Release 93-17

FOR IMMEDIATE RELEASE                                                    CONTACT:     Jerry Martin
October 8, 1993                                                                                                  (916) 322-2990

Air Resources Board Hearing to Review Effects of Clean Diesel Fuel Standards

        SACRAMENTO - At the request of Governor Pete Wilson, the Air Resources Board (ARB) will contact a public hearing next week to review the effects of clean diesel fuel standards, which went into effect October 1.

        The hearing will be October 15, 8:30 AM, in the Lincoln Plaza Auditorium, 400 P Street, Sacramento. The Board will study the effects of the rule on supply, price and engine performance.

        The ARB regulations, which are similar to those nationwide adopted by EPA, require refiners to lower levels of sulfur and aromatic hydrocarbons. They are intended to reduce emissions of soot-like particles, which are intended to reduce emissions of soot-like particles, which are considered highly corrosive to lung tissue and also are carriers for highly toxic, cancer-causing compounds, such as benzene and 1,3 butadiene.

        The new standards are also intended to lower emissions of nitrogen oxide, a key ingredient in urban smog that also forms nitric acid and visibility-reducing particles in the air.

        Overall, the cleaner diesel fuel is expected to reduce emissions from trucks and buses up to 25 percent.

        In adopting the rule in 1988, the ARB incorporated many safeguards to insure a steady supply of diesel fuel as well as lower costs. In addition to the five years lead time for refiners to plan their compliance, the ARB also provided oil companies with the option of designing their own unique formula for diesel fuel, provided that it reduced the same amount of pollution. Three of the state's largest diesel fuel producers took advantage of that option, estimating that it cut their costs by up to 50 percent, adding only 6 cents to a gallon of fuel.

        To avoid supply shortages, the ARB granted variances to three large oil companies, allowing them to produce fuel that does not comply with the new clean-up rules while they finish refinery modifications by the end of this year or early in 1994.

        Despite those efforts, the ARB received reports of price hikes far higher than those predicted by the oil companies and exceeding their cost of making the cleaner grade diesel.

       Also, some spot shortages were attributed to unexpected equipment failures in refineries and usually high diesel sales in the week before the cleaner diesel rule went into effect, referring to speculative buying and a "run on the racks" that increased demand three or four times more than normal in the latter part of September.

        In his letter, the Governor acknowledged recent efforts of the ARB, in cooperation with oil companies, to increase diesel supplies. "I understand that significant additional volumes of fuel are being introduced into the market. Additionally, since some of the problem can be directly attributed to refining equipment breakdowns which have now been rectified, I fully expect additional volumes of fuel to be available in the next few days."

        "However, there remain concerns that refiners may be unable to supply enough diesel fuel to avoid continued supply problems," he continued. "Despite changing market conditions, these concerns should be addressed and resolved if necessary."

        The ARB hearing will provide up-to-date information on price and supply, as well as short and long-term projections.

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