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MTBE
The use of methyl tertiary butyl ether (MTBE) in gasoline increased substantially when the Clean Air Act Amendments of 1990 required that all gasoline sold in certain high-smog areas contain an "oxygenate" – a compound with oxygen in its molecular structure. The EPA's regulatory policy strongly favored MTBE over ethanol because of its transportability, its superior performance in reducing toxic air emissions and its lower volatility.
An unintended consequence of this increased use is that MTBE has contaminated some water supplies, primarily from leaking underground gasoline storage tanks. Current scientific evidence shows that drinking water containing MTBE, even at concentrations with an unpleasant odor or taste, produces no adverse health effects, with a wide margin for safety. However, because of consumer concerns and the perceived difficulty in removing MTBE from water, several states instituted bans on the use of MTBE, and the U.S. EPA was pressured to ban MTBE nationwide.
In place of the oxygenated fuel requirement, Congress mandated in the Energy Policy Act of 2005 that, beginning in 2006, at least 4 billion gallons (2.78% of gasoline sales) of fuel be produced from renewable sources such as ethanol, bio-mass, etc. increasing to 7.5 billion gallons in 2012.
In May of 2006, Sunoco discontinued the use of MTBE and continues our commitment to being a responsible producer and marketer of fuels and intends to meet all applicable requirements.
During 2008, Sunoco, along with other refiners, entered into a settlement in principle covering 53 of approximately 77 lawsuits Sunoco is involved with pertaining to MTBE. Sunoco’s portion of the settlement was approximately $28 million. The majority of the remaining MTBE cases have been removed to federal court and consolidated for pre-trial purposes in the U.S. District Court for the Southern District of New York. One of the cases is scheduled to proceed to trial in June 2009.
Low Sulfur Fuels
The U.S. EPA adopted rules under the Clean Air Act (which relates to emissions of materials into the air) that phased in limits on the sulfur content in gasoline beginning in 2004 and the sulfur content of on-road diesel fuel beginning in mid-2006. Sunoco met the requirements for these rules through capital projects that totaled $755 million. Additionally, the gasoline and diesel sulfur limitations rules have significantly increased capital and operating expenditures, including increased energy consumption.
A third rule adopted by the EPA in 2004 began phasing in limitations on the allowable sulfur content of off-road diesel fuel starting in mid-2007. In connection with this requirement, Sunoco had initiated an approximately $400 million capital project at the Tulsa Refinery. The project was to include a new 24 thousand barrels-per-day Hydrotreating unit, a sulfur recovery unit and a tail gas treater. However, in 2008 Sunoco elected not to proceed with the project as it intends to sell the Tulsa Refinery or convert it to a terminal by the end of 2009.
Renewable Fuels
The Energy Policy Act of 2005 also included a renewable fuel standard (RFS) for refiners beginning in 2006 and increasing to 8 billion gallons by 2008. Sunoco switched to ethanol on May 1, 2006, satisfying the RFS requirement for 2006. In December 2007, another law was enacted increasing the automobile mileage standards by nearly 40% to 35 miles per gallon by 2020. The law also increases the renewable fuel mandates almost 5-fold to 36 billion gallons per year by 2022.
However, new energy security legislation passed by Congress and signed by the President in 2007 greatly expanded the renewable fuel requirement beginning in 2008. |
