[sustran] Canadian series on cars (3)

Craig Townsend townsend at central.murdoch.edu.au
Wed May 23 10:51:22 JST 2001


 From the Vancouver Sun newspaper online edition, 22 May 2001

Dirty gas: Refiners fought sulphur cuts
Human health measured against costs to industry
Paul McKay Vancouver Sun

Horse-trading over human health.

That's the grim game Canada's oil refiners got into during the year 
following passage in June 1999 of an obscure federal regulation limiting 
sulphur levels in gasoline.

It's a story buried in some 350 pages -- many stamped confidential -- 
obtained under access to information laws. They detail an intense year of 
closed meetings, pressure from lobbyists, cost calculations and secret 
briefing memos for federal cabinet ministers.

It amounts to a war of words -- and wills. On one side were CEOs of oil 
refiners that produce high-sulphur gasoline that "poisons" catalytic 
converters on Canadian cars. On the other, Environment Canada and Health 
Canada.

The issue was when the oil refiners would comply with the 1999 regulation 
and upgrade their refineries to strip out sulphur particles in gasoline.

On the face of it, the regulation was uncompromising. The deadline is Jan. 
1, 2005. An interim level of 150 ppm kicks in by July 2002. Sulphur levels 
must be reduced from a national average that now exceeds 300 ppm to just 30 
ppm. No exceptions.

Yet only two months after the regulation was enacted, the refiners began 
pressing the federal government hard for amendments. That's when the 
brokering began over future deaths, hospital admissions and health-care 
costs generated by Canada's notoriously dirty gasoline and its related smog 
effects.
The campaign was led by the Ottawa-based Canadian Petroleum Products 
Institute. Many of the negotiations with federal officials took place in 
its Slater Street office. The institute's dominant members are Imperial Oil 
and Petro-Canada, which sell more than half the 38 billion litres of 
gasoline burned in Canada's cars each year.

Seven of the Imperial and Petro-Canada refineries rank among the dozen 
worst producers of high-sulphur gas in Canada (see sidebar). According to 
independent technical reports commissioned by Environment Canada, they face 
the biggest costs for refinery upgrades to remove sulphur.

In September 1999, the petroleum products institute proposed a plan that 
would allow oil producers to keep selling high-sulphur fuel in exchange for 
"future considerations." The longer they could wait, they argued in memos 
and meetings, the better and cheaper sulphur-removal technology would be.
But first came a triple-barrelled warning:

- As many as eight major refineries might have to mothball operations, 
causing national gas-price hikes, short supplies and trucked imports that 
would increase air pollution;
- Meeting the 150-ppm target by 2002 would be technically impossible and 
financially ruinous for Esso and Petro-Canada refineries in Ontario;
- And the federal government would have to accept their proposed delays by 
April 2000 or the refiners would begin notifying already jittery gas 
retailers of impending shortages and employees of potential shut-downs.

That blunt message was coated with a sweetener: if Environment Canada would 
waive the interim sulphur limit of 150 ppm by July 2002, the refiners would 
agree to meet the 30 ppm limit by 2004 -- one year ahead of the regulatory 
deadline. That would "buy" an extra year of reduced auto emissions, and 
allow the next generation of auto anti-pollution devices to work in tandem.

But Environment and Health Canada staff concluded that the offer had a dark 
side. It would allow the biggest refiners to continue selling dirty gas 
until 2004, putting more sulphur pollutants into the air and triggering 
additional smog-related illnesses and costs.

The industry proposal would also sandbag the maverick refiner Irving Oil, 
which had just committed to upgrade its New Brunswick complex to meet the 
30 ppm standard by this year. And, memos noted, it would be condemned by 
the doctors, car makers and environmentalists who wanted all of Canada's 
high-sulphur refiners to quickly match Irving Oil's example.

At a January 2000 meeting at the institute's headquarters, Environment and 
Health Canada staff stressed that no proposal would fly unless there was 
proof it would create no net increase in emissions and health damage.

In response, an institute executive produced a list entitled "Options for 
Generating Sulphur Credits." Instead of reducing sulphur in gasoline, the 
oil refiners proposed to reduce sulphur in home heating oil, diesel fuel 
for trucks, power plants and construction machinery, and from refinery 
operations.

There were no details on which refineries would make the reductions in 
exchange for credits against their high-sulphur gasoline, or how the 
credits would be calculated.

Nothing was said about a crucial issue: The high-sulphur gas would damage 
the anti-emission devices on some four million new vehicles expected to be 
sold in Canada from 2001 to 2005 -- and allow the escape of other 
smog-related pollutants.

After institute executives warned that Imperial Oil, Petro-Canada and Shell 
were concerned about possible gas shortages unless there were concessions, 
an Environment Canada memo notes, a vice-president "indicated that CPPI's 
alternative path forward is to go 'political' with the message that there 
will not be compliance at full production levels [and] there will be strong 
and dramatic action."

That was coded language for refinery shutdowns, gas shortages and price 
hikes at the pumps -- a message no politician could ignore.

A few days later, institute president Alain Perez wrote to the deputy 
minister of Environment Canada. "I believe," he wrote, "that the main 
obstacle is that Health Canada experts are not prepared to accept the 
methodology offered, or are asking for further studies that cannot be 
accommodated because of time pressure or lack of existing data."

By April 7, 2000, the institute had provided some sketchy calculations to 
back up the proposed sulphur offsets in other fuels, and pressed for urgent 
action. Meanwhile, Environment Canada had commissioned outside experts to 
study how quickly the oil refiners could meet the 150 ppm and 30 ppm 
targets, and the costs to comply.

Health Canada compared the institute plan to earlier studies on public 
health damage due to high-sulphur gas. Those estimates had anchored 
Environment Canada's determination to clean up Canada's gasoline.
The following week, Environment Canada staff met separately with Imperial 
Oil and Petro-Canada executives. Both companies pressed for even more 
"flexibility."

Petro-Canada wanted a system of credits, extending to 2010, which would be 
earned by reducing sulphur in highway diesel, regular diesel, furnace oil, 
jet fuel and refinery emissions based on a benchmark of its highest sulphur 
levels from 1996-98. It also wanted credit for meeting the 30 ppm limit in 
gasoline by 2004.

Imperial Oil also wanted to use its worst sulphur levels as the benchmark 
for credits, and to earn offsets by reducing sulphur in diesel and furnace 
oil through the year 2010. It also wanted credit for meeting the 30 ppm 
limit one year early.

In most cases, the two companies were seeking credits far into the future 
for pollution reductions in other fuels, such as diesel, which also face 
imminent regulatory reductions. But there were no hard commitments, and no 
details on which fuels would have how much sulphur reduced by what date.
"It is not possible to quantify the sulphur-reduction benefits, let alone 
the health benefits, from the data provided by Petro-Canada," an 
Environment Canada official concluded.

"Imperial Oil left no quantification documents for Environment Canada to 
use. ... The responsibility for providing the necessary information on 
potential offset packages was left with the respective companies."
That information never did arrive. But an analysis by Health Canada on the 
institute's proposal did, and it was not good news for the high-sulphur 
refiners. During 2002 and 2003, it concluded, health damage would increase 
dramatically if the 150 ppm limit was waived, and far outweigh the gain of 
moving to the 30 ppm limit one year earlier.

Health Canada estimated the net increased health damage would include 60 
premature deaths, 70 hospital admissions, 190 emergency room visits, 220 
chronic respiratory disease cases, 2,700 extra cases of lung disease in 
children, 45,000 extra days of restricted activity, 93,000 days in which 
people suffered acute asthma symptoms, and 330,000 additional cases of 
acute respiratory symptoms.
"Although the measures proposed by CPPI are likely to bring some benefits, 
the sum total of benefits will be less than for the current regulation," 
wrote then-deputy minister of Health Canada, David Dodge. "This is due to 
the lower benefits that can be expected from some of the proposed measures 
than from those actions on sulphur in gasoline."

Soon after, external experts hired by Environment Canada provided their 
draft analysis of the impact of the sulphur regulations on the oil 
refiners. Using precise, refinery-by-refinery data, they concluded that all 
the refineries could meet the 30 ppm deadline by 2003, that the threat of 
refinery shut-downs and gas shortages was barely credible, and that all the 
upgrades combined would add only a penny per litre to gas costs.

The institute responded by sending delegations and memos to senior 
mandarins at federal departments, and by pitching their case to provincial 
politicians where their refineries are located. They also persuaded Liberal 
MPs to approach federal Environment Minister David Anderson, and sought 
meetings at the federal deputy minister level.

Facing intense pressure, Anderson's staff made a counter offer: if all the 
institute's members would agree to meet the 30 ppm standard by July 2003, a 
deal could be struck to waive the interim 150 ppm legal limit. That would 
bring more pollution in the first three years, and less in the last two.

In early May 2000, the institute responded with an even more complex 
variation: each refiner could choose to either meet the interim limit and 
wait until 2005 to meet the 30 ppm deadline, or ignore the interim limit 
and produce 30 ppm gas two years earlier.

Once again, Health Canada crunched the numbers to estimate the health 
impacts of the new proposal. It concluded that an additional 30 deaths, 35 
hospital admissions, 95 emergency room visits, 110 bronchitis cases, and 
200,000 days lost to respiratory illnesses would result.

It was the last offer Canada's high-sulphur refiners put on the table. By 
2000, Imperial Oil and Petro-Canada were earning record profits.

Company officials now say all their refineries will meet the 30 ppm sulphur 
in gasoline limit by 2004, without mothballing any facilities, laying off 
any employees or gas supply shortages.

They and their rivals are now locked in a new test of wills with federal 
regulators over proposals to reduce high levels of sulphur in the 12 
billion litres of diesel fuel burned annually by Canada's 370,000 big 
highway rigs and 77,000 buses.

________________________________________________
Craig Townsend
Institute for Sustainability & Technology Policy
Murdoch University
South Street, Murdoch
Perth, Western Australia 6150

tel: (61 8) 9360 6293
fax: (61 8) 9360 6421
email: townsend at central.murdoch.edu.au



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