RPC Reg Spotlight July 18, 2012

 

Regulatory Action in the Spotlight:

 

EPA Refinery Rule Regulating Process Heaters and Flares in Petroleum Refineries

 

Adverse Effects:

 

  • Places high regulatory costs on the domestic energy sector
  • Will not significantly improve environmental conditions

 

Response of the Obama Administration:

 

On June 1, 2012, Environmental Protection Agency (EPA) Administrator Lisa Jackson unveiled a final regulation regarding amendments to “Standards of Performance for Petroleum Refineries” (RIN: 2060-AN72).  This regulation seeks to reduce volatile organic compound emission, sulfur dioxide, and nitrogen oxide.  This will be done through controlling emissions from two components of refineries: process heaters and flares. 

 

The rule affects process heaters “modified, reconstructed or constructed after May 14, 2007,” and flares “modified, reconstructed or constructed after June 24, 2008.”  This regulation is set to go into effect within 60 days of publication in the Federal Register. 

 

 

Impact on the United States:

 

According to the American Action Forum, the proposed rule was due to cost $350 million.  When the final rule was unveiled, the new cost was set at an estimated $460 million, with an annual paperwork burden of 54,572 hours.    There are 200 petroleum refineries in the United States, according to census data.  Therefore, this rule would impose $500,000 in annual costs on each refinery.  Most of these facilities are located in the Midwest or Mid-Atlantic regions.  The rule is set to most noticeably have an effect on the following states: Texas ($92 million), California ($56.6 million), Louisiana ($42.4 million), Pennsylvania ($25.9 million), and Oklahoma ($21.2 million). 

 

The American Petroleum Institute (API) and the American Fuel and Petrochemical Manufacturers (AFPM) strongly disapprove of this new rule, fearing the costs of implementation will exceed the estimates of the EPA, and that the regulation will not provide any significant environmental benefits.  API Regulatory and Scientific Affairs Director Howard Feldman stated, “Refineries have spent billions of dollars to improve environmental performance and air quality continues to improve under existing regulations.  This is part of a tsunami of new EPA air regulations for refineries that could diminish our fuel manufacturing capacity and increase our reliance on imported fuels.”  AFPM Vice-President for Regulatory Affairs David Friedman said, “This final rule will not ‘dramatically save’ but rather cost the industry significant amounts each year, adding to the billions already paid in complying with the myriad fuel and stationary source regulations, some of which are conflicting and contradictory.”

 

 

In Closing:

 

This is yet another example of the Obama’s administration’s anti-energy regulatory agenda.  During this time of high gas prices and dependence on foreign sources of energy, the Obama administration continues to take actions to hamper domestic energy production.  With expensive hydraulic fracturing, particulate matter standards, limits on greenhouse gas emissions from new power plants, and Boiler MACT regulations still waiting to be finalized, and with the addition of recent rules such as CSAPR, the EPA continues to strain the financial wherewithal of the U.S. energy industry. 

 

 

Relevant Legislation:

 

The 112th Congress has held several hearings regarding the EPA’s regulatory agenda and its effect on American businesses.  On June 6, 2012, the Subcommittee on Energy and Power held a hearing titled, “EPA Enforcement Priorities and Practices.”  At that hearing, Chairman Fred Upton stated, “Let’s be honest – under the Obama EPA, the extreme has become routine. That’s why, when video surfaced of Dr. Al Armendariz talking about his ‘crucify’ enforcement strategy, it really rang a bell with those of us in Congress who oversee the agency, not to mention those who have to deal with the economic consequences back home. His words provided a window into a pervasive mindset driving a long list of problematic enforcement and regulatory actions by the agency.”