The oil industry reacted yesterday with mixed emotions to the Environmental Protection Agency's order to remove more than 90 percent of the lead from leaded gasoline by the end of the year.
Some industry officials said they were afraid they could not prepare their refineries within so short a period of time to make high-octane gasoline without lead, and warned that the result could be gasoline shortages.
But most others, though grumbling over the EPA's action, said they could probably meet the requirements -- although they said that, in any event, the order will mean slightly higher gasoline prices.
"This will produce some changes that gore some peoples' oxes, and not others'," said Ron Jones, director of refining for the American Petroleum Institute, an industry group.
The EPA's announcement was not a surprise to the industry: The agency has been saying for months it soon would order the reduction of the amount of lead in gasoline and, in any case, the demand for leaded gasoline has been steadily declining for several years, leading many oil refineries to make changes in their operations to produce more unleaded fuel.
Under the new EPA regulations, refiners must reduce the amount of lead in a gallon of leaded gasoline to 0.5 gram from the current 1.1 grams by July 1. Lead content must further be reduced to 0.1 gram by Jan. 1, and lead may be eliminated entirely by 1988. The agency took the action based on an increasing number of health reports on the adverse effect of lead, particularly in causing high blood pressure.
Lead is considered to be the easiest, cheapest way to boost the octane level of gasoline. If they can't use lead, refiners will have to either switch to other, more expensive additives or, more likely, refine gasoline much more stringently to increase the octane level. Such refining requires sophisticated, expensive equipment, which many refineries have been installing over the past decade.
Experts said refineries that already have converted substantially to make unleaded gas or have excess capacity that is not being used probably will have little trouble meeting the requirements. But those that have been slow to make the change may fall behind. Industry analysts said many refineries have held off on the large capital investment in equipment to make more unleaded gasoline because of poor profit margins in the refining industry in recent years.
"There are certain refiners that have made the investments to get their octane capacity up," said David Zinamon, an analyst at Petroleum Industry Research Foundation in New York. "But there are quite a number of refiners who, for various reasons, have restricted their capital investment."
If there are problems with getting the lead out, they may be confined to specific areas of the country, depending on local refining capacities and market habits. Jones said that gasoline consumption in the Rocky Mountain states, for instance, runs about 60 to 40 percent in favor of leaded gasoline -- the opposite of the national average. "Obviously, there's more potential for a problem there than there is in Houston," Jones said. "So there is a regional problem."
Will Norva, president of Denver-based Asamera Oil (U.S.) Inc., a large refiner, said, however, that his company would be able to meet the new regulations, which he saw as inevitable. "Our position . . . has been that we have supported the lead phasedown," Norva said. "We feel that there wasn't any reason that the EPA should delay the action any further . . . It was just delaying the inevitable for a number of plants that weren't ready for a lead phasedown."
But the API, the industry's chief trade group, said in a statement that although the new lead regulations had been expected, "The announced lead-reduction schedule will create a substantial problem for the refining industry in providing motorists with adequate quantities of high-quality gasoline at a reasonable cost."
Many in the industry are hoping that the EPA will adopt some sort of "banking" plan for refiners under which those refiners who put less lead in gasoline than is required at one stage of the phasedown will be given credits that can be applied when they might be on the wrong side of the standards. Experts believe such banking rules will be in the final draft of the EPA rule when it is released in a few weeks.
Analysts differed on how much the new rules would cost consumers. The consensus was that the requirements would add a couple of cents a gallon to the overall price of gasoline, and the price of leaded gasoline would increase to about the level of unleaded, which it now trails by a few cents. But some experts said prices could go up by as much as a nickel, while others said it would depend on whether the market could absorb such an increase. "Do prices go up? Who knows?" Jones said. "Prices are determined by the marketplace. The point is that costs go up."
Perhaps the most damage inflicted by the new rules will be on Richmond's Ethyl Corp., the main supplier of lead to U.S. refineries. Vice Chairman Lawrence E. Blanchard Jr. said yesterday that the company's annual U.S. lead sales of about $50 million were in jeopardy because of the EPA's action, and he said the company may have to close its only U.S. lead plant, in Louisiana.
Ethyl also could face the loss of much of the rest of its $200 million worldwide lead business if other countries, as expected, adopt restrictions similar to those in the U.S. -- an action believed to be a few years off.
Blanchard said the company had been frustrated by the anti-lead movement, and in a statement, Ethyl called the EPA's action "just another chapter in a long and sordid novel written by EPA to try to make lead the scapegoat for real and serious environmental problems."
But Ethyl, like the refineries it serves, has seen this coming for some time. The company has diversified over the years into chemicals, materials, coal, oil and gas and life insurance, so lead sales only account for about 8 percent of its earnings.