New “Tier 3” requirements to limit sulfur content in gasoline are set to take effect in just over two months — on January 2017. In March 2013, the Environmental Protection Agency (EPA) proposed to limit the sulfur content of gasoline produced or imported into the U.S. to no more than 10 parts per million (ppm) from the current “Tier 2” 30 ppm standard by January 1, 2017. With these upcoming “Tier 3” requirements, refiners have been developing their strategies to meet the regulations and in some cases have already invested hundreds of millions of dollars in their facilities. Today, we look at the various approaches refiners can take for compliance and their impacts on the industry.
Arnold Schwarzenegger said “Hasta la vista, baby” to the governor’s office in Sacramento four years ago, but his 2007 executive order establishing a low-carbon standard for transportation fuels is only now starting to have a real effect on California refineries. Some refiners say the rule aimed at reducing “life-cycle” greenhouse gas emissions from the transportation fuel sector 10% by 2020 is unrealistic and could result in refinery closings and gasoline and diesel shortages. Others say California’s goal is achievable. Today, we consider the Golden State’s low-carbon fuel standard (LCFS) and what it may mean for refiners.
The US Environmental Protection Agency (EPA) June 2014 Clean Power Plan (CPP) proposal to reduce greenhouse gas emissions from the power sector 30% from 2005 levels by 2030 would result in a sharp increase in natural gas consumption and potentially major changes in infrastructure to deliver more gas to power plants. The proposal would radically increase the pace at which coal-fired power plants are replaced by gas-fired generation. Today, we consider the proposal and its likely impact on gas demand and the industry.
A couple of months back in March 2013, the US Environmental Protection Agency (EPA) released proposed Tier 3 gasoline regulations that, if approved, will go into effect on January 1, 2017. The new rules include lower sulfur specifications for gasoline and tighter emissions controls for motor vehicles. Tier 3 also encourages acceptance of higher percentages of ethanol in gasoline. These regulations come at a time when US refinery gasoline blenders are jumping through hoops to handle a flood of new light shale crudes and increased demand for natural gasoline exports to Canada. Today we examines the proposals and their impact on gasoline and natural gas liquids markets.
Emission regulations require that companies planning new olefin crackers in EPA designated nonattainment areas like Houston must buy emission credits prior to construction. The market for credits in Houston for one criteria pollutant – volatile organic compounds (VOCs) skyrocketed from $4.5K/ton in 2011 to $300K/ton this month. The scarcity of emission credits and their rising price threaten to constrain or delay new petrochemical plant builds and will continue to hamper plant development and expansions in the Gulf Coast region. Today we describe the challenge new projects face.
Cheap feedstocks resulting from dramatic increases in US shale production of natural gas and natural gas liquids (NGLs) have led petrochemical companies to plan at least 7 new processing plants - known as olefin crackers - all but one on the Gulf Coast. These plants are expensive (think $billions) and take years to permit and build. They also produce significant quantities of emissions that are restricted by the Clean Air Act (CAA) – some of which trade in a market that has been skyrocketing for the past few months – threatening to delay or constrain the Gulf Coast cracker building spree before it gets started. Today we describe the regulations.
Does lightning strike twice? How about three times? Sure seems like the coal industry has been hit by three lightning bolts in the past several years: a recession that reduced demand for electrical power, low prices for competing fuels (i.e., natural gas), and new federal regulations on smokestack emissions. Today we review regulations that have left coal power generators singing the smokestack blues.
Last week (Feb 19, 2013) we explored California’s cap-and-trade program for Greenhouse Gas emissions (GHG) and saw that it has already increased electricity prices by 20% and pushed up the cost of refining a barrel of oil by $0.78/bbl. These developments are just the tip of the iceberg. California’s program will impact regional natural gas demand and basis. Companies will shift the locations where crude oil is processed. Power imports into the California market from the Pacific Northwest will soar. Today we’ll dive even deeper into the emissions market to better understand the outlook for GHG pricing and how the cap-and-trade rules are likely to influence all sorts of energy and fuel markets.
On January 1st, 2013, California’s cap-and-trade program for Greenhouse Gas emissions (GHG) went live and West Coast energy markets entered a whole new world. Wholesale electricity prices in California increased 20% as a result and other energy markets have felt the impact. For example, the new rules pushed up the average cost of refining oil by $0.78/bbl. For companies subject to the regulations, the bottom line is that if you generate GHG, you pay. But exactly who pays, how much you pay, and when you pay are all subject to a dizzying array of rules and regulations. Today we’ll navigate the turbulent and uncharted seas of California cap-and-trade markets.