United States
Environmental Protection
Agency
Office of Air Quality
Planning and Standards
Research Triangle Park, NC 27711
EPA452/R-95003
August 1995
Air
SvEPA
Economic Impact Analysis for the
Petroleum Refineries NESHAP
FINAL
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is report is «--
It
technical data
ii
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CONTENTS
Page
....... . vi
TABLES . .............. * ...
......... Vlll
FIGURES ............
... IX
ACRONYMS AND ABBREVIATIONS ..... .....
ES1
"35 SSSSc WCT A^YSIS OGIVES : : : : : : : ^
S 7 SECONDARY REGULATORY IMPACTS ........ _ ; |s.13
SI |SN?IALC1«LL BUSWESS WPACTS ! I '. I I - «
10 1NTROD«CTIOS «.D S^MARV OF CHOSEN REGULATORY ALTERNATIVE 1
' i'J
.
2 0 INDUSTRY PROFILE ...... ° *"*"""'"...... 4
' 1-1 S^A^ECTW FACILITIES ' '. '. i . . - - - - »
m sssss sss&ssrsfjs^i-^- .... .
?: S52S5 5S2^T2S«. *- --"- ' S
I'."'. S caplc±tr Md Capacity DtiliMtion ;_; '_ ^
2.2.6 Refinery complexity ......... .... 20
2 3 MARKET STRUCTURE . ; .......... ... 21
' 22:33;2 SSSLTSSSSSS id *^i*»^ . . . . ^?
2.42-3MlRjET^SpaL/cSScWlSTICS : ! '. i '. \ ' »
2.4.1 Past and Present Productaon ...... .... 34
942 Supply Determinants . . ...... 37
1*1 3 SSbrts of Petroleum Products ......... ^
''^^sszss^y^'-^^ \ '; ; ; »
2.5.2 Demand Determinants . * * ..... 42
953 Past and Present Consumption . 45
2 '.5*. 4 ?mjor?s of Refined Petroleum Products ^ . . . . - 45
2.5.5 Pricing - - ............. .... 49
'S.6!f55|S?SSofl* fWoductio,' id capacity;_ . . . - «
2 6.2 Demand Outlook ......... * ... 54
2.6.3 Price Outlook .............
ill
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CONTENTS (continued)
Page
3.0 ECONOMIC METHODOLOGY
3.1 INTRODUCTION . ° 61
3.2 MARKET MODEL 61
3.2.1 Partial Equilibrium Analysis' .' ." .* ' ' "
3.2.2 Market Demand and Supply f1
3.2.3 Market Supply Shift . ..... 62
3'2'(^antityt °* fUfP^. Sh±ft on'Kar^ Price and ' ' ' *
3.2.5 Trade Impacts' * " " ' * 65
3.2.6 Plant Closures ....'.'.'.'. 66
3.2.7 changes in Economic Welfare ' «f
3.2.8 Labor input and Energy input Impacts '. '. '.'.'' 70
3.2.9 Baseline Inputs . '*
3.3 INDUSTRY SUPPLY AND DEMAND kksTICITIES .' .' '.'.'' jl
?:?* Pri.ce Elasticity of Demand .... ?«
3.3.2 Prace Elasticity of Supply .... 76
3.4 CAPITAL AVAILABILITY ANALYSIS .' '. ' ' ZZ
* oo
94
4.2 CONTROL COST ESTIMATES 94
4:4 SSSS'&'SSSfSSi.'"' 'KEi?ORT'1N'G 'CO'ST'S' ' ' »
4.5 ESTIMATED ENVIRONMENTAL IMPACTS* "°
4.6 COST EFFECTIVENESS 107
108
^LABILITY
5.1 INTRODUCTION ' 110
°F PRIMARY IMPACTS ".".';:
ILABILITY ANALYSIS '-':::
5.5 SUMMARY .
115
6.0 SECONDARY ECONOMIC IMPACTS
6.1 INTRODUCTION . 117
6.2 LABOR MARKET IMPACTS 117
6.3 ENERGY INPUT MARKET * 117
6.4 FOREIGN TRADE ... ' ' 119
6.5 REGIONAL IMPACTS ' * 119
6.6 LIMITATIONS . ... 120
6.7 SUMMARY . . ' ' 120
122
7.0 POTENTIAL SMALL BUSINESS IMPACTS
7.1 INTRODUCTION . «»«**> 123
7.2 METHODOLOGY . 123
7.3 SMALL BUSINESS CATEGORIZATION 124
7.4 SMALL BUSINESS IMPACTS 124
125
iv
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CONTENTS (continued)
APPENDIX B - SENSITIVITY ANALYSES
Page
. A-l
. B-l
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TABLES
Page
PRIMARY ECONOMIC'IMPACTS'OF PETROLEUM
"Js^Jss^&s^
TMI£ ES-L S.MHARY OF COSTS X» THE FXFTH YEA* BY ON
POINT *
TABLE ES-2. SUMMARY OF
REFINERY NESHAP
TABLE ES-3. SUMMA]
.TABLE ES-4. ^ANNUA:
REFINING REGULATION ^ OPERABLE
TABLE 2-1. PRODUCTION tAfA'-.n
£990 REFINERY COMPLEXITY DISTRIBUTIONs OPERABLE^
ES-10
r.
RATES
TABLE 2-5.
TABLE 2-7
TABLE 2-8
DATA .
TABLE 2-9.
FIRMS IN
«=«A*TTV STATISTICS "oF REFINERY CAMPLE 1987-1991
^l% ;;;
REFINERS 1977-19 88^^
TABLE 2-1 '
TABLE 2-3
BY TYPE
TABLE 2-15.
PETROLEUM
TABLE 2-16.
TABLE 2-17.
TABLE 2-18
TABLE
INDUSTRY
TABLE 3-3.
TABLE 3-4.
TABLE 3-5.
TABLE 4-1.
POINT
TABLE 4-2
ASSOC:
MARKET
18
20
22
23
28
39
AND 'DOMESTIC CONSUMPTION OF REFINED ^
U S PETROLEUM PRODUCT IMPORTS ^EXPORTS . .
^^sssss^^^^.;;: :.
TABLE 2-1.. ^gTf?Eg^SBAS£SN?°DS ?BpS?S ! . «
5SS«: BASESESSpSsCF0R ?»E PETROLEO, KBFINIKG _ _ _
65
ESTIMATES OF 'PRICE 'ELASTIcTY OF DEMAND .....
'
72
81
85
89
Vi
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TABLES (continued)
TABLE 5-]
TABLE 5-2.
TABLE 6-1.
Pagel
OF SECONDARY REGULATORY IMPACTS*
96
TABLE 6-2. FOREIGN TRABi (NEFEXP^RTS? iSpAC?^: I" ' ' ^
101
vii
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FIGURES
Page
ES-1.
2-1.
2-2.
2-3.
3-1.
MODEI, Ho
s
viii
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ACRONYMS AND ABBREVIATIONS
API
ASM
bbl
bbl/d
BCA
BWON
defined below)
CAA
CERA
DOC
DOE/EIA
Administration
EIA
EPA
HAP
HON
below)
LPGs
MACT
Mg
MRR
MTBE
NAAQS
NESHAP
Pollutants
NSPS
NOX
OGJ
OMB
PADD
RFA
American petroleum Institute
Annual Survey of "^^gJ^fSllon.
One barrel; equal to 42 gallons
barrels per day .
SS/SSSS-. HESHAP (KESHAP is
SSridje £ergy Research Associates
II SSSTi-rW information
'
is defined
reporting, and recordKeeping
New Source Performance Standard
nitrogen oxide
Oil and Gas Journal «1M,flet
Flexibility Anal|"Jlatorv Impact Analysis
Standard^Industrial classification
sulfur dioxide
volatile Organic Compound
IX
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EXECUTIVE SUMMARY
M
.! ECONOMIC IMPACT ANALYSIS OBJECTIVES
economic i
Pollutants CNESH*P> on the behav.or of «
refinars. The E!A was conducted basea on the
-
baseline
ine industry conditions whxch would
for
Clean
the D .3-
ha2ardous air pollutants (HAPs, for «h ,ch e .- ^^
Protection *«*<> ^ ent » is
-t is require»ent,
industrse
=»
secion »7 o, tne «, retires
,.
ES-1
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«.
the
satisfy the requirements of the CAA and to partiallv
requirements of Executive Order 12866 partia11*
ES.2
INDUSTRY CHARACTERIZATION
ln the
ES-2
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. --« r=y
endent firms.
Fourteen firms operate four or
petroleu*
ES.3
CONTROL COSTS ftND COST-EFFECTIVENESS
refinery »ESHAP would require sources to achieve
reflecting ^ ^^ ^l^, «
achievable control technology (»CT^ a^lable controi options
n the first , years after
emisslon
controlcss were developed for the followin, major emission
nf the petroleum refinery NESHAP. Econoraxc impacts were
ES-3
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!-
. -txmates for controlling existing sources and
constructed emission points, which were prepared by the
engneering contractor for use in the EIA. All cLts ar! T
actuallv ,
nation l a ^ ° °r 6gu^ent le^- ^e total
national annualized cost for the chosen alternative is
approximately $79.2 Billion (including monitoring, reporting and
recouping costs, . No control costs are assorted
ES-4
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To allocate the costs among the five petroleum product
categories in the analysis, a national average production mix was
applied to individual refinery production data found in the Oil
and Gas Journal's (OGJ) "Survey of Operating Refineries for
1992." This calculation assumes that all refineries have the
same product mix as the national average. Costs were then
allocated in a two-step process: (1) by assuming that all
storage vessels control costs were associated with the production
of motor gasoline, and (2) costs associated with equipment leaks
and miscellaneous process vents were distributed among the
product categories based on the national product mix ratios.
ES.4 MONITORING, RECORDKEEPING, AND REPORTING COSTS
In addition to provisions for the installation of control
equipment, the proposed regulation includes provisions for
monitoring, recordkeeping, and reporting (MRR). EPA estimates
that the total annual cost for refineries to comply with the MRR
requirements is $20 million. After incorporating MRR costs, the
total cost of compliance of the Chosen Regulatory Alternative is
$79 million.
ES.5 ECONOMIC METHODOLOGY OVERVIEW
In this study, data inputs are used to construct a pre-control
baseline equilibrium market model of the petroleum refining
industry. This baseline model of the petroleum refining market
provides the basic framework necessary to analyze the impact of
proposed control costs on the industry. The Industry Profile for
the Petroleum Refinery NESHAP (1993) contained industry data,
including estimates of price elasticities of supply and demand
measures which are inputs to the baseline model. The industry
profile characterizes the market structure of the industry,
provides necessary supply and demand information, and identifies
market trends. Engineering control cost studies provide the final
major data input required to quantify the potential impact of
ES-6
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control measures on the market. These profile and engineering
cost data inputs are evaluated within the context of the market
model to estimate the impacts of regulatory control measures on
the petroleum refining industry and on society as a whole. The
potential impacts include the following:
Changes in market price and output.
Financial impacts on firms.
Predicted closure of refineries.
Welfare analysis.
Small business impacts.
Labor market impacts.
Energy use impacts.
Foreign trade impacts.
Regional impacts.
The progression of steps in the EIA process is summarized in
Figure ES-1.
ES.6 PRIMARY REGULATORY IMPACTS
Primary regulatory impacts include estimated increases in
the market equilibrium price of refined petroleum products,
decreases in the market equilibrium domestic output or
production, changes in the value of domestic shipments, and plant
closures. The analysis was conducted for the five petroleum
products of interest. The primary regulatory impacts are
summarized in Table ES-2.
As shown in Table ES-2, the estimated price increases for the
petroleum products range from an increase of $0.03 per barrel for
residual fuel oil to $0.14 per barrel for jet fuel. These
predicted price increases represent a less than 1 percent
increase in the price of each product and range from 0.24 percent
for residual fuel oil to 0.53 percent for jet fuel. Domestic
production is expected to fall for the five petroleum products
combined by approximately 12.52 million barrels annually. This
estimated decrease in production for each of the petroleum
ES-7
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products varies fro. annual
jet fuel to 5.67
of domestic shipments
ase
«-e five petrol «ts
the exception of residual fuel oil. Price increases for
-/-elastic a--
closure as a result of
estimates and
* - overe^ations for the
following reasons:
. The model assumes that all refineries compete in a
national market. In reality, some refiner.es are
protected from market fluctuations by regional or local
trade barriers and may therefore be less Ixkely to
close.
ES-8
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TABLE ES-2
Refined Product
Motor gasoline
Amount
Percentage
jet fuel
Amount
Percentage
Residual fuel
Amount
Percentage
Distillate fuel
Amount
Percentage
LPGs
Amount
Percentage
OF PRIMARY
REFINERY
ECONOMIC IMPACTS OF
NESHAP
Price
Increases1
$0.09
0.29%
$0.14
0.53%
$0.03
0.24%
$0.08
0.29%
$0.07
0.26%
^H*^^^
Value of
Production Domestic
n*°reases2 Shipments3,
(5.67)
(0.22%)
(0.65)
(0.13%)
(1.62)
(0.50%)
(2.78)
(0.26%)
(1.80)
(0.25%)
NOTES: 'Prices are shown in price p onB of bamsls
:ores oTarrrrrrsHovvn *«
Backets indicate decreases or negative values.
$55.63
O.O7%
$53.22
0.41%
($11.92)
(0.26%)
$8.06
0.03%
$2.42
0.01%
ES-10
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It x. assumed that the plants with the highest control
cost per unit of production also have the highest
baseline production costs. This is a worst- case
assumption and may not be true in every case.
Control costs are assigned exclusively to the five
products of interest which collectively represent 93
percent of the total quantity of petroleum products
produced.
Refineries with the highest per-unit control costs have
compliance costs that are significantly higher than the
average costs. This could be the result of the manner
in which control costs were estimated or the method
used to allocate costs by product category based on
production data.
ES.7 SECONDARY REGULATORY IMPACTS
Secondary impacts of the Petroleum Refinery NESHAP include th
potential effects of the regulation on the lair marL^ ^
use, foreign trade, and regional effects. The effects on the
^ rieed in
Labor market losses resulting from the NESHAP are estimated to
be between o and 114 jobs for the domestic petroleum ^
industry. This estimate reflects the estimated range of *
reductions in jobs predicted to result from the anticipated
reduction in annual production of refinery products. NO effort
has been made to estimate the number of jobs that may be created
^Uion (MM dollars) ammally. Net M-ai ^ "e°'8i
predicted to decrease by 2.26 million barrels for the five
ES-ll
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barrels
Regional effects are exp
stnce the
throughout the united
BS-3. SOTH«
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ES.8 ECONOMIC COST
«*«»- «=°n«i= wen-being
services refined petroleum products, to the producton of
o", EOOn°"iC "St ~ d -itH - reauocation
'
°f re9Ula"°" ^P-ate costs borne
by
be
of
TABLE ES-4.
POR THE
(Millions of 1992 dollars)
Social Cost Category
i^"«"^
Chosen Alternative:
-a, .. *..=iijuG=.i. Surplus
Change in Producer Surplus
Change in Residual Surplus to Society2
Total Social Cost of
$ 342.86
$ (174.32)
$ (73.25)
$ 95.29
ES-13
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POTESTIM. SBM.L BOSISESS IHPMTS
E8.9
The RFA requires that a
whether or not the subject
economic impact on a substantial
number is "a11v
of -»
There were
(SBA)
would
not have changed the results closure of some firms in
the final regulation may result » the clos ^^ ^
the industry - with small business ent.txes at g ^
_ this study indicates that th< .number of cios ^
a«e=ted by a reflation is to compare
revenues for small bus.n -^l^t. are ,,signlf icant" if
industry, ^^^^^^ior small entities is at least 1C
costs as a percentage of sales to Dercentage of sales for
s -r: =
these ratios exceeds
a significant
warranted .
