EPA Issues Potentially Costliest Regulations in History

The Environmental Protection Agency issued more stringent air quality standards for ground-level ozone, likely affecting the retail motor fuels market.

October 02, 2015

WASHINGTON – On Thursday, the U.S. Environmental Protection Agency (EPA) issued more stringent air quality standards for ground-level ozone, a move that will likely have a significant negative effect on the retail motor fuels market.

Under today’s final rule, the ozone National Ambient Air Quality Standards (NAAQS) will be lowered to 70 parts per billion (ppb), down from the current standard of 75 ppb. With the lower standard, more areas of the country will likely be designated as “nonattainment” areas, triggering federal and state regulations directly affecting the retail fuel marketing industry, as described further below.

Ground-level ozone, often referred to as smog, is regulated by the EPA under the Clean Air Act (CAA). To protect public health and welfare, the CAA requires the EPA to periodically review and establish NAAQS for six air pollutants, including ground-level ozone. The current ozone NAAQS was established in 2008 and is set at 75 ppb.

Last December, the EPA proposed to lower the standard to a range between 65 and 70 ppb. The agency also solicited comments on setting the standard as low as 60 ppb. NACS submitted comments on the proposed standard in March of this year. In its comments, NACS highlighted the potential negative consequences that would result from a more stringent ozone NAAQS.

Specifically, NACS stated in the submitted comments that the proposal would result in:

  • The introduction of reformulated gasoline (RFG) in what are now conventional gasoline areas
  • More states and/or localities imposing lower Reid Vapor Pressure (RVP) requirements
  • Certain states retaining costly and unnecessary “Stage II” vapor recovery requirements.

The combination of these actions would lead to a balkanized fuels market and higher retail fuel prices for consumers.

Moving forward, the EPA will make attainment/nonattainment designations under the updated standard by late 2017. A state or area designated as nonattainment under the standard would be required to develop a State Implementation Plan to demonstrate the steps it will take to attain (i.e. become compliant with) the updated standard. As described in the NACS comment letter to the EPA, some states may choose to include the introduction of specialized gasolines as part of their attainment plans. The nonattainment areas will have between three and 20 years to reach attainment, depending on the severity of the nonattainment designation.

The new ozone NAAQS will be very controversial in Congress. Republicans have been highly critical of a lower ozone standard, stating that nonattainment designations under the standard could negatively impact economic development in designated nonattainment areas.

Anticipating the release of the final rule, the Senate Environment and Public Works Committee held a hearing this week on the EPA’s clean air policies, including the updated ozone standard. Chairman Jim Inhofe (R-OK) stated that a more stringent ozone standard will be one of the costliest regulations in history and have detrimental effects on the economy. While Republicans may seek to block the new ozone standard through legislation, such efforts would most likely face a presidential veto. 

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