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The Obama administration announced strict new vehicle fuel-efficiency standards Tuesday, requiring that the U.S. auto fleet average 54.5 miles per gallon by 2025, an uncontroversial move that, unlike other administration energy policies, was endorsed by industry and environmentalists alike.

The new rules, announced by Transportation Secretary Ray LaHood and Environmental Protection Agency administrator Lisa P. Jackson, expand on existing standards requiring American-made cars and light trucks to average 34.5 mpg by 2016. They will significantly cut U.S. oil consumption and greenhouse gas emissions by the time they are fully implemented, according to the EPA.

“These fuel standards represent the single most important step we’ve ever taken to reduce our dependence on foreign oil,” President Obama said in a statement.

This second phase of standards, which apply to model years 2017 to 2025, will double the efficiency of the U.S. fleet compared with vehicles manufactured in 2008.

Tuesday’s announcement marked the culmination of a compromise the White House forged between the auto industry, environmentalists, labor unions and the state of California.

California enacted its own greenhouse gas emissions standards several years ago, and it battled the auto industry in court until the administration brokered a deal between all the parties in May 2009.

“Customers want higher fuel efficiency in their cars and trucks, and GM is going to give it to them,” said Greg Martin, General Motors’ executive director for communications. “We expect the rules to be tough, but we have a strong history of innovation, and we’ll do our best to meet them.”

Phyllis Cuttino, director of the Pew Environment Group’s clean-energy program, said the fact that so many people now accept the idea of greater fuel efficiency does not lessen the rules’ “historic” importance.

“We’ve just come a long way in five years,” Cuttino said, noting that in 2007 lawmakers debated whether the U.S. fleet could average 30 mpg by 2025. “This gives me hope for energy policy in this country.”

Auto dealers warned Tuesday that making the technical changes required to achieve greater efficiency would increase the average price of a vehicle by $3,000 by the time the rules are fully implemented.

“This increase shuts almost 7 million people out of the new-car market entirely and prevents many millions more from being able to afford new vehicles that meet their needs,” Bill Underriner, who chairs the National Automobile Dealers Association, said in a statement.

While the sales of some electric cars have failed to meet industry expectations — GM initially predicted its electric Chevy Volt would sell 45,000 units in 2012, and it now projects it will reach sales of 20,000 Volts by the end of next month — the overall efficiency of the American auto fleet continues to rise.

Edmunds.com senior analyst Jessica Caldwell said buyers have begun to place fuel efficiency “at the top” of their shopping priorities, regardless of the size of the car they’re buying. But she cautioned that it remains to be seen whether sales of electric vehicles or hybrids — which make up just 3 percent of the U.S. auto market — will expand, or whether more-efficient internal-combustion engines will dominate a decade from now.

“The jury’s still out in terms of which technology is going to come out on top,” Caldwell said.

Some future changes may have less to do with the engine than what surrounds it. Alcoa’s chief sustainability officer, Kevin Anton, said that making a car body entirely out of lightweight aluminum rather than steel automatically boosts its fuel efficiency by 10 percent.

“We have a cost-effective way for them to meet the new fuel standards without compromising on safety, comfort or performance,” Anton said.

Caldwell also cautioned that the EPA uses a different method of calculating mileage for the window stickers that consumers see at an auto dealer, so the estimate consumers should expect to see on window stickers in 2025 will be closer to 36 mpg.

In addition to increasing fuel efficiency, the rules also establish an emissions standard of 144 grams of carbon dioxide per mile for passenger cars and 203 grams of CO₂ per mile for trucks.

Kevin Kennedy, who directs the U.S. climate initiative at the World Resources Institute, noted that light-duty vehicle emissions represent approximately 17 percent of the country’s total greenhouse gas emissions.

“These rules represent one of the best opportunities for the administration to take a bite out of emissions that are damaging the planet, and in a way that’s good for consumers and the auto industry,” Kennedy said.

According to EPA estimates, the proposed standards would reduce CO₂ emissions by 2 billion metric tons over the lifetimes of light-duty vehicles sold between model years 2017 and 2025. By 2025, the EPA said, the standards would cut U.S. oil consumption by 2.2 million barrels of oil per day compared with 2010 levels, save $1.7 trillion in fuel costs and result in an average fuel savings of more than $8,000 per vehicle.

“Vehicles that go much farther on a gallon of gasoline are the best weapon we have against rising gas prices,” said Daniel J. Weiss, senior fellow and director of climate strategy at the liberal think tank Center for American Progress.

Even as the administration moved to finalize the standards, GOP presidential nominee Mitt Romney has vowed to overturn them if elected. Last fall, Romney said he “would get the EPA out of its effort to manage carbon dioxide emissions from automobiles and trucks.”

