REFINING IN THE '90S-CONCLUSION CLEAN AIR AMENDMENTS PUT BIG BURDEN ON REFINERY PLANNERS
Richard C. Scherr, G. Allan Smalley Jr., Michael E. Norman
ENSR Consulting & Engineering
Houston
The Clean Air Act Amendments of 1990 will not only require the production of reformulated gasoline but also have significant impact on other refinery-related construction. This must be considered when developing a sound planning strategy.
The three titles of the Clean Air Act Amendments that will have the greatest effect on refining are:
- Title 1: Nonattainment
- Title III: Air toxics
- Title V: Permitting.
NONATTAINMENT INTERACTIONS
To understand the ramifications of these amendments, it is necessary to review the interactions of new requirements with the permitting and construction schedule shown in Fig. 3, Part 1 (see OGJ, May 27, p. 68). Fig. 1 illustrates the nonattainment issues of concern to refiners.
STATE IMPLEMENTATION PLANS
States must file State Implementation Plans (SiPs), starting in 1993, to demonstrate how they intend to improve or maintain air quality. The SIP filings will result in many rule changes during the permitting and design process, threatening to make new construction quickly obsolete.
To deal with this possibility, a planner must conservatively predict the new requirements and either design to meet them or plan to make later changes. Unless projected controls are extremely costly, overcontrol on new construction will be more cost-effective for refineries.
The combination of volatile organic compounds (VOC) reductions for ozone nonattainment areas and maximum achievable control technology (MACT) for existing refineries will result in the implementation of most conceivable controls. For planning purposes, it can reasonably be expected that all refineries will have to meet Los Angeles-type standards for new construction by 1995.
NONATTAINMENT CLASSIFICATION
The states were required to propose all areas as being attainment, nonattainment, or unclassifiable by Mar. 15, 1991. Designations for all pollutants and all areas must be made final by July 13, 1991.
These designations are critical to the planning process since classification as marginal, moderate, serious, or severe will determine not only attainment dates but also the severity and type of regulations affecting refineries and marketing operations in that area.
In most cases, these designations are already well established, but some surprises should be expected. For example, the Houston-Galveston area will probably be nonattainment for SO2, based on modeling of permitted, but not used, high-sulfur fuels. This will require rule changes limiting sulfur in fuels or requiring controls.
Other areas along the Gulf Coast may be similarly affected.
SIP REVISIONS
The ozone SIP revisions will have the greatest effect on new construction. Proposed revisions for reasonably available control technology (RACT) will be known this summer.
Requirements for additional VOC control can be expected to result from SIP changes to demonstrate 15% reductions in VOC inventory in the first 6 years. These rules will be proposed in November 1992 and finally adopted no later than November 1993. The requirements apply to all ozone nonattainment areas except marginal areas.
This will be a difficult demonstration for states to make. Therefore, states will be likely to use every control at their disposal. The result may be that more areas opt for reformulated gasoline. Refiners can participate in the SIP revision process to influence the choice between producing more reformulated gasoline and implementing additional source controls.
Marginal areas that do not achieve the standard by November 1993 will become moderate areas and thus will also be subject to the 15% rule. This process will be repeated in November 1994, for serious, severe, and extreme areas, when they must adopt additional rules showing a 3%/year reduction in VOCs.
The SIP revision process will also force severe tightening of NOx, emissions standards. The amendments provide a mechanism for NOx to be used as a replacement for VOC in achieving ozone reductions.
Control estimates should include low NOx burners and ammonia injection for moderate and serious areas. Severe and extreme areas will require selective catalytic reduction, and perhaps scrubbing technology, for NO,, control. Additional requirements for particulates and SO2 should be considered for facilities in those nonattainment areas.
It is unlikely that states will have adopted measures other than reasonably available control measures (RACM) for particulates prior to the permit submittal date shown in Fig. 1. Additional SO2-control requirements in the Gulf Coast region will limit future ability to burn high-sulfur oil without SOx controls.
MARINE UNLOADING
New requirements for marine unloading of volatile compounds are to be adopted by November 1992. These are expected to require unloading and ship modifications to achieve greater than 90% control of present fugitive emissions.
As shown in Fig. 1, this will occur well after permits would need to be submitted for new construction, but early enough to include appropriate controls in the design of the facility.
HAZARDOUS AIR POLLUTANTS
Many of the 189 compounds listed as hazardous air pollutants (HAPs), often called air toxics, are found in petroleum raw materials, products, and by-products.
Common HAPs associated with refining operations are benzene, hexane, methanol, phenol, naphthalene, toluene, xylenes, ethylbenzene, hydrogen fluoride, diethanolamine, cresols, methyl tertiary butyl ether, and polycyclic organic matter.
Fig. 2 shows the compliance schedule for HAP issues.
MAXIMUM ACHIEVABLE CONTROL
Hazardous air pollutants will be controlled by establishing rules for source categories to establish the maximum achievable control technology (MACT). This is similar to the process of publishing control technology guidance to establish RACT.
The U.S Environmental Protection Agency (EPA) will begin proposing regulations in November 1991, and must promulgate regulations for the first 41 source categories and subcategories by November 1992. MACT will apply to all major sources. The definition of major source will be lowered to 10 tons/year of any single HAP, or 25 tons/year of all HAPs.
Early in 1990, EPA published lists of categories and subcategories for HAPs and prioritized the lists using a rating of 1 as the highest. Categories related to petroleum refining rated as 1 are petroleum refining, industrial boilers, bulk petroleum terminals, petroleum marketing, and gasoline marketing. A listing of all categories related to petroleum refining and marketing operations can be found in Table 1.
