Big Auto vs. Big Oil Sulfur-in-fuel debate tests their clout

Not many months ago, suggesting that automakers lobby for cleaner fuels was about as likely as Al Gore declaring his affection for the internal combusion engine.

Even regulators described talk of a next-generation fuel as "premature" and "potentially inflammatory."

So why did the American Automobile Manufacturers' Association (AAMA) and the Association of International Automobile Manufacturers (AIAM) decide to gang up on the oil industry and petition the U.S. Environmental Protection Agency (EPA) to reduce sulfur in gasoline?

For the same reason a cornered prey will sometimes turn to fight the predator - survival. A source at the AAMA puts it more succinctly: "Unfortunately, for the last 20 years the auto industry has had to bear the burden of emissions control," he says. "Now it's time for the oil industry to step up to it."

The EPA looked at regulating sulfur in the early 1980s, but shelved the idea because good test data was lacking. That has changed. Recent data sheds significantly more light on the debate, auto industry observers say.

Sulfur occurs naturally in crude oil and remains in the refined fuel unless removed. A higher level of sulfur in refined fuel degrades performance of catalytic converters, causing increased nitrogen oxide (NOx) emissions. NOx is major component of smog.

Up to half of the vehicles that will be certified as meeting the new National Low Emission Vehicle (NLEV) actually won't meet those stringent emission standards in the real world because of high levels of sulfur in fuels, a joint AAMA/AIAM study indicates.

The AAMA source says he expects a nasty battle over the AAMA/AIAM call for sulfur concentrations of an average 40 parts per million (ppm). The joint plan allows an alternative plan with an average of 30 ppm for the year, but with an absolute high of 80 ppm.

The oil industry is arguing for a much less stringent two-tier system limiting sulfur to 150 ppm in areas where air pollution problems are severe and 300 ppm in areas without significant air pollution problems.

Although differences in parts per million may sound trifling, billions of dollars are at stake over the eventual regulatory decision.

The American Petroleum Industry (API) estimates meeting the 40 ppm standard will cost about a nickel a gallon while sticking to its less aggressive 150/300 ppm program could keep costs closer to a penny or two per gallon.

The auto lobby recognizes it has taken on a serious foe, says John Cabaniss, AIAM regulatory affairs manager for air quality. After all, it's not every day the AAMA and AIAM work so closely.

"We're getting down to the point in vehicle standards where getting that last little bit is like chasing your tail to get the pollution out of the car," he says.

Reducing sulfur in gasoline to the suggested 40 ppm range makes a significant difference in emissions, Mr. Cabaniss says.

The API counters that using gasoline with 150 ppm sulfur in heavily polluted areas during the summer (and allowing 300 ppm sulfur in less-polluted areas) cuts the cost of compliance by more than half. Its plan would take effect in 2004 when the next round of tighter federal emission standards kicks in.

The oil industry lobby says cleaner gasoline accounts for the largest single improvement in overall vehicle emissions since 1970. It already has met requirements to remove lead from fuel, produce low evaporation gasoline, winter gas, diesel fuel with 85% reduced sulfur, reformulated gasoline and California gasoline. "We've done enough already," the argument might go.

But Mr. Cabaniss says the oil industry should be trying to get out front on the issue. If the fuel companies don't come up with the fuel needed to drive the next generation of vehicles, then someone else will and they'll miss the boat, he says.

Although the oil industry may have felt confident about its political clout, an April conference in the heart of the auto industry likely dispelled any doubt that sulfur in fuel will remain an issue.

During a contentious meeting between auto and oil executives on fuel issues, an EPA regulator made it clear that sulfur in fuel is the leading issue in cleaning up emissions, says one attendee.

In fact, the EPA employee was surprisingly candid about the issue and seemed to suggest the EPA is leaning quite strongly toward the auto industry's position on sulfur.

And while oil industry leaders continue to suggest the auto industry could build a sulfur-resistant catalyst, a Chrysler engineer at the meeting explained that the size of sulfur molecules is so close to that of the platinum family of molecules that a sulfur-proof catalyst is impossible.

While the auto industry acknowledges the increased cost of reducing sulfur content, it's hardly fair to say that gas prices will go up because fuel restrictions are tighter.

"In California (where fuel already meets national standards proposed by AAMA/AIMA) last week, gasoline was cheaper than in Washington D.C.," Mr. Cabaniss says.

The stark reality is that current gasoline is not clean enough to meet the requirements even in time for the '99 model year, he adds.

As part of the AAMA/AIAM study, researchers looked at vehicles already certified to meet California's LEV program, which means they'll likely also be certified for the National LEV program. California LEV tests use the low-sulfur California fuel to meet standards.

The researchers ran gasoline with sulfur concentrations ranging from 40 ppm to 600 ppm. The vehicles used in the study represent a majority of the vehicles sold in the U.S.