In February, Romney reiterated his opposition during a speech in Detroit, saying the fuel-efficiency rules “hurt domestic automakers and provided a benefit to some of the foreign automakers.”

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WASHINGTON, DC, Nov. 22

By Nick Snow

OGJ Washington Editor

The US Environmental Protection Agency does not anticipate meeting a mid-December deadline to issue proposed greenhouse gas emission limits for refineries. The agency expects to need more time and is working with litigants to develop a new schedule, a spokeswoman told OGJ by e-mail in response to an inquiry.

The American Petroleum Institute welcomed the news. “EPA is allowing itself more time to analyze industry data before proposing the unprecedented and enormously complex greenhouse gas rules for refineries,” said Howard Feldman, API regulatory and scientific affairs director.

Feldman said refiners recently provided more than 5 million data entries regarding their operations, and have repeatedly asked EPA to issue an advanced notice of proposed rulemaking before proposing new refinery rules. This would ensure that such rules would be based on accurate assessments of refineries’ actual emissions and risks, he explained.

“Of course, EPA’s application of the Clean Air Act in a way that was never intended by Congress threatens to unnecessarily raise the cost of producing America’s energy at a time when the administration should be focused on job creation and economic recovery,” Feldman said.

Environmental and other organizations supporting EPA’s effort to develop and implement GHG emissions limits for refineries did not immediately comment.

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HOUSTON, Oct. 20

By Paula Dittrick
OGJ Senior Staff Writer

Investments in greenhouse gas mitigating technologies in North America surged during 2009-10, said a report commissioned by the American Petroleum Institute. The report showed the US-based oil and natural gas industry contributed nearly half of an estimated $225 billion total investment.

Industry invested $108 billion in GHG mitigating technologies, including the development of shale gas, and $71 billion without shale gas investments. Other US-based private industries invested $74 billion and the US government invested $43 billion during 2009-10, the report said.

Kyle Isakower, API vice-president of regulatory and economic policy, told reporters during an Oct. 20 conference call, that API commissioned the report to inform the public about industry’s commitment to GHG mitigating technologies.

The report estimated industry’s GHG mitigating investments, which included shale gas, efficiency improvements including combined heat and power, and advanced technology for vehicles. Oil and gas companies reduced natural gas flaring and fugitive emissions to curb methane releases while adding to gas supplies through gas production from shale plays, Isakower said.

For the latest report, API included industry’s investments in shale gas development because the use of gas can displace the use of coal, which helps reduce GHG emissions, Isakower said. The report noted the potential for GHG mitigation was determined by the amount of gas-on-gas substitution vs gas-on-coal.

The federal government invested in energy efficient lighting, wind, solar, biofuels, and basic research with some of that investment during 2009-10 stemming from the American Recovery and Reinvestment Act of 2009.

Major investments by other private industries included advanced technology vehicles, efficiency improvements in electric generation, biofuels, wind, and solar.

Thomas Tanton, president of T2 and Associates, prepared the report for API, entitled “Key Investments in Greenhouse Gas Mitigation Technologies from 2000 Through 2010 by Energy Firms, Other Industry, and the Federal Government.”

Tanton wrote the report after his company compiled information from more than 565 publicly available documents or web sites, including corporate annual reports, federal budget documents, and other public sources.

Oil and gas investments

Of its GHG mitigation investments, the oil and gas industry spent $60.5 billion on fuel substitution efforts. Shale gas investments accounted for $37 billion of the $60.5 billion, the report said.

Compared with industry’s investment patterns from 2000-10, the fuel substitution investments jumped during 2990-10, the report said. Isakower attributed this surge to investments for shale gas development along with shale play research and development investments.

“These significant new investments were made in the face of a persistent recession,” the report noted.

The Energy Information Administration reported on Aug. 18 that energy-related carbon dioxide emissions in the US during 2010 increased by 213 million tonnes, or 3.9%, compared with 2009. The US-based oil and gas industry reported direct emission reductions of 55.9 million tonnes during 2010 compared with 2009, the API report said.

The 55.9 million tonnes equates to 11.2 million passenger vehicles taken off the roads, API calculated. The US Department of Transportation in 2009 reported 246 million cars and trucks total in the US.

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WASHINGTON, DC, Sept. 26

By Nick Snow

OGJ Washington Editor

The oil and gas industry will need more time to respond to the US Environmental Protection Agency’s proposed upstream greenhouse gas (GHG) emission requirements and its proposed refinery emissions rule, American Petroleum Institute officials said. “We’d like to work with the agency to get oil and gas rules that satisfy environmental improvements everyone is working for,” Howard Feldman, API’s regulatory and scientific affairs director, told reporters in a Sept. 26 teleconference.

