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Petroleum refining has been called "one of the most heavily regulated industries in the United States." (DOE-OIT, 2000, p. 1). According to a recent EPA fact sheet, EPA has recently settled enforcement actions with companies comprising over 30% of U. S. domestic refining capacity, and is currently engaged in settlement negotiations with companies comprising an additional 20%.
In addition to dealing with the environmental impacts of their operations, refiners face complex regulatory issues involving their products. Gasoline formulations are restricted differently depending on the season of the year, and on the geographical location of the market in which they are sold.
The dominant environmental impacts from refinery operations currently involve air quality. About three-fourths of the TRI poundage reported by the sector are releases to the air.
In the near future, the industry is likely to be facing pressure to expand capacity as rapidly as possible. This is likely to exacerbate an ongoing regulatory issue regarding the distinction between existing sources and new sources, the latter being regulated more stringently under the Clean Air Act.
Looming on the farther horizon are the potential regulatory consequences of the global warming issue, which may strongly affect both the operations of this highly energy-intensive industry and the demand for its products.
Environmental impacts and risks
Effects of existing and future regulations on impacts
Value of Shipments
|Capital environmental spending||$826,000,000|
|Operations, Maintenance and Administration||$3,132,000,000|
(Source: API figures for 1996, refining sector)
Concentrated in coastal states (Texas, California, Louisiana), near current or historical sources of crude oil (Alaska, Pennsylvania, Oklahoma) and near heavily industrialized regions.
Prices for petroleum products were historically low for the latter part of the 80s and much of the 90s, leading to closure of many U.S. facilities. Many of the facilities that closed were older (typically less efficient, with higher emissions). Since the summer of 2000, it has become clear that the pendulum is swinging in the other direction. Domestic refinery capacity is now considered insufficient to meet demand. (See, for example, Senate testimony, 4/25/01)
Refinery production may be limited in the near future by electricity shortages, particularly on the West Coast.
The industry is still adjusting to reformulated gasoline (RFG) requirements, particularly in light of health and groundwater impact concerns associated with MTBE, and by the necessity of balancing differing geographical requirements under conditions of tight supply.
Association of Petroleum Re-refiners (used oil recycling; no website -- contact information only)
Other organizations (no websites or full-time staff)
American Independent Refiners Association
Western Independent Refiners Association
Impacts are associated both with manufacturing operations and with use of the finished products (refined petroleum products).
The major classes of processes typically carried out by refineries can be categorized as follows:
Reforming and extraction (a wide variety of operations)
Waste recovery and treatment
Impacts associated with the manufacturing operations include:
volatile hydrocarbons from crude oil
SOx from crude oil and process heat
NOx and particulates from process heat
H2S from sulfur recover operations
about 75% of total TRI emissions by weight is released to air
process wastewater from desalting, distillation, cracking, and reforming operations
about 24% of total TRI emissions is released to wastewater
large quantities of cooling water
other process sludges
storage tank bottoms
refining is an energy-intensive operation (the most energy intensive in the U.S., according to DOE)
most of the energy is consumed as process heat generated from refining by-products
thus, little prospect for replacement of process energy by renewable or non-CO2-intensive sources
Other: hydrocarbon spills from leaking storage tanks and pipes, and during receiving and shipping
Fuel products comprise about 88% of U. S. refinery products (EPA-OECA Sector Notebook, 1995). Virtually all of this output is ultimately released to the atmosphere, mostly as combustion products, with a lesser amount evaporating before use.
Transportation fuel alone accounts for 43% of total output. By its nature, the impact from this component is geographically dispersed.
The major impacts due to refinery products are associated with
the global warming potential of carbon dioxide (which constitutes the ultimate fate of most of the carbon in the product)
local effects of carbon monoxide and of unburned hydrocarbons (an ozone precursor)
potential for groundwater contamination from leaks and spills
Of these, refineries themselves are directly affected most by the second item, through reformulated gasoline standards. Refineries would not ordinarily be held accountable for formulating their products to minimize the impact of spills, but are held responsible for the impact of their formulations on air quality. (MTBE may ultimately provide an exception to this generalization.) Global warming holds the potential for the greatest impact, but it is currently essentially unregulated in the U. S.