ES-14
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1.0 INTRODUCTION AND SUMMARY OF CHOSEN REGULATORY
ALTERNATIVE
1.1
INTRODUCTION
This report evaluates the economic impact of a final standard
on the petroleum refining industry. Section 112 of the CAA
contains a list of HAPs for which EPA has published a list of
source categories that must be regulated. To further this
requirement, EPA is evaluating alternative NESHAPs for the
petroleum refining industry, because several emission sources
within refineries emit HAPs. Section 317 of the CAA requires EPA
to evaluate regulatory alternatives through an EIA. Executive
Order 12866 requires EPA to assess major regulations through a
Regulatory Impact Analysis (RIA). In addition to other analyses,
an RIA includes an EIA. Accordingly, this EIA has been prepared
to satisfy the requirements of the CAA and to partially fulfill
the requirements of Executive Order 12866.
This chapter presents a discussion of the NESHAP alternative
under analysis in this report. Chapter 2 of this report is a
compilation of economic and financial data on the petroleum
refining industry. Included in this profile are an
identification of affected refineries, a characterization of
market structure, separate discussions of the factors which
affect supply and demand, a discussion of foreign trade, a
financial profile, and the quantitative data inputs for the EIA
model. Chapter 3 outlines the economic methodology used in this
analysis, the structure of the market model, and the process used
to estimate industry supply elasticities.
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Chapter 4 presents the control costs used in the model, the
estimated emission reductions expected as a result of regulation,
and the cost-effectiveness of the regulatory option. Also
included is a quantitative estimate of economic costs and a
qualitative discussion of conceptual issues associated with the
estimation of economic costs of emission controls. Chapter 5
presents the estimates of the primary impacts determined by the
node!, which include estimates of price, output, and employment
impacts. A capital availability analysis is included as well as
a discussion of the limitations of the model. Chapter 6 presents
the secondary economic impacts, which are the estimated
quantitative impacts on the industry's labor market, energy use,
foreign trade, and regional markets. Lastly, Chapter 7
specifically addresses the potential impacts of regulation on
small refineries.
1.2 SUMMARY OF CHOSEN REGULATORY ALTERNATIVE
The CAA stipulates that HAP emission standards for existing
sources must at least match the percentage reduction of HAPs
achieved by either (1) the best performing 12 percent of existing
sources, or (2) the best five sources in a category or
subcategory consisting of fewer than 30 sources. For new
sources, the CAA stipulates that, at a minimum, the emission
standard must be set at the highest level of control achieved by
any similar source. This minimum level of control for both
existing and new sources is referred to as the MACT floor.
A source within a refinery is defined as "the collection of
emission points in HAP-emitting petroleum refining processes
within the source category." The source comprises several
emission points. The definition of source is an important
element of this NESHAP because it describes the specific grouping
of emission points within the source category to which this
standard applies. An emission point is a piece of equipment or
component of production which produces HAPs. Based on Section
112(c) of the CAA, controls are required on the following
emission points in refineries: storage vessels, equipment leaks,
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miscellaneous process vents, wastewater collection and treatment
systems, and catalytic reformer process vents. EPA chose one
regulatory alternative for detailed economic impact analysis
which combines MACT floor level controls for storage vessels,
wastewater collection and treatment systems, and miscellaneous
process vents, with an option more stringent than the MACT floor
for equipment leaks.
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2.0 INDUSTRY PROFILE
2.1
INTRODUCTION
The petroleum industry can be divided into five distinct
sectors: (1) exploration, (2) production, (3) refining, (4)
transportation, and (5) marketing; Refining, the process subject
to this NESHAP, is the process which converts crude oil into
useful fuels and other products for consumers and industrial
users. All affected facilities are classified under Standard
Industrial Classification (SIC) code 2911. Although petroleum
refineries produce a diverse slate of products, the five primary
output categories are (1) motor gasoline, (2) jet fuel, (3)
residual fuel, (4) distillate fuel, and (5) liquefied petroleum
gases (LPGs), which in total accounted for 93 percent of all
domestically refined petroleum products in 1992. This analysis
focuses on the markets for these five main product categories.
Section 2.2 through Section 2.6 of this chapter provide an
overview of the activities of the petroleum refining industry.
The economic and financial information in this chapter
characterizes the conditions in the refining industry which are
likely to determine the nature of economic impacts associated
with the implementation of the alternative NESHAPs. The
information contained in this chapter represents the inputs to
the economic model (presented in Chapter 3) which were used to
conduct the economic impact analysis. The general outlook for
the industry is also discussed in this chapter.
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Section 2.2 describes the refining process and refined
petroleum products, and identifies the unique market
characteristics of each product. Section 2.2 also identifies
affected refineries, presents trends in refining capacity, and
addresses the range in complexity among refineries. Section 2.3
characterizes the industry structure in terms of market
concentration, integration, and product differentiation. Also
included in Section 2.3 is a financial profile of a sample of
firms. Section 2.4 characterizes the supply side of the market
in terms of production trends, supply determinants, and export
levels. Section 2.5 presents demand-side characteristics,
including end-use markets, consumption trends, and import levels.
Lastly, Section 2.6 presents quantitative estimates of supply,
demand, and price projections.
A wide range of references were relied upon in the development
of this industry profile. Data from the U.S. Department of
Energy/Energy Information Administration (DOE/EIA) are relied
upon most extensively, since DOE/EIA provides the most
comprehensive production and consumption data by refined
petroleum product. In cases of conflicting or differing
information, preference is given to the most current and complete
data source.
2.2 PROFILE OF AFFECTED FACILITIES
This section reviews the products and processes of the
refining sector of the industry, and identifies any differences
among product markets. The affected refineries are identified by
location, capacity, and complexity.
2.2.1 General Process Description
The refining process transforms crude oil into a wide range of
petroleum products which have a variety of applications. The
refining industry has developed a complex variety of production
processes used to transform crude oil into its various final
forms, many of which are already subject to some CAA controls.
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EPA's source category list (57 FR 31576, July 16, 1992) required
by Section 112(c) of the CAA, identified two source categories
within refineries for which NESHAPs are to be established. These
two categories are: (1) catalytic cracking (fluid and other)
units, catalytic reforming units and sulfur units, and (2) other
sources not distinctly listed. During development of the
proposed standard, EPA determined that some of the emission
points from these two categories can be controlled by the same
control techniques, and as a result, the emission points within
these source categories will be regulated by a single NESHAP.
Upon revision of the source category list, all emission points
regulated by the subject NESHAP will be in a single source
category.
There are numerous refinery processes from which emissions
occur. Separation processes (such as atmospheric distillation
and vacuum distillation), breakdown processes (thermal cracking,
coking, visbreaking), change processes (catalytic reforming,
isomerization), and buildup processes (alkylation and
polymerization) all have the potential to emit HAPs. HAP
emissions may occur through process vents, equipment leaks, or
from evaporation from storage tanks or wastewater streams. The
NESHAP will address emissions from all of these refinery
processes.
2.2.2 Product Description and Differentiation
Most petroleum refinery output consists of motor gasoline and
other types of fuel, but some non-fuel uses exist, such as
petrochemical feedstocks, waxes, and lubricants. The output of
each refinery is a function of its crude oil feedstock and its
preferred petroleum product slate. The five main petroleum
product markets which are analyzed in this EIA are motor
gasoline, residual fuel oil, distillate fuel oil, jet fuel, and
LPGs.
Motor gasoline is defined as a complex mixture of relatively
volatile hydrocarbons that have been blended to form a fuel
suitable for use in spark-ignition engines. Residual fuel oil is
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a heavy oil which remains after the distillate fuel oils and
lighter hydrocarbons are distilled away in refinery operations.
Uses include fuel for steam-powered ships, commercial and
industrial heating, and electricity generation. Distillate fuel
oil is a general classification for one of the petroleum
fractions produced in conventional distillation operations. It
is used primarily for space heating, on- and off-highway diesel
engine fuel (including railroad engine fuel and fuel for
agricultural machinery), and electric power generation. Jet fuel
is a low freezing point distillate of the kerosene type used
primarily for turbojet and turboprop aircraft engines. LPGs are
defined as ethane, propane, butane, and isobutane.
Product differentiation is a form of non-price competition
used by firms to target or protect a specific market. The extent
to which product differentiation is effective depends on the
nature of the product. The more homogenous the overall industry
output, the less effective differentiation by individual firms
becomes. Each of the five petroleum products in this analysis
are by nature quite homogenous there is little difference
between Exxon premium gasoline and Shell premium gasoline and,
as a result, differentiation does not play a major role in the
competitiveness among petroleum refineries.
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2.2.3 Distinct Market Characteristics
The markets for refined petroleum products vary by geographic
location. Regional markets may differ due to the quality of
crude supplied or the local product demand. Some smaller
refineries which produce only one product have single, local
markets, while larger, more complex refineries have extensive
distribution systems and sell their output in several different
regional markets. In addition, because refineries are the source
of non-hydrocarbon pollutants such as individual HAPs, volatile
organic compounds (VOCs), sulfur dioxide (SO2), and nitrogen
oxide (NOX), many Federal, State, and local regulations are
already in place in some locations. Differences in the regional
market structure may also result in different import/export
characteristics.
The United States is segmented into five regions, called
Petroleum Administration for Defense Districts (PADDs), for which
statistics are maintained. PADDs were initiated in the 1940s for
the purpose of dividing the United States into five economically
and geographically distinct regions. Relatively independent
markets for petroleum products exist in each PADD, and much of
the data available from DOE and other sources is segmented by
PADD. Figure 2-1 illustrates the geographic breakdown for each
PADD.
Table 2-1 shows both State- and PADD-level capacity totals for
a variety of refinery processes. Several industry trends are
evident from the PADD-level totals in Table 2-1. First, PADD III
has more than twice the capacity of any other single PADD, mainly
because much of the domestic crude oil supply is located in this
region. Conversely, PADDs I and IV have very little capacity.
Given the large population and correspondingly large petroleum
demand in PADD I and the small population and lower demand in
PADD IV, it is likely that the market for petroleum products is
in some way fundamentally different in each district. The
availability of petroleum products in each PADD plays a role in
the import/export characteristics of each region.
-------
-------
-------
TABLE 2-1 (CONTINUED).
PAD District
Stale
Delaware
Georgia
Now Jersey
New York
North Carolina
Pennsylvania
Virginia
We«t Virginia
Illinois
Indiana
Kansas
Kentucky
Michigan
Minnesota
North Dakota
Ohio
Oklahoma
Tennessee
Wisconsin
Alabama
Arkansas
Louisiana
Miesisetppi
New Mexico
Texas
Colorado
Montana
Utah
Wyoming
Alaska
Arizona
California
Hawaii
Nevada
Oregon
Washington
Tj.S.Totals
Vacuum
" 96,000
0
258.900
28.000
0
320.250
29,000
6.000
j=??-"raOT"!wdgrJ'Egf^
Hydro-
0
266,000
0
Catalytic
Rjdro-
tareattag
Fuels
Solvent
383,900
235,450
124.660
92,000
38.000
182,000
0
172,000
147,000
12.000
20.500
45,000
23,300
1,132,200
274.776
13,900
1,718.900
43,000
63,450
46,980
73.000
0
21,000
0
0
0
14,000
0
0
247.OOO
27,500
0
28,000
62,600
67.600
0
60,000
0
31,700
26,500
0
0
12,000
0
680,700
83,500
0
373,800
4200
7'70o
8600
9.000
6,000
7.000
1,347,600
74,250
0
16,000
255,500
^7,276.605 .-
0
0
630,900
13.000
O
0
72,000
378.000
173,000
123,800
100,000
47.000
83,000
26.000
174,000
149,000
30,000
11.000
10,000
<200
9.000
O
1,000
1.000
3.600
17,500
6.000
0
0
19,100
895,600
80,000
33,800
1,642*00
27,500
66,900
84,800
62.000
302,300
W.800
93.800
46,000
33,000
69.600
12.100
162,600
101.600
10,000
8,000
775
11,600 .
7,000
4,600
125,600
1,000
6.280
W.600
12.500
0
0
666,700
20,000
0
0
118.600
0
0
14,000
0
0
0
7,000
26.000
11.200
630,300
96.000
21,050
22,900
37,730
30.500
32.360
0
7.000
0
0
6,800
2.000
0
0
77,600
0
0
200,400
10.200
3,700
0
17.000
0
0
61,000
0
4,440
12,000
0
642,300
13,000
0
0
128,600
123,000
2,940
288.000
0
0
471.820
26.600
4,000
0
3,190
0
0
0
0
87.200
6,000
0
0
0
0
172,000
68,000
1,000
313,600
5,000
4.900
2.400
0
617,600
267,800
211.000
172,300
61.800
227,000
19,100
196,600
177.600
30,000
14^00
9,000
O
408,800
18,000
0
0
52,000
69,300
30,000
1,287,600
264,000
29,800
3,176.660
35,700
119.840
41.200
62,800
0
0
1,475,180
3.600
0
0
219,000
;'; 9,676.330
0
0
0
0
0
0
0
0
6,000
6,600
10,000
O
0
0
9,000
10,300
0
0
o
6,600
35,000
0
0
102.600
0
11.600
6.000
0
'""71.50C
c
t
60.0CK
21,60
-------
4
3
| TABLE S-L PRODUCTION CAPACITY OF OEERABLE PETROLEUM REFINERIES 8
i
]
^
^
1
j FADDiitriet
I 'State
' ipADDITitiib'-^&i's
Delaware
Georgia
, . NewJ«r»*y
. NawYork
North Carolina
Ponnayhraala
Virginia
W««t Virginia
BlinoU
Indiana
Kanaos
Kentucky
Michigan
Minnesota
North Dakota
Ohio
Oklahoma
Tennessee
Wisconsin
P&&mTpiji£&?
Alabama
Arkansas
Louisiana
Mississippi
New Mexico
Texas
Colorado
Montana
Utah
Wyoming
.FADDV.$ptal6'"-v" -fl
Alaska
Arizona
California
Hawaii
Nevada
Oregon
Washington
UJS.Tdtaii..'.V,;:.':-:::
(AS OF JANUARY 1. 1881)
Knmbarof
Operabla Kafinarle*
Total Operating Idle
tfSp2? KlfSS'^^Si^
i" " i b
21 1
6 42
1 10
1 10
8 80
2 20
1 10
7 70
£ 41
8 80
2 20
3 30
2 20
1 10
4 40
e eo
1 10
1 10
\^-^fZ^ [;. ^-^yM'^^Ss
3 21
8 80
22 19 3
6 61
4 31
34 32 2
8 21
' 4 40
6 60
6 £ 0
^v^'^V^^'JL-i^tS-^S
6 60
1 1 ft
82 29 S
2 20
1 01
1 1 0
7 61
": 2Q2;:.- .:.; 184 -;: 18- ;
12
Atooapfeerle Crate OH DiftUlatioa Capadty
Bazrala par Calendar D«y
Opmtiaff MU
^^^tti^l^MJKMWO.
140,000 0
6^S40 28,000
334.600 124,400
41.8CO 0
3.000 0
744.316 0
66,700 0
12.600 0
937,600 0
429,900 1^50
2 0
218,900 0
118.600 O
267.100 0
68,000 0
487,100 0
395.600 0
60,000 0
88,200 0
:?v:: Vftlibt ;^"T. wbiifio :'
113,500 26,600
58,900 6,800
2.286,767 340,600
362,400 6,000
74,800 4,000
S.876,600 67,250
76,000 16,200
139,660 0
164,500 0
169.725 0
Vvr 2j986\OiW/rv:- ".~:.30t£Bb -
289.640 0
10,000 0
2,094,160 91,460
146,300 0
0 4,600
0 0
496,100 11,900
.; ;14.607,079 716,860
B&rrala par Straam Day
OpmOas
' ~ .f.l^ftS'JdM'".','
162,000
6.000
352.000
46,000
8,000
772,600
60,000
12^00
994,000
443,100
374,488
226,300
129.000
279,220
60,000
477,000
416,200
62,000
35,000
'Lv#7,iiiS'or.^r
116,300
67,000
2,388,900
383,000
79,107
4,097,000
86,000
146,600
160,000
175.750
: '.i8.a«$!|i&b ;:;.:;
264,700
12,000
2^17,400
150,000
0
0
631,000
' :-lfi,761,860!-
i
-------
In addition to differences in regional markets, each of the
five product categories in this analysis possesses its own
individual market segment, satisfying demand among different end-
use sectors. The substitutability of one of the products motor
gasoline, for example - is not possible with another refinery
output, such as jet fuel. Thus, each of the products in this
analysis is treated as a separate product with its own share of
the market. From a refinery standpoint, however, if the
production of one refined product were to become less costly
after regulation, production of this product may increase at the
expense of a product with a more costly refining process.
