“Job-Killing Regulations” at EPA Made US a Net Fuel Exporter

January 4th, 2012 by Susan Kraemer

Jordan Weissmann at the Atlantic has a fascinating piece on just how it is that the gas-guzzling US has just become a net fuel exporter, even though our oil production peaked in the 1960s .

As you have probably read, the US has just become a net fuel exporter – with refined products, such as diesel, gasoline, and jet fuel made from crude oil now our #1 export.

Of course we still import 9 million barrels of crude a day from the oil producing countries, but our domestic gas use is down at a seven year low. More efficient vehicles, lack of jobs to commute to, baby boomers retiring, and new drivers being more carbon-conscious accounts for the reduction.

But Weissmann digs a little deeper.

Within that bigger picture, though, there’s a smaller and instructive story. It’s about how those meddling government regulators at the Environmental Protection Agency may have helped make U.S. refiners more competitive in the global marketplace. How? By forcing them to create cleaner burning diesel fuel.

THREE CHEERS FOR ESOTERIC DIESEL REGULATION!

If you look at the Energy Information Administration’s breakdown of the country’s petroleum of product exports, one category should jump out at you: distillate fuel oil. That’s the technical term for what we all know as diesel. In October of 2011, U.S. refiners shipped out about 2.7 million barrels a day of finished petroleum products. Forty percent of those barrels contained diesel fuel. Gasoline only accounted for 19 percent.

After signing the Kyoto Protocol and instituting climate regulations requiring low-carbon fuels, ultra low sulfur diesel has become the fuel of choice in the EU. This is a cleaner form of diesel than the US has long used; with lower greenhouse gases.

And oil refineries in the Gulf of Mexico have invested heavily in the sophisticated technology necessary to create that kind of clean diesel fuel.

So the Invisible Hand of the Market led the Gulf refiners to retool in order to export this ultra low-sulfur diesel to meet the demand, right?

Um, no. It was those “jackbooted thugs at the EPA” with that “job-killing agenda” of government regulations.

Not until the EPA rule reducing sulfur in diesel oil by 97% went into effect in 2006, were refineries actually forced to begin producing more of the cleaner diesel. Refiners spent billions updating their plants with the necessary equipment, adding roughly 37% more desulfurization capacity. The result?

Now we make what the climate legislation in the EU requires. So our exports are up. Two-thirds of the diesel exports accounting for the increases were the variety known as “ultra low sulfur.”

So it was the EPA that forced US refiners to produce a commodity that the rest of the more carbon-constrained world market actually wants and needs.

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Tags: EPA, jack-booted thugs, job killing regulations, net fuel exporter, ultra low sulfur diesel, US

About the Author

Susan Kraemer writes at CleanTechnica, CSP-Today, PV-Insider , SmartGridUpdate, and GreenProphet. She has also been published at Ecoseed, NRDC OnEarth, MatterNetwork, Celsius, EnergyNow, and Scientific American. As a former serial entrepreneur in product design, Susan brings an innovator's perspective on inventing a carbon-constrained civilization: If necessity is the mother of invention, solving climate change is the mother of all necessities! As a lover of history and sci-fi, she enjoys chronicling the strange future we are creating in these interesting times. Follow Susan on Twitter @dotcommodity.

Rich

Touche on the origination of the laws.

The core point was the regulations being written today. The current issue of the Economist has cover story on the adverse affects of regulatory excess in the US.
http://www.richardasun.com/ Richard A. Sun, CFA

Much of the concern over EPA actions is focused on the current Obama administration appointees and their actions, including aggressive writing of regulations for laws passed under prior administrations. Implicitly the writer is approving Bush era laws. The effect of the current round of excessive regulation has not yet been felt except in the uncertainty they have created. They are far more likely to be job killers, especially given the almost total absence of private sector knowledge and experience in Obama appointees.
- http://muckrack.com/dotcommodity Susan Kraemer
  
  Actually, the laws originated in the Clinton administration. Clinton’s EPA head Carol Browner was quite cheesed off that the Bush admin took credit for them, once the good effect was noticed, later.
  
  http://abcnews.go.com/US/story?id=94626&page=1#.TwYEVpis9zQ
  
  “W A S H I N G T O N, Dec. 21
  The Clinton administration has approved new regulations that are expected to cut air pollution from heavy-duty trucks and buses by more than 90 percent over the next decade.
  
  Attacking one of the major sources of dirty air, the federal standards will require new large trucks and buses to meet stringent tailpipe emission limits and direct refiners to produce virtually sulfur-free diesel fuel.
  
  The rules were announced today by the White House and the Environmental Protection Agency as part of a flurry of regulations being churned out in the last days of the Clinton administration and crafted to head off challenge by an incoming Bush administration.
http://pulse.yahoo.com/_6NIXVPTV7EN5RVGURTKNLW2W4M jackass

I would disagree with most of the conclusions drawn by the author. Her use of the generic term “fuels” is also a bit disingenuous. It can mean lots of things.

