  202  205  202  202 – S 181 - W 211 – S 200- W T90 (øF) 286-369  316  318  316  330 331 – S 324 - W Aromatics (vol%) 6.1-52.2  23.9  25.8  23.4  20.7 – S 19.2 - W 27.7 – S 24.7 - W Olefins (vol%) 0.4-29.9  8.7  8.5  8.2  11.9 – S 11.2 - W 12 – S 11.6 - W Benzene (vol%) 0.1-5.18  1.60  1.60  1.0 (1.3 max) 0.66 1.21 – S 1.15 - W Sulfur (ppm) 10-1170  305  313  302 (500 max) 71 – S 81 - W 106 – S 97 - W MTBE4 (vol%) 0.1-13.8  --  15  11 (7.8-15) 7.02 – S 6.63-W 1.66 – S 1.41 - W EtOH4 (vol%) 0.1-10.4  10  7.7  5.7 (4.3-10) 3.03 - S 2.86 – W 1.75 – S 2.19 – W
  14. 14. <ul><li>Dramatic reduction in sulfur in total pool </li></ul><ul><ul><li>From 1170 to 106 ppm in conventional by 2005 </li></ul></ul><ul><ul><li>From 313 in “oxyfuel” to 71-81 in RFG by 2005 </li></ul></ul><ul><li>RVP reductions </li></ul><ul><ul><li>From as high as 15.9 in conventional to 8.3 (summer) </li></ul></ul><ul><ul><li>From 8.7 for “oxyfuel” to 6.9 for Phase II RFG </li></ul></ul><ul><li>Reduction in benzene </li></ul><ul><ul><li>From as high as 5.18% to 1.21% in conventional and from 1.6% to .66% in RFG </li></ul></ul>Current Regulations – U.S. Gasoline – Changes with RFG
  15. 15. <ul><li>“ Tier 2 and Gasoline Sulfur Program” </li></ul><ul><ul><li>Required changes in vehicles for model year 2004 and later </li></ul></ul><ul><ul><li>Required another “ratchet” downward on sulfur in motor gasoline </li></ul></ul><ul><li>Major changes in sulfur limits for gasoline and diesel </li></ul><ul><ul><li>Per gallon cap of 80 ppm (gasoline) </li></ul></ul><ul><ul><li>Average of 30 ppm (gasoline) </li></ul></ul><ul><ul><li>Diesel regs discussed in next section </li></ul></ul><ul><li>“ Phase in” period began January 2004 </li></ul><ul><ul><li>Special rules for small refiners to extend transition period </li></ul></ul>Current Regulations – U.S. Tier 2 – More Sulfur Reductions
  16. 16. <ul><li>The “MSAT” Regulations </li></ul><ul><ul><li>Establishes an Exhaust Toxics Standard for conventional gasoline </li></ul></ul><ul><ul><li>Establishes a Total Toxics Standard for RFG </li></ul></ul><ul><li>Requires refiners to maintain at least their average 1998-2000 performance levels for 5 types of toxics considered probable human carcinogens </li></ul><ul><ul><li>Benzene </li></ul></ul><ul><ul><li>Formaldehyde </li></ul></ul><ul><ul><li>Acetaldehyde </li></ul></ul><ul><ul><li>1-3 Butadiene </li></ul></ul><ul><ul><li>POM </li></ul></ul>Current Regulations – U.S. Gasoline – Toxics
  17. 17. <ul><li>Also known as the “anti backsliding” regulation </li></ul><ul><ul><li>Performance in 2000 was better than what the current regulations actually required at the time </li></ul></ul><ul><ul><li>Set a baseline for future performance at the 1998-2000 level </li></ul></ul><ul><ul><li>Producers had to file their baselines and demonstrate they were at those levels or better (further reduction from baseline) in the future </li></ul></ul><ul><ul><li>Established a default baseline for refiners without a 1998-2000 history </li></ul></ul>Current Regulations – U.S. Gasoline – Toxics – MSAT 1
  18. 18. <ul><li>Followed a review of toxics in fuels as of mid decade </li></ul><ul><ul><li>Affects gasoline, passenger vehicles, and gas cans </li></ul></ul><ul><ul><li>Applies to both conventional and reformulated gasoline </li></ul></ul><ul><li>Sets a new annual average benzene content limit of .62% nationwide </li></ul><ul><li>New standard goes into effect 2011 </li></ul>Current Regulations – U.S. Gasoline Toxics – MSAT 2
  19. 19. <ul><li>Other provisions of MSAT 2 </li></ul><ul><ul><li>Refiners/blenders can meet the standard by buying credits until 2012 </li></ul></ul><ul><ul><li>After July 1, 2012, actual volume ceiling of 1.3% is effective for all </li></ul></ul><ul><li>California is exempt; its standards are already lower </li></ul><ul><li>Special compliance flexibility for approved small refiners </li></ul>Current Regulations – U.S. Gasoline Toxics – MSAT 2
