California Air Resources Board

SACRAMENTO – State clean air officials today pledged that there would be an adequate supply of diesel fuel this October, when new Air Resources Board (ARB) clean-up standards go into effect, a move that will reduce soot-like emissions by 20 percent and smog-forming nitrogen oxides by seven percent.

They also said that they were encouraged by oil company announcements in the last week that a substantial amount of the fuel would meet the ARB's standards by the deadline and that the ARB would act to help refiners comply as quickly as possible with the remaining supplies.

In an appearance before the State Food and Agriculture Board in Sacramento, James D. Boyd, Air Resources Board executive officer, said that those assurances were based on recent discussions with seven oil companies who have outlined their plans for refinery modifications to produce the fuel.

Boyd said that the Board was heartened about the supply of cleaner-burning diesel because two of the state's largest suppliers, Chevron and Texaco, have received ARB approval for alternative formulas that reduce as much pollution as the standards require and both have said that they would be willing to make it available to other refiners who cannot produce their own complying fuel.

 In addition, Boyd noted that Chevron has proven its commitment to producing the fuel by spending $20 million so far to remodel its refineries and is spending $5 million a month to complete the project. Chevron also said that it could produce as much as 90,000 barrels of clean diesel per day, which is almost 60 percent of the statewide demand.

Boyd told the agricultural panel that "based on our most recent information, the ARB is comfortable that there will be an adequate supply of diesel fuel, especially enough to meet the needs of growers in the San Joaquin Valley, and we will take every action to ensure that."

The special assurance that growers will have their fuel needs met is based on commitments from two San Joaquin Valley refiners that blanket the market; Texaco, which operates a major refinery in Bakersfield, and Kern Oil Company, a small refiner that is an important source for private marketers and independent users, who said this week that it will continue to sell diesel fuel after the October 1 deadline.

Other oil companies who have publicly committed to producing clean diesel fuel include Unocal, who earlier this week said speculation that they would abandon the diesel fuel market was incorrect, Ultramar, Tosco, and ARCO.

Boyd strongly emphasized that the ARB was willing to use variances to help oil companies who could not complete refinery modifications by the October 1 deadline to insure an uninterrupted supply of fuel. Those variances, he said, would likely be temporary and would be issued to refiners who were making a good faith effort to comply with the rules as quickly as possible. He noted that the variances would be structured to prevent refiners from gaining an unfair competitive advantage by delaying compliance with the rule.

 "We will protect the financial investment for very refiner that is working to comply with the standards," Boyd said, by incorporating a fee into the variance that would increase over time, prompting refiners to comply with the standards as quickly as possible.

He also noted that the cost estimates for the cleaner diesel fuel, based on discussions with refiners over the last year, were about six cents per gallon or less, depending on how a refiner met the rule. He emphasized that speculation about cost increases that were five times higher than that were unfounded.

He also noted that recent surveys which predicted those higher costs ignored the federal EPA's tightening of diesel fuel standards nationwide. These specification changes will increase diesel fuel prices throughout the nation and narrow the difference between fuel costs in California and those in other places.

The ARB standards require most refiners to reduce sulfur levels by 80 percent and also require a reduction in certain hydrocarbons, known as aromatics, to cut both smog-forming nitrogen oxide emissions as well as soot-like particles. The cleaner diesel fuel also will lead to better visibility and reduce the public health threat from highly toxic compounds, such as benzene and polycyclic aromatic hydrocarbons (PAH).

 "This cleaner diesel fuel will automatically reduce pollution from all the trucks and buses on the road," Boyd noted, "and it will also help engine manufacturers meet the state's "sootless" standards that the ARB has set for all new models."

 "This fuel will curb more nitrogen oxide emissions over the next seven years than any of our tough tailpipe standards for new cars and all of the health benefits of cleaner diesel fuel certainly make it worth the cost."