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Tier 3 Fuel Standards Program

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Utah’s petroleum industry cares deeply about air quality and is committed to doing our part to maintain and improve clean air in the State. Utah’s five petroleum refineries have not only dramatically reduced emissions from our point source facilities over the past decade but continue to produce cleaner burning fuels that significantly reduce vehicle emissions. According to the Utah Division of Air Quality (UDAQ), vehicles contribute approximately half of the air emissions generated along the Wasatch Front and are the largest source of pollution during winter inversions and summer ozone season.

What are Tier 3 Fuels?
EPA’s Tier 3 Motor Vehicle Emission and Fuel Standards rule was finalized in April 2014. Tier 3 is an integrated system of national vehicle and fuel standards established by EPA that requires cleaner vehicles to be phased in from model year 2017 through 2025. It also requires petroleum refiners to reduce the sulfur content of gasoline from an average of 30 parts per million (ppm) to 10 ppm. Large refiners producing 75,000 barrels per pay (bbl/day) or more must meet the sulfur requirement by 2017 while smaller refiners below 75,000 bbl/day have until 2020 to meet the new standard. All of Utah’s five refineries are classified as small refiners.

Sulfur is a natural component in crude oil that is present in gasoline and diesel unless removed. Sulfur in gasoline impairs the effectiveness of emission control systems and contributes to air pollution. Reducing the sulfur content in gasoline enables advanced emission controls and reduces air pollution.

Why is Tier 3 Important?
Implementation of Tier 3 fuels will significantly impact air quality in Utah. DAQ estimates that Tier 3 fuel will reduce vehicle emissions in our existing fleet by approximately 7% to 11%. EPA projects that once fully implemented, the Tier 3 vehicle and fuel standards will reduce volatile organic compounds (VOC) and nitrogen oxides (NOx) emissions by 80% on a fleet average basis and direct particulate emissions by 70% on a per vehicle basis. This is equivalent to taking four of every five cars off the road.

Implementation and Compliance
EPA’s Tier 3 rule allows refiners options on how best to comply with the standard. The rule establishes an Averaging, Banking and Trading (ABT) program that allows refiners to meet the 10ppm sulfur standard by averaging across their fleet of refineries or by purchasing credits from other refiners that have reduced sulfur below 10ppm. Recognizing this, Utah’s Governor, Legislature and Department of Environmental Quality (DEQ) have worked closely with the refining industry to encourage and support the manufacture of 10ppm fuel in Utah. To incentivize 10ppm fuel, the Legislature passed and Governor signed legislation to exempt the sales tax on refining equipment used in the manufacture of Tier 3 fuels.

Other challenges also complicate the transition for Utah refiners to make Tier 3 fuels in Utah. The cost of equipment upgrades and retrofits necessary to produce 10 ppm fuel is significant. On a national scale, Utah’s refineries are small and securing capital to move to Tier 3 is challenging. Additionally, manufacturing Tier 3 fuel is energy intensive and will likely necessitate marginally increased emissions from Utah’s point source refineries. While the potential point source emission increases are relatively small in comparison to the emission benefits of Tier 3 fuel in vehicles statewide, it still poses a significant hurdle considering Utah’s State Implementation Plan (SIP) does not allow for additional emission increases from point sources. DEQ is working with both refiners and EPA to develop a suitable solution to this problem.

Environmental Stewardship and Commitment
One Utah refiner already produces Tier 3 compliant fuels. Others have committed to producing Tier 3 fuels in Utah while some are still evaluating the technical and economic feasibility for their plants. Tier 3 fuels will not solve all the Wasatch Front’s air quality problems but will be a major contributing factor in controlling vehicle emissions and maintaining Utah’s air quality as the State grows and population and vehicles continue to increase. Tier 3 follows closely on the heels of the full implementation of the Tier 2 gasoline sulfur program finalized in 2000 that reduced sulfur content in gasoline by up to 90%. It is a continuing demonstration of the commitment of Utah’s refining industry to be good corporate citizens and partners in protecting and maintaining Utah’s environment.
    • As of 2015, Utah ranks 11th nationally in oil production and 12th among states in natural gas production.
    • There are currently 141 operating refineries in the United States with 5 located in Utah. Utah refineries produced over 36 million barrels (1.5 billion gallons) of motor gasoline in 2015 and over 19 million barrels (798 million gallons) of distillate fuel (diesel).
    • Well completions in Utah (both oil and gas) have declined dramatically over recent years as commodity prices plummeted and have stayed low. There were 1243 completions in 2008, 925 in 2014 and only 305 in 2015.
    • Duchesne (46%), Uintah (34%) and San Juan (12%) Counties accounted for 92% of oil production in Utah in 2015. The balance was produced collectively from Sevier, Grand, Summit, Carbon and Emery Counties.
    • The ratio of oil wells drilled in Utah versus natural gas wells has shifted significantly over recent years as commodity prices have affected company's drilling programs. In 2008, only 28% of wells drilled were for oil while in 2014, 76% of all wells drilled were primarily seeking oil.
    • Wages for energy-related jobs are nearly double the average annual wage for all employment in Utah.
    • In 2015 petroleum products and natural gas accounted for 59% of total energy consumed in Utah. Coal was responsible for 38% while all renewables combined made up 3% of energy use.
    • Utah refineries received record amounts of crude oil in 2014 and only slightly less in 2015, with 43% coming from in-state and 8% coming from Canada.
    • Fossil fuels made up 98% of Utah’s total energy production in 2015, while renewable sources accounted for only 2% of Utah’s production portfolio.
    • Property taxes charged against Utah oil and gas activities have increased more than six times since 1996, totaling nearly $64 million in 2015.
    • The value of crude oil produced in Utah reached an all-time inflation-adjusted high of $3.2 billion in 2014, but then dropped to only $1.5 billion in 2015 as commodity prices sank.
    • Natural gas production in Utah reached a record high in 2012 of 491 billion cubic feet, but has since dropped to 423 billion cubic feet in 2015.
    • Oil and gas operations in Utah account for about 1.3% of the State's gross state product. Utilities (including some non-energy sectors), refineries, and pipeline transportation and maintenance account for an additional 1.9%.
    • The last major refinery built in the United States was put into operation in 1977.
    • Utah’s average price of residential natural gas in 2015 was $9.72 per thousand cubic feet, the 17th lowest in the nation. As recently as 2011, Utah’s price was the third lowest in the nation, but new natural gas pipelines have better connected our once captive market with the rest of the United States.
    • Natural gas is the largest source of annual energy production in Utah, surpassing coal for the first time in 2010.
    • In 2015, 76% of the electricity generated in Utah was from coal-burning power plants. Electricity generation from natural-gas power plants more than doubled since 2007, increasing its total share in 2015 to 19%.
    • Utah produced 18% more energy than it consumed in 2015, continuing its status as a net-energy exporter. This percentage is usually closer to 30%, but production of fossil fuels was significantly down in 2015.
    • Energy-related employment in Utah declined to 15,367 in September of 2015 (down 16% from the 18,236 recorded in October 2014 prior to the oil price crash), of which the majority (30%) came from the oil and gas sector.
    • Average yearly wages in the energy sector ($83,400, first three quarters of 2015) are more than double the statewide average annual wage ($41,500, first three quarters of 2015).

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