2.2.4 Affected Refineries, Employment, and Location
As of January 1, 1992, there were 192 operable petroleum
refineries in the United States.2 Though refineries differ in
capacity and complexity, almost all refineries have some
atmospheric distillation capacity and additional downstream
charge capacity, such as the processes described above in Section
2.2.1.
The most recent employment data source is the 1987 Census of
Manufactures for petroleum and coal products, which lists data on
employment and the number of establishments for SIC code 29II.3
Table 2-2 provides an indication of the frequency distribution of
small facilities in the petroleum refining industry. An
adjustment to the U.S. Department of Commerce data was necessary
because of the estimation process used by DOC.4 Column 3 lists
the number of plants which can be attributed to overestimation by
DOC. This conclusion was determined based on information from
DOE. Column 4 lists the actual number of refineries. Some
disparity still exists between column 4 and DOE data, but the
totals (219 and 213, respectively) are comparable. According to
the adjusted data set (column 6), slightly fewer than 4 percent
of refinery employees work in establishments of fewer than 100
people. The remaining 96 percent of the labor force in the
industry works at establishments of 100 employees or more.
13
-------
On a firm level, 1990 employment data were available for
several of the larger petroleum refining companies. Table 2-3
lists employee and sales data for a sample of companies in SIC
2911. In addition to these large firms, there are numerous small
firms which typically operate one refinery. For the smallest
firms in this industry, employment data was not available.
Refineries have many different specialties, targeted product
slates, and capabilities. Some refineries produce output only by
processing crude oil through basic atmospheric distillation.
These refineries have very little ability to alter their product
yields and are deemed to have low complexity. In contrast,
refineries that have assorted downstream processing units can
substantially improve their control over yields, and thus have a
higher level of complexity. Because of their differences in size
and complexity, refineries can be grouped by two main structural
features: (1) atmospheric distillation capacity (which denotes
their size) and (2) process complexity (which characterizes the
type of products a refinery is capable of producing).
2.2.5 Capacity and Capacity Utilization
Capacity is the characteristic most often used to categorize
petroleum refineries in market analyses. Throughout this report,
capacity will be used as a measure of production and output.
National refining production capacity was summarized on a
regional and State basis in Table 2-1. Appendix A, at the end of
this report, lists the production capacity for all firms and
refineries in the petroleum refining industry.
Capacity utilization rates of petroleum refineries have been
rising in recent years, reaching a high of 87.1 percent in 1990.7
This indicates that existing refineries are operating closer to
full capacity, and will have limited opportunity to enhance
production by increasing utilization.
14
-------
USTRY34
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16
-------
TABLE 2-3. 1990 EMPLOYMENT FOR SELECTED REFINING FIRMS56
Company
Number of
Employees
Amoco
ARCO
Ashland Oil
Chevron
Citgo
Diamond Shamrock
Exxon
Mobil
Occidental Petroleum
Phillips Petroleum
Sun Co.
Texaco
54,524
27,300
33,400
54,208
3,300
841
104,000
67,300
12,500
21,800
20,926
39,000
NOTES: 'Diamond Shamrock had 1990 sales in excess of 91 billion, and therefore cannot be
considered a small entity.
17
-------
During the past 23 years, the entire domestic refining
industry has been affected by crude oil quality changes, shifting
petroleum demand patterns, and evolving regulations, resulting in
a more complex, more flexible refining industry. Ownership of
U.S. refiners changed through consolidation and foreign
investments. Throughout the 1970s, the number of U.S. refineries
rose.rapidly in response to rising demand for petroleum products.
In the early 1980s, the petroleum refining industry entered a
period of restructuring, which continued through 1992. A record
number of U.S. refineries were operating in 1981. A decline in
petroleum demand in the early 1980s caused many small refineries
and older, inefficient plants to close. The refinery shutdowns
resulted in improved operating efficiency, which enabled the
refinery utilization rate to increase, despite lower crude oil
inputs. As of January 1, 1992, there were 192 operating
refineries, compared with 324 in 1981. Trends in the nation's
operable refining capacity and capacity utilization are presented
in Table 2-4. Note that operable capacity has remained
relatively constant since 1985, while capacity utilization has
risen steadily.
18
-------
TABLE 2-4. AVERAGE ANNUAL OPERABLE AND CAPACITY
UTILIZATION RATES8
(THOUSAND BARRELS PER DAY)
Year/Element
1985
Operable
Capacity
Utilization
Rate
1986
Operable
Capacity
Utilization
Rate
1987
Operable
Capacity
Utilization
Rate
1988
Operable
Capacity
Utilization
Rate
1989
Operable
Capacity
Utilization
Rate
1990
Operable
Capacity
Utilization
Rate
I
1,538
75.4
1,456
84.3
1,450
86.6
1,464
88.5
1,452
87.2
1,505
83.5
II
3,367
81.5
3,296
85.9
3,282
86.9
3,302
88.7
3,267
89.2
3,307
92.0
PADD
III
7,199
77.2
7,106
83.5
7,174
82.5
7,449
81.8
7,377
84.2
7,165
85.6
IV
558
77.6
534
81.0
535
81.7
537
84.7
552
83.4
555
83.4
V
3,01
0
75.6
3,06
5
78.2
3,20
2
79.1
3,17
6
84.2
3,05
4
88.4
3,09
1
87.9
Total
U.S.
15,671
77.6
15,459
82.9
15,642
83.1
15,927
84.4
15,701
86.3
15,624
87.1
19
-------
2.2.6 Refinery Complexity
Complexity is a measure of the different processes used in
refineries. It can be quantified by relating the complexity of a
downstream process with atmospheric distillation, where
atmospheric distillation is assigned the lowest value, 1.0. The
level of complexity of a refinery generally correlates to the
types of products the refinery is capable of producing. Higher
complexity denotes a greater ability to enhance or diversify
product output, to improve yields of preferred products, or to
process lower quality crude oil. By defining refinery
complexity, it is possible to differentiate among refineries
having similar capacities but different process capabilities. In
theory, more complex refineries are more adaptable to change, and
are therefore potentially less affected by regulation.
As Table 2-5 indicates, the complexity of a refinery usually
increases as its crude capacity increases. (Lube plants are the
exception to this rule.) As Table 2-5 indicates, well over 50
percent of the operable capacity (50,000 to 100,000 bbl/d) can be
found at refineries with above-average complexity (above 7.0).
Likewise, the smaller refineries are apt to be less complex.
2.3 MARKET STRUCTURE
The purpose of this section is to characterize the market
structure of the refining industry. Market structure has
important implications for the resultant price increases as a
result of controls. For example, in a perfectly competitive
market, the imposition of control costs will shift the industry
supply curve by an amount equal to the per-unit control costs and
the price increase will equal the cost increase. A perfectly
competitive market is characterized by many sellers, no barriers
to entry or exit, homogeneous output, and complete information.
In other words, a perfectly competitive market is one in which
producers have small degrees of market power and pricing is
determined by market forces, rather than by the producers. An
20
-------
indication of the market structure of the petroleum refining
industry is provided by an assessment of the number of firms
operating refineries, market concentration, vertical integration,
and diversification. Each of these factors is discussed
separately.
2.3.1 Market Concentration
Market concentration is a measure of the output of the largest
firms in the industry, expressed as a percentage of total
national output. Market concentration is usually measured for
the 4, 8, or 20 largest firms in the industry. A firm's
concentration in a market provides some indication of the firm's
size distribution. For example, on one extreme, a concentration
of 100 percent would indicate monopoly control of the industry by
one firm. On the other extreme, concentration of less than 1
percent would indicate the industry was comprised of numerous
small firms.
The American Petroleum Institute (API) has compiled a time-
series set of market concentration data for the petroleum
refining industry.9 Concentration is measured based on refining
capacity, which, in turn, is based on information developed from
DOE/EIA data on operable refining capacity per calendar day.
Table 2-6 summarizes refinery concentration for selected years in
the past decade. Until recently, the top four firms have
consistently comprised over 30 percent of the market share, but
most market concentration ratios have marginally decreased in
recent years.
21
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API also gauges market concentration by using the Herfindahl-
Hirschman index, which is defined as the sum of the squared
market shares (expressed as a percentage) for all firms in the
industry. If a monopolist existed, with market share equal to
100 percent, the upper limit of the index (10,000) would be
attained. If an infinite number of small firms existed, the
index would equal zero. An industry is considered unconcentrated
if the Herfindahl-Hirschman index is less than 1,000. Ratings
are also developed for moderately concentrated (between 1,000 and
1,800) and highly concentrated (greater than 1,800) industries.
As Table 2-6 shows, the petroleum refining industry has always
been considered unconcentrated.9
2.3.2 Industry Integration and Diversification
Vertical integration exists when the same firm supplies input
for several stages of the production and marketing process.
Firms that operate petroleum refineries are vertically integrated
because they are responsible both for exploration and production
of crude oil (which supplies the input for refineries) and for
marketing the finished petroleum products after refining occurs.
To assess the level of vertical integration in the industry,
firms are generically classified as major or independent.
Generally speaking, major energy producers are defined as firms
that are vertically integrated.
23
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24
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A definition of major energy producers, majors, was originally
developed by DOE/EIA in 1976.10 Selection criteria for the list
of publicly owned major firms included those which had either at
least 1 percent of the production or the reserves of oil, gas,
coal, or uranium, or 1 percent of the refining capacity or
petroleum product sales. DOE's current list contains 20 major
energy Companies. Table 2-7 lists the 20 firms (with refining
capacity) that are currently considered to be major energy
producers. The table also shows the percentage of refining
capacity operated by each of the firms. The crude capacity of
the major, vertically integrated firms represents almost 70
percent of nationwide production.
For the major oil companies, horizontal integration exists
because these firms operate several refineries which are often
distributed around the nation. Seventy-three of the 109 firms in
the industry operate only one refinery each. These are the
smaller independent firms. The major firms operate several
refineries, and the largest, Chevron, operates 13. Fourteen
firms operate four or more refineries each.
Diversification exists when firms produce a wide array of
unrelated products. In the short run, diversification may
indirectly benefit firms that engage in petroleum refining, since
the costs of control in petroleum refining may be dispersed over
other unaffected businesses operated by the firm. Over the long
term, however, firms will not subsidize petroleum product
production with profit from other operations, but will shut down
unprofitable operations instead.
25
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TABLE 2-7. MAJOR ENERGY FIRMS WITH REFINING CAPACITY1112
Company
Amerada Hess
Amoco Oil
Ashland Oil
Atlantic Richfield
BP Oil
Chevron U.S.A.
Coastal Corp.
E.I. Du Pont
Exxon
Fina Oil & Chemical
Kerr-McGee Corp.
Mobil Oil
Pacific Resources
Phillips 66
Shell Oil
Sun
Texaco
Total Petroleum
U.S. Steel
Unocal
Total
Barrels per
Calendar
Day
(Operating)
30,000
974,000
346,500
415,740
733,500
1,495,100
248,700
406,500
1,147,000
165,000
156,800
838,000
93,500
305,000
1,082,900
515,000
320,000
197,600
604,500
226,000
10,301,340
Percentage
of
National
Total
0.2%
6.5%
2.3%
2.8%
4.9%
10.0%
1.7%
2.7%
7.7%
1.1%
1.0%
5.6%
0.6%
2.0%
7.2%
3.4%
2.1%
1.3%
4.0%
1.5%
68.9%
26
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2.3.3 Financial Profile
This subsection examines the financial performance of a sample
of the petroleum refining industry's major firms. In order to
evaluate the financial condition of the refinery operations of
firms, annual reports to stockholders were used as a source of
data for a small sample of firms. While this sample is too small
and diverse to be considered representative of the aggregate
industry, the data presented are more recent and more refinery-
specific than API's data. The compilation of financial data for
this small sample is presented at the end of the chapter.
The sample of annual report data presents refinery-specific
data in order to provide a preliminary assessment of the
condition of the refinery segments of firms in the industry. The
firms included in this sample are listed in Table 2-8. This 12-
firm sample as a whole operated 59 refineries in 1991, and
represented 45.3 percent of the industry's total refining
capacity. Refining capacity in the sample ranges from 165,000
bbl/d to 2,139,000 bbl/d. Refinery-specific data obtained from
annual reports are presented in Table 2-9. Over the 5-year
period from 1987 to 1991, operating income per dollar of revenue
increased from 1 percent to 4 percent. Capital expenditures
increased steadily, while refined product sales continued a
period of decline. The consolidation taking place in the
refining industry is reflected in the decreasing crude oil
capacity and refinery runs shown in the table.
According to DOE, refined product margins are a good indicator
of overall refinery financial performance.13 The difference
between refined product costs and refined product revenues is the
refined product margin. During the 1980s, refined product
margins were affected by a shift in product slates to gasoline
and jet fuels, the decrease in crude oil prices, fluctuations in
demand, and an increase in refinery utilization rates.14 Refined
product margins for the years 1977 through 1988 are shown in
Table 2-10. In constant 1982 dollars, the refined product margin
fluctuated over this time frame, decreasing between 1985 and 1987
27
-------
and then increasing significantly in 1988. The fluctuations in
the refined product margins reflect the volatility of the market
and the degree to which refineries' revenues are often subject to
significant change over short time periods. In the early half of
1990, the margin between overall U.S. refined product prices and
crude oil import costs rose to record levels, given falling crude
oil prices and stable gasoline prices.15 After the invasion of
Kuwait, U.S. refined product prices did not keep pace with crude
oil prices for the remainder of the year. This negatively
impacted refinery revenues for 1991.
Firms have three sources of funding for the capital available
for purchasing emission control equipment to comply with the
NESHAP. These sources include (1) internal funds, (2) borrowed
funds, and (3) stock issues. Typically, firms seek a balance
between the use of debt and stock issues for financing
investments. Debt-to-equity ratios reflect a measure of the
extent to which the firm has balanced the tax advantages of
borrowing with the financial safety of stockholder financing.
Based on information obtained in the annual reports of the 12
companies in the refinery sample, firms anticipate that
internally generated funds will fund most of their capital
expenditures. Other firms recognize the need to also draw on
available credit lines and commercial paper borrowing. As
indicated in Table 2-9, the total amount of credit available to
these 12 firms as of December 31, 1991 was $13,462.9 million, or
an average of $1,121.9 million per firm. DOE has published
annual capital expenditures by domestic refiners.16 This trend is
presented in Table 2-11. Overall, capital expenditures have
doubled since 1977, although spending peaked in 1982 and has
since been in a period of decline.
28
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TABLE 2-8. FIRMS IN SAMPLE FOR REFINERY-SPECIFIC FINANCIAL DATA
Amoco Oil Inc.
Ashland Petroleum
Chevron U.S.A.
Coastal Corporation
Diamond Shamrock
Kerr-McGee Corporation
Mobil Oil Corp.
Murphy Oil
Phillips 66 Co.
Shell Oil Co.
Sun Co. Inc.
Texaco Refining and
Marketing '
29
-------
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-------
TABLE 2-10. REFINED PRODUCT MARGINS14
1977-1988
Refined Product Margin
Year
Current
Dollars
Constant:
Dollars
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
0.64
0.75
0.85
1.00
0.83
0.85
0.71
0.01
1.09
0.67
0.15
1.78
0.95
1.04
1.08
1.17
0.88
0.85
0.68
0.01
0.98
0.59
0.13
1.46
31
-------
Planned uses of investment funds by the 12 firms in the
financial sample over the next few years include construction of
diesel desulfurization units, expansion of existing units, and
construction of units to manufacture methyl tertiary butyl ether
(MTBE) and oxygenated fuels. In a 1991 study, Cambridge Energy
Research Associates (CERA) surveyed refiners and oxygenate
producers to evaluate the ability of the refining industry to
meet CAA provisions.17 Among the firms in the CERA survey, the
majors and some large independents plan to fund their investments
primarily or entirely from internally generated cash flows, while
most of the small refineries surveyed are planning on resorting
to the debt market for funds.