Sources will have 3 years to comply with MACT, making the earliest compliance date late 1995 or early 1996. The earliest MACT proposal dates (November 1991) fall prior to permit submittal, making the source subject to the rules. Therefore, MACT controls must be included in the estimates.
MACT EXTENSIONS
If a source achieves 90% control beyond 1987 emissions, prior to the proposal of MACT rules, the source can achieve a 6-year compliance extension. Installing such controls prior to the probable proposal date for refineries (as early as November of this year) is almost impossible.
However, EPA has indicated a willingness to consider a permit application, prior to the MACT proposal, as an irrevocable commitment sufficient to qualify for the extension.
ACCIDENTAL RELEASES
Estimates will need to include some allowance for meeting the 1994 rules for accidental releases. However, one should strongly consider eliminating processes such as HF alkylation, where alternate processes exist. These rules could force such processes into obsolescence.
PERMITTING INTERACTIONS
Fig. 3 shows the timing of the new permitting program, in relation to the construction schedule. State programs must be proposed by November 1993. EPA has 1 year to approve the state submittals. Industry would then be required to submit permits by late 1995.
States are expected to move quicker to take advantage of the significantly higher permit fees. A comparative listing of current and future permitting fees for a gas processing plant is illustrated in Table 2.
In estimating and designing the new facilities' costs, additional monitoring and measurement capabilities will need to be included. The most important strategic impact of the permitting requirements is the probable permitting delays for new construction, which are likely to occur immediately after the new permit systems go into effect. Staff shortages and inexperienced staff will combine to lengthen the permitting cycle.
In the next year, EPA will have to issue over 25 major rules connected with the 1990 Clean Air Act. Over 50 rules will have to be issued within 3 years.
In the past, EPA has taken an average of 3 years to issue a major rule.
This suggests that prespending on capacity and flexibility in earlier construction will be a worthwhile investment.
OTHER ENVIRONMENTAL RULES
Interactions with existing rules must also be included in the product supply strategy. Process changes to produce reformulated gasoline may trigger New source performance standards at existing refineries.
Existing requirements for benzene national emissions standards for hazardous air pollutants (Neshaps) will stay in force.
Future changes required under current Resource Conservation and Recovery Act rules for toxic characteristic leaching procedure and primary sludges must be met. Site expansion may require wetlands permitting and offsets.
RECOMMENDATIONS
It is clear that many regulations will be promulgated during the permitting, design, and construction of the refining and marketing facilities needed to meet the new fuels requirements. Without proper planning, expensive retrofits could be required on new reformulated fuel facilities starting up in 1994-1995.
Because 70% of today's refining capacity is located in nonattainment areas, it is likely that poor planning could also result in new capacity being located in areas where, by 1995, no offsets are available for further expansion.
If this facility is key to providing more reformulated gasoline as the market expands, a company could become supply limited and lose market share.
Refiners should begin the planning process immediately by following the steps listed below. Following these steps should lead to the selection of a cost-effective, robust plan.
- Determine the compliance, control, and emission status of all facilities.
- Select a market strategy for your business, assuming no constraints on product refining and marketing.
- For the selected strategy, define the ideal refining/ marketing system and compare it to your existing system.
- Determine the changes to your existing refining/marketing system which will allow you to meet your market strategy and move closer to the ideal refining/marketing system.
- Consider outside impacts (such as change in crude supply) which could have a major impact on planning, and outline changes to the ideal plan and actual plan to accommodate these changes.
- Estimate the cost of your proposed improvements using forecasted levels of control required after 1995.
- Evaluate the need for growth at the facilities after these changes and the probability of obtaining offsets.
- Decide if offsets are a problem; evaluate building-in excess capacity or modifying the plan to put capacity at more desirable locations.
- For facilities in areas of high population, evaluate the possible impact of residual risk requirements limiting future growth or existing capacity.
- If costs are too great or if expansion to meet the market plan is impossible, modify the market plan and repeat the analysis.
Once a plan is selected it can be finely tuned, considering items that affect only cost.
After current emission and control data are available, an evaluation can be made of the cost and feasibility for any process or facility to achieve 90% VOC control. This should first be done for those facilities being modified for the reformulated fuels program.
Other facilities should also be evaluated for the purpose of determining the merits of spending capital now to get a 6-year extension, vs. spending in 1993 and 1994 to meet the first round of MACT. The issue here is leveling out cash flow around the spending required to deliver reformulated gasoline.
The initial cost estimates for the plan should be made assuming the most stringent control scenario. Once a plan is selected, the control scenarios should be re-evaluated to determine if prespending is really more desirable than retrofit. In most cases, the additional cost for more stringent controls now is easily justified over the cost of later retrofit.
It is unlikely that retrofit will be avoided given the air toxics driving force alone. If the control can be conceived, in most cases it eventually will be required.
However, there will be some cases where either the control is so costly or the chance that it will be required is judged to be so low that the additional control should be eliminated from the plan and left in the capital forecast for later years.
While the planning process is intense and subjective, and the time frame limited, the prospects of going forward without a plan are at the least expensive, and at the worst, disastrous.
In business, change is opportunity.
The 1990 Clean Air Act Amendments provide a new market for petroleum refiners and a new environment to participate in that market. Those who formulate good plans and act positively have the best chance to win in this new environment.
By 1997, the market shares will shift to those seeing these amendments as an opportunity rather than an additional cost of doing business.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.