  20. 20. <ul><li>Forecast impact </li></ul><ul><ul><li>Refiners/blenders in Pacific NW, AK and Rockies, others with higher than average benzene will have to make additional investments </li></ul></ul><ul><ul><li>Refiners/blenders who reduce benzene early, can generate and trade “early credits” if using specific technologies approved by EPA </li></ul></ul>Current Regulations – U.S. Gasoline Toxics – MSAT 2 Impact
  21. 21. <ul><li>Early credits </li></ul><ul><ul><li>Early credits can be generated from 2007 through 2010 </li></ul></ul><ul><ul><li>5 types of benzene control technologies qualify for early credit generation: </li></ul></ul><ul><ul><ul><li>Reformer feed treating (light naphtha splitting or isomerization) </li></ul></ul></ul><ul><ul><ul><li>Reformate treating (benzene extraction or benzene saturation) </li></ul></ul></ul><ul><ul><ul><li>Treating other streams not used as reformer feed (other naphtha) </li></ul></ul></ul><ul><ul><ul><li>Treating benzene streams other than reformate </li></ul></ul></ul><ul><ul><ul><li>Benzene alkylation </li></ul></ul></ul>Current Regulations – U.S. Gasoline Toxics MSAT 2 – Credits
  22. 22. <ul><li>20 years after the Clean Air Act </li></ul><ul><ul><li>Elimination of lead </li></ul></ul><ul><ul><li>The rise and fall of MTBE as a gasoline blendstock </li></ul></ul><ul><ul><li>Dramatic reductions in sulfur (from 1000+ ppm to virtually none today) </li></ul></ul><ul><ul><li>Major reductions in RVP ceilings </li></ul></ul><ul><ul><ul><li>To meet summer ozone standards </li></ul></ul></ul><ul><ul><ul><li>To accommodate mandated increases in ethanol blending </li></ul></ul></ul><ul><ul><li>Stringent caps on benzene </li></ul></ul>Summary Current Regulations – U.S. Gasoline
  23. 23. Current Regulations – U.S. Diesel
  24. 24. <ul><li>Diesel fuel quality </li></ul><ul><ul><li>Has been regulated since 1993 with introduction of “LSD” (Low Sulfur Diesel) </li></ul></ul><ul><ul><li>Highway sulfur diesel program finalized in 2001 </li></ul></ul><ul><ul><ul><li>Required transition from low sulfur diesel to ULSD (Ultra Low Sulfur Diesel) by 2006 for on road vehicles </li></ul></ul></ul><ul><ul><ul><li>New sulfur limit for ULSD is 15 ppm </li></ul></ul></ul><ul><ul><ul><li>Limit is measured at the point where the fuel is delivered to the consumer </li></ul></ul></ul><ul><ul><ul><li>Refiners upstream in the distribution system have to deliver at less than 15 ppm </li></ul></ul></ul><ul><ul><li>“ Non Road”, Locomotive, and Marine (NRLM) diesel sulfur content reduction targets are staged between 2007 and 2012 </li></ul></ul>Current Regulations – U.S. Diesel
  25. 25. Source: U. S. Environmental Protection Agency (EPA) Distillate Regulations – Regulated Categories (to date)
  26. 26. Source: U. S. Environmental Protection Agency (EPA) Diesel Regulations – On Road Fuel Performance Targets
  27. 27. Source: U. S. Environmental Protection Agency (EPA) Diesel Regulations – Off Road Fuel Performance Targets
  28. 28. “ NR” = Non Road “LM”= Locomotive/Marine Source: U. S. Environmental Protection Agency (EPA) Diesel Regulations Summary and Timeline
