Clearing the Air and Muddying the Economic Water

Crain's Insider is reporting (subs.) that the sulfer reduction bill-a pet initiative of Mayor Mike-is being held up, possibly for good, in the state senate: "A bill to prohibit the sale of high-sulfur home heating oil is “on the doorstep of passage” in the state Senate, according to Environmental Advocates of New York. But the bill, sponsored by Sen. Bill Perkins, D-Manhattan, has fallen short several years in a row, and environmental groups fear Senate Republicans will vote against it as a bloc."

Ah, if that was the bill's only impediment. Our sources tell us that a number of skeptical Dems-particularly from upstate-have also begun to join the opposition; and opponents are looking to delay implementation in order to give refineries a better chance to retrofit their facilities: "Opponents want the effective date pushed back several years; the bill would take effect in one year. But many oil heat industry leaders pledged in September to switch to ultra low-sulfur diesel by July 2011. In exchange, they asked clean-air advocates to stop promoting conversions to natural gas or woody biomass heat."

The problem with the bill-S1145 in the senate-is that it doesn't consider the economic impacts-and the need for time to adjust-or, as one refiner told us: "to give refiners an opportunity to absorb the current EPA requirements concerning blending renewable fuels and reducing benzene content of gasoline, both of which will begin in 2011, and have time after that to plan, obtain necessary permits and build the required facilities to produce the low sulfur home heating oil at the 500 parts per million level."

Without the needed time, there will be dislocation and job loss because of a withdrawal by a number of producers from the NY market-not to mention a spike in home heating oil prices, something you don't want to see in a recession. As our refiner told us: "That will likely have profound impact on the price of heating oil (and diesel fuel) in our region and cause substantial additional increase in price over and above the 5.6 cents per gallon price differential that already exists."

So, the senate is right to go a bit more slowly-listen to to producers and gauge the economic impacts. It does little good to try to clean up the air if it leads to unwanted economic hardships that can be avoided by a more judicious approach.