First, the US is a net importer of gasoline, diesel and jet fuel. The US is a net exporter of natural gas and coal. Additionally, much of the natural gas produced in the US goes to plastics, hydrogen, and ammonia production. Much of which is also exported.

Second, while it’s true EPA regulations have forced refineries to reduce their emissions, and become more efficient with production rates from existing facilities, these regulations have not reduced costs. Instead, draconian EPA regulations have made the cost of building new refinery capacity prohibitive. So the only option left for refiners is to increase output from existing facilities.

The issue of US refiners delay in switching to ultra-low sulfur diesel fuel had very little to do with emissions. Instead, it had to do with the reliability of diesel engine fuel injectors. The older injectors relied on a small amount of sulfur in the fuel to provide lubrication. Until US engine manufacturers made ULS-compatible fuel injectors available, there was no market for ULS diesel fuel.

Lastly, if the author was up-to-date on automotive engine technology, she would understand that the future of automotive engines is not diesel. It’s highly-boosted, downsized, DI gasoline engines. These engines are as efficient as diesels, with lower costs and lower emissions.
- http://muckrack.com/dotcommodity Susan Kraemer
  
  Thanks, jackass.
  
  I did not say that EPA rules have reduced refiners costs. Reducing costs for refiners is not the purpose of EPA regulation, in any case. We need an EPA to preserve a livable environment, not to do the R&D that lowers costs for industries.
  
  I don’t think which tech is the future of auto engines matters to this story about one environmental rule. But if asked about my future auto tech favorite: I personally prefer an EV I can run off my roof. But my son is with you on direct injection, loves VWs GTI and agrees with you on the lower emissions.
David

Logic is based on proof and Inference. I’d be wary saying someones Logic is “Bad”, at best it makes you look bad and at worst it makes you sound pedantic. Case in point..”had the regulations not existed in the EU/US our exports would still be up due to reduced demand while saving the regulation upgrade costs.” Not True.

Our Exports would not be up because the EU Regulations prevent High-sulfur diesel imports. So even though USA Regs were implemented before the EU, the result is the opportunity for US Distillers to export into the EU. EU Distillers now have to compete with US Distillers who’ve amortized the investments, and find the financing from EU banks to implement the changes for their domestic market only. The US advantage is likely to exist for some time.

The EPAs requirement for BAT acts as a Market force by introducing competition into a Market otherwise void of it. Requiring BAT kills off the weaker players, while creating new opportunities for new ideas and new companies to implement the requirements, while reducing health costs for all.
The EPAs requirement of BAT for Diesel created market(s) for Diesel cars in the USA, a domestic fuel market with more fuel efficient cars and trucks that directly resulted in excess distillation capacity and hence Diesel exports to the EU & World market.

This article states that it is “Climate Legislation” that the new rules are based on, but the original cited article states “Many governments, particularly in Europe, are requiring varieties with lower levels of sulfer(sic), a major air pollutant that causes respiratory problems and contributes to acid rain.”- The EU version of Clean Air acts and this is more in line of what I know to be the driver of the EU Fuel regulations.

Either Way the inference of the articles is regulations lead to better outcomes for us all. I’d like a few more statistics myself but the inference of this article is correct.

Take Care and have a great 2012
- http://muckrack.com/dotcommodity Susan Kraemer
  
  David, your reply to Aku below came in above it.
  
  But, replying to your comment to me, yeah, I am guilty of introducing my own thoughts on the cause for the EU interest based on the ECE regulations greenhouse gases of cars and results in them being much lower in ghgs than US cars.
  
  I chopped a reference to the immediate pollution like acid rain and particulate matter that the Atlantic article points out. (I battle long windedness: our editor says “you don’t need to write a dissertation!”)
  
  The new fuel contains 15 parts per million of sulfur, down from the old 500 parts per million, thanks to changes in the refining process.
Akumaryuu

I love diesel as much as the next guy and can’t wait for more cars in the US to have diesel options. I’m a little surprised by this article though. You’re sort of arguing that a self fulfilling regulation circle created jobs. I certainly want low sulfur diesel because it’s better but if the EU had not created those regulations requiring low sulfur then we would have happily continued to export the diesel we were making before the EU/US regulations went into effect without, as you pointed out, spending billions to update US refining capabilities to produce low sulfur fuel. That means that not only would our exports be high but those refiners would have saved all that money…. We’re exporting more because our consumption is down and we create a compliant product but had the regulations not existed in the EU/US our exports would still be up due to reduced demand while saving the regulation upgrade costs. I’m not arguing that low sulfur is bad or regulation is bad just that your logic is bad.