GASOLINE SULFUR AVERAGING BANKING TRADING ABT ABT PROGRAM

GASOLINE SULFUR AVERAGING, BANKING, & TRADING (ABT)

ABT PROGRAM § Three Purposes l l l additional incentives for early reduction encourage meeting 30 ppm early enhance overall feasibility and C/E § ABT Provides l l l within company flexibility (averaging) time flexibility (banking) cross-company flexibility (trading)

MAJOR ELEMENTS § Sulfur allotments, to be used against the corporate pool average standards § Sulfur credits, to be used against the refinery average and GPA gasoline standards

SULFUR ALLOTMENTS § Designed for use in compliance with corporate pool average standards of 120 ppm in 2004 and 90 ppm in 2005 § Provisions apply in various ways to large refiners and importers but not to small refiners. § Different allotment generation programs for 2003 and 2004/2005

2003 SULFUR ALLOTMENT GENERATION § Applies to individual refineries, not importers - must have established ‘ 97/98 baseline § Must be below baseline and 60 ppm § Number and type of allotments generated depends on measured average sulfur value for the refinery

2003 ALLOTMENT CALCULATION § Terminology l l l SA - sulfur allotments Savg - measured average sulfur value Sbase - ‘ 97/’ 98 sulfur baseline CR - sulfur credits V- volume of gasoline

2003 ALLOTMENT CALCULATION § SA = (120 -Savg)(V) l l if 30<Savg<60. Then 20% discount (Type A) if Savg <30, no discount (Type B) § CR = (Sbase-120)(V)

2004/2005 SULFUR ALLOTMENT GENERATION § Applies to domestic refiners and importers § Trigger value is 120 ppm in 2004 and 90 ppm in 2005 § Two cases apply, depending on the level of the standard and your measured average sulfur value § No discounts

2004/2005 SULFUR ALLOTMENT GENERATION § Case 1 l l l Sa < 30 SA = (std-30)(V) Type A SA = (30 -Sa)(V) Type B § Case 2 l l 30<Savg<std SA = (std-Savg)(V)

ALLOTMENT USE § Sulfur allotments generated in 2003 /2004 can be used to meet the CAS in 2004 § Sulfur allotments generated in 2005 can be used to meet the CAS in 2005 § Sulfur allotments generated in 2003/2004 can be carried over to used in 2005 if discounted by 50%

ALLLOTMENT USE § Allotments can be sold at any time, even before they are generated § Allotments can be transferred only twice § Small refiners and GPA gasoline may use allotments to meet refinery average standards

ALLOTMENT USE § Allotment use and transactions are under the control of the refiners/importers involved § Allotment generation, transfer, and use must be tracked and reported to EPA, but EPA will not broker

ALLOTMENT LIFE § Allotments expire at the end of 2006 § Unused allotments may be converted to sulfur credits § Converted allotments are subject to life and use restrictions of the credit program l l Type A treated as 2004 credits Type B treated as 2004 and later credits

SULFUR CREDITS § Designed for use against refinery average standard by allowing use of credits to get from a value below the cap down to the standard 2004 2005 2006 refinery std n/a 30 30 cap 300* 300 80 § Similar applicability to GPA gasoline and small refiner standards/caps

SULFUR CREDITS § Generation can begin in 2000, use begins in 2004 for small refiners/GPA and 2005 for other refiners/importers § Program provisions vary for 2000 -2003, 2004 -2007, 2007+ § Standards applicable to small refiners and producers/importers of GPA gasoline may decrease if they generate early credits

CREDIT GENERATION 2000 -2003 § Provisions l applies to individual refineries, not importers l must establish a ‘ 97/’ 98 baseline l achieve sulfur level >10% below baseline l independent of CG/RFG distinctions l no oxygenate exclusion l includes low sulfur gasoline produced for state programs l no double counting of allotments/credits

CREDIT GENERATION 2000 -2003 § Calculation CR = (Sbase-Savg)(V) § no discounts apply § cannot be converted to allotments

CREDIT GENERATION 2004+ § Provisions l l applies to domestic refiners and importers must be less than 30 ppm or applicable GPA/small refiner std § Calculation CR = (V)(STD-Savg) § No discounts apply

CREDIT USE § Credit use and transactions are under the control of the refiners/importers involved § Credit generation, transfer, and use must be tracked and reported to EPA, but EPA will not broker

CREDIT USE § Credits may be used by any refiner to meet refinery avg stds, GPA gasoline stds and small refiner stds § Credit use begins in 2005 for refinery average standards and 2004 for GPA gasoline and small refiner standards § Available credits must be used before seeking a deficit carry forward

CREDIT LIFE § Credits generated 2000 -2003 expire at the end of 2006 compliance year for refinery avg stds and GPA and 2007 compliance year for small refiners § Credits generated 2004 and later expire five years after they are generated § Credits may be transferred no more than twice.

AB&T Program Summary