32
-------
TABLE 2-11.
CAPITAL EXPENDITURES BY DOMESTIC
PETROLEUM REFINERS16
1977-1988
Year
Current Dollars
1982 Constant
Dollars
1,029
1,430
2,221
2,547
4,041
4,973
3,695
3,681
2,380
1,752
1,920
3,675
1,529
1,981
2,826
2,972
4,299
4,973
3,556
3,418
2,148
1,538
1,631
3,020
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
33
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2.4 MARKET SUPPLY CHARACTERISTICS
This section analyzes the supply side of the petroleum
refining industry. Historical production data are presented, and
the factors which affect production are identified. The role of
foreign competition in this industry is also assessed.
2.4.1 Past and Present Production
The domestic supply of refined petroleum products and its
components for the past decade are shown in Table 2-12. A
significant increase in domestic demand in 1984 stimulated
domestic refinery production. Refiners have increased production
almost every year since 1984. Historically, motor gasoline has
been the product that is supplied in the greatest quantities to
meet increased demand. Most of the other petroleum products show
a net increase in supply over the past few years. The lack of
change in the yield for most refined petroleum products indicates
a relatively stable supply slate, but significant regulatory
costs could force some reshuffling of product yield.
Refinery production of motor gasoline has increased each year,
with the exception of periods of economic recession. Production
remained relatively steady from 1988 to 1992. Distillate fuel
oil output peaked at 3.3 million barrels per day in 1977, then
fell through 1983. Output has increased slightly almost every
year since, reaching 3 million barrels per day in 1992. Jet fuel
production grew during the 1970s and 1980s, and almost doubled by
1990 before declining to 1.4 million barrels per day in 1992.
Residual fuel oil production generally declined from 1980 through
1985, and was 1 million barrels per day in 1992, compared with
0.7 million barrels per day in 1970.
2.4.2 Supply Determinants
The most important short-run production decision for an oil
refinery is to decide how much crude oil to allocate for the
production of each of the refinery's products. The production
34
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decision depends on the profit each of the oil products can
generate for the firm. Profits, in turn, depend on the
productivity of the oil refinery its ability to obtain each
oil product as effectively as possible from a barrel of crude
oil. The quantity of crude oil a refinery will refine depends on
the capacity of the refinery and the cost of production. The
marginal costs of production of each product will determine any
future changes in production. Crude oil is the primary material
input to the refining process; as a result, the production of
refined products is vulnerable to fluctuations in the world crude
oil market.
In the long run, production decisions are based on the cost of
capacity expansion relative to existing and anticipated future
price levels. A refinery uses different processing units to turn
crude oil into finished products, so when a particular processing
unit reaches capacity, output can be increased only by
substituting a more expensive process. Firms will typically
utilize sufficient crude oil to fill the appropriate processing
unit until the price increases substantially. At this point, the
firm would calculate whether the increased price warrants using
an additional, more expensive processing unit.19
35
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TABLE 2-12. U.S. PETROLEUM PRODUCTS SUPPLIED, 1980-199218
(MILLION BARRELS PER DAY)
Yr.
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
Motor
Gas.
6.58
6.59
6.54
6.62
6.69
6.83
7.03
7.21
7.34
7.33
7.24
7.19
7.27
Jet Distillate
Fuel Fuel Oil
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
07
01
01
05
18
22
31
38
45
49
52
47
45
2
2
2
2
2
2
2
2
3
3
3
2
2
.87
.83
.67
.69
.84
.87
.91
.98
.12
.16
.02
.90
.98
Residual
Fuel Oil
2.
2.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
51
09
72
42
37
20
42
26
38
37
23
16
09
Liquid.
Petrol.
Gases
1.47
1.47
1.50
1.51
1.57
1.60
1.51
1.61
1.66
1.67
1.56
1.69
1.76
Other
Prods .
2
2
1
1
2
2
2
2
2
2
2
2
2
.57
.08
.86
.94
.07
.01
.09
.22
.33
.31
.42
.27
.47
Total
17.07
16.07
15.30
15.23
15.72
15.73
16.27
16.66
17.28
17.33
16.99
16.68
17.02
NOTES: Other products include kerosene, petrochemical feedstocks, wax, lubricants, petroleum coke, asphalt, road oil
and miscellaneous.
36
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2.4.3 Exports of Petroleum Products
Some measure of the extent of foreign competition can be
obtained by comparing exports with domestic production. Table 2-
13 presents export levels and domestic refinery output for the
past decade. Exports as a percentage of domestic refinery output
steadily increased from 1984 to 1991, and then fell slightly to
5.6 percent in 1992. Distillate oil, residual fuel oil, motor
gasoline, and petroleum coke are exported in the highest volumes.
The combined export volumes of these products represent 75
percent of domestic refinery output shipped overseas.
2.5 MARKET DEMAND CHARACTERISTICS
The purpose of this section of the profile is to characterize
the demand side of the petroleum refining industry, to identify
the end-use markets of each petroleum product in this analysis,
evaluate the extent to which price determines demand levels, and
define the role that imports play in satisfying domestic demand.
37
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TABLE 2-13. EXPORTS AND DOMESTIC REFINERY OUTPUT 20
(MILLION BARRELS PER DAY)
Year
Exports
Domestic
Refinery
Output
Exports As a
Percentage
of Domestic
Output
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
0.37
0.58
0.58
0.54
0.58
0.63
0.61
0.66
0.72
0.75
0.88
0.86
13.99
13.39
13.14
13.68
13.75
14.52
14.63
15.02
15.17
15.26
15.20
15.30
2.6%
4.3%
4.4%
4.0%
4.2%
4.3%
4.2%
4.4%
4.7%
4.9%
5.8%
5.6%
38
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2.5.1 End-Use Markets for Refined Products
In this analysis, the end-use sectors that contribute to
demand for refined petroleum products are classified in the
following four economic sectors: (1) residential and commercial,
(2) industrial, (3) transportation, and (4) electric utilities.
Figure 2-2 shows a more detailed breakdown of the 93.2 percent
petroleum product demand attributed to fuel users for the years
1970 through 1990. Petroleum products used as transportation
fuel include motor gasoline, distillate (diesel) fuel, and jet
fuel, and accounted for an estimated 64 percent of all U.S.
petroleum demand in 1990. Since mobile source emissions will be
regulated by Title II regulations, this output from petroleum
refineries will be most affected by the CAA. The industrial
sector constitutes the second highest percentage of demand for
petroleum products, followed by household and electric utility
demands.
Petroleum is used most widely in the transportation sector.
In the household and commercial sector, light heating oil and
propane are used for heating and,energy uses, and compete with
natural gas and electricity. Petroleum fuels in the industrial
sector compete with natural gas, coal, and electricity. In the
industrial sector, residual and distillate heating oils are used
for boiler and power fuel. In the electric utility sector,
petroleum products satisfy demands for heavy residual fuel oil
and in smaller amounts, bulk light distillate fuel oil.21
In terms of refined products, the motor gasoline and jet fuel
markets are associated with the transportation sector. The
markets for distillate fuel oil are associated with the
transportation sector (diesel-powered trucks), household (space
heating), industrial (fuel for commercial burner installations),
and electric utilities (power generation). The sectors that are
sources of demand for residual fuel oil include the commercial
and industrial sectors (heating), utilities (electricity
generation), and the transportation sector (fuel for ships).
Nonutility use of residual fuel has been decreasing due to
39
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interfuel substitution in the commercial and industrial sectors.
Because LPGs cover a broad range of gases, demand levels are
attributable to various end users.
2.5.2 Demand Determinants
The demand for refined petroleum products is primarily
determined by price level, the price of available substitutes,
and economic growth trends. The degree to which price level
influences the quantity of petroleum products demanded is
referred to as the price elasticity of demand, which is explored
later in this report. Prices of refined petroleum products
affect the willingness of consumers to choose petroleum over
other fuels, and may ultimately cause a change in consumer
behavior. In the transportation sector, the effect of high
gasoline prices on fuel use could reduce discretionary driving in
the short term and, in the long term, result in the production of
more fuel-efficient vehicles.
In the market for jet fuel, demand is primarily determined by
a combination of price concerns and the overall health of the
airline industry. In the residential sector, demand for home
heating (distillate) is determined in part by price level, and
also by temperature levels and climate. Temperature in different
areas of the country may determine the degree to which buildings
and houses are insulated. Temperature and insulation are
exogenous factors which will determine heating needs regardless
of the price level of fuel. High prices for home heating oil
provide incentive for individuals to conserve by adjusting
thermostats, improving insulation, and by using energy-efficient
appliances. In some cases, higher oil prices also provide
incentive for switching to natural gas or electric heating.
(Adjusting thermostats is a short-run response, while changing to
more energy-efficient appliances or fuels are long-run
responses.)
40
-------
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In the industrial sector, fuel oil competes with natural gas
and coal for the boiler-feed market. High prices relative to
other fuels tend to encourage fuel-switching, especially at
electric utilities and in industrial plants having dual-fired
boilers. Generally speaking, in choosing a boiler for a new
plant, management must choose between the higher capital/lower
operating costs of a coal unit or the lower capital/higher
operating costs of a gas-oil unit. In the utility sector, most
new boilers in the early 1980s were coal-fired due to the impact
of legislative action, favorable economic conditions> and long-
term assured supplies of coal.22 Today, because the CAA will
require utilities to scrub or use a low-sulfur fuel, oil will
eventually become more competitive with coal as a boiler fuel,
although a significant increase in oil-fired capacity is not
expected until 2010.°
Demand levels in each of the end-use sectors are also
affected, in part, by the economic environment. Periods of
economic growth and periods of increased demand for petroleum
products typically occur simultaneously. For example, in an
expanding economy, more fuel is needed to transport new products,
to operate new production capacity, and to heat new homes.
Conversely, in periods of low economic growth, demand for
petroleum products decreases.
2.5.3 Past and Present Consumption
Total consumption of all types of petroleum products has
fluctuated over the past 20 years, reflecting the volatility of
this market. The consumption level has been sporadic and has
shown an overall decline in recent years. Demand for individual
petroleum product types has also fluctuated over this period, as
shown in Table 2-14. Of all the petroleum products, demand is
the greatest for motor gasoline followed by distillate fuel oil.
Over the 23-year period from 1970 to 1992, the demand for
residual fuel oil has decreased by 50 percent, showing the
42
-------
greatest percentage of change over time of any of the petroleum
products; it has also been the only fuel to show a decline in
use. This decrease in residual fuel demand reflects a move in
the industry from heavier fuels toward lighter, more refined
versions. This trend is expected to continue into the future
with efforts to further control air emissions.
All other types of fuel show increases in use, with the most
growth occurring in the market for jet fuel. Substantial gains
in airplane fuel efficiency in the last two decades, which have
resulted from improved aerodynamic design and a shift toward
higher seating capacities, have been exceeded by even faster
growth in passenger miles traveled.25 The other categories show
an average growth rate of approximately 23 percent over this time
period. All major petroleum products registered lower demand in
1991 than in 1990, except LPGs. This was the first time since
1980 that demand for all major petroleum products fell
simultaneously in the same year. In this case, decreased demand
was brought on by warmer winter temperatures, an economic
slowdown, and higher prices resulting from the Persian Gulf War.26
Motor gasoline demand increased from a 1970 low to a high of
7.4 million barrels per day in 1978. The increase reflected a 31
percent growth in the number of automobiles in use and a 25
percent growth in vehicle miles traveled.21 From 1985 to 1992,
motor gasoline use accounted for about 42 percent of all
petroleum products consumed.
Changes in demand for distillate fuel oil were similar to
motor gasoline in that consumption reached its lowest and highest
levels in 1970 and 1978, respectively. Between 1985 and 1992,
consumption was relatively stable and accounted for about 18
percent of total U.S. petroleum consumption. Residual fuel oil
demand, in response to lower-priced natural gas and other
factors, fell 64 percent, from a high in 1977 of 3.1 million
barrels per day to 1.1 million barrels per day in 1992.
43
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TABLE 2-14.
PETROLEUM PRODUCTS SUPPLIED* TO THE U.S. MARKET BY TYPE
1970-1992
(MILLION BARRELS PER DAY)
Year
1970
1971
19.72
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
Motor
Gasoli
ne
5.78
6.01
6.38
6.67
6.54
6.67
6.98
7.18
7.41
7.03
6.58
6.59
6.54
6.62
6.69
6.83
7.03
7.21
7.34
7.33
7.24
7.16
7.16
Jet
Fuel
0.97
1.01
1.05
1.06
0.99
1.00
0.99
1.04
1.06
1.08
1.07
1.01
1.01
1.05
1.18
1.22
1.31
1.38
1.45
1.49
1.52
1.45
1.48
Distill
ate
Fuel
Oil
2.54
2.66
2.91
3.09
2.95
2.85
3.13
3.35
3.43
3.31
2.87
2.83
2.67
2.69
2.84
2.87
2.91
2.98
3.12
3.16
3.02
2.95
3.13
Residu
al
Fuel
Oil
2.20
2.30
2.53
2.82
2.64
2.46
2.80
3.07
3.02
2.83
2.51
2.09
1.72
1.42
1.37
1.20
1.42
1.26
1.38
1.37
1.23
1.13
1.10
LPGs
1.22
1.25
1.42
1.45
1.41
1.33
1.40
1.42
1.41
1.59
1.47
1.47
1.50
1.51
1.57
1.60
1.51
1.61
1.66
1.67
1.56
1.60
1.61
Other
Produc
ts
1.98
1.98
2.08
2.21
2.13
2.00
2.16
2.37
2.51
2.67
2.57
2.08
1.86
1.94
2.07
2.01
2.09
2.22
2.33
2.31
2.42
2.29
2.44
Total
Demand
14.70
15.21
16.37
17.31
16.65
16.32
17.46
18.43
18.85
18.51
17.06
16.06
15.30
15.23
15.73
15.73
16.28
16.67
17.28
17.33
16.99
16.58
16.92
NOTES: *DOE uses the term "product supply" as an approximation of consumption. It is calculated by adding refinery
production, natural gas liquids production, supply of other liquids, imports, and stock withdrawals, and subtracting
stock additions, refinery inputs, and exports.
44
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Between the period 1970 to 1990, expanding air travel spurred
a 57 percent growth in jet fuel demand. Demand increased from a
1970 low of 1.0 million barrels per day to 1.5 million barrels
per day in 1990.
The variation in U.S. petroleum product demand has been linked
to changes in the prices of petroleum products relative to one
another, and relative to other energy sources. Dramatic
petroleum price increases and eventual steep drops were in
response to wars, political upheaval in crude oil producing
areas, and supply disruptions during the past two decades.
2.5.4 Imports of Refined Petroleum Products
Table 2-15 presents import levels and domestic consumption for
the past decade. Imports as a percentage of domestic consumption
have fluctuated over this time period, although in 1992 levels
were 10.6 percent, or roughly the same level as in 1981. Table
2-16 compares exports to imports over the past decade. The
import to export ratio has decreased since 1981, due primarily to
steady increases in exports.
2.5.5 Pricing
As Table 2-17 indicates, prices for petroleum products have
shown volatility over the time period from 1978 through 1992.
This volatility is mainly attributable to the fluctuations in the
global market for crude oil and the inelastic demand for
petroleum products. Inelastic demand allows refiners to pass
crude oil price increases on to consumers. Because petroleum
products are essentially commodity products, produced to standard
specifications with little product differentiation and produced
by a large number of refiners, little ability for pricing
flexibility exists in this industry.
45
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TABLE 2-15. IMPORTS AND DOMESTIC CONSUMPTION
OF REFINED PETROLEUM PRODUCTS25
(MILLION BARRELS PER DAY)
Year
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
Imports
1.60
1.63
1.72
2.01
1.87
2.05
2.00
2.30
2.22
2.12
1.85
1.81
Domes-tic
Petroleum
Product
Consumption
16.06
15.30
15.23
15.73
15.73
16.28
16.67
17.28
17.33
17.33
16.70
17.00
Imports As a
Percentage of .