“The Obama administration has an initiative to review and improve regulations to reduce unnecessary burdens on business,” added Khary Cauthen, API’s federal relations director, who also participated. “We support its work and urge the agency to focus on the enormous benefits to our economy that might be produced from sounder regulations, including those affecting our industry.”

Feldman noted that while the agency’s upstream GHG proposal has not attracted the amount of attention that EPA’s recently withdrawn out-of-cycle ozone rules did, it affects all oil and gas drilling, producing, and transportation. Its potential implementation costs could be much greater than EPA’s estimates, he warned.

“The proposal is expansive and complex,” he explained. It includes a set of five interconnected rules, spanning over 100 pages in the Federal Register with many times that number of pages of supplemental analyses and materials. Preparing comments on any one of these rules would be a challenge within 60 days. Preparing thorough and meaningful comments on all five [in that period] is not reasonable or practicable. The agency should allow an additional 60 days for comment.”

More time to implement

Producers support more use of what EPA has called green equipment if the technology is safe, technically feasible, and cost-effective, according to Feldman. But he recommended that final rules phase in any green completion requirements over 2 more years to give the industry time beyond the proposed implementation in 2012’s second quarter to assure that equipment is available and meets necessary performance and safety standards.

“Thousands of tank combustors, for example, will need to be certified and put on the market,” he said. “Some are in use right now. Thousands more would be required. If another manufacturer comes onto the market and says it wants to help meet the new demand, we’ll want to make sure it also can meet the technical and safety requirements. We’ll be asking for that much longer.” API and other witnesses will make that point at EPA’s hearings on the proposal Sept. 27 in Pittsburgh, Sept. 28 in Denver, and Sept. 29 in Arlington, Tex., Feldman indicated.

Similar time problems exist with EPA’s proposed downstream regulations, which include “Tier 3” gasoline requirements to reduce sulfur limits further as well as refinery emissions, Cauthen said.

“The refinery rule is currently scheduled to be proposed just over one month after EPA finishes collecting emissions data from oil and natural gas companies. More time is needed to review this information,” he noted. “And the agency has yet to make a strong case that additional sulfur reductions will produce environmental improvements worth their costs.”

He said that EPA is scheduled to receive a large amount of data at the end of 6 months. “It actually will be impossible—or near impossible—for companies to use that data as they move forward to comply with these rules,” Cauthen said. “EPA should do an advanced notice of proposed rulemaking on it instead.”

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New Estimates Of Methane Leakage From Drilling and Pipelines Outweighed By Emissions Reductions At Power Plants

WASHINGTON–(BUSINESS WIRE)–A new study based on revised Environmental Protection Agency (EPA) estimates of the greenhouse gas emissions (GHG) from natural gas finds that gas-fired electricity still produces 50 percent fewer emissions than does coal-fired generation. The reduction in GHG is even greater when compared to coal-fired plants built at least 30 years ago.

The paper was written by Gregory C. Staple, CEO of American Clean Skies Foundation, and Joel N. Swisher Ph.D., director of technical services for Camco International, a carbon offset developer, and a consulting professor of engineering at Stanford University.

The study – available at cleanskies.org/ghgemissions – updates existing studies by incorporating 2011 EPA estimates of fugitive methane emissions from producing natural gas.

These new EPA estimates have triggered controversy about the extent of fugitive methane emissions from gas drilling, especially in shale gas formations. However, even assuming the EPA’s new emissions estimates are correct, the Staple-Swisher study found that, using the latest Department of Energy (DOE) data on electricity generation, the fuel chain emissions from existing gas-fired power is still about 52 percent less GHG intensive on average than is existing coal-fired generation.

The new Staple-Swisher paper also corrects the misleading impression about the overall GHG footprint of gas and coal recently offered by a team of Cornell researchers led by Professor Robert Howarth. The full text of the Howarth report can be found at http://www.eeb.cornell.edu/howarth/Howarth%20et%20al%20%202011.pdf.

The Howarth team compared the estimated GHG footprint of shale gas versus coal based solely on the theoretical amount of energy input for power generation. This disregards the efficiency advantage of modern gas-fired generation in terms of the electric energy output — kilowatt hours. In contrast, the Staple-Swisher paper uses the most recent EPA and nationwide DOE data to calculate GHG emissions from both the production and combustion portion of the fuel chain for all natural gas-fired and coal-fired electric power. The comparison is based on GHG emissions per kilowatt hour generated and also uses conventional internationally accepted values for estimating the climate impact of various GHG emissions over 100 years. By contrast, the Cornell team looked primarily at a 20-year time horizon and used novel values for weighting the comparative climate impact of methane and other greenhouse gases, rather than the 100-year period that climate scientists and researchers regard as most accurate and useful for estimating the impact of methane and other greenhouse gases.

