Release 94-3

FOR IMMEDIATE RELEASE                                                     CONTACT: Jerry Martin
February, 8, 1997                                                                                             (916) 322-2990

Air Resources Board Grants Variance to Tosco Oil

         SACRAMENTO - In a move that will significantly reduce air pollution, the Air Resources Board (ARB) today granted a variance to Tosco Oil Company as part of a two-step phase-in of cleaner-burning diesel fuel.

        Under the variance, Tosco will have a temporary exemption from the state's clean air specifications for diesel fuel, but will still make a lower-polluting grade than it currently produces. In addition, over the next four months, the company will accelerate plans to make an even cleaner-burning grade of diesel fuel that does meet ARB standards.

        Tosco, an independent oil company from Concord, CA., that in recent months has become a major supplier, will produce up to 45,000 barrels a day of cleaner diesel fuel under the variance. At the same time, the company will develop a diesel fuel to meet stricter clean air standards normally reserved for larger, major oil companies by this summer, 27 months earlier than ARB rules require. That will result in 10 million gallons of diesel fuel that will be lower polluting than it otherwise would be.

        The ARB specifications require that diesel fuel with low sulfur levels to reduce soot-like particles and reduced content of aromatic hydrocarbons, a component of diesel fuel that contributes to emissions of nitrogen oxides, a key ingredient in urban smog. The ARB standards are estimated to reduce emissions from diesel cars, trucks and buses by up to 25 percent.

        Under the ARB rules, large refiners must limit the aromatic hydrocarbon content of diesel fuel to 10 percent, while small and independent refiners -- such as Tosco -- can produce less costly grades containing up to 20 percent aromatics for the next two years before meeting the stricter standard. As a condition of its variance, Tosco will meet the more costly and stricter 10 percent limit no later than this July.

        The ARB variance notes that the fuel Tosco will produce in the next four months is substantially cleaner than diesel fuel produced by other refiners under variance and that it nearly meets the ARB specifications that went into effect last October 1. The variance order also concludes that Tosco is making a good faith effort to meet the standards, noting that it has spent approximately $30 million to upgrade its Martinez refinery in the last two years.

        To prevent oil companies from gaining an unfair competitive advantage in the marketplace by not complying with the rule, those receiving ARB variances have paid and environmental mitigation fee of up to six cents per gallon, reflecting the estimated cost of producing the cleaner fuel. The ARB concluded, however, that the fee was not necessary in Tosco's case because of the cost it had invested in making the cleaner fuel. In addition, the ARB concluded that by giving up its status as an independent refiner under the rule, Tosco could not gain a competitive edge in the marketplace. "Tosco will incur significant costs in reducing the aromatic hydrocarbon content, increasing the cetane number, and meeting the additional specifications on its variance fuel which were not incurred by other variance recipients to date," the ARB's variance order states.

        Tosco had requested the variance because it had exhausted its annual sales allocation allowed under the ARB regulations in an effort to reverse a temporary shortage of diesel fuel last year. The regulations allowed Tosco to produce up to 5.2 million gallons (14,400 barrels per day) of non-complying fuel through September, 1994. Tosco accelerated its production last fall, however, to meet the needs of truckers, growers and motorists when production problems of some refiners, and the pulling out of the Northern California market by others, caused shortages.

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