  29. 29. <ul><li>Billions in hydrotreating investments </li></ul><ul><ul><li>Needed to produce initial LSD (Low Sulfur Diesel) and remove gasoline sulfur (RFG program) in mid 1990’s </li></ul></ul><ul><ul><li>Significant investments since 2000 to accommodate Tier 2 sulfur reductions and ULSD (Ultra Low Sulfur Diesel) programs </li></ul></ul><ul><ul><li>Some new refineries will treat whole crude stream vs. intermediates </li></ul></ul><ul><li>Investment in testing & instrumentation </li></ul><ul><ul><li>ULSD standards require test methods able to detect very low concentrations of sulfur </li></ul></ul><ul><ul><li>Repeatability is important to document compliance with specs when shipments are transferred </li></ul></ul><ul><ul><li>New lab equipment needed at terminals; increase in transmix volumes due to “trail back” of sulfur in batch systems </li></ul></ul>Impact of Diesel Rules to Date
  30. 30. <ul><li>Dramatic reductions in allowable sulfur content beginning with low sulfur diesel in 1993 </li></ul><ul><li>Reduction in allowable sulfur in most engine fuels to 15 ppm by 2014 </li></ul><ul><li>Further restrictions on sulfur in residual fuels due to new limits in the marine markets (MARPOL VI standards) </li></ul><ul><li>Requirements for blendstocks to accommodate mandated use of biofuels (Renewables standards) </li></ul>Summary Current Regulations – U.S. Diesel/Distillate Fuels
  31. 31. <ul><li>http://www.dieselnet.com </li></ul><ul><ul><li>Technical research library on diesel fuels emissions and control technologies </li></ul></ul><ul><li>U.S. Environmental Protection Agency </li></ul><ul><ul><li>Office of Transportation & Air Quality (OTAQ) </li></ul></ul><ul><ul><li>http://www.epa.gov/otaq/ </li></ul></ul>Reference Diesel/Distillate Fuels
  32. 32. Current Regulations – U.S. The Rise of Renewable Fuels
  33. 33. <ul><li>A new type of regulation </li></ul><ul><ul><li>Energy Independence and Security Act of 2007 </li></ul></ul><ul><ul><ul><li>Gives EPA the power to revise and implement regulations to “ensure that gasoline sold in the United States contains a minimum volume of renewable fuel.” </li></ul></ul></ul><ul><ul><li>Departs from air quality mission - this goal NOT based on air quality issues </li></ul></ul><ul><ul><li>Designed to promote increased use of U.S. based renewable fuels </li></ul></ul>Renewable Fuels
  34. 34. <ul><li>Current regulations “RFS 1” </li></ul><ul><ul><li>“ Renewables” defined as produced from plant or animal products or wastes </li></ul></ul><ul><ul><li>Target total volume of renewables to be blended into gasoline </li></ul></ul><ul><ul><ul><li>From a minimum of 7.5 billion gallons by 2012 (489,000 BPD) to 36 billion gallons (2.3 million BPD) by 2022 </li></ul></ul></ul><ul><ul><ul><li>2012 target has been met; 2008 volume was 9 billion gallons </li></ul></ul></ul><ul><ul><ul><li>Target post 2012 adjusted depending on gasoline demand – if gasoline demand actually peaked in 2007 the target could potentially fall </li></ul></ul></ul><ul><ul><li>Refiners “obligated” to either blend the required volume or buy “RIN’s” (Renewable ID Numbers) to make up the difference </li></ul></ul><ul><ul><li>Refiners must file reports demonstrating compliance on a corporate level </li></ul></ul><ul><ul><li>Small refiners exempt through 2010 </li></ul></ul><ul><ul><li>Alaska and Hawaii exempt indefinitely </li></ul></ul>Renewable Fuels – “RFS 1”
  35. 35. <ul><li>“ RFS 1” impacts to date </li></ul><ul><ul><li>Consumer resistance in some regions due to lowered mileage </li></ul></ul><ul><ul><li>Unsufficient consideration given to total lifecycle emissions of renewable production </li></ul></ul><ul><ul><li>High cost of RIN’s has changed the relationship between refiners and third party blenders </li></ul></ul><ul><ul><li>Issues over difficulty with biodiesel “gelling” in cooler regions </li></ul></ul><ul><ul><li>2009 “standard” is 10.21% - this exceeds the warranty tolerance for many automobiles </li></ul></ul>Renewable Fuels – “RFS 1”