Domestic
Consumption
10.0%
10.6%
11.3%
12.8%
11.9%
12.6%
12.0%
13.3%
12.8%
12.8%
11.1%
10.6%
46
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TABLE 2-16. U.S. PETROLEUM PRODUCT IMPORTS AND EXPORTS25
(THOUSAND BARRELS PER DAY)
Year
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
Imports
1,599
1,625
1,722
2,011
1,866
2,045
2,004
2,295
2,217
2,123
1,845
1,805
Exports
367
579
575
543.
577
631
613
661
717
748
880
860
Net
Imports
1,232
1,046
1,147
1,470
1,289
1,414
1,391
1,634
1,500
1,375
965
945
Import/
Export
Ratio
4.4
2.8
3.0
3.7
3.2
3.2
3.3
3.5
3.1
2.8
2.1
2.1
47
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TABLE 2-17. PETROLEUM PRODUCT PRICE LEVELS, 1978-1992
27
Refiner Prices of Petroleum Products to End Users
(Cents Per Gallon Excluding Taxes)
Yr.
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
Motor
Gasoline
48.4
71.3
103.5
114.7
106.0
95.4
90.7
91.2
62.4
66.9
67.3
75.6
88.3
79.7
78.4
Jet
Fuel
38.7
54.7
86.8
102.4
96.3
87.8
84.2
79.6
52.9
54.3
51.3
59.2
76.7
65.2
61.0
Distillate
Fuel Oil
37.2
53.4
77.3
93.1
89.9
85.6
85.3
81.7
53.3
55.8
51.1
58.6
72.7
65.7
62.7
Residual
Fuel Oil
29.8
43.6
60.7
75.6
67.6
65.1
68.7
61.0
34.3
42.3
33.4
38.5
44.4
34.0
33.8
LPGS
33.5
35.7
48.2
56.5
59.2
70.9
73.7
71.7
74.5
70.1
71.4
61.5
74.5
73.0
66.2
48
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2.6
MARKET OUTLOOK
This section presents quantitative production, demand, and
price projections available from the literature. Projections are
important to the EIA since future market conditions contribute to
the potential impacts of the NESHAP which are assessed for the
fifth year after regulation.
2.6.1 Supply Outlook (Production and Capacity)
The refining industry was operating near maximum capacity in
1991, with an average annual utilization rate of approximately 92
percent.28 This is an increase from levels of previous years,
which were shown earlier in Table 2-4. In the market for motor
gasoline, for example, production capacity is nearly at full
capacity. As a result, any increases in demand will have to be
met by imported products. This will result in an increase in
worldwide competition for gasoline. East Coast refiners,
accounting for more than 90 percent of all unleaded gas imports
to the United States, will be most affected by this increased
competition.29 DOC predicts that, although U.S. refinery output
will remain relatively unchanged, net imports of refined
petroleum products are expected to increase by 15 percent.28 DOE
predicts net petroleum imports will rise to at least 10 million
bbl/d in 2010, and perhaps as high as 15 million bbl/d from the
1990 level of 7 million bbl/d as domestic oil production is
expected to decline. Imports are expected to supply between 53
and 69 percent of U.S. petroleum consumption by 2010, compared
with 42 percent in 1990. Refined products will account for much
of this increase because most of the expansion in the world's
refinery system is expected to take place outside the United
States.30
Over the next 5 years, the petroleum industry as a whole plans
to increase crude oil distillation capacity by an additional 2
percent, or 272,000 bbl/d, of which 44 percent would be produced
49
-------
by new facilities.29 (The other 56 percent includes reactivations
and expansions.) The level of added demand will determine if
this added capacity is sufficient to satisfy the market without
driving up prices.
Companies that operate more complex refineries (often the
largest refineries) will presumably be in a more favorable
position to make the necessary capital investments for the
transition to cleaner fuels. Such refineries will most likely be
those large enough to benefit from the economies of scale, and
with basic downstream configurations to facilitate compliance
with the new regulations. A financial analysis of major
petroleum refineries in the 1980s conducted by DOE concluded that
vertically integrated firms benefitted from integration in a
period characterized by increased regulatory activity and price
instability.31 The report found that the larger vertically
integrated companies could offset a loss in one subsidiary or
business operation with gains from another line of business. (It
is important to note, however, that in the long run, both large
and small firms would close refineries which operate at a loss
over time.)
By contrast, smaller, independent, and less complex refineries
will face higher marginal compliance costs, and may not find it
economical to spend the required environmental capital.
Generally not as flexible as the larger, integrated companies,
these firms operate at greater risk from the effects of market
instability. As a result, an industry which has seen a high
level of consolidation in past years will be likely to see more
concentration.32
Supply Prediction. Given each of the considerations discussed
thus far, DOE has projected the future level of supply in the
refining industry. These projections, shown in Figure 2-3, are
based on a DOE prediction that the United States will become
increasingly more dependent on foreign refined products and crude
oil supplies, while domestic refiners will continue to invest in
50
-------
downstream additions to meet environmental specifications.33 (It
should be noted here that DOE makes the assumption that products
imported from foreign refineries will meet U.S. specifications.)
DOE's projections are based on the following four different
scenarios and assumptions:
51
-------
52
-------
Assumptions
Scenario
2010 Oil Price
(1990 $)
Annual
Economic Growth
Rate
High Economic Growth
Low Economic Growth
High Oil Price
Low Oil Price
$33.40
$33.40
$40.20
$23.00
2.7%
1.8%
2.2%
2.2%
As shown in Figure 2-3, projections are the lowest in cases where
economic growth is low or when the price of oil is high.
Overall, the effect of the CAA on individual refineries is
dependent upon production capacity, economies of scale, degree of
self-sufficiency, capital cost, and ability of refiners to "pass
through" higher costs to consumers. Predictions of the effect on
the aggregate industry are difficult at this time because of the
uncertainty of the ability of some refineries to develop plans
for compliance pending resolution of key issues affecting their
operations. A recent Harvard University study, however,
predicted that the promulgation of environmental regulations was
likely to result in the early phase out of older, less
sophisticated facilities, combined with the upgrade and expansion
of more efficient, complex refineries at a faster rate.34
2.6.2 Demand Outlook
DOC projects the demand for all petroleum products to rise
slowly and steadily over the next 5 years, with domestic demand
for refined products increasing by 2.1 percent in 1992, assuming
an economic recovery and a return to "normal" weather. DOC's
longer term demand prediction is for a steady growth rate of 1
percent through 1996.35-36 By petroleum product, the 5-year
projected growth rates are as follows:
Motor gasoline: 0-1 percent
Jet fuel: 2.1 percent
Distillate fuel: 6:1 percent
Residual fuel: 0-1 percent
53
-------
Other products: 3.6 percent
Given that two-thirds of petroleum product demand is
attributable to the transportation sector, projected demand
growth for motor gasoline will have the greatest effect on
refiners. Industrial demand for distillate fuel reflects the
strongest projected growth. According to DOE projections, the
consumption of diesel fuel in the transportation sector is
expected to grow by over 40 percent between 1990 and 2010.w
Residential and commercial sectors are expected to show a
decrease in demand for petroleum products.
DOE has also projected future levels of demand as outlined in
Table 2-18. In comparison with DOE's supply projections in the
previous section, these demand projections fall between the high
and low economic growth supply projections, and between the high
and low oil price projections. Motor gasoline will remain the
leading end use of petroleum products throughout DOE's chosen
time frame, dropping off during 1990 and 1995, and rising again
to higher levels by 2010. DOE predicts the demand for residual
oil to rise, level off, and then begin to decline in 2010. Jet
fuel and distillate fuel are both projected to rise steadily
through 2010.
2.6.3 Price Outlook
Given that the demand for motor gasoline is price inelastic as
discussed in Section 2.5.5, the added capital investment that
refineries will be required to undertake in the production of
reformulated gasolines is likely to be passed on to consumers in
the form of a price increase. DOC has estimated this price
increase to be a 5 to 10 cent-per-gallon rise in the price of
motor gasoline.39 In a recent study undertaken by the National
Petroleum Council, the impacts of air quality regulations on
petroleum refineries were assessed. One of the conclusions of
the study was that the costs of controlling air emissions are
likely to be passed along to consumers as increases in the final
54
-------
price of refined products. (The study offered no quantitative
proj ections, however.) *°
DOE has projected the domestic prices of petroleum products
for 2010, as outlined in Table 2-19. DOE projects the average
price for all petroleum prices to increase at a rate in the range
of 0.4 percent to 2.1 percent annually. These price increases
are due to projected increases in both domestic demand and crude
oil .prices. DOE also accounted for higher refining and
distribution expenses in making these projections. The real price
of motor gasoline is projected to rise from $1.17 per gallon in
1990 to between $1.30 and $1.74 in 2010, depending on the level
of world crude oil prices. On-highway diesel fuel prices are
projected to increase to between $1.27 and $1.69 per gallon,
primarily because of the added refinery costs of desulfurization.
The average retail price of residual fuel oil, the least
expensive petroleum product, is projected to be within the range
of $25.52 to $40.79 per barrel in 2010.
If refineries are able to accommodate projected increases in
demand, the price level will remain fairly stable. However,
because the price level in this industry is contingent upon so
many factors independent of the industry, any price predictions
necessarily have their limitations. In the long run, therefore,
price forecasts will need to be modified with the occurrence of
any world events which will affect the supply of crude oil to the
refineries and therefore to the supply of refined petroleum
products. Refineries may also be faced with more environmental
legislation, escalating their pollution abatement costs. An
increase in regulatory costs would tend to increase the price of
refined petroleum products, all other factors held constant.
55
-------
TABLE 2-18.
PROJECTED CONSUMPTION OF PETROLEUM PRODUCTS
(MILLION BARRELS PER DAY)*
38
Product
Motor Gasoline
Distillate Fuel
Residual Fuel
Jet Fuel
Liquefied Petroleum
Gases
Total Products
Supplied
1989
7.33
3.16
1.37
1.49
1.67
15.02
1990
7.21
3.02
1.23
1.49
1.55
14.50
1995
7.22
3.25
1.29
1.61
1.70
15.07
2000
7.50
3.49
1.53
1.82
1.83
16.17
2005
7.83
3.70
1.53
2.01
1.96
17.03
2010
8.08
3.87
1.47
2.22
2.08
17.72
NOTES: 'DOE approximates consumption by adding refinery production, natural gas liquids production, supply
of other liquids, imports, end stock withdrawals, and subtracting stock additions, refinery inputs, and
exports.
56
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TABLE 2-19. PROJECTED PRICES OF PETROLEUM PRICES41
(1990 DOLLARS PER GALLON)1
Alternative Projections for
Product
Motor
Gasoline
Diesel Fuel
No. 2 Heating
Oil
Residual Fuel
1990
1.17
1.18
0.97
0.46
0.76
High
Economic
Growth
1.58
1.55
1.23
0.86
0.99
Low
Economic
Growth
1.57
1.52
1.15
0.82
0.95
2010b
High
Pric
e
1.74
1.69
1.32
0.97
1.13
Low
Pric
e
1.30
1.27
0.96
0.61
0.71
NOTES: 'Projected prices include estimated State and federal taxes.
bAssumptions used for each of the four scenarios are as follows:
Crude Oil
Price/BbI
(1990 $)
Average
Annual Economic
Growth Rate
Annual
Energy Demand
Growth Rate
Annual
Electricity
Demand
Growth Rate
High Economic Growth
Case:
Low Economic Growth Case:
High Oil Price Case:
Low Oil Price Case:
$33
$33
$40
$23
2.7%
1.8%
2.2%
2.2%
1.4%
0.9%
1.0%
1.3%
2.2%
1.8%
1.9%
2.0%
57
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-------
REFERENCES
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
U.S. Department of Energy. Petroleum Supply Annual, 1992.
Volume 1. DOE/EIA-0340(90)/1. Energy Information
Administration. Washington, DC. May 1993.
Robert Beck and Joan Biggs. OGJ 300. Oil & Gas Journal.
Vol. 89. No. 39. Tulsa, OK. September 1991.
U.S. Department of Commerce. 1987 Census of Manufactures,
Petroleum, and Coal Products. Industry Series. MC87-I-
29A. Bureau of the Census. Washington, DC. April 1990.
Table 4.
Al Foreman. U.S. Department of Commerce. Bureau of the
Census. Washington, DC. Personal communication. April
21, 1992.
Dun & Bradstreet. Million Dollar Directory.
Standard & Poor's. Register of Corporations, Directors,
and Executives.
Reference 2. Table 36.
Reference 2. Table FE3.
American Petroleum Institute. Market Shares and
Individual Company Data for U.S. Energy Markets, 1950-
1989. Discussion Paper #014R. Washington, DC. October
1990.
U.S. Department of Energy. Petroleum Marketing Annual,
1990. DOE/EIA-0487(90). Energy Information
Administration. Washington, DC. December 1991.
U.S. Department of Energy. Petroleum: An Energy Profile.
DOE/EIA-0545(91). Energy Information Administration.
Washington, DC. August 1991.
U.S. Department of Energy. Performance Profiles of Major
Energy Producers, 1990. DOE/EIA-0206(90). Energy
Information Administration. Washington, DC. December
1991.
U.S. Department of Energy. The U.S. Petroleum Refining
Industry in the 1980's. DOE/EIA-0536. Energy Information
Administration. October 1990.
U.S. Department of Energy. Annual Outlook for Oil and
Gas. DOE/EIA-0517(9l). Energy Information
Administration. Washington, DC. June 1991.
Reference 12.
58
-------
16. Reference 13.
17. Cambridge Energy Research Associates. The U.S. Refining
Industry: Facing the Challenges of the 1990s. Prepared
for U.S. Department of Energy. January 1992.
18. U.S. Department of Energy. Monthly Energy Review.
DOE/EIA-0035(93/07). Energy Information Administration.
Washington, DC. July 1993. Tables 3.3 to 3.10.
19. Robert S. Pindyck and Daniel L. Rubinfeld.
Microeconomics. MacMillan Publishing Co. 1989.
20. U.S. Department of Energy. Petroleum Supply Monthly.
Energy Information Administration. Washington, DC. March
1991.
21. U.S. Department of Energy. The U.S. Petroleum Industry:
Past as Prologue 1970-1992. DOE/EIA-0572. Energy
Information Administration, Office of Oil and Gas.
Washington, DC. September 1993.
22. Bonner & Moore Management Science. Overview of Refining
and Fuel Oil Production. Houston, TX. April 29, 1982.
23. U.S. Department of Energy. Annual Report to Congress.
DOE/EIA-0173(91). Energy Information Administration.
Washington, DC. March 1992.
24. Reference 18.
25. Dermot Gately. New York University. Taking Off: The
U.S. Demand for Air Travel and Jet Fuel. The Energy
Journal. Vol. 9. No. 4. 1988.
26. Reference 10.
27. Reference 10.
28. U.S. Department of Commerce. Petroleum Refining U.S.
Industrial Outlook 1992. Washington, DC. January 1992.
29. U.S. Department of Commerce. Petroleum'Refining U.S.
Industrial Outlook 1991. Washington, DC. January 1991.
30. U.S. Department of Energy. Annual Energy Outlook, 1992.
DOE/EIA-0383(92). Energy Information Administration.
Washington, DC. January 1992.
31. Reference 13.
32. Reference 28.
33. Reference 30.
59
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34.
35.
36.
37.
38.
39.
40.
41.
Henry Lee and Ranjit Lamech. The Impact of Clean Air Act
Amendments on U.S. Energy Security. Harvard University.
Energy 93-01. Cambridge, MA. 1993.
Reference 28.
Reference 29.
Reference 30.
Reference 11.
Reference 29.
National Petroleum Council. Estimated Expenditures by
Petroleum Refineries to Meet New Regulatory Initiatives
for Air Quality. For presentation at the 86th Annual Air
& Waste Management Association Meeting. Denver, CO. 93-
WA-78A.03. June 13-18, 1993.
Reference 28.
