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Sizing up oxyfuels.

Anchorage and Fairbanks must begin using oxygenated fuels in November. Designed to foster cleaner air, the fuels also will cost more at the pump.

Motorists in Fairbanks and Anchorage could be paying as much as 25 cents more per gallon for gasoline next winter. That's when the federal government requires the sale of oxygenated fuels in both areas. The higher cost results from using additives necessary to make the fuel burn cleaner. The net effect sought, according to the U.S. Environmental Protection Agency (EPA), is consistent compliance with federal air-quality standards.

Anchorage and Fairbanks are 2 of 9 cities in the Pacific Northwest and 41 nationwide, in which air quality does not meet national standards for carbon monoxide, according to EPA. Amendments to the Clean Air Act in 1990 require the cities to begin using gasoline fortified with high-oxygen additives by November 1992.

Rules and guidelines proposed last summer by EPA take affect in February. They require stations in both cities to sell "oxyfuels" by Nov. 1. Further, the fuels must be sold from November through February each year. Under the law, carbon monoxide levels may not exceed nine parts per million; only one incidence of noncompliance is allowed per year.

"Any more than that, and you're in violation," says Ron King, a project manager in the Alaska Department of Environmental Conservation's (DEC) air-quality-management section. DEC is responsible for drafting state regulations to implement and enforce the federal law.

Although requirements won't go into effect for many months, refiners, distributors and gas station owners already are contemplating their implications. Not everyone is convinced the added expense and effort are worthwhile.

Pollution Problem. Carbon monoxide concentrations vary with the weather, building up significantly in the extreme cold, when the air is still, or during temperature inversions. Emissions are especially high when a vehicle is warming up, because the motor uses extra fuel. The problem is exacerbated in Fairbanks by the tendency of motorists to leave cars idling for extended periods during extreme cold.

To combat those effects, gasoline sold in target regions must meet a requirement of 2.7 percent average oxygen content. The addition of oxygenates promotes more complete combustion, reducing carbon monoxide emissions by up to 20 percent, according to EPA.

Oxygen is added by blending compounds such as methyl tertiary butyl ether (MTBE) at the refinery, or by the addition of alcohols, such as ethanol or methanol, at a distribution terminal. One advantage of MTBE is that it can be piped through gas lines; alcohols cannot.

According to DEC, the use of MTBE offers other advantages:

* It blends more easily with gasoline and is not prone to separation as are alcohols.

* It is compatible with all vehicle engines.

* It can be transported and stored in existing gasoline equipment without special provisions.

* It does not increase evaporative emissions as alcohols can.

MTBE is the additive of choice for both Mapco Alaska Petroleum and Tesoro Alaska, companies that operate the state's two refineries and produce the lion's share of gasoline sold in Alaska. Buki Wright, vice president of Mapco Alaska Petroleum, says that while MTBE is a more costly alternative -- at least until supplies catch up with the new demand -- it is easier to store, handle and blend. "We're looking for the most 'error free' product possible," he adds.

By one DEC estimate, cities affected by new Clean Air Act mandates will demand 95 percent of the world's current supply of MTBE, which is the most-favored additive nationwide. Drawbacks to choosing methyl tertiary butyl ether include foregoing federal and state tax incentives available for using either ethanol or methanol.

The incentives apply when mixtures incorporate at least 10 percent alcohol. At that point, the oxygen content in the gasoline is approximately 3.5 percent, more than the minimum 2.7 percent mix. With MTBE, a 15-percent blend provides just the required 2.7 percent oxygen equivalent, according to Wright.

That means both Mapco and Tesoro Alaska will forfeit participation in a program that benefits refineries producing gasoline with higher-than-requested oxygen content. Participating refineries earn marketable credits that they can trade with other refineries to offset sales of gasoline containing lower levels of oxygen.

The idea is to give refineries greater flexibility in meeting standards. But the program has more impact in larger markets encompassing more than just two players, because credits must be used within the same area and during the same period in which they are earned.

Mapco plans to use additives in all gasoline produced for sale during the winter months, Wright says. Tesoro Alaska intends to produce both kinds of gasoline for sale during those periods, according to Gene Burden, vice president of environmental affairs and government relations for the company.

Calculating Cost. The bottom line for consumers is that gasoline will cost more. The added expense per gallon in Alaska could easily amount to five times that in the Lower 48. Higher fuel prices will cover the cost of buying and shipping the additives to Alaska and of installing extra tanks and pipes to handle the new fuels.

Nationally, EPA has estimated that oxygenated gasoline will cost drivers an additional two to three cents per gallon. According to Mike Lidgard, with EPA's regional air programs branch in Seattle, prices in different regions will fluctuate depending upon the type and availability of oxygenates, cost differences between suppliers and other variables.