  36. 36. <ul><li>“ RFS 2” rules proposed early 2009 </li></ul><ul><li>Resets the minimum gallon target from 5.4 billion in 2008 to 9.0 billion (vs. previous target of 7.5 billion by 2012) </li></ul><ul><li>Adds mandated renewables requirement for diesel (both on and off-road) </li></ul><ul><li>Sets new, specific volume standards for: </li></ul><ul><ul><li>Cellulosic biofuels </li></ul></ul><ul><ul><li>Biomass based diesel </li></ul></ul><ul><ul><li>Advanced biofuel </li></ul></ul><ul><ul><li>Total Renewables </li></ul></ul>Renewable Fuels – “RFS 2”
  37. 37. Source: U.S. Environmental Protection Agency (EPA) RFS 2 – Volume Targets 2015-2023+ New Targets for “Nonconventional” Biofuels Renewable Fuel Volume Requirements for RFS2 (billion gallons) Year Cellulosic biofuel requirement Biomass-based diesel requirement Advanced biofuel requirement Total renewable fuel requirement 2008 n/a n/a n/a 9.0 2009 n/a 0.5 0.6 11.1 2010 0.1 0.65 0.95 12.95 2011 0.25 0.80 1.35 13.95 2012 0.5 1.0 2.0 15.2 2013 1.0 a 2.75 16.55 2014 1.75 a 3.75 18.15 2015 3.0 a 5.5 20.5
  38. 38. a – target not yet known; minimum 1 billion gals. b – not yet determined Source: U.S. Environmental Protection Agency (EPA) RFS 2 – Volume Targets 2008-2015 New Targets for “Nonconventional” Biofuels Renewable Fuel Volume Requirements for RFS2 (billion gallons) Year Cellulosic biofuel requirement Biomass-based diesel requirement Advanced biofuel requirement Total renewable fuel requirement 2016 4.25 a 7.25 22.25 2017 5.5 a 9.0 24.0 2018 7.0 a 11.0 26.0 2019 8.5 a 13.0 28.0 2020 10.5 a 15.0 30.0 2021 13.5 a 18.0 33.0 2022 16.0 a 21.0 36.0 2023 + b b b b
  39. 39. <ul><li>Renewables producers must determine lifecycle GHG impact of their fuels </li></ul><ul><li>Lifecycle includes production and transport of feedstock used in fuels production </li></ul><ul><li>Renewables must demonstrate a specified reduction in lifecycle GHG as compared to a 2005 baseline for the diesel or gasoline displaced to qualify for the “quota” in the regulations </li></ul><ul><li>Ethanol plants in operation before December 2007 are exempt from this requirement </li></ul>“ RFS 2” Introduction of Lifecycle GHG Standards
  40. 40. Source: NPRA Summary of Regulatory Impacts
  41. 41. Current Regulations The Rest of the World Euro V and Asia
  42. 42. <ul><li>Applies to vehicles sold and emissions standards applicable to European Union member states </li></ul><ul><li>Retrofits not required for older vehicles but new ones must comply </li></ul><ul><li>“ Euro” standards are a series of European Union directives </li></ul><ul><li>Standards have grown progressively more restrictive </li></ul><ul><li>Other countries (non member European states, Australia, parts of Asia) are harmonizing their requirements with these </li></ul>European Fuels Specifications “Euro” Standards
  43. 43. European Fuels – Gasoline/Petrol “Euro” Standards
  44. 44. European Fuels – Diesel “Euro” Standards
  45. 45. <ul><li>Current standard for 2009 is Euro 5 </li></ul><ul><li>Sulfur cap - gasoline </li></ul><ul><ul><li>From 500 ppm for “Euro 2” fuels to 10 ppm for “Euro 5” </li></ul></ul><ul><li>Sulfur cap – diesel </li></ul><ul><ul><li>From 500 ppm for “Euro 2” to 10 ppm for “Euro 5” </li></ul></ul>European Fuels – Sulfur “Euro” Standards
  46. 46. <ul><li>http://www.dieselnet.com/standards/eu/fuel.php </li></ul>European Standards References
  47. 47. <ul><li>Began emissions regulations in 1983 </li></ul><ul><li>Imposes fuel economy standards on new vehicles </li></ul><ul><li>Major fuel types addressed </li></ul><ul><ul><li>Gasoline </li></ul></ul><ul><ul><li>Diesel </li></ul></ul><ul><ul><li>Biodiesel (B100) </li></ul></ul><ul><ul><li>Compressed natural gas </li></ul></ul><ul><ul><li>Methanol (M15 and M85) </li></ul></ul><ul><ul><li>LPG </li></ul></ul>Asia - China Fuels Regulations Ministry of Environmental Protection
