Ill-conceived rules could harm US refining, API officials warn

US refiners have enough operating or planned capacity to meet domestic demand for the foreseeable future, but the situation could change if ill-conceived proposed regulations are adopted, American Petroleum Institute officials warned.

“Our refineries can compete with refineries anywhere in the world even though they are often more heavily regulated,” API Chief Economist John C. Felmy said during a Jan. 18 teleconference. “Here in the United States, government rules affect every refinery process, every product, every facility modification, virtually every aspect of how business is conducted. More rules will be issued. We should do all we can to ensure they are as practical and cost-effective as possible.”

While their plants are among the most heavily regulated US industrial facilities, refiners also work hard to develop standards and practices to improve safety, added Bob Greco, API’s downstream group director. New standards covering personnel fatigue risk management and placement of temporary buildings recently joined more than 100 refining standards and practices, he told reporters.

Refiners also carefully investigate every personnel or process safety incident, whether major or minor, and use lessons learned to improve safety and reduce risk, Greco said. API’s programs also have certified 8,000 refinery inspectors at more than 200 companies, he added.

US Bureau of Labor Statistics data show that a refinery employee is up to five times less likely to be injured on the job than counterparts in other industries, and the refining industry’s injury rate has fallen 40% since 2003, he said. “However, no incident is acceptable, and US refiners strive constantly to prevent any and all incidents,” Greco said.

Latest shutdown

Their teleconference came the same day that Hovensa LLC, a refining joint venture of Hess Corp. and Petroleos de Venezuela SA, reported plans to close its 500,000 b/d refinery in the US Virgin Islands in mid-February due to reduced demand and the addition of new refining capacity in emerging markets (OGJ Online, Jan. 18, 2012). Low US natural gas prices also put the facility, which runs on oil, at a competitive disadvantage, Hovensa said.

US refiners have been under heavy financial strain, with other closures announced in the Northeast and Hawaii, “yet we’ve also seen discussions of carbon and other regulations which would put more pressure on refiners,” Felmy said.

It should be a goal of US energy policy goal to keep US refineries strong and preserve and build on the benefits they provide, he maintained. “Excessive or impractical regulation could threaten the ability of some refineries to continue operating domestically, and could result in substantial losses in employment and tax revenue,” he said. “It could push some refinery investment out of the country, increase our need to import gasoline and other fuels, and cost US jobs.”

“It’s a regulatory blizzard,” Greco said. “We’re concerned about rules which are being pursued without adequate justification. Rules which don’t meet the necessary cost-benefit requirements will hurt our country’s ability to compete with overseas refineries. Some of the proposals were cited in refinery closure announcements.”

Felmy noted that refining is a vital part of the US economy which supports more than 500,000 jobs paying nearly $78 billion in wages and benefits, including more than 100,000 which are direct positions which pay an average $94,500/year. US refining capital expenditures were more than $28 billion from 2008 to 2010, and refiners also deliver billions of dollars annually to federal, state, and local treasuries in income, sales, and use and property taxes, he said.

Contact Nick Snow at nicks@pennwell.com.

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