Can butane blenders generate allotments and credits?

Section 80.340(b)(1) provides that butane blenders may comply with the gasoline sulfur rule sampling and testing requirements using test results from the butane supplier provided that certain requirements are met. One requirement is that the sulfur content of the butane must not exceed 120 ppm in 2004 and 30 ppm in 2005 and thereafter on a per-gallon basis.

Section 80.340(b)(3) requires that the sulfur content and volume of each batch of butane used to produce gasoline is treated as a separate batch for purposes of calculating compliance with the sulfur standards in §§ 80.195 and 80.216. These sections include the corporate pool and refinery and importer annual average standards.

Although the regulations require refiners who blend butane into previously certified gasoline under § 80.340(b) to comply with the sulfur standards for the butane on a per-gallon basis, we believe that the regulations at § 80.340(b)(3) also require refiners to include the butane in compliance calculations for purposes of complying with the corporate pool standards and the refinery annual average standards. Thus, a refiner that produces gasoline by blending butane into previously certified gasoline and also produces gasoline by processing crude oil or blending other components will include the butane in its corporate pool average in 2004 and 2005, and in its refinery average beginning in 2005. Similarly, a refiner that produces gasoline only by blending butane into previously certified gasoline will comply with the corporate pool and refinery average standards based on the batches of butane blended into the gasoline.

In either case, we believe that sulfur allotments and credits may be generated based on reductions from the corporate pool and refinery annual average standards as provided in §§ 80.275 and 80.310.