In sum, the new paper shows that, using the most current U.S. national inventory data and standard international assumptions on the global warming impact of various gases, as compared to coal-fired power, the large comparative GHG advantage of natural gas-fired power plants continues to outweigh the estimated methane leakage from natural gas production.

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By Bruce Alpert

WASHINGTON — House Republicans mounted an attack Wednesday on the Obama administration’s plan to regulate greenhouse emissions with predictions the new rules would stymie job creation.

Rep. Steve Scalise, R-Jefferson, was among the most aggressive critics, asking Environmental Protection Agency Administrator Lisa Jackson whether she agrees with then-Sen. Barack Obama who once predicted cap and trade legislation would substantially raise utility costs.

“Yes or no?” he pressed during the hearing by the House Energy and Commerce Committee on a GOP bill to bar the EPA from imposing new carbon emission standards under the Clean Air Act.

Jackson said that her agency isn’t implementing cap and trade legislation, which failed to pass the Senate in the last session. The new EPA regulations, she said, would not adversely impact jobs, and likely would save companies money by making them more energy efficient.

Scalise said he was disappointed that Jackson, in arguing why the nation needed to come to deal with carbon emissions, had suggested “global warming” was a factor in the flooding caused by Hurricane Katrina when Scalise said everyone knows that the real damage from that storm was caused by failed federal levees.

Jackson said she had done no such thing, but was simply pointing out what many scientists have said — that global warming leads to rising water levels and increased storm surge that can have devastating impact on flood-prone areas such as “my hometown” of New Orleans.

Scalise and other Louisiana lawmakers have raised particular concern about the regulations’ effect on oil refineries that are a large part of Louisiana’s economy.

Scalise’s tough questions drew a rebuke from Rep. Henry Waxman, D-Calif., who last year said he likes Scalise despite their differing views on environmental issues. Waxman said Scalise wasn’t giving Jackson a chance to reply, though Waxman has been accused of that same thing in the past.

Under EPA plans, industries that are large emitters of carbons linked to global warming, would be required to implement energy-efficient measures when they build new facilities or make major modifications in existing plants.

A cap and trade approach would set mandatory caps on reducing emissions, though industry would have the flexibility to reach the goals by getting credits from businesses that exceed the new standards.

Rep. Joe Barton, R-Texas, said that the EPA regulations would put the “economy in a straitjacket” at a time when President Obama says creating jobs is the nation’s No. 1 priority.

But Waxman, who chaired the panel until the GOP regained the House majority in the 2010 elections, said Republicans are ignoring overwhelming scientific evidence that global warming is real and a major threat. The GOP bill, which would block the EPA from regulating greenhouse emissions, is called the Energy Tax Prevention Act, but “that is total nonsense, Waxman said.

“What this bill should be called is the Big Polluter Protection Act,” Waxman said.

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Sen. Jim Inhofe, R-Okla., who once called global warming the “greatest hoax ever perpetrated on the American people,” told the House Energy and Commerce Committee that even if he is wrong new regulations won’t be effective. U.S. businesses, he predicted, will flee the new regulations by relocating operations to China, India and other nations that won’t impose tough regulations.

Jackson said there’s no doubt global warming is real.

“Eighteen of America’s leading scientific societies have written that multiple lines of evidence show humans are changing the climate, that contrary assertions are inconsistent with an objective assessment of the vast body of peer-reviewed science, and that ongoing climate change will have broad impacts on society, including the global economy and the environment,” Jackson said.

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By Paula Dittrick

HOUSTON, Feb. 4 — Congress should direct US policy on greenhouse gas emissions rather than the Environmental Protection Agency, American Petroleum Institute spokesmen told reporters during a Feb. 4 conference call from Washington, DC.

Khary Cauthen, API director of federal relations, said he sees growing, bipartisan sentiment among congressional members that EPA needs to be stopped from regulating GHG emissions under the Clean Air Act. For instance, Cauthen said CAA never was intended to regulate stationary source GHG emissions.

Previously, API has asked EPA officials to reconsider using New Source Performance Standards (NSPS) under the CAA to set GHG standards. Cauthen said API is concerned that “overly burdensome regulations” could hinder companies from creating jobs and spurring the nation’s economic growth.