  48. 48. Vapor pressure controls imposed during summer season Mandatory detergent additives Future reductions in sulfur and toxics Source: Chinese Ministry of Environmental Protection Presentation Asia China - Gasoline
  49. 49. Currently not compliant with U.S. and Euro V Sulfur standards for on road fuel Source: Chinese Ministry of Environmental Protection Presentation Asia China - Diesel
  50. 50. <ul><li>Association of Southeast Asian Nations </li></ul><ul><li>Includes </li></ul><ul><ul><li>Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Viet Nam </li></ul></ul><ul><li>Promotes increase in interregional and international trade, economic growth </li></ul><ul><li>Concerned about GHG, sustainability, and increasing use of biofuels </li></ul>Other Asia ASEAN
  51. 51. <ul><li>Targeting agreement on emissions reductions as a bloc by 2012 </li></ul><ul><li>Promoting common standards for vehicles </li></ul><ul><li>Hydrocarbon fuels standards likely to track Euro V </li></ul><ul><li>Export refineries (Singapore) already in compliance with CARB for components exported to U.S. West Coast </li></ul><ul><li>Concerned about GHG, sustainability, and increasing use of biofuels </li></ul>Other Asia ASEAN – Fuels Issues
  52. 52. On the Horizon Marine Bunker Fuels Changes MARPOL VI
  53. 53. <ul><li>Regulations developed by “MARPOL” </li></ul><ul><ul><li>Discharge into the air and water from marine vessels in the open seas subject to agreements made by and between members party to the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78) </li></ul></ul><ul><ul><li>All parties to this “convention” must agreed to be bound by Annexes I and II; others are optional </li></ul></ul><ul><ul><li>Affects pollution liability insurance </li></ul></ul><ul><ul><li>Violators subject to inspection and fines </li></ul></ul>Diesel Regulations Marine Fuels
  54. 54. <ul><li>MARPOL </li></ul><ul><ul><li>International MARine POLlution Convention (document) created by the United Nations in 1973 </li></ul></ul><ul><ul><li>Subscribers to the MARPOL rules are members of the International Marine Organization (IMO) </li></ul></ul><ul><ul><li>IMO is a UN agency that oversees the shipping industry </li></ul></ul><ul><ul><li>Has 167 international government members </li></ul></ul>Diesel Regulations Marine Fuels – “MARPOL”
  55. 55. <ul><li>Annexes I and II – applies to all subscribers </li></ul><ul><ul><li>Set agreed limits on discharges of oil/oily waste </li></ul></ul><ul><ul><li>Contains standards for double hull tankers </li></ul></ul><ul><ul><li>Forbid discharges of chemicals dangerous to marine life </li></ul></ul><ul><ul><li>Governs discharges of “noxious liquid substances” in Baltic and Black Seas </li></ul></ul><ul><li>Annexes III through VI – optional </li></ul><ul><ul><li>Annex VI governs air pollution from ships at sea </li></ul></ul>Diesel Regulations Marine Bunkers MARPOL VI
  56. 56. <ul><li>Annex VI – air pollution controls </li></ul><ul><ul><li>Covers emissions of SoX, NoX & VOC’s from marine vessels </li></ul></ul><ul><ul><li>Applies to fixed and floating drilling rigs and vessels above 400 tons </li></ul></ul><ul><ul><li>Provides for issuance of an International Air Pollution Prevention Certificate to vessels and rigs inspected and in compliance </li></ul></ul><ul><ul><li>NoX controls on engines installed or overhauled after January 2000 </li></ul></ul><ul><ul><li>Limits of 4.5% sulfur in marine bunkers on the seas and 1.5% in designated SoX control areas </li></ul></ul>Diesel Regulations Marine Bunkers MARPOL VI
  57. 57. <ul><li>Limits already imposed on sulfur in many ports </li></ul><ul><li>Baltic Sea and North Sea established as Sulfur Emission Control Areas (SECA’s) with 1.5% limits </li></ul><ul><li>U.S. EPA recently imposed a 1.5% limit on marine fuels within 200 miles of U.S. coasts </li></ul>Diesel Regulations Marine Bunkers MARPOL VI – Issues to Date