Air emissions data for certain key criteria pollutants (ozone precursors) are available from the National Emission Trends (NET) database (1999), and hazardous air pollutant emissions data are available from the National Toxics Inventory (NTI) database (1996 is the most recent year for which final data are available). For SIC code 3241 (Hydraulic cement), the total emissions listed in these databases are:
The HAP total includes contributions from SIC 2911 and another category labeled "Petroleum Refineries - Other Sources Not Distinctly Listed" in the NTI database.
The petroleum refining sector is the largest VOC source and the third largest NOx source among all sectors at the four digit SIC level.
TRI data for manufacturing processes carried out by the sector indicate that petroleum refining is a significant contributor to overall air emissions of TRI chemicals among all sources reporting TRI data. Reported TRI air emissions for the entire petroleum sector (SIC code 29) in 1999 amount to about 2% of the total for all industries, ranking ninth among all sectors. Direct releases to surface water for the same reporting year indicate the petroleum sector is responsible for about 6% of all reported emissions, behind chemicals (30%), primary metals (24%), food (19%),and paper (7%). The petroleum sector also accounts for about 1% of reported underground injections, behind chemicals at 75%, metal mining at 14%, and RCRA solvent recovery at 9%.
In terms of greenhouse gas emissions, petroleum refining (NAICS code 324110) is responsible for 513.8 teragrams (million metric tons, Tg) of carbon dioxide equivalent emissions, according to 2000 data. This indicates that petroleum refining is the largest source of greenhouse gases of any manufacturing sector, and second only to the electric power sector among all sectors in the economy. More information on the calculation of greenhouse gas emissions is provided in another document in this series, Greenhouse Gas Estimates for Selected Industry Sectors.
Major sources of environmental risk:
Air: Refinery emissions contain several major ozone precursors. The associated impacts would be most significant near and downwind of a given facility. http://www.wri.org
Water and soil: potential for contamination from leaks and spills
Carcinogens: benzene is a significant component of refinery air emissions
Global warming: refinery products are a significant contributor (the overall risk associated with global warming is still being characterized)
Clean Air Act, including 1995 NESHAP (this category comprises the dominant regulatory effect on refinery operations)
A NESHAP covering Catalytic Cracking, Catalytic Reforming and Sulfur Plant Units was finalized in 2002
Reformulated gasoline (RFG) standards (this category affects operations indirectly through restrictions on product mix)
Clean Water Act
Other regulations (beyond environmental) affecting sector:
Corporate Average Fuel Economy (CAFE) standards (indirect effect through performance requirements on products)
Health and safety standards
Differing environmental restrictions on gasoline formulation in different areas of the country make it more difficult to make up for localized spot shortages with imports from other areas.
RFG development was promoted by refiners themselves, in part as a response to proposals to replace gasoline with alternative fuels (although the industry simultaneously opposed RFG legislation, according to a 1995 analysis from the Congressional Research Service of the Committee for the National Institute for the Environment).
RFG requires that oxygen-containing compounds be included in the gasoline formulation, to reduce volatile organic carbon (VOC) emissions from normal engine combustion. However, several of the oxygenates used for this purpose have posed problems:
Methyl tert-butyl ether (MTBE), like most ethers, biodegrades very slowly, posing a groundwater contamination risk. It is also under investigation as a health risk.
Ethanol is very volatile, and must be blended with lower vapor pressure constituents to keep the overall product vapor pressure acceptably low during the summer months.
Several detailed studies of the sector's environmental impact and recent performance have been prepared, both by government (EPA, DOE-OIT) and by industry (API) sources.
Some recent studies address the question of how the existing regulatory framework affects the operations carried out by the sector:
A 1998-9 study looks at the effect of environmental regulation on productivity in Los Angeles Basin, 1979-92.
A 1999 paper by from the Energy Information Administration considers the effects of RFG regulations on refinery operations.
The former study concludes that, since productivity of refineries actually rose in that region during a period of increasingly stringent regulation, the effect of air quality regulation on refinery operations is not necessarily economically disadvantageous to the sector.
