SULFUR REGULATIONS BLAMED FOR REFINERY SHUTDOWN

Excessively aggressive environmental regulation took another bite out of US energy security on Jan. 17.

Premcor Inc., St. Louis, said it will close its Blue Island, Ill., refinery at the end of January because of required cuts in the sulfur content of oil products.

The Blue Island plant can process 76,000 b/cd of crude. It has 30,000 b/cd of fluid catalytic cracking, 29,000 b/cd of catalytic reforming, and 10,000 of catalytic hydrocracking capacity.

Premcor had spent $70 million in the 5 years since it acquired the plant from Clark Refining & Marketing.

The company said it will continue to operate three other refineries it acquired from Clark: Hartford, Ill., 68,000 b/d; Lima, Ohio, 165,000 b/d; and Port Arthur, Tex., 225,000 b/d.

Blue Island's crude capacity represents less than 0.5% of the US total. But its disappearance at the end of the month is important. The country needs more refining capacity, not less.

The need has become painfully evident in the past year, with refiners operating near capacity levels and inventories low.

Yet the only way crude capacity grows in the US nowadays is through debottlenecking as refiners add processing units downstream of distillation towers. So shutdowns of whole plants are reason to worry.

Premcor said profitability of the Blue Island plant didn't justify investment required by "the next wave of low-sulfur, cleaner-burning fuels."

The Environmental Protection Agency has required cuts in the average sulfur content of US gasoline to 30 ppm from 300 ppm and proposed that the sulfur content of diesel fuel drop to 15 ppm from an average of 500 ppm.

EPA didn't need to cut sulfur so much. It could have achieved equivalent environmental improvement with sulfur reductions less punishing to refiners.

But it chose to regulate to the maximum legal extent, anyway. It chose to impose maximum economic harm on refiners and, ultimately, consumers of oil products.

So refineries are closing while demand for oil is rising. In terms of energy security and consumer interest, that's moving backward.

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