  58. 58. <ul><li>Pressure is mounting for a global reduction from 4.5% to 1.5% on all marine fuels </li></ul><ul><li>Proposed reduction from 1.5% to .5% in the Baltic Sea and North Sea SECA’s </li></ul><ul><li>Proposed outright ban on marine bunkers </li></ul><ul><li>New regulations on particulates and GHG’s </li></ul>Diesel Regulations Marine Bunkers MARPOL VI – On the Horizon
  59. 59. <ul><li>EU fuels standards already more stringent than U.S. on sulfur; fewer restrictions on RVP and aromatics </li></ul><ul><li>Export refiners already comply with U.S. standards for components coming here due to certification and registration requirements </li></ul><ul><li>Chinese standards following Europe – sulfur too high for export to U.S. </li></ul><ul><li>Middle East exporters targeting Euro V specs </li></ul><ul><li>Still have flexibility to market “non compliant” components outside these boundaries </li></ul><ul><li>Latin, Central, South America are still relatively “unregulated” markets </li></ul><ul><li>All consuming markets interested in renewables </li></ul>Asia, Europe, Other Current Regulations - Summary
  60. 60. Summary and Outlook “What Can We Make?” Scenario for the Future
  61. 61. <ul><li>Continued pressure to remove sulfur from transportation fuels </li></ul><ul><ul><li>“ Nowhere to run, nowhere to hide” in fuels pool </li></ul></ul><ul><ul><li>Coke, asphalt last refuge for sulfur </li></ul></ul><ul><ul><li>Need for low sulfur kerosene in biodiesel blends </li></ul></ul><ul><li>Increased octane giveaway potential due to need for low RVP “BOB’s” (blendstocks for oxygenate blending) to accommodate increased ethanol use </li></ul><ul><li>Replacing energy lost from increased use of ethanol </li></ul><ul><li>Outcome of “debate” over automobile warranties as ethanol content increases </li></ul>Facing the Future – Issues
  62. 62. <ul><li>Low sulfur fuels </li></ul><ul><li>Low RVP blendstocks for oxygenate blending </li></ul><ul><li>Asphalt (considered a CO2 reduction since it’s not transformed in refining) </li></ul><ul><li>Heating oil (higher sulfur still allowed for now) </li></ul><ul><li>Low sulfur distillate </li></ul>Overall Outlook What Can We Make?
  63. 63. <ul><li>Outcome of GHG regulations for motor fuels – ongoing status of the Sept 2009 proposal for carbon emissions limits </li></ul><ul><li>Whether EPA will continue to require increasing volumes of renewables regardless of overall gasoline/diesel market growth </li></ul><ul><li>Pushback from consumers and car makers on requirements for higher ethanol volumes above warranted levels </li></ul><ul><li>Adoption of programs to increase use of E85 in regions with high ethanol production </li></ul>Overall Outlook What to Watch
  64. 64. Presenter Bio Anne B. Keller <ul><li>President of Midstream Energy Group, consultancy and asset development company specializing in transportation, processing, and distribution of natural gas, gas liquids, and transportation fuels </li></ul><ul><li>20+ years’ experience with Conoco and DuPont in finance and operations support for refining, LPG, and petrochemical feedstock logistics </li></ul><ul><li>Managed fuels reporting software service for Pace/Jacobs Consultancy to handle compliance with gasoline regulations </li></ul><ul><li>Developed and deployed new software system to handle reporting and “tracking” of movements of ULSD from refinery gate to customer </li></ul>Midstream Energy Group, Inc. 12 Greenway Plaza, Suite 1100 Houston, TX 77046 Office: 713.425.4932 Cell: 713.582.2579 Email: abk@midstreamenergygroup.com

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