-FINAL-
                               
                 PHASE 2 RFG TRANSITION SUBCOMMITTEE

                 MEETING SUMMARY - AUGUST 17, 1994



          Introduction

          On August 17, 1994, Transition Subcommittee held the first of a
          series of planned meetings.  The Transition Subcommittee's
          discussion leader, Susan Brown, Deputy Division Chief, Planning
          and Forecasting Division of the California Energy Commission,
          indicated that the purpose of the Transition Subcommittee is to
          evaluate supply, demand, distribution and compliance issues
          related to the implementation of Phase 2 Reformulated Gasoline
          (RFG).  Where appropriate, the subcommittee will discuss with the
          Phase 2 RFG Advisory Committee  possible measures that can be
          taken to better facilitate a smooth transition to the use of
          Phase 2 RFG.

          Susan Brown began the meeting by briefly introducing herself and
          several staff members from the Energy Commission and the Air
          Resources Board.  As a revised agenda was distributed, Susan
          explained the purpose and goals of the subcommittee.  It was
          noted that one of the lessons learned from the recent
          implementation of  ARB's diesel regulation was the need for a
          phased in compliance schedule.  The, Phase 2 RFG compliance
          schedule adopted by the Air Resources Board requires that RFG be
          produced by the refineries by March 1, 1996, distributed by bulk
          terminals by April 15,1996, and sold at the retail pump by June
          1, 1996.


          Antitrust

          There was a great level of concern expressed regarding the
          potential for antitrust violations by refiners who participate in
          this subcommittee. These concerns were directly related to the
          open discussion and exchange of information regarding company
          specific production capacity, cost of production, wholesale and
          retail pricing, and product distribution.  Susan indicated that
          both the CEC and ARB are well aware of the concerns and will be
          very cautious with the structure and operation of the
          subcommittee to avoid questionable activity.  Susan also stated
          that no company specific data would be discussed by the
          subcommittee.  All company specific data will be obtained by an
          ARB/CEC internal working group.  Confidential materials will be
          handled as required by the California Code of Regulations.  Data
          presented to the subcommittee and made available to the public
          will be in the form of aggregate or average values.

          Susan introduced Dick Light, Deputy Attorney General, California
          Department of Justice, who was invited to attend this meeting for
          the very purpose of responding to the antitrust concerns.  Mr.
          Light is an expert in the area of antitrust law and agreed that
          these concerns were warranted.  However, he also indicated that
          understands the worthwhile nature of the subcommittee's goals
          and believes that its successful operation is possible if
          appropriate precautions are employed.


          Mission Statement

          A draft mission statement (enclosed) was distributed and
          discussed.  The only comment offered was the suggestion that the
          mission statement be expanded to include the goal of timely
          implementation of the regulation as it currently exists and that
          contingency planning should not be addressed by this
          subcommittee.  This comment lead into a brief discussion of
          variance procedures and whether it was anticipated that
          procedures would be established as they were during the
          implementation of the diesel regulation last year.  Susan
          explained that existing procedures are intended to provide relief
          during unforeseen and unavoidable situations such as force
          majeure outages.  It was further noted that the variance issue
          would ultimately be an ARB policy determination although there is
          currently no intention of allowing variances beyond what is
          provided in existing law.


          Presentations

               CEC

               Tom Glaviano of the CEC presented an overview of  the
          petroleum industry in California and how it may be effected by
          the Phase 2 RFG regulation (presentation material enclosed) .
          Tom reviewed all of the various processes and steps necessary to
          transform crude oil into gasoline at the retail pump.  The
          presentation revealed that there are  many areas of this industry
          which may be affected by the regulation. It also illustrated the
          difficult nature of completing a thorough evaluation of the
          industries' ability to provide Phase 2 RFG to meet the needs of
          California's motorists.  Such an evaluation of the adequacy of
          supply, inherently must also include an evaluation of demand.
          Tom's presentation did not identify specific issues or propose
          any solutions, however, this type of overview was fundamental in
          the development of the subcommittee's action plan.

               Immediately following Tom's presentation the discussion
          shifted back to antitrust concerns related to any open discussion
          by the subcommittee of supply and demand issues.  Dick Light
          indicated that even limiting such discussions to dealing with
          aggregate numbers would not prevent possible claims of antitrust
          activity.  If it could be demonstrated that such discussions had
          an effect on the market, the subcommittee members may be
          subjected to antitrust liability.  Dick indicated that obtaining
          company specific production data on a confidential basis,
          compiling the data and publishing aggregated numbers is
          permissible.  However, competitors having open discussion of any
          such information is not permissible.

               U.S. EPA

               Al Mannato, a section chief with U.S. EPA in Washington
          D.C., gave a presentation regarding the Supply and Distribution
          Working Group which has been established as part of the
          implementation of Federal RFG.  U.S. EPA has hired a private
          contractor to perform and publish supply evaluation which will
          include specific production data.  They do not believe there will
          be a supply problem; they are confident that adequate supply will
          be available.  They are concerned about various distribution
          issues and regulation interpretation, implementation, and
          compliance demonstration.  Outstanding issues/concerns relate to
          mixing of off-spec product in the distribution system, trans-mix,
          certification of import products, blending and refining at import
          facilities, and the status of refiner's baselines.  U.S.EPA will
          continue to meet and discuss these outstanding issues until
          resolution has been reached.  Summaries of findings regarding
          these issues and their resolution will be posted on U.S.EPA's
          electronic bulletin board system as they become available.  The
          final issue they intend on addressing  is how to deal with
          emergency situations.


               Santa Fe Pacific Pipeline

               Mary Morgan, Director of Product Movement for Santa Fe
          Pacific Pipeline Partners, gave a presentation detailing the
          delivery locations and overall operation of their various
          pipelines located in California (presentation materials
          enclosed).


               ARB

               Dean Simeroth, Chief of the Criteria Pollutants Branch,
          presented a Proposed Action Plan (enclosed) for the Transition
          Subcommittee.  Hard copies of the proposed plan were distributed
          to everyone present.  The action plan delineates the issues to be
          addressed at each of a series of five subcommittee meetings to be
          held between now and January 1995 (specific dates will be noticed
          at a later date).  The structure of the plan is such that each
          meeting will have a general theme, with each theme being
          addressed in the most advantageous timeframe.

                The majority of the materials to be presented at future
          meetings will be prepared by the ARB/CEC internal working group.
          ARB and CEC believe one function of the subcommittee is to review
          the presented materials, including any associated proposed
          recommendations, for completeness and accuracy.  All constructive
          comments intended to further the subcommittees progress in
          meeting the established mission are encouraged and welcome.
          Determination of data needs and its solicitation will also be the
          responsibility of the internal working group.  The proposed
          action plan is quite ambitious and successful completion of many
          tasks will rely on the cooperative efforts of the petroleum
          industry.


               The final presentation of the day was given by Gary Yee,
          Manager of the Industrial Section (presentation materials
          enclosed).  Gary gave a brief overview of the status of the
          various California refiners in obtaining the required permits and
          making the necessary modifications in order to produce Phase 2
          RFG.  In summary, 10 of 13 major refineries have met all CEQA
          requirements, 9 refineries have obtained full or partial air
          permits, and 3 refineries are developing their EIRs.  ARB expects
          the major refineries will be permitted in time to comply with the
          Phase 2 RFG requirements by specified March 1, 1996 deadline.


CBG Program Advisory and Subcommittee Activities