The study results suggest that at least half of those vehicles won't meet NLEV standards while burning the typical fuel, even though they meet the requirements using low-sulfur test fuel.

Another auto industry concern about the API plan is the impact of vehicles driving from an area using 300 ppm fuel into an area where 150 ppm fuel is required. The API says the sulfur in the catalytic converter is purged fairly quickly when the vehicle switches to the 150 ppm fuel.

But the AAMA/AIAM study paints a different picture.

"To purge sulfur from a catalyst in many vehicles requires an extreme driving cycle," Mr. Cabaniss says. "In the worst case for cars, which is what we had to use to keep the test fair, we had to run the throttle wide open at speeds between 70 mph to 90 mph (113 to 145 km/hr.).

Driving 70 mph to 90 mph at extended speeds isn't practical in the real world, even if it might give a new excuse for speeding, he says. And the design of new engines won't allow driving cycles that burn off sulfur naturally because of emission problems produced in the process.

Then there is political reality. Future regulations are expected to be even tougher as the Clinton Administration looks for ways to meet the U.S. commitments to the Kyoto global warming treaty, as well as tighter air pollution requirements already approved. Even without formal adoption of the Kyoto agreement by Congress, automakers expect to see some shift in policy to require lower fuel consumption.

"Reading the tea leaves out 10 to 15 years, we're going to need fuel improvements," Mr. Cabaniss says. "And it's not just gasoline and engines that are going to have to get cleaner. It's also a motor oil issue."

Anything that might flow through the engine will have to meet more demanding environmental standards.

Indeed, recent partnerships between General Motors Corp. and Amoco and Ford Motor Co.'s agreement with Mobil show promise. Both Amoco and Mobil have agreed to work with the automakers to produce cleaner burning fuels for the expected diesel hybrids and other next generation vehicles. But those alliances are directed at future generations of vehicles far from production.

"If I were a refiner it would make sense to look at the overall situation and get with the program," Mr. Cabaniss says.

The AAMA/AIAM petition to the EPA carries no deadline or requirements for action. The sulfur proposal could prompt new regulations, or sit on a shelf for years.

AUTO INDUSTRY: Automakers want the U.S. EPA to require the oil industry to limit sulfur in fuel to 40 ppm. The auto plan also would support an alternate system allowing sulfur variability as high as 80 ppm, providing the overall average for the fuel supply was 30 ppm for a given year. Automakers say that at levels above 40 ppm new, cleaner cars fail to meet their designed emission levels.

OIL INDUSTRY: The oil industry is proposing regulations that would limit fuel in areas with air pollution problems to 150 ppm of sulfur, with cleaner areas allowed to have an average of 300 ppm. The oil industry says the 150/300 ppm plan would be clean enough and would be substantially less expensive to implement. The oil industry proposes to implement the new rules by 2004.

Oil companies say it will cost a bundle to bring the sulfur content of gasoline down to the levels the auto industry wants, but one Texas company believes even the automakers are overestimating the price of cleaner gasoline.

CDTech of Pasadena, TX, a developer of process technology for the refining and petrochemical industries, says it has a proven method for reducing gasoline sulfur content from the 800 parts per million (ppm) level to less than 50 ppm at a cost of about two cents per gallon.

Some oil industry interests have said gasoline sulfur-level reductions could cost on the order of 20 cents per gallon. This is particularly significant for areas of the U.S. such as Chicago and St. Louis, where the country's highest-sulfur gasoline is found.

The 800-ppm sulfur level in major portions of Chicago-St. Louis gasoline is largely attributed to very high-sulfur crude oil from Venezuela; that country now owns a larger refinery and marketing outlets in the upper Midwest. One source said last year that Venezuela now supplies more than 20% of the crude oil coming into the U.S., and that proportion is growing.

A recent report by the American Automobile Manufacturers Assn. on sulfur levels in gasoline referred to tests run by Ford Motor Co. that showed, with reference to California ultra-low emissions vehicles, that gasoline with 930 ppm sulfur increases tailpipe hydrocarbon emissions by three times compared to a 60-ppm sulfur fuel.

Current California gasoline is in the 20 ppm to 30 ppm sulfur range, based on the AAMA survey, while the average sulfur level in the Chicago-St. Louis area is 580 ppm and 540 ppm, respectively, for regular-grade gasoline. Average sulfur content in premium gasoline sold in the Midwest ranges between 160 and 230 ppm.

Vehicle owners, however, have no way of knowing the sulfur level of the gasoline they use and the degree to which the performance of their catalytic converters is reduced. This can cause some vehicles to fail state-run emissions tests.

Sulfur also can degrade vehicle emissions control effectiveness to the point that onboard diagnostic lights are turned on, even though the vehicle easily passes state emissions test requirements.