60
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3.0 ECONOMIC METHODOLOGY
3.1 INTRODUCTION
The economic methodology used in this study is outlined in
this chapter. Baseline values used in the partial equilibrium.
analysis are presented, and the analytical methods used to
conduct each of the following analyses are described separately
in this chapter:
Partial equilibrium analysis
impact of control costs on market price and quantity
Trade impacts and plant closures
Economic surplus changes
Labor and energy impacts
capital availability analysis.
3.2
MARKET MODEL
3.2.1 Partial Equilibrium Analysis
A partial equilibrium analysis is an analytical tool often
used by economists to analyze the single market model. This
method assumes that some variables are exogenously fixed at
predetermined levels. The goal of the partial equilibrium model
is to specify market supply and demand, estimate the post-control
shift in market supply, estimate the change in market equilibrium
(price and quantity), and predict plant closures.
61
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3.2.2 Mark&t Demand and Supply
The baseline or pre-control petroleum refining market is
defined by a domestic market demand equation, a domestic market
supply equation, and a foreign market supply equation. It is
further assumed that the markets will clear or achieve an
equilibrium. The following equations identify the market demand,
supply, and equilibrium conditions:
QD
Qs' =
QSf = Q
where :
Q
QD =
Qsd
Qsf
annual output or quantity of petroleum products
purchased and sold in the United States
quantity of the petroleum products domestically
demanded annually
quantity of the products produced by domestic suppliers
annually
quantity of the products produced by foreign suppliers
annually
p = price of the petroleum product
Superscripts e and 7 reference price elasticity of demand and
price elasticity of supply, respectively.
The constants a, /S, and p are computed such that the baseline
equilibrium price is normalized to one to simplify computations.
The market specification assumes that domestic and foreign supply
elasticities are the same. This assumption was necessary because
data were not readily available to estimate the price elasticity
of supply for foreign suppliers.
62
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3.2.3 Market Supply Shift
The domestic supply equation shown above may be solved for the
price of the petroleum product, P, to derive an inverse supply
function that will serve as the baseline supply function for the
industry. The inverse domestic supply equation for the industry
is as follows:
_i
P = «?S'/P)T
A rational profit maximizing firm will seek to increase the
price of the product it sells by an amount that recovers the
capital and operating costs of the regulatory control
requirements over the useful life of the emission control
equipment. This relationship is identified in the following
equation:
KC
a - 0
where :
C = increase in the supply price
Q = output
V = measure of annual operating and maintenance control
costs
t = marginal corporate income tax rate
S = capital recovery factor
D = annual depreciation (assumes straight line
depreciation)
K = investment cost of emission controls
Thus, the model assumes that individual refineries will seek to
increase the product supply price by an amount (C) that equates
the investment costs in control equipment (k) to the present
value of the net revenue stream (revenues less expenditures)
related to the equipment. Solving the equation for the supply
price increase (C) yields the following equation:
63
-------
kS - D
-------
P =
where:
C(Ci,q;) = a function that shifts the post-control supply
function
q = vertical shift that occurs in the supply curve for
the ith refinery to reflect post-control costs
qi = quantity produced by the ith refinery
This shift in the supply curve is illustrated in Figure 3-1.
3.2.4 Impact of Supply Shift on Market Price and Quantity
The impact of the proposed emission standards on market
equilibrium price and output is derived by solving for the post-
control market equilibrium and comparing the new equilibrium
price and quantity to the pre-control equilibrium. Since post-
control domestic supply is assumed to be segmented, or a step
function, a special algorithm was developed to solve for the
post-control market equilibrium. The algorithm first searches
for the segment in the post-control supply function at which
equilibrium occurs and then solves for the post-control market
price that clears the market.
Since the market clearing price occurs where demand equals
post-control domestic supply plus foreign supply, the algorithm
simultaneously solves for the following post-control variables:
Equilibrium market price
Equilibrium market quantity
Change in the value of domestic production or revenues
to producers
The quantity supplied by domestic producers
The net quantity supplied by foreign producers.
The changes in the market equilibrium are assessed by comparing
baseline equilibrium values with post-control equilibrium values,
65
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3.2.5 Trade Impacts
Trade impacts are reported as the change in both the volume
and dollar value of net exports (exports minus imports). It is
assumed that exports comprise an equivalent percentage of
domestic production in the pre- and post-control markets. The
supply elasticities in the domestic and foreign markets have also
been assumed to be equal. As the volume of imports rises and the
volume of exports falls, the volume of net exports will decline.
However, the dollar value of net exports may rise or fall when
demand is inelastic, as is the case for the petroleum products of
interest. The dollar value of imports will increase since both
the price and quantity of imports increase. Alternatively, the
quantity of exports will decline, while the price of the product
will increase. Price increases for products with inelastic
demand result in revenue increases for the producer.
Consequently, the dollar value of exports is anticipated to
increase. Since the dollar value of imports and exports rise,
the resulting change in the value of net exports will depend on
the magnitude of the changes for imports relative to exports.
66
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UJ
Q
O
2
CL
s
co
LU
o
Q_
LL
O
"Z.
g
I
CO
CO
UJ
£E
Z)
g
u_
I
CL
67
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The following algorithms are used to compute the trade
impacts :
*
-------
3.2.6 Plant Closures
It is assumed that a refinery will close if its post-control
supply price exceeds the post-control market equilibrium price.
Post-control supply prices for the individual refinery are
computed as described in Section 3.2.3, Market Supply Shift.
3.2.7 Changes in Economic Welfare
Regulatory control requirements will result in changes in the
market equilibrium price and quantity of petroleum products
produced and sold. These changes in the market equilibrium price
and quantity will affect the welfare of consumers of petroleum
products, producers of petroleum products, and society as a
whole. The methods used to measure these changes in welfare will
be described individually in the following sections.
3.2.7.1 Changes in Consumer Surplus. Consumers will bear a
loss in consumer surplus, or a dead weight loss, associated with
the reduction in the amount of petroleum products produced and
sold, and the higher prices paid for the products purchased.
This loss in consumer surplus represents the amount consumers
would have been willing to pay over the pre-control price for
eliminated production. In addition, consumers will be faced with
a higher price for post-control output. This consumer surplus
change, ACS is given by:
ACS =/ (Q/o)* dQ + P!
-------
between foreign and domestic consumers in the pre-control market.
The change in domestic production (&C5d) becomes the following:
11-
-------
APS
(1-0
Since domestic surplus changes are the object of interest, the
welfare gain experienced by foreign producers due to higher
prices is not considered. This procedure treats higher prices
paid for imports as a dead-weight loss in consumer surplus. From
a world economy perspective, higher prices paid to foreign
producers represent simply a transfer of surplus from the United
States to other countries. The higher prices paid for imports
represent a welfare loss from the perspective of the domestic
economy.
3.2.7.3 Residual Effect on Society. The changes in economic
surplus as measured by the changes in consumer and producer
surplus previously discussed must be adjusted to reflect the true
change in social welfare as a result of regulation. The
adjustments are necessary due to tax effects differences and to
the difference between the private and the social discount rates.
Two adjustments to economic surplus are necessary to account
for tax effects. The first relates to the per unit control cost
(Ct.) that reflects after-tax control costs and is used to predict
the post-control market equilibrium. True cost of emission
controls must be measured on a pre-tax basis.
A second tax-related adjustment is required because changes
reflect the after-tax welfare impacts of emission control costs
on affected refineries. As noted previously, a one dollar loss
in pre-tax surplus imposes an after-tax burden on the affected
refinery of (1-t) dollars. Alternatively, a one dollar loss in
after-tax producer surplus causes a complimentary loss of t/(l-t)
dollars in tax revenue.
Economic surplus must also be adjusted because the private and
social discount rates differ. The private discount rate is used
to shift the supply curve of firms in the industry since this
rate reflects the marginal cost of capital to affected firms.
71
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The economic costs of regulation must consider the social cost of
capital. This rate reflects the social opportunity cost of
resources displaced by investments in emission controls.
The adjustment for the two tax effects and the social cost of
capital are referred to as the residual change in economic
surplus, AJJS. This adjustment is shown by the following
equation:
i'l
(C, - pc fa + APS [*/(!-*)]
where pc,- is the per unit cost of controls for each refinery,
with the tax rate assumed to be zero, the discount rate assumed
to be the social discount rate of 7 percent, and all other
variables have been previously defined.
3.2.7.4 Total Economic Costs. The total economic costs of
the proposed regulations are the sum of the changes in consumer
surplus, producer surplus, and the residual surplus. This
relationship is defined in the following equations:
EC = &CSd + APS + ARS
where EC is the economic cost of the proposed controls and all
other variables have been previously defined.
3.2.8 Labor Input and Energy Input Impacts
The estimates of the labor market and energy market impacts
associated with the alternative standards are based on input-
output ratios and estimated changes in domestic production. The
methodologies used to estimate each impact are presented
separately in the following sections.
3.2.8.1 Labor Input Impacts. The labor market impacts are
measured as the number of jobs lost due to domestic output
reductions. The estimated number of job losses are a function of
72
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the change in level of production that is anticipated to occur as
a result of the proposed emission controls. The change in
employment is estimated as follows:
where:
AL = the change in employment
L0 = the number of production workers per million barrels of
annual production
Subscripts 0 and 1 represent pre- and post-control values,
respectively.
All other variables have been previously defined.
3.2.8.2 Energy Input Impacts. The reduction in energy inputs
associated with the proposed standard results from the expected
reduction in expenditures for energy inputs as a result of
production decreases. The expected change in use of energy
inputs is calculated as follows:
where:
A£ = the change in expenditures on energy inputs
E0 = the baseline expenditure on energy input per dollar of
refined petroleum output
All else is as previously defined.
3.2.9 Baseline Jjtiputs
The partial equilibrium model requires baseline values for
variables and parameters that have been previously described to
characterize the petroleum refining market. Table 3-1 lists the
variable and parameter inputs to the model that vary for the five
73
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petroleum products. Table 3-2 lists variables and parameters
that are assumed to be the same for all petroleum products.
The baseline conditions in the petroleum refining industry are
characterized by the baseline parameters and variables in the
tables. The baseline market prices, quantities, imports, and
exports for the five petroleum products were taken from the U.S.
Department of Energy, Petroleum Market Annual, 1992. Prices are
stated in cents per gallon excluding taxes and refinery output is
stated in millions of barrels produced per year. Sources for the
price elasticity of supply and demand are discussed in Section
3.3, Industry Supply and Demand Elasticities. The marginal tax
rate of 25 percent, private discount rate of 10 percent, and
social discount rate of 7 percent are rates that have been
assumed for the analysis as surrogates for the actual rates in
the economy. The equipment life of 10 years was obtained from
the study of emission control costs, conducted for EPA by the
engineering contractor. The number of workers per unit of output
(£) and the energy expenditure per value of shipments (E) were
derived from the U.S. Department of Commerce, Annual Survey of
Manufactures (ASM), 1991. Data from the ASM used to derive these
estimates include the 1991 annual values for total number of
workers employed, total expenditures on energy, and the value of
shipments for SIC 2911.
Data inputs also include the number of domestic refineries
operating in 1992, annual production per refinery, and control
costs per refinery. The number of operating refineries and
annual production per refinery were obtained from the Oil and Gas
Journal Refinery Survey, January 1992. Emission control costs
were obtained from engineering studies conducted by an
engineering contractor for EPA.
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TABLE 3-1. PRODUCT-SPECIFIC BASELINE DATA INPUTS
Refined Petroleum Product
Variable/
Parameter
Residu Distill
Gasolin Jet al ate
e fuel fuel fuel
oil oil
LPGs
Price (Po)1
Domestic Output,
(QoM)2
78.40 61.00 33.8 62.7 66.20
2,576.17 510.635 325.58 1,085.51 719.78
0.04 0.06 0.42 0.07 0.07
Import ratio3
Export Ratio4
Demand Elasticity
(7)
0.01 0.03 0.22 0.07 0.02
-0.69 -0.15 -0.675 -0.745 -0.8
NOTES: 'Cents per gallon, excluding taxes (1992).
'Millions of barrels per year.
Imports divided by domestic production.
'Exports divided by domestic production.
TABLE 3-2. BASELINE INPUTS FOR THE PETROLEUM REFINING INDUSTRY
Variable/Parameter
Value
Supply Elasticity (e)
Tax rate (t)
Private Discount rate (r)
Social Discount rate
Equipment life (T)
Labor
Energy
Number of operating petroleum refineries
1.24
0.25
0.10
0.07
10 years
9.12
workers
$0.03
192
NOTES: 'Production workers per million barrels produced per year.
"Energy expenditures per dollar value of shipments.
75
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3.3 INDUSTRY SUPPLY AND DEMAND ELASTICITIES
Demand and supply elasticities are crucial components of the
partial equilibrium model that is used to quantify the economic
impact of regulatory control cost measures on the petroleum
refinery industry. This chapter discusses the price elasticities
of demand and supply used as inputs to the partial equilibrium
analysis. The price elasticities of demand for each product were
available from published sources. The price elasticity of supply
was estimated for this analysis. The techniques utilized to
estimate the price elasticity of supply are discussed in detail
in Section 3.3.2, Price Elasticity of Supply.
3.3.1 Price Elasticity of Demand
The price elasticity of demand, or own-price elasticity of
demand, is a measure of the sensitivity of buyers of a product to
a change in price of the product. The price elasticity of demand
represents the percentage change in the quantity demanded
resulting from each 1 percent change in the price of the product.
Petroleum products represent a very important energy source
for the United States. Many studies have been conducted which
estimate the price elasticity of demand for some or all of the
petroleum products of interest. Over one hundred studies of the
demand for motor gasoline alone have been conducted (see Dahl and
Stern1 for a survey of these model results). Numerous published
sources of the price elasticity of demand for petroleum products
exist and are discussed in detail in the Industry Profile for the
Petroleum Refinery NESHAP (Pechan, 1993). The own-price
elasticities of demand used in this analysis are listed in Table
3-3.
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TABLE 3-3. ESTIMATES OF PRICE ELASTICITY OF DEMAND
Fuel Type
Long-Run Elasticity
Motor Gasoline
Jet fuel
Residual Fuel Oil
Distillate Fuel Oil
Liquified Petroleum Gases
-0.55 to -0.822
-0.153
-0.61 to -0.742
-0.50 to -0.992
-0.60 to -l.O2
The elasticity estimates reflect that each of these products
has inelastic demand. Regulatory control costs are more likely
to paid by consumers of products with inelastic demand compared
with products with elastic demand, all other factors held
constant. Price increases for products with inelastic demand
lead to revenue increases for the producers. Thus, one can
predict that price increases resulting from implementation of
regulatory control costs will lead to higher revenues for the
petroleum refining industry.
The market changes resulting from the regulations are based
upon the midpoint of the range of demand elasticities (with the
exception of jet fuel for which a range of elasticities was not
provided). A sensitivity analysis of this assumption is made
using the upper and lower bounds of the range of elasticities and
is reported in Appendix B.
3.3.2 Price Elasticity of Supply
The price elasticity of supply, or own-price elasticity of
supply, is a measure of the responsiveness of producers to
changes in the price of a product. The price elasticity of
supply indicates the percentage change in the quantity supplied
of a product resulting from each 1 percent change in the price of
the product.
77
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3.3.2.1 Modeling Issues. Published sources of the price
elasticity of supply using current data were not readily
available. Two studies estimated the price elasticity of supply
for gasoline to be 1.964 and 1.475, respectively. Since the years
of data used in these studies covered time periods during the
decade of 1970, it was determined that the price elasticity of
supply should be estimated econometrically using time series data
inclusive of more current information and of periods with greater
market stability.
The petroleum refinery industry has a history of long periods
of stable market conditions followed by periods of major market
disruptions, which must be considered in estimating the price
elasticity of supply using time series data. The Arab oil
embargo and the Iranian crisis in 1973 and 1978, respectively,
represent major crude oil supply disruptions that had significant
repercussions on the U.S. economy, and industrialized economies
of countries throughout the world. These market disruptions
drastically affected the market equilibrium for petroleum
products. The price per barrel of crude oil, the major input
into producing petroleum products, increased from an average
price of $4.15 per barrel in 1972 to an average price of $35.24
per barrel in 19816, an increase of 749 percent in nominal prices
and an increase of 249 percent when these prices are deflated by
the producer price index for all commodities.7 These events
suggest the possibility of a structural change or break during
the periods of the Arab oil embargo and the Iranian crisis as
noted by Tsurumi.4 A Chow test, or F-test, for structural change
was conducted for the period 1973 through 1979, or the period
relevant to these significant events. The statistical results of
this test are presented with the statistical results of the
model.
