The American Petroleum Institute (API) retained MathPro Inc. to analyze the long-term technical and economic effects in the refining industry of gasoline standards to control toxics emissions, proposed by a third-party organization in EPA’s MSAT 2 rule-making process.

The proposed standards involved controlling (i) the total aromatics content of the U.S. gasoline pool to stringent limits and (ii) the benzene content of the U.S. gasoline pool “to the maximum extent technologically feasible.” The proposal was based on the premise that the U.S. refining industry could meet these standards at little or no cost and with no adverse consequences on gasoline producibility, by reducing the volume of reformate in the gasoline pool and replacing the reformate with ethanol.

We analyzed the technical and economic implications of the EFC proposal in the U.S. refining industry primarily by refinery LP modeling, using an aggregate model of all U.S. refining operations. The refining analysis addressed two scenarios for ethanol use in 2014.

• An RFS Mandate scenario, in which baseline ethanol use was the EPACT 2005 RFS mandate volume for 2014 (assumed to be 7.8 billion gallons per year (bgy)). In response to the proposed aromatics standard, ethanol use was allowed to increase to a volume such that every gallon of U.S. gasoline contained 10 vol% ethanol (except for California gasoline, which contained 7.7 vol% ethanol).
• A National E10 scenario, in which baseline ethanol use was fixed at the assumed national E10 volume in 2014 (about 15.6 bgy), and ethanol use remained unchanged in response to the proposed aromatics standard.

The scenarios, differing only in the assumed baseline volume of ethanol use in 2014, were designed to bracket the permissible range of ethanol use in 2014, under then-current legislation and regulation. In each scenario, we developed baseline cases for summer and winter gasoline production (a total of four baseline cases). For each baseline case, we analyzed a corresponding study case, denoting implementation of the proposed aromatics standard (in addition to the EPA MSAT2 rule).

The analysis indicated that, in both scenarios, the U.S. refining industry would meet the proposed aromatics standard by blending ethanol and changing refinery operations (including, but not limited to, reducing reforming severity and throughput).

• In the RFS Mandate scenario, representing the lower limit of baseline ethanol use, the proposed aromatics standard incurred a total national cost of about $7 billion per year, or about 5¢/gal of gasoline. The average national cost for each 1% reduction in pool aromatics content was about $1.3 billion per year, comprising (i) the costs of producing the projected gasoline via increased ethanol blending (called out by the aromatics standard), (ii) the fuel economy penalty associated with ethanol blending, and (iii) refining investment and operating costs incurred to meet the aromatics standard.
• In the National E10 scenario, representing the upper limit of baseline ethanol use, the proposed aromatics standard incurred a total national cost of about $3½ billion per year, or about 2½¢/gal of gasoline. The average national cost for each 1% reduction in pool aromatics content was about $1.6 billion per year – lower than in the RFS Mandate scenario because the study case in the National E10 scenario involves no additional ethanol use beyond the baseline volume and, hence, no national costs associated with additional ethanol production. The proposed aromatics standard calls out additional refinery investment of about $12 billion, required to achieve the proposed aromatics reduction and maintain projected out-turns of all refined products, with no compensating reduction to accommodate increased ethanol use.