Howard Feldman, API director of regulatory and scientific affairs, said EPA should finalize NSPS that remain under development before setting new GHG standards.

Refiners want to improve their energy efficiency in order to improve their own financial performance, Howard said. API has worked with EPA to revise previous versions of the NSPS as required by the Clean Air Act.

“Any New Source Performance Standard must be cost effective and achievable so refineries can continue to make the changes necessary to meet the nation’s energy needs,” Howard said.

API supported EPA’s request for more time to issue a maximum achievable control technology (MACT) rule concerning air pollutants such as mercury and soot from industrial boilers and solid waste incinerators (OGJ, Dec. 13, 2010, Newsletter).

A US District Court for the District of Columbia rejected EPA’s request for an extension in a court-ordered schedule for issuing the rule. The court told EPA to finalize the rule by Feb. 21.

Refiners already invested money into technology to make boilers highly efficient, Howard said. He suggested an administrative stay might be imposed on a new boiler rule as a way to give the EPA more time to work on it.

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Three Republican lawmakers have joined the bandwagon of opponents of Environmental Protection Agency regulation of climate-altering gases. Senator James Inhofe of Oklahoma and Representatives Fred Upton of Michigan and Ed Whitfield of Kentucky are circulating a draft of a bill dubbed the Energy Tax Prevention Act of 2011 that takes aim squarely at the E.P.A.’s authority to impose limits on emissions of carbon dioxide and other heat-trapping gases.

Their bill joins several other efforts in Congress to curtail or delay the agency’s plans to issue greenhouse gas regulations, rules that these opponents believe will raise energy costs, drive manufacturers offshore and strangle the economic recovery.

The Inhofe-Upton-Whitfield bill would, its sponsors say, prevent the E.P.A. from enacting rules that should properly be written by Congress, restrict use of the Clean Air Act to address climate change, prevent the administration from enacting a “backdoor” carbon tax and protect American jobs from foreign competition.

The draft measure reverses the E.P.A.’s landmark 2009 finding that greenhouse gases pose a threat to human health and the environment, and thus undercuts the rationale for any regulation of these substances. It would allow the emissions reduction deal among auto makers and federal and state governments to remain in place through 2017 (but not after) and provide for continued federal research on climate change.

But it would repeal already-enacted federal rules governing carbon dioxide emissions and bar federal enforcement of state climate change laws.

“We firmly believe federal bureaucrats should not be unilaterally setting national climate change policy,” the three lawmakers said in a statement. “E.P.A.’s cap-and-trade tax agenda will cost jobs, undermine the competitiveness of America’s manufacturers, and, as E.P.A. has conceded, will have no meaningful impact on climate.”

Just two years ago, the Democrat who was then chairman of the Energy and Commerce Committee, Representative Henry A. Waxman of California, along with Representative Edward J. Markey of Massachusetts, introduced the most sweeping climate change legislation ever proposed in Congress. They muscled the measure through the committee and won a hard-fought battle on the House floor in June with a strong push from Nancy Pelosi, then the House speaker, and the White House.

The bill died in the Senate, and Democratic advocates of action on global warming are now fighting a rearguard action to try to preserve the last large-scale tool they have left to address the problem, a suite of federal regulations to reduce emissions from factories, power plants and vehicles.

Mr. Upton has in the past expressed relatively moderate views on climate change, calling for action to reduce greenhouse gas emissions. But he now appears committed to moving a bill to handcuff the E.P.A. through his committee. Speaker John Boehner, a skeptic on climate change, supports the effort and may well be able to secure passage in the House.

The Senate is more problematic for opponents of greenhouse gas regulation, although a number of Democrats have expressed concern about the economic impacts of such regulation. A measure proposed by Senator John D. Rockefeller IV, Democrat of West Virginia, to force a two-year delay in any E.P.A. climate change regulation may have a chance of passage, but the White House has said that President Obama will veto any such effort to throttle the agency.

Brendan Gilfillan, an E.P.A. spokesman, said of the latest Republican measure, “These efforts would halt E.P.A.’s common-sense steps under the Clean Air Act to protect Americans from harmful air pollution that, until now, has not been subject to any pollution standards.”

He said that cleaning up cars, factories and power plants would encourage investment in clean-energy alternatives and make American companies more competitive.

Mr. Waxman said: “The Republicans have a lot of power, but they can’t amend the laws of nature. Gutting the Clean Air Act is only going to make our problems worse. This proposal threatens public health and energy security, and it undermines our economic recovery by creating regulatory uncertainty.”

Representative Whitfield said he would hold a hearing on the measure in the Energy and Commerce subcommittee energy and power, which he chairs, next Wednesday.

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