By Tom Doggett
WASHINGTON, June 24 (Reuters) - U.S. diesel engine manufacturers and petroleum refiners should have no problem in meeting new federal standards to reduce the amount of sulfur in diesel fuel, according to a new Environmental Protection Agency report.
The report was a blow to the U.S. oil industry, which complained it would have a tough time complying with the EPA's goal of cutting the sulfur level in diesel fuel by 97 percent to just 15 parts per million (ppm).
Refiners must begin producing the cleaner diesel by 2006. Large trucks, buses and other heavy duty vehicles must be on the market by 2007 with engines that can process the fuel.
The EPA's report, which was released on Friday and is now being reviewed by an advisory panel this week, found that both industries are "making significant progress" in meeting the lower sulfur requirements.
Some refiners are ahead of schedule and will be capable of producing the diesel fuel with the low sulfur levels as early as next year, it said.
"We are very encouraged by the actions some refiners have already taken in terms of announcing specific plan for low sulfur diesel fuel production," the EPA said.
Nonetheless, small refiners will be given up to four additional years to meet the new standards.
In addition, refiners that supply fuel to western states and Alaska will have until 2008 to produce the low-sulfur fuel.
Separately, the EPA said engine makers plan to use technology that already exists to build engines with special filters that could process the cleaner diesel fuel.
"Although it is still early in the process, every major engine manufacturer that we visited told us that they expect to have emission-compliant products in 2007," EPA said.
The oil industry and other business groups had sued the EPA in an effort to block the sulfur guidelines.
Oil companies said the EPA requirements would cause them to close refiners instead of making expensive modifications to their facilities, resulting in fuel supply shortages and higher diesel prices.
However, a federal court ruled last month in favor of the agency's rule making, saying technology was available to make diesel fuel that emitted fewer sulfur emissions.