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U.S. eases clean gasoline rules in East after Sandy

By Timothy Gardner

WASHINGTON (Reuters) - The U.S. environmental regulator waived clean gasoline requirements through November 20 on the eastern seaboard to help ease a supply crunch after Hurricane Sandy ripped across the region's energy system.

"I have determined that an 'extreme and unusual fuel supply circumstance' exists that will prevent the distribution of an adequate supply of gasoline to consumers," Lisa Jackson, the head of the Environmental Protection Agency, said in a letter on Wednesday to governors of the states.

New York, New Jersey and Pennsylvania and 13 other states had requested a waiver in requirements to sell reformulated gasoline, or RFG, in smog-plagued regions of the country. The waiver also applies to states in the mid-Atlantic including Maryland and states in the South including Tennessee, North Carolina and South Carolina.

Sandy damaged petroleum storage facilities and caused pipeline delays that are projected to prevent the distribution of RFG in areas hit by the storm, Jackson said in the letter.

East Coast fuel supplies could be tight into next week as flooding and downed power lines slowed the recovery of two New Jersey refineries, including the Phillips 66 Bayway plant, the region's second largest.

On Wednesday some drivers in New Jersey were forming long lines to buy gasoline and causing traffic delays on several highways. On Route 17 in the north of the state lines to buy gasoline were backing up onto the road.

"Route 17 is like a parking lot with cars lined up in the slow lane on both sides," said Erin Gardner Myers, a motorist coming home from work. "It's really bad out here."

Under the waiver the EPA will allow fuel retailers to sell conventional gasoline in place of RFG effective immediately. It also allows some states to mix conventional and RFG to ease supply issues.

A copy of the letter can be seen here: http://r.reuters.com/dec73t.

Earlier on Wednesday, the EPA granted a waiver for operators of generators and pumps in New Jersey to use heating oil in place of ultra low sulfur diesel to help ease a supply crunch of that fuel.

An energy expert said fuel waivers were one of the things the few things the Obama administration could do to help people with energy problems after the storm.

"There's not much they can do about getting the power back on, but the government can at least lead on this so people know things are going to get better," said Lucian Pugliaresi, president of the Energy Policy Research Foundation, Inc.

(Additional reporting by David Sheppard in New York; Editing by Ed Davies)

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