The latter describes a complex series of adjustments in refinery inputs and outputs initiated by the vapor pressure requirement associated with RFG, including a decrease in the amount of liquefied petroleum gases (LPG) used as inputs by refineries, an increase in the amount of crude oil used, and a consequent increase in the production of fuel oil (enough to change the U. S. from being a net importer to a net exporter of fuel oil). The differential environmental impacts resulting from the adjustments would be interesting to know, but were not within the scope of the paper.
The Environmental Assessment Division (EAD) at Argonne National Laboratory has issued a report summarizing its efforts to develop alternative regulatory prototypes for future petroleum refinery operations. A summary of the program that produced the report is available on the Internet. Two different prototypes are examined, a "risk based bubble" (RBB) approach that focuses primarily on ways to minimize cumulative risk, and a "negotiated performance agreement" (NPA) approach that uses cost-benefit analysis to apply a mix of alternative emissions reduction options most effectively and efficiently.
The National Petrochemical & Refiners Association reports that EPA is seeking changes to the Clean Air Act that will primarily affect electric utilities, but which may have an effect on the refinery sector.
Carbon dioxide emissions are not regulated yet, and the nation's regulatory future with respect to the global warming issue is uncertain. Any future regulation in this area is bound to have a significant impact on the petroleum refinery sector.
With the recent changes in energy prices, CAFE standards may be subject to revision. This is likely to have an indirect effect on refinery operations, by narrowing the product specification envelope, and thus may have indirect environmental impacts.
Several other upcoming regulatory initiatives may impact petroleum refining facilities in certain locations. For example, the Regional NOx Transport rule (1998) requires 22 eastern states to institute measures to decrease their overall emissions of nitrogen oxides. The bulk of the nation's petroleum refining operations do not happen to be located in these states, but some individual facilities may be affected. Similarly, new rules covering emissions of ozone precursors (now pending), as well as the Regional Haze Rule (1999), may be applicable in some cases..
DOE-OIT roadmap document, 2000, http://www.oit.doe.gov/petroleum/pdfs/petroleumroadmap.pdf
EPA-Office of Compliance Sector Notebook for the Petroleum Refining Industry, 1995 http://es.epa.gov/oeca/sector/sectornote/pdf/petrefsn.pdf
API, Sixth Annual Petroleum Industry Environmental Performance Report, 1998, http://www.api.org/step/pdf/piep98.pdf
U. S. Census Bureau 1997 economic census, http://www.census.gov/epcd/ec97/us/US000_31.HTM#N324
1995 analysis, Committee for the National Institute for the Environment, http://www.cnie.org/nle/air-12.html
2000 analysis, Midwest, price inelasticity of gasoline http://www.ftc.gov/os/2001/03/mwgasrpt.htm#B.%20EPA
Testimony from Carl Shapiro, Haas School of Business, UC Berkeley to the Consumer Affairs Subcommittee, Senate Commerce Committee, 4/25/01, http://www.senate.gov/~commerce/hearings/0425sha.pdf
Energy Info Admin, DOE, 1997 http://www.eia.doe.gov/emeu/finance/usi&to/downstream/ch4.html
CAA catalytic cracking rule http://www.epa.gov/ttn/oarpg/t3/fact_sheets/petrolfs.wpd
NESHAP 1995 http://www.epa.gov/ttncaaa1/t3/meta/m10626.html
MACT standard guidance 1997 http://es.epa.gov/oeca/main/compasst/pdf/mactdoc.pdf
NESHAP (docs from 2000)
NESHAP summary page http://www.epa.gov/ttn/atw/petrefine/petrefpg.html
RCRA listing http://www.epa.gov/epaoswer/hazwaste/id/petroleum/
Sectors page http://www.epa.gov/sectors/sector/petrol2.htm
Old CSI page http://www.epa.gov/commonsense/petro5.html http://www.epa.gov/commonsense/bkgrnd5.html
Consent decree, Marathon Ashland, 5/11/01 http://es.epa.gov/oeca/ore/aed/marathon.html
NPRA paragraph, 5/15/01, on changes to the Clean Air Act to be proposed by EPA http://www.npradc.org/environmental/green-rm/green_room.html#2