Another concern in estimating the price elasticity of supply
for petroleum refinery products is the joint product nature of
the five petroleum products. Joint products are products that
are produced jointly or in conjunction with other products.
Joint products may be categorized as either joint products of
78
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fixed proportions, or as joint products of variable proportions.
Beef and leather are the classic example of a joint product with
fixed proportions. Alternatively, the petroleum products under
study represent joint products of variable proportions. Thus,
managers at petroleum refineries have some discretion over the
level of production between refinery products. The jointness and
variability in the jointness of the products further complicates
the analysis.
Several model approaches were considered in the Analysis Plan
for the Economic Impact Analysis of Alternative NESHAP for the
Petroleum Refinery Industry (Pechan, 1993). The most
theoretically sound methodology involved estimation of a
production function with a function of the five petroleum
products as the dependent or left-hand-side variable. It was
determined that software was not readily available to estimate
this type of model. Alternatively, a model estimating the
production function for each of the five products treating the
price of the alternative four products as dependent or right-
hand-side variables was recommended. This approach assumes that
the prices of the alternative products are exogenous to the
model. In fact the prices of the five products are highly
correlated over time and are endogenous to the model. Estimation
of this model was not successful.
Two alternative models were considered. The first involved
estimation of a supply-demand model, and the second was to
estimate a production function for the five products combined.
The supply-demand approach estimates the price elasticity of
supply using simultaneous supply and demand equations and avoids
simultaneous system bias. This method allows for the treatment
of the price of alternative joint products as endogenous
variables. The results of the model estimated in this manner
were less satisfactory than estimation of the production function
for the five joint products in terms of significance of the
model, significance and signs of the individual parameter
estimates, and goodness of fit measures. Consequently, it was
determined that the price elasticity of supply would be estimated
using a production function for the five products combined.
79
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3.3.2.2 Model Approach. The approach used to estimate the
price elasticity of supply is consistent with economic theory and
makes the best use of available data. The method of deriving a
supply elasticity from an estimated production function will be
briefly discussed. The industry production function is defined
as follows:
where:
0s
L
K
H
t
the quantity of motor gasoline, jet fuel, residual fuel
oil, distillate fuel oil, and LPGs produced by domestic
refineries
the labor input or number of labor hours
real capital stock
the quantity of crude oil processed
a time variable to reflect technology changes
In a competitive market, market forces constrain firms to
produce at the cost minimizing output level. Cost minimization
allows for the duality mapping of a firm's technology (summarized
by the firm's production function) to the firm's economic
behavior (summarized by the firm's cost function). The total
cost function of the petroleum refinery industry follows:
TC = h(C#,t,Qs)
where TC is the total cost of production, C is the cost of
production (including cost of materials and labor), and the other
variables have been previously defined. This methodology assumes
that capital stock is fixed, or a sunk cost of production. This
model assumption is consistent with the goal of modeling post-
control market changes likely to occur. Firms facing prospective
regulatory emission controls will consider embedded capital stock
as a fixed or sunk cost in economic decision making. Firms will
make economic decisions that consider those costs of production
that are discretionary or avoidable. In the short run, avoidable
costs are generally variable costs such as labor and materials.
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Investments in new capital, such as emission control equipment,
are also discretionary . Firms have the discretion to shut down
rather than make investments in required emission control
equipment. By contrast, costs associated with existing capital
are not avoidable or discretionary, but represent sunk costs.
Differentiating the total cost function with respect to Q5
derives the marginal cost function:
where MC is the marginal cost of production and all other
variables have been previously defined.
Profit maximizing competitive firms will choose to produce the
quantity of output that equates market price (P) to the marginal
cost of production (MC) . Setting the price equal to the
preceding marginal cost function and solving for Q* yields the
following implied supply function:
where P is the market price of the petroleum products, PL is the
price of labor, PM is the price of crude oil, and all other
variables have been previously defined.
An explicit functional form of the production function may be
assumed to facilitate estimation of the model. For this
analysis, the Cobb-Douglas or multiplicative form of the
production function is postulated. The Cobb-Douglas production
function has the convenient property of yielding constant
elasticity measures. The functional form of the production
function becomes:
where:
Q. =
x, =
sum of the industry output of the five product
categories in year t
real capital stock in year t
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Lt = the quantity of labor hours used to produce the
petroleum products in year t
Kt ~ quantity of crude oil processed in year t
A, aK, OLL, au, X are parameters to be estimated by the model.
This equation can be written in linear form by taking the
natural logarithms of both sides of the equation. Linear
regression techniques may then be applied. Using the approach
described, the implied supply function may be derived as:
i * 04
PS
where:
PL
factor price of the labor input
PM factor price of the material input
JST = real fixed capital.
The coefficients, /3,- and 7, are functions of a,-, the
coefficients of the production function.
The supply elasticity, -y is equal to the following:
_ «i * «*
It is .necessary to place some restrictions on the estimated
coefficients of the production function in order to have well-
defined supply function coefficients. The sum of the
coefficients for labor and materials should be less than one.
Coefficient values for OCL and aM that equal to one result in a
price elasticity of supply that is undefined, and values greater
than one result in negative supply elasticity measures. For
these reasons, the production function is estimated with the
restriction that the sum of the coefficients for the inputs equal
one. This is analogous to assuming that the petroleum refining
industry exhibits constant returns to scale or is a long-run
constant cost industry. This assumption seems reasonable on an a
priori basis and is consistent with the data.
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3.3.2.3 Estimated Model. The estimated model reflects the
industry production function for the petroleum products using
annual time series data for the time period from 1963 through
1991. The following model was estimated econometrically:
where each of the variables and coefficients has been previously
defined.
3.3.2.4 Data. The data used to estimated the model is
enumerated in Table 3-4. This table contains a list of the
variables included in the model, the units of measure, and a
brief description of the data. The data used in the analysis
represents data for the petroleum refining industry, SIC 2911,
with two exceptions. The data inputs for quantity produced (Q,)
represents production at the five digit SIC level for gasoline,
jet fuel, distillate fuel oil, residual fuel oil, and LPGs. The
capital stock variable represents real net capital stock for
petroleum and coke products SIC 29. Capital stock data were not
readily available for the Petroleum Refining Industry at the
four-digit SIC level from published sources for the relevant time
periods. However, limited data reviewed for specific years
during the study period indicates that the majority of gross
capital stock in SIC 29 relates to the petroleum refining
industry. Consequently, use of this capital stock data is
unlikely to create errors for the analysis.
The capital stock variable represents the most difficult
variable to quantify for the econometric model. Ideally this
variable should represent the economic value of the capital stock
actually used by the refinery industry to produce petroleum
products for each year of the study. The most reasonable data
for this variable would be the number of machine hours actually
used to produce the refinery products each year. This
information is unavailable. In lieu of machine hours data, the
83
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dollar value of net capital stock in constant 1987 prices, or
real net capital stock, is used as a proxy for this variable.
The capital stock data are flawed in two ways. The first flaw
occurs because the data represent accounting valuations of
capital stock rather than economic valuations. This aberration
is not easily remedied, and is generally considered unavoidable
in most studies of this kind.
The second flaw involves capital investment that is idle and
not actually used for production in a particular year. This
error may be corrected by adjusting the capital investment to
exclude the portion of capital investment that is idle and does
not contribute directly to production in a given year. In an
effort to further refine the data, real capital stock was
adjusted for capacity utilization. This refinement would then
provide a data input that considers the percentage of real
capital stock actually utilized in petroleum refining production
each year.
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TABLE 3-4. PRODUCTION FUNCTION DATA INPUTS
Variable Unit of Measure
Description
Q,
If,
Millions of barrels
Years
Millions of 1987
dollars
Thousand of labor man
hours
Millions of barrels
The output variable
includes the sum of annual
production for motor
gasoline, jet fuel,
residual fuel oil,
distillate fuel oil, and
LPG7
Technology time trend
Real capital stock for
Petroleum and Coal Products
adjusted for capacity
utilization8-9
Production worker hours
for Petroleum refineries10
Gross input of crude oil to
petroleum product
distillation7
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3.3.2.5 Statistical .Results. A restricted least squares
estimator was used to estimate the coefficients of the production
function model. A log-linear specification was estimated with
the sum of the a,- restricted to unity. This procedure is
consistent with the assumption of constant returns to scale. The
model was further adjusted to correct for first-order serial
correlation using the Prais-Winston algorithm. The results of
the estimated model are presented in Table 3-5.
TABLE 3-5. ESTIMATED PRODUCTION FUNCTION COEFFICIENTS
Variable
Estimated
Coefficients*
Adjusted R2
t time
Kt Capital Stock
L, Labor
M, Materials or crude
oil
0.9680
0.0481
(2.061)
0.4457
(4.916)
0.1447
(2.090)
0.4096
(4.507)
NOTES: 't-ratios are shown in parentheses.
The equation explains about 97 percent of the variation in the
output variable. The time variable and labor variable are
significant at the 95 percent confidence level, while the capital
and crude oil or material variables are significant at the 99
percent confidence level. The F test and the Chi-square test for
the estimated model show that the coefficients of the estimated
model are jointly significant at the 99 percent confidence level.
Using the estimated coefficients in Table 3-5 and the formula
for supply elasticity shown Section 3.3.3.2 Model Approach, the
price elasticity of supply for the five petroleum products is
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derived to be 1.24. The calculation of statistical significance
for this elasticity measure is not a straightforward calculation
since the estimated function in non-linear. No attempt has been
made to assess the statistical significance of the estimated
elasticity.
A Chow test for structural stability was conducted of the
coefficients to determine if a structural change occurred during
the period from 1973 through 1979. This period included two
significant supply disruptions of crude oil, the major input to
the petroleum refining process. The test of structural change
for the period using an F-test for linear restrictions leads to a
conclusion that a structural break did not occur during the
period for the estimated model. It is recognized that this
result differs from the conclusion of Tsurmi.4 However, the
model estimated by Tsurmi differed from the model estimated in
this analysis in many respects. The data used in the Tsurmi
study represented quarterly data rather than annual data used in
the present study. It should be noted that the supply elasticity
estimates reported in Yang and Hu also do not adjust for
structural change.5 As a further test of the model's results on
this issue, the model was re-estimated excluding data for the
period from 1973 through 1979. The results were quite similar to
those reported in this document in terms of signs of the
coefficients and significance tests. The price elasticity of
supply estimated with such a model was 1.25. This price
elasticity of supply estimate is virtually the same as the
estimate used in the model reported.
3.3.2.6 Limitations of the Supply Elasticity Estimates. The
estimated price elasticity of supply for the five petroleum
products reflects that the petroleum refinery industry in the
United States will increase production of gasoline, jet fuel,
residual fuel oil, distillate fuel oil and LPG jointly by 1.24
percent for every 1.0 percent increase in the price of these
products. The preceding methodology does not estimate the supply
elasticities for the individual products or directly consider the
87
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interrelationships between products. The assumption implicit in
use of this supply elasticity estimate is that the elasticities
of the individual petroleum products will not differ
significantly from the elasticity of the products combined. This
does not seem a totally unreasonable assumption since the same
factor inputs are used to produce each of the petroleum products.
The methodology also does not explicitly consider the cross-price
elasticities for the petroleum products. Since these products
are joint products, changes in the price of one product will have
an effect on the quantity supplied of the other products.
The uncertainty of the supply estimate is acknowledged. It is
possible to conduct a sensitivity analysis of the price
elasticity supply. Such an analysis would quantify the impact of
this assumption on the reported market results.
3.4
CAPITAL AVAILABILITY ANALYSIS
It is necessary to estimate the impact of the proposed
emission controls on the affected petroleum refineries' financial
performance and their ability to finance the additional capital
investment in emission control equipment. Financial data were
not available for the majority of the refineries in the industry.
Financial data were only available for the largest publicly held
petroleum refining companies. For this reason, the capital
availability analysis has been conducted on an industrywide
basis.
One measure of financial performance frequently used to assess
the profitability of a firm is net income before interest expense
expressed as a percentage of firm assets, or rate of return on
investment. The pre-control rate of return on investment (roi)
is calculated as follows:
roi
100
where nt is income before interest payments and a, is total
assets. A five year average is used to avoid annual fluctuations
88
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that may occur in income data. The proposed regulations
potentially could have an effect on income before taxes, nt, for
firms in the industry and on the level of assets for firms in the
industry, a,. Since firm-specific data were unavailable for all
of the affected firms, sample financial data collected by the API
were used." Data from the API study are available in the
Industry Profile for the Petroleum Refinery NESHAP (Pechan,
1993). The sample studied by API represents 71 percent of net
income in the industry and 70 percent of total industry assets.
These percentages will be considered to estimate changes in the
financial ratio, and are necessary to allocate changes in income
and assets resulting from emission controls to the study sample.
The average rate of return on investment for firms in the sample
was 6 percent. There is a great diversity among the refineries
in the industry; therefore, individual firm financial performance
may vary greatly from the sample estimate. The post-control
return on investment (proi) is calculated as follows:
proi =
1990
/-1986
+ A n
* A*
100
where:
proi
post-control return on investment
= change in income before interest resulting from
implementation of emission controls .for firms in
the sample
change in investment or assets for firms in the
sample
The ability of affected firms to finance the capital equipment
associated with emission control is also relevant to the
analysis. Numerous financial ratios can be examined to analyze
the ability of a firm to finance capital expenditures. One such
measure is historical profitability measures such as rate of
return on investment. The analysis approach for this measure has
89
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been previously described. The bond rating of a firm is another
indication of the credit worthiness of a firm or the ability of a
firm to finance capital expenditures with debt capital. Such
data are unavailable for many of the firms subject to the
regulation, and consequently, bond ratings are not analyzed.
Ability to pay interest payments is another criterion sometimes
used to assess the capability of a firm to finance capital
expenditures. Coverage ratios provide such information. The
interest coverage ratio or the number of times income (before
taxes and interest) will pay interest expense is a ratio that
provides some information about the ability of a firm to cover or
pay annual interest obligations. The pre-control measure of
coverage ratio is as follows:
1990
where:
tc
= number of times earnings will cover annual interest
charges
eJbit = earnings before interest payments and taxes
interest = annual interest expense.
The baseline five year average of the interest coverage ratio
was 7.14 times for the sample of firms in the API study. Post-
control coverage ratios may be estimated as follows:
ptc
where AeJbit is the estimated change in earnings before interest
and taxes of the firm, ^interest, is the anticipated change in
interest expense, and all other variables have been previously
described. The ^interest is calculated by multiplying the
capital expenditures for the proposed controls (&k) by the
90
/ 1990
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V « 1986
bit] 1 5
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* A ebit
+ A interest
-------
assumed private cost of capital of 10 percent. Interest costs
are generally lower than the overall cost of capital for a firm
and this method would tend to overstate the impact of controls on
industry interest coverage ratio.. Again the interest coverage
ratios of individual petroleum refineries may differ from the
average significantly.
Finally, the degree of debt leverage or debt-equity ratio of a
firm is considered in assessing the ability of a firm to finance
capital expenditures. The pre-control debt-equity ratio is the
following:
die
C1990
where d/e is the debt equity ratio, d is debt capital and e is
equity capital. Since capital information is less volatile than
earnings information, it is appropriate to use the latest
available information for this calculation. If one assumes that
the capital costs of control equipment are financed solely by
debt, the debt-equity ratio becomes:
pdle
ixx>
where pd/e is the post-control debt-equity ratio assuming that
the control equipment costs are financed solely with debt.
Obviously, firms may choose to issue capital stock to finance the
capital expenditure or to finance the investment through
internally generated funds. Assuming that the capital costs are
financed solely by debt may be viewed as a worse case scenario.
