Valero Energy Introduces ultra Low Sulfur Diesel

San Antonio, TX - Valero Energy Corporation is the first refiner in the U.S. Southwest to introduce Ultra Low Sulfur Diesel (ULSD), a specially refined diesel fuel that has significantly lower sulfur content than regular on-road diesel. As part of Valero's clean fuels program, the company introduced its ULSD well in advance of regulatory requirements to help improve the air quality in cities that are currently in non-attainment or near non-attainment status for nitrogen oxides (NOx) emissions, one of the leading contributors to the formation of ozone.

"We're really excited about being the first refiner in the Southwest and one of the first in the nation to offer Ultra Low Sulfur Diesel," said Bill Greehey, Valero's chairman and CEO. "This new clean diesel can make a dramatic improvement in the air quality of non-attainment cities, like Houston and Dallas, and near non-attainment areas, such as San Antonio and Austin."

Valero began producing ULSD at its refinery in Three Rivers, Texas at the end of 2002 and has already received considerable interest in the environmentally friendly fuel from municipal and private fleets. Valero recently signed a contract with Dallas Area Rapid Transit (DART) for 9 million gallons over a two-year period, and it secured a contract with Capital Metro of Austin for 600,000 gallons over one year.

"Switching early to ULSD is part of our ongoing commitment to improving air quality in the metroplex," said Mike Hubbell, vice president of maintenance of DART. "We're particularly excited about Valero's ULSD because it significantly reduces emissions from NOx and particulate matter."

Additionally, Valero forged an agreement to supply approximately 300,000 gallons annually to Houston-based Silver Eagle Distributors, the nation's second-largest distributor of Anheuser-Busch products.

"Silver Eagle Distributors is proud to partner with Valero Energy Corporation in their efforts to improve the air quality in the Houston area," said John L. Nau, president and CEO of Silver Eagle Distributors.

"By utilizing Valero's ULSD fuel in a total of 42 fleet trucks equipped with the emission reduction equipment, our company is expected to reduce 8.7 tons of NOx this year. As a company committed to reduce emissions and protect our communities' health, we also plan to use the ULSD fuel in the remainder of our fleet currently awaiting equipment conversion, thus reducing NOx even more," he said.

Valero's ULSD exceeds the EPA requirements that stipulate lowering the sulfur content in on-road diesel from 500 parts per million (ppm) to 15 ppm by 2006. This ULSD also meets the more stringent Texas Low Emission Diesel (LED) specifications that go into effect in 2005 and are focused on reducing emissions of NOx. In addition to meeting these future environmental regulations, Valero's ULSD meets all specifications for regular on-road diesel, including the lubricity standards required by engine manufacturers to maintain engine reliability.

The lower sulfur content produces fewer emissions and enables the use of emission-reduction equipment, such as particulate filters, which can be retrofitted on vehicle tailpipes. Use of these systems in conjunction with ULSD can reduce NOx by as much as 70 percent and particulate matter by approximately 90 percent. Even without the special emission-reduction equipment, use of Valero's ULSD can significantly reduce these emissions.

Several public and private organizations have tapped funds for clean diesel projects from the Texas Emissions Reduction Plan, an incentive program that was established by the state legislature to improve air quality in Texas. TERP, which is administered by the Texas Commission on Environ-mental Quality, provides grants to eligible projects in affected counties. These grants pay for incremental costs of clean projects, which includes improving vehicle emissions through new purchases, retrofits and add-ons.

"Many of the new emission-reducing technologies require the use of Ultra-Low Sulfur Diesel, and its availability is important to help local communities meet their clean air goals and attainment objectives. The added early availability of Texas Low Emission Diesel will help us that much more to meet those goals," said Steve Dayton, Senior Grants Manager for the TCEQ's TERP program.

Valero is capable of producing 20,000 barrels per day of ULSD at its Three Rivers refinery and is exploring the possibility of producing additional barrels at its McKee refinery, located in the Texas Panhandle. Outside of Texas, the company's Wilmington, California refinery is able to produce 30,000 barrels per day of ULSD.

"This effort is really important to us because we have a very strong commitment to producing clean fuels," said Greehey. "And, we believe that introducing this clean diesel well before it's mandated can help significantly improve air quality in major cities."