March 19, 2006

NPRA does not expect US to waive fuel regulations

SALT LAKE CITY, Utah (Reuters) - The U.S. Environmental
Protection Agency (EPA) has indicated it will not issue waivers
for clean fuel regulations this summer unless there is a
"demonstrated need," the head of the National Petrochemical and
Refiners Association (NPRA) said on Sunday.

Fuel producers in the United States will need to meet lower
sulfur requirements for gasoline and diesel this year. The
industry is also phasing out gasoline-additive MTBE, banned in
several states because of water pollution concerns.

Oil experts say the transitions could cause supply
disruptions and regional price spikes.

The EPA, the agency that would grant fuel regulation
waivers, has indicated there "will not be waivers unless there
is a demonstrated need for them," said NPRA President Bob
Slaughter, speaking to reporters at the NPRA's annual meeting.

Slaughter, Valero Energy Corp. CEO and NPRA Chairman Bill
Klesse, and James Mahoney, NPRA vice chairman and Koch
Industries vice president of operations all emphasized the
challenges the new regulations posed to the refining industry.

The regulations were "designed with less of a margin for
safety than the industry recommended," said Slaughter,
cautioning that there could be some supply glitches as the
industry transitions to a new ultra-low sulfur diesel and
phases out gasoline-additive MTBE.

"I do think there are going to be issues," Mahoney said,
speaking specifically about the switch to ultra-low sulfur
diesel, which on June 1 will start "leaving the refinery
fence," and enter U.S. pipelines and retail outlets.

While most refiners have made the necessary investment and
will be ready for both the diesel and gasoline specification
changes, "some are lagging," said Klesse.

The EPA did grant waivers to fuel regulations after a
series of hurricanes ravaged Gulf Coast refineries and other
industry infrastructure last year and Slaughter said that
learning experience had helped both the agency and industry.

"We found out which waivers were helpful," said Slaughter.
He added that if the Atlantic hurricane season was as active in
producing strong storms that hit the U.S., he expected waivers
"will happen sooner."

Klesse told reporters that while strong prices for ethanol
showed that supply "is tight. We believe there will be enough

Ethanol, blended with reformulated blendstock for oxygenate
blending (RBOB) will be used as a gasoline additive to replace


"We think there is enough RBOB," said Klesse.