The methods used to analyze the capital availability do have
some limitations. The approach matches 1990 debt and equity
values with estimated capital expenditures for control equipment.
Average 1986 through 1990 income and asset measures are matched
with changes in income and capital expenditures associated with
the control measures. The control cost changes and income
changes reflect 1992 price levels. The financial data used in
the analysis represents the most recent data available. It is
91
-------
inappropriate to simply index the income, asset, debt, and equity
values to 1992 price levels for the following reasons. Assets,
debt, and equity represent embedded values that are not subject
to price level changes except for new additions such as capital
expenditures. Income is volatile and varies from period to
period. For this reason, average income measures are used in the
study. The analysis reflects a conservative approach to
analyzing the changes likely in financial ratios for the
petroleum industry. Some decreases the cost of production
expected to result from implementation of emission controls have
not been considered. These include labor input and energy input
cost decreases. Annualized compliance costs are overstated from
a financial income perspective since these costs include a
component for earnings or return on investment. In general, the
approach followed is a worst case scenario approach that
overstates the negative impact of the proposed emission controls
on the financial operations of the petroleum refining industry.
92
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REFERENCES
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Carol Dahl and Thomas Sterner. Analyzing Gasoline Demand
Elasticities: A Survey. Energy Economics. July 1991.
U.S. Department of Energy. Short-term Energy Outlook,
Vol. II. DOE/EIA-0202/42. Energy Information
Administration. Washington, DC. August 1980.
Robert S. Pindyck and Daniel L. Rubinfeld.
Microeconomics. MacMillan Publishing Company.
1989.
Hiroki Tsurmi. A Bayesian Estimation of Structural Shifts
By Gradual Switching Regressions with an Application to
the U.S. Gasoline Market Bayesian Analysis in Econometrics
and Statistic Essays in honor of Harold Jeffries. Edited
by Arnold Zellner. 1980.
Gasoline Demand and Supply
Energy Economics. October
Bong-Min Yang and Teh-wei Hu.
Under a Disequilibrium Market,
1984.
U.S. Department of Energy: Petroleum Marketing Annual,
1992. Volume 1 DOE/EIQ-0340(90)/1. Energy Information
Administration. Washington, DC. May 1993.
U.S. Department of Commerce. Business Statistics 1963-
1991. 27th Edition. June 1992.
U.S. Department of Commerce.
the.United States 1925-1989.
Fixed Reproducible Wealth in
U.S. Department of Commerce. Survey of Current Business.
Volume 73. Number 9. September 1993.
U. S. Department of Commerce.
Manufactures. 1963-1991.
Annual Survey of
American Petroleum Institute. Financial Trends for
Leading U.S. Oil Companies 1968-1990. Discussion Paper
#017R. Washington, DC. October 1991.
93
-------
-------
4.0 CONTROL COSTS, ENVIRONMENTAL IMPACTS,
COST-EFFECTIVENESS
4.1 INTRODUCTION
Inputs to the model outlined in the previous chapter include
the quantitative data summarized in Chapter 2.0 and control cost
estimates provided by EPA. This chapter summarizes the cost
inputs used in this EIA, and the methodology used for allocating
costs to each of the five petroleum product markets.
A Regulatory Impact Analysis (RIA) of alternative emission
standards includes a Benefit Cost Analysis (BCA). A BCA requires
estimates of economic costs associated with regulation, which do
not correspond to emission control costs. This chapter presents
the progression of steps which were taken to arrive at estimates
of economic costs based on the emission control cost estimates.
The environmental impacts associated with the chosen regulatory
option in this analysis are summarized and the cost-effectiveness
of the regulatory option is presented.
4.2 CONTROL COST ESTIMATES
Control cost estimates and emission reductions were provided
on a refinery level. The control costs estimated for each
refinery can be divided into fixed and variable components.
Fixed costs are constant over all levels of output of a process,
and usually entail plant and equipment. Variable costs will vary
as the rate of output changes. The costs were calculated for new
94
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and existing petroleum refinery emission sources. New source
costs represent the control of new process units and equipment
built (or reconstructed or replaced) in the first 5 years after
promulgation. It should be noted for regulatory purposes that
some of these units and equipment will be considered new sources
and others will be considered part of an existing source. It is
not possible to determine how many new units will fall into these
two categories; however, the emission points will require control
in either case.3
Table 4-1 presents the fifth year costs for the regulated
sources included in this analysis. Emission control costs are
the annualized capital and annual operating and maintenance costs
of controls based on the assumption that all affected refineries
install controls. The controls associated with each of the five
emission points are discussed separately below.
For equipment leaks, the MACT floor level of control is the
Petroleum Refinery New Source Performance Standard (NSPS).' The
chosen control alternative is a level more stringent than the
floor, which is the HON negotiated regulation without connector
monitoring. The cost for this option was calculated assuming
quarterly monitoring of gas valves and light liquid valves. The
annual costs for the floor are $69 million per year, while the
costs for applying the negotiated regulation to petroleum
refineries are estimated to be $58 million per year.2
The MACT floor level control for HAPs from miscellaneous
process vents is incineration or equivalent control (i.e., 98
percent reduction or 20 parts per million by volume outlet
level). The cost and emission reduction represent the nationwide
cost of piping uncontrolled miscellaneous vents to existing flare
or fuel gas systems. The annual cost for controlling emissions
from miscellaneous vents was estimated to be $11.4 million per
year. The miscellaneous process vents include all process vents
at a refinery, excluding fluidized catalytic cracking unit
catalyst regeneration vents, catalytic reformer catalyst
regeneration vents, and sulfur plant vents.
95
-------
A MACT floor analysis performed on wastewater collection and
treatment systems indicated that the MACT floor level of control
for this emission point is compliance with the benzene waste
operations NESHAP (BWON). No costs are therefore anticipated for
the industry to reach the MACT floor level of control.
The MACT floor level of control for floating roof storage
vessels requires control equivalent to the VOL Storage NSPS
requirements (which are listed in subpart Kb of CFR Part 60),
seals and conversion to floating roof or 95 percent control for
fixed roof vessels. This level of control applies to vessels
larger than 1,115 barrels storing liquids with true vapor
pressures greater than or equal to 3.4 psia.5 The annual cost
for MACT floor control is estimated to be $3.8 million.
Control cost estimates were provided on an emission point and
on a refinery basis. A methodology was developed to allocate
these costs to the specific products in this analysis. The
allocation was based on each refinery's estimated production of
the five products of interest. The Oil & Gas Journal's U.S.
Refinery Survey publishes total daily output by refinery. Each
refinery's total production was multiplied by 0.90 since the five
products of interest accounted for 93 percent of total refinery
output. Production of each specific product was estimated based
on the assumption that each refinery produces the national
average mix of the five products.
Emission control costs for the selected control alternative
include those associated with storage vessels, process vents, and
equipment leaks (net of recovery credits).
96
-------
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Costs are allocated to the five products as follows:
Motor gasoline - all costs associated with storage
vessel controls plus gasoline's "share" of process vent
and equipment leak costs.
Jet fuel, residual fuel oil, distillate fuel oil, and
LPG - each products' "share" of process vent and
equipment leak costs.
Product "shares" are computed, for each refinery, as the ratio of
the production of that product to total production of the five
products of interest.
4.3 MONITORING, RECORDKEEPZNG, AND REPORTING COSTS
In addition to provisions for the installation of control
equipment, the proposed regulation includes provisions for
monitoring, recordkeeping, and reporting (MRR). EPA estimates
that the total annual cost for refineries to comply with the MRR
requirements is approximately $20 million. After incorporating
MRR costs, the total cost of compliance of the Chosen Alternative
is $79 million.
In order to calculate the costs of MRR associated with the
petroleum refinery NESHAP, estimates of hours per item (i.e., a
required MRR action), frequency of required action per year, and
number of respondents were estimated based on the requirements in
the proposed rule for all of the emission points. To compute the
costs associated with the burden estimates, a wage rate of $32
per hour (in 1992 dollars) was assumed. This assumption was
based on estimate that 85 percent of the labor will be
accomplished by technical personnel (typically by an engineer
with a wage rate of $33 per hour), 10 percent will be completed
by a manager (at $49 per hour), and 5 percent by clerical
personnel (at $15 per hour). All of the wage rates include an
additional 110 percent for overhead. Costs were annualized
98
-------
assuming an expected remaining life for affected facilities of 15
years from the date of promulgation of the subject NESHAP, and
using an interest rate of 7 percent.
Compliance requirements vary in terms of frequency. This
variance is taken into account in the annualization of costs.
Performance tests to demonstrate compliance with the control
device requirements are required once. Compliance requirements
.also include monitoring of operating paramenters of control
devices and records of work practice and other inspections.
These activities must be reported semiannually. The compliance
requirements that must be met only once are annualized over the
time from the year in which they are to take place to the
expected end of facility life.
The MRR requirements are outlined separately for each emission
point. The proposed compliance determination provisions for
storage vessels include inspections of vessels and roof seals.
If a closed vent system and control device is used for venting
emissions from storage vessels, the owner must establish
appropriate monitoring procedures. For wastewater stream and
treatment operations, the MRR requirements are outlined in the
rule for the BWON.
For miscellaneous process vents, the proposed standard
specifies the performance tests, monitoring requirements, and
test methods necessary to determine whether a miscellaneous
process vent stream is required to apply control devices and to
demonstrate that the allowed emission levels are achieved when
controls are applied. The format of these requirements, as with
the format of the miscellaneous process vent provisions, depends
on the control device selected. The MRR requirements for
miscellaneous process vents are summarized by control device in
Table 4-2.
For equipment leaks, because the provisions of the proposed
rule are work practice and equipment standards, monitoring,
repairing leaks, and maintaining the required records constitutes
compliance with the rule. The HON equipment leak provisions are
appropriate to determine continuous compliance with the petroleum
99
-------
refinery equipment leak standards. In summary, these provisions
require periodic monitoring with a portable hydrocarbon detector
to determine if equipment is leaking.
4.4 ESTIMATES OF ECONOMIC COSTS
Air quality regulations affect society's economic well-being
by causing a reallocation of productive resources within the
economy. Resources are allocated away from the production of
goods and services (refined petroleum products) to the production
of cleaner air. Estimates of the economic costs of cleaner air
require an assessment of costs to be incurred by society as a
result of emission control measures. By definition, the economic
costs of pollution control are the opportunity costs incurred by
society for productive resources reallocated in the economy to
pollution abatement. The economic costs of the regulation can be
measured as the value that society places on goods and services
not produced as a result of resources being diverted to the
production of improved air quality. The conceptually correct
valuation of these costs requires the identification of society's
willingness to be compensated for the foregone consumption
opportunities resulting from the regulation. In contrast to the
economic cost of regulation, emission compliance costs consider
only the direct cost of emission controls to the industry
affected by the regulation. Economic costs are a more accurate
measure of the costs of the regulation to society than an
engineering estimate of compliance costs. However, compliance
cost estimates provide an essential element in the economic
analysis.
Economic costs are incurred by consumers, producers, and
society at large as a result of pollution control regulations.
These costs are measured as changes in consumer surplus, producer
surplus, and residual surplus to society. Consumer surplus is a
measure of well-being or of the welfare of consumers of a good
and is defined as the difference between the total benefits of
consuming a good and the market price paid for the good.
Pollution control measures will result in a loss in consumer
100
-------
surplus due to higher prices paid for refined petroleum products
and to the deadweight loss in surplus caused by reduced output of
petroleum products in the post-control market.
101
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established in the NCS
itoring data, as described in 563.552(f)(3)(i)(C| of this subpart, the duration of the period
Periodic Report.
C 0
emission Is caused by insufficient mo
ire not collected shall be included in th
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"When a period of excei
when monitoring data t
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§
o)
.£
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at
44 megawatts or for boilers and proce'f heaters where the vent
ng or reporting associated with monitoring is required for such boilers and process heaten
1 for boilers and process heaters with 1
or as the primary fuel. No recordkeel
v £
hNo monitoring Is requir
stream is Introduced wi
it regulated under this subpart. No monitoring, recordkeeping, or reporting is required for
W
uted to refinery fuel gas systems are r
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2 £
'Process vents that are
boilers and process hea
105
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Producer surplus is a measure of producers welfare that
reflects the difference between the market price charged for a
product and the marginal cost of production. Pollution controls
will result in a change in producer surplus that consists of
three components. These changes include surplus gains relating
to increased revenues experienced by firms in the petroleum
industry experiencing higher post-control prices, surplus
losses associated with increased costs of production for
annualized emission control costs, and surplus losses due to
reductions in post-control output. The net change in producer
surplus is the sum of these surplus gains and losses.
Additional adjustments or changes in the residual surplus to
society are necessary to reflect the economic costs to society of
pollution controls, and these adjustments are referred to as the
change in residual surplus to society. Specifically, adjustments
are necessary to consider tax gains or losses associated with the
regulation and to adjust for differences between the social
discount rate and the private discount rate. Since control
measures involve the purchase of long-lived assets, it is
necessary to annualize the cost of emission controls.
Annualization of costs require the use of a discount rate or the
cost of capital. The private cost of capital (assumed to be 10
percent) is the relevant discount rate to use in estimating
annualized compliance costs and market changes resulting from the
regulation. Firms in the petroleum refinery industry will make
supply decisions in the post-control market based upon increases
in the costs of production. The private cost of capital more
accurately reflects the capital cost to firms associated with the
pollution controls. Alternatively, the social costs of capital
(assumed to be 7 percent)6 is the relevant discount rate to
consider in estimating the economic costs of the regulation.
The economic cost of the regulation represents the cost of the
regulation to society or the opportunity costs of resources
displaced by emission controls. A risk-free discount rate or the
social discount rate better reflects the capital cost of the
regulation to society.
106
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The sum of the change in consumer surplus, producer surplus
and residual surplus to society constitutes the economic costs of
the regulation. Table 4-3 summarizes the economic costs
associated with the Chosen Regulatory Alternative. The economic
cost for the Chosen Alternative for all petroleum products is
$95.29 million annually. The economic costs for individual
products range from $8.52 million annually to $48.03 million
annually for residual fuel oil and motor gasoline, respectively.
More details concerning the methodology used to estimate these
welfare changes or the economic cost of the regulation are
discussed in Section 3.2.7 Changes ±n Economic Welfare.
TABLE 4-3. ESTIMATES OF THE ANNUALIZED ECONOMIC COSTS ASSOCIATED
WITH ALTERNATIVE NESHAPS BY PETROLEUM PRODUCT MARKET1
(MILLIONS OF $1992 )
Petroleum
Product Market
Motor Gasoline
Jet Fuel
Residual Fuel
Oil
Distillate Fuel
Oil
LPGs
TOTAL
Change in
Consumer
Surplus
$180.19
$52.06
$11.74
$58.86
$40.01
$342.86
Change in
Producer
Surplus
$(93.07)
$(30.97)
$(1.76)
$(29.59)
$(18.91)
$(174.32)
Change in
Residual
Surplus
$(39.08)
$(11.71)
$(1.45)
$(12.77)
$(8.24)
$(73.25)
Loss in
Surplus
Total
$48.03
$9.38
$8.52
$16.50
$12.86
$95.29
NOTES: 'Brackets indicate negative costs or benefits.
4.5
ESTIMATED ENVIRONMENTAL IMPACTS
Table 4-4 reports estimates of annual emission reductions
associated with the chosen alternative. The estimate of total
HAP emission reductions is 48,000 Mg per year, and the total VOC
emission reduction associated with the regulatory alternative is
252,000 Mg per year.
107
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4.6 COST EFFECTIVENESS
Cost effectiveness is computed as annualized costs divided by
the emission reductions, and is presented in Table 4-4 for each
pollutant. Economic cost effectiveness is computed by dividing
the annualized economic costs by the estimated emission
reductions.
Generally, a dominant alternative results in the same or
higher emission reduction at a lower cost than all other
alternatives. Because this analysis evaluated only one
alternative, however, there is no basis for comparison.
TABLE 4-4. ESTIMATED ANNUAL REDUCTIONS IN EMISSIONS
AND COST-EFFECTIVENESS ASSOCIATED WITH THE CHOSEN
REGULATORY ALTERNATIVE
Chