1. © ChevronTexaco 2003 Chevron Products Company - FR&ET EPA Nonroad Diesel NPRM Chevron’s Perspectives Mike Ingham WRAP Mobile Source Forum Meeting Denver July 16, 2003

2. 2 Chevron Products Company - FR&ET Outline Advocacy History on NPRM Perspectives on NPRM Two-Step Approach Enforcement Credit Banking & Trading Summary

3. 3 Chevron Products Company - FR&ET Chevron’s Advocacy History on Nonroad NPRM Began meeting with EPA OTAQ Ann Arbor in early 2001 to discuss potential nonroad fuels provisions. Actively participated in API Diesel Issues Work Group meetings with OTAQ beginning September 2002. Chevron Products Company President testified on behalf of API at EPA Hearing June 17 in Los Angeles.

4. 4 Chevron Products Company - FR&ET Chevron’s Perspectives on Nonroad NPRM Two-Step Process First step to 500 ppm in mid-2007* should include home heating oil (HHO), as well as Part 89, railroad & marine fuels. »Provides substantial additional sulfate PM benefits for northwest and eastern United States (HHO vol. ~15% > RR+marine vol.) »Simplifies EPA’s enforcement concerns; eliminates need for separate dye or marker for HHO »Levels competitive playing field. »However, states, not EPA, have authority over HHO. * Chevron would support mid-2006 implementation if needed. Provides states with additional near-term air quality benefits. Aligns with on-highway implementation, avoiding creation of “third” fuel for distribution system to handle (assuming HHO included).

5. 5 Chevron Products Company - FR&ET Chevron’s Perspectives on Nonroad NPRM Two-Step Process, cont. Support 15 ppm cap in mid-2010 for Part 89 fuels. »Aligns with 100% on-highway requirement. »Allows industry to gain experience producing diesel to 15 ppm cap. »Provides time for hydroprocessing technologies to evolve to treat more difficult diesel streams (e.g., LCO). Don’t support 15 ppm cap for railroad & marine fuels in mid-2010. »Aftertreatment technologies requiring ULSD not yet demonstrated for railroad and marine engine applications. »Absent aftertreatment, incremental PM benefit between 500 and 15 ppm sulfur is small* and not cost-effective. »Provides essential home for downgraded 15 ppm fuel. * Reducing HHO from current level of ~2000 ppm S to 500 ppm cap yields ~6x the sulfate PM benefit of reducing rail and marine fuels from 500 ppm cap to 15 ppm cap.

6. 6 Chevron Products Company - FR&ET Chevron’s Perspectives on Nonroad NPRM Enforcement Chevron not enthused with EPA baseline proposal; unduly constrains future refinery flexibility to respond to changing market; designate & track approach preferred. Beyond preservation of highway rule, primary concern seems to be use of HHO in nonroad fleet. »Include HHO in 500 ppm requirement, or »Require unique marker or dye* in HHO, and »Preclude production of any non-HHO 5,000 ppm fuel after mid- 2007 (i.e., no credits for early 500 ppm nonroad fuel); same timing for smalls, or place enforcement burden on them if additional time granted. * Yellow dye proposed in NPRM poor choice; not visible; basic chemistry demonstrated to cause deposits in aircraft engine fuel nozzles at typical jet fuel contamination levels.

7. 7 Chevron Products Company - FR&ET Chevron’s Perspectives on Nonroad NPRM Credit Banking & Trading Chevron willing to forgo opportunity to generate credits to produce 5,000 ppm nonroad fuel beyond mid-2007 (by supplying 500 ppm nonroad fuel early) to facilitate simpler approach to enforcement, but Chevron would like unrestricted provision to generate credits to produce 500 ppm nonroad fuel beyond mid-2010 by supplying 15 ppm nonroad fuel early.

8. 8 Chevron Products Company - FR&ET Summary Chevron supports EPA’s proposed two-step process to regulate the sulfur content of nonroad diesel fuels. However, we would like to see EPA work with the states to coordinate a 500 ppm sulfur cap for home heating oil in mid-2007. Chevron does not support EPA’s proposed baseline approach to enforcement, we prefer designate & track. Chevron willing to forego opportunity to generate credit to make 5,000 ppm fuel beyond mid-2007 by supplying 500 ppm early, but we would like to see more flexibility to produce 500 ppm fuel beyond mid-2010 by supplying 15 ppm fuel early.