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Petroleum Refining

Impacts, Risks and Regulations

Summary

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. 

Contents

Industry Profile

Environmental impacts and risks

Effects of existing and future regulations on impacts

Information sources

Industry profile

Economic data

Census Bureau Information (1997 Economic Census)

SIC code 2911
NAICS code 324110
Establishments 242

Value of Shipments

$157,525,704,000

Annual payroll

$3,886,587,000

Paid employees

65,471

Compliance spending

Capital environmental spending $826,000,000
Operations, Maintenance and Administration $3,132,000,000
Remediation $171,000,000
Spills $29,000,000

(Source:  API figures for 1996, refining sector)

Geographic distribution

Concentrated in coastal states (Texas, California, Louisiana), near current or historical sources of crude oil (Alaska, Pennsylvania, Oklahoma) and near heavily industrialized regions.

Industry trends

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. 

Trade associations

Environmental impacts and risks

Impacts are associated both with manufacturing operations and with use of the finished products (refined petroleum products).

Processes

The major classes of processes typically carried out by refineries can be categorized as follows:

Impacts associated with the manufacturing operations include:

Products

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

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.

Quantitative impact data

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.

Risk

Major sources of environmental risk:

Effects of existing and future regulations on impacts

Existing regulations affecting sector

Additional notes on effects of reformulated gasoline (RFG) standards:

Other notes

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:

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.

Future regulations

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..

Information sources

General

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 

Reformulated gasoline (RFG) requirements and CAFE standards

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, NESHAP

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

RCRA listing http://www.epa.gov/epaoswer/hazwaste/id/petroleum/ 

Other references

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