California Air Resources Board

 SACRAMENTO – The Air Resources Board (ARB) has approved variances for three oil companies so that they can complete refinery modifications to produce cleaner burning diesel fuel, a move to insure uninterrupted diesel fuel supplies as rules that require cleaner fuel take effect on October 1.

Under the variances, the three companies -- Chevron, Unocal and Ultramar -- will produce about half of their diesel fuel to meet the ARB's new standards by December, 1993, while the remainder will be brought into compliance no later than the fall of next year

In all, the ARB has received commitments from five other oil companies to produce clean diesel fuel this fall, insuring that there will be an adequate supply to meet the demand. The three who applied for variances, however, require extra time to complete refinery modifications that are already well underway.

As a condition of the variance, the three companies will pay an environmental mitigation fee of five to six cents for each gallon of non-complying diesel fuel they sell -- equal to the ARB's cost estimate for producing the cleaner grade. The fees are designed to prevent them from undercutting the price of other oil companies that will fully comply with the standards on time, insuring an equal, competitive marketplace for all oil companies. Funds collected will be used for projects to mitigate the increased emissions resulting from the temporary production of non-complying fuel and will be mutually decided between the oil companies and the ARB.

"These three oil companies have already made a good faith effort to comply with our clean diesel rules by designing refinery changes and beginning construction," said Jananne Sharpless, ARB chairwoman, who noted by example that Chevron has installed 14 new pieces of equipment at its Bay Area refinery to comply with the new standards. "These variances are a way of helping them finish the job they have already started.

"These variances will provide a smooth transition as the clean diesel rules go into effect this October 1, and will insure a steady supply of diesel fuel to meet the demand.

 "In addition, the variances will prevent a serious economic hardship for the companies still remodeling their refineries while the environmental fee will protect the financial investments of those oil companies who are already prepared to meet the rule on time," she continued.

The ARB clean diesel rules are expected to reduce overall soot-like particle emissions from buses and trucks by about 25 percent. The regulations require refiners to cut sulfur levels in diesel fuel by about 80 percent, to .05 percent. Another key specification requires an average 66 percent reduction in aromatic hydrocarbons, a key to reducing smog-forming nitrogen oxide gases. The new standards are also expected to reduce public exposure to highly toxic, potentially cancer-causing compounds such as benzene.

 Besides adopting specification for cleaner-burning diesel, the ARB rule also offers oil companies the flexibility of producing their own, unique blends, as long as they reduce the same amount of pollution. Three oil companies -- Chevron, Texaco, and ARCO -- have received ARB approval for their alternative diesel fuel blends.

In addition to the ARB rules, the federal Environmental Protection Agency also is requiring reductions in sulfur content to match those in California for diesel fuel sold in the remaining states, at an estimated cost of two to five cents per gallon nationwide.

The cleaner fuel requirements are one of three ARB programs designed to reduce public exposure to harmful diesel emissions. The ARB also has adopted emission standards that require "sootless" diesel bus engines, beginning with 1993 models, and conducts a roadside testing program -- similar to the Smog Check for passenger cars -- that identifies high-polluting trucks and requires repairs to bring emissions down to acceptable levels.

EDITORS NOTES:

CHEVRON: Variance is for 52,000 barrels per day from Oct-Dec 1993. Allowable amount of non-complying fuel drops to 28,000 bpd until Jun 30, 1994, when the variance expires. Environmental Mitigation Fee is 6 cents per gallon.

ULTRAMAR: Variance is for 14,800 barrels per day; expires Jul 1994. Environmental Mitigation Fee is 5 cents per gallon, reflecting its status as a smaller, independent refiner.

UNOCAL: Variance is for 22,000 barrels per day, Oct-Dec 1993. Allowable amount of non-complying fuel drops to 12,000 bpd until Sep 1994 Environmental Mitigation Fee is 6 cents per gallon.

DIESEL FUEL SUPPLY: The ARB has commitments to produce clean diesel fuel from eight California refiners; Chevron (52,000 bpd); Texaco (20,000 bpd); ARCO (15-20,000 bpd); Unocal (22,000 bpd); Exxon (2-3,000 bpd); Tosco (15,000 bpd); Ultramar (15,000 bpd); and Kern Oil (the total output of all complying small refiners will be 20,000 bpd). Shell and Mobil have not made their intentions public to date.

These suppliers have the capacity to produce 160,000 barrels per day of diesel fuel, enough to meet the California demand of 155,000 bpd. In addition, Chevron has disclosed that it has the potential to produce an added 38,000 bpd, if market conditions warrant. The ARB's latest information continues to show that sufficient supplies of diesel fuel will continue to be available for California.