Preliminary DEC studies suggest the price increase in Alaska will be about 10 cents per gallon. Based on typical consumption in previous years, Alaskans will pay $28 more per vehicle each winter to purchase oxygenated gasoline.

Refiners anticipate higher costs than those projected by DEC. "There have been various efforts to define how much that's going to be," says Tesoro Alaska's Burden. From preliminary indications, he anticipates an increase of from 15 to 25 cents per gallon. This winter, his company began negotiations with a foreign supplier to purchase MTBE.

Burden does not expect to increase his staff in response to the additive requirements. But Tesoro Alaska does anticipate spending a yet-to-be-determined amount to retrofit its refining, storage and distribution facilities to produce the alternative fuel supply. "It's a requirement that's got to be met regardless of the expense, although, of course, we will try to accomplish it as cost-efficiently as possible," says Burden.

Likewise, Mapco has committed an undisclosed sum to construction projects it deems necessary next summer, says Wright. In the end, consumers will pay for that work in per-gallon cost increases that may boost pump prices enough to rival peak prices during the Persian Gulf war.

For station owners, the expense should be minimal. Although there are labeling requirements, owners can use the same tanks and pumps to handle the oxyfuels. There may be an initial changeover problem for station owners.

According to Jim Boltz, vice president of refining for Petro Star Inc. of North Pole, when oxygenates are introduced, they react with the inside surface of a tank. The net effect is "scrubbing" away residue.

"They'll clean out your entire system, so that if you have any sludge -- say that has accumulated in your tanks -- it will clean it out," Boltz explains. That could result in plugged filters at the vehicle's fuel pump, although it would probably be a one-time-only complication, he says. "It shouldn't really be much of a problem after the first year. Tanks don't get that dirty," Boltz adds.

Bernie Saupe of Saupe Enterprises, a Chevron distributor in Fairbanks, is among those who are unconvinced the cost of compliance is worthwhile. "It's a big exercise in futility as far as I'm concerned," he says.

Chevron, as are Mapco and Tesoro Alaska, is leaning toward use of MTBE. That means Saupe will not have to worry about building a blending facility in Fairbanks -- a prospect that worried him early on. But he wants some reassurance consumers will be getting their money's worth.

Making Headway. Saupe notes that Fairbanks -- like Anchorage -- has come a long way since the 1970s in complying with federal air standards. Newer, fuel-efficient vehicles have been part of that difference. The emissions testing program begun in both cities in 1985 also has been effective.

A decade ago, Anchorage air contained up to 18 parts per million of carbon monoxide, exceeding the federal standard of 9 parts per million 66 days per year. In 1990, Anchorage air contained 12 parts per million, thanks largely to the inspection-and-maintenance automobile emissions control program.

Fairbanks recorded a maximum concentration of 16.8 parts per million during the winter of 1981-82, according to records in the borough's environmental services division. There were 39 days that year when air quality exceeded the standard. Last winter, the highest recorded concentration was 10.4 parts per million; there were only two days of noncompliance.

Anticipating the new regulations, Saupe says, "We have to do it but I think we're doing it without knowing if it's going to be effective or not. It cleans up fuel to some extent, but how do you measure the cost against the benefit?"

Regulations were still being drafted by the state Department of Environmental Conservation late last year and public hearings were planned for January, according to project manager King. Regulations will become final upon signature by the lieutenant governor.

Several states already have existing oxygenated gasoline programs. Colorado started its program in 1988. According to Alaska's DEC, that initiative is considered a success in reducing carbon monoxide levels. Other areas with programs include Tucson and Phoenix, Ariz.; Reno and Las Vegas, Nev.; and Albuquerque, N.M.

According to EPA's Lidgard, while cost may be a concern, field tests in areas where oxygenates are already in use show that engine performance is not. "People are always worried about performance. We don't see that as a problem," he says.

Areas subject to the oxyfuel requirements can obtain a waiver for a year or two if there are inadequate supplies of oxygenates or difficulties with fuel distribution. No exceptions will be made after the winter of 1994. Neither Mapco nor Tesoro Alaska intend to apply for a waiver, according to spokesmen for those companies.

According to DEC's King, once in place, the oxygenated fuels program will be around for as long as carbon monoxide levels exceed federal standards, probably 7 to 10 years. That time period could be shortened if cities turn in satisfactory performances for three winters in a row and devise an acceptable 10-year maintenance plan. "Then we could probably do away with the oxygenated fuels program," he says.

Meanwhile, if Anchorage and Fairbanks do not meet the upcoming November deadline, the federal government could opt to limit private drivers to vehicle use on alternate days, limit industrial growth, force commuters to car pool, and withhold highway funds.
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Title Annotation:use of oxygenated fuel will foster cleaner air but will cost more
Author:Martin, Ingrid
Publication:Alaska Business Monthly
Date:Feb 1, 1992
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