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MEETING REQUIREMENTS FOR CLEANER FUELS AND REFINERIES TO ADD 6-10 CENTS/GAL. TO FUELS COST, DOE-REQUESTED STUDY SAYS

 HOUSTON, Aug. 30 /PRNewswire/ -- Petroleum "light products" (gasoline, jet fuel, home heating oil and diesel fuel) will cost an average of 6 cents per gallon more in 1995 and 10 cents per gallon more in 2000 -- or $18 billion a year -- because of the cost of meeting government environmental, health and safety requirements on refineries and their products.
 These are among key findings of a comprehensive study of U.S. refining done for the U.S. Department of Energy by the National Petroleum Council (NPC), a federally chartered advisory committee to the U.S. Secretary of Energy.
 In areas where "reformulated" gasoline is required by Clean Air Act regulations, the study concludes, per-gallon increases for gasoline will be 10 cents in 1995 and more than 13 cents in 2000. The cost increase in 2000 could be higher, depending on the final requirements of rules still being discussed. For example, if standards set by the California Air Resources Board are adopted by other areas, this could add another 9 cents per gallon to the cost of reformulated gasoline.
 At a news conference here today, the study was formally presented to Energy Secretary Hazel O'Leary by NPC Chairman Ray Hunt, chairman of Hunt Oil Co., and Ken Derr, chairman and chief executive officer of Chevron Corp., who headed up the study. The study's cochairman representing the federal government was Deputy Energy Secretary William White.
 In representing the report, Derr stressed its stark yet comprehensive view of the U.S. petroleum refining industry in the 1990s and beyond. "This will be a period of great uncertainty, with major concern that margins in a very competitive market will be inadequate to recover the large environmental investments and other regulatory costs."
 The NPC study took more than two-and-a-half years to complete. About 125 people from 25 companies and the Department of Energy worked to gather and analyze data included in the study. They considered U.S. refining capabilities; the higher cost of making cleaner transportation fuels; the increased cost of meeting existing and expected environmental regulations on the refineries themselves; and the competitiveness of domestic versus foreign supplies.
 The study concluded that the U.S. refining industry can meet federal and state environmental requirements, but that this will require new capital investments of about $37 billion between 1991 and 2000. This is some $6 billion more than the current value of all U.S. refineries carried on the books of the companies that own them.
 NPC Chairman Hunt said the study has recommended that Secretary O'Leary take the lead in implementing:
 -- Cost-effective reformulated gasoline regulations that are fully compatible with the existing distribution system;
 -- A constructive partnership process involving interested stakeholders to create cost-effective solutions to societal concerns related to the industry;
 -- Recognition by policy makers that the costs of regulation will ultimately be reflected in the marketplace and will affect rationalization, competitiveness, and the long-term financial health of the industry.
 According to the Department of Energy, the refining industry earned a profit of about 2.7 cents per gallon during the 1980s, realizing an average return on investment of 8.8 percent. But 120 refineries shut down for a variety of reasons, including over-capacity in the industry. Governmental policies may reduce demand for transportation fuels while, at the same time, other policies will require major new environmental investments.
 Many refiners expect to have excess capacity in the 1990s, the NPC study found. In a very competitive market, they are seriously concerned that margins will be inadequate to recover large environmental investments and other regulatory costs, and that refinery shutdowns will continue. Expectations of reduced demand or excess capacity discourage new refining investments.
 The cash cost of pollution controls and health and safety programs in U.S. refineries, including operating and maintenance expenses and capital investments, is projected to exceed $150 billion between 1991 and 2010, according to the study. But that figure does not include any expenses required to make cleaner-burning products, nor does it include required changes to the nation's product distribution or marketing systems.
 -0- 8/30/93
 /NOTES TO EDITORS:
 -- All figures are in 1990 dollars.
 -- The National Petroleum Council is a federally chartered, privately funded advisory committee that was established in 1946 at the request of President Truman. In 1977, it was transferred from the Department of the Interior to the newly created Department of Energy. Its purpose is solely to advise, inform, and make recommendations to the Secretary of Energy with respect to any matter relating to oil and natural gas or to the oil and gas industries submitted to it or approved by the Secretary. The NPC does not concern itself with trade practices, nor does it engage in any of the usual trade association activities.
 Council membership of about 150 persons is selected and appointed by the Secretary of Energy. Members serve without compensation as representatives of their industry or associated interests as a whole, not as representatives of their particular companies or affiliations.
 The advice of the NPC is transmitted to the Secretary in the form of reports approved by the Council and is rendered to the government as a public service. The cost of providing this service is borne by voluntary contributions from Council members. The NPC has prepared over 200 reports over the years dealing with virtually every aspect of oil and gas operations. All NPC reports are available to the public.
 -- Printed copies of the report will be available for purchase from NPC in late September./
 /CONTACT: Carla Scali Byrd, information coordinator of the National Petroleum Council, 202-393-6100/


CO: National Petroleum Council ST: Texas IN: OIL SU:

TM-BR -- SF004 -- 7164 08/30/93 15:16 EDT
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Publication:PR Newswire
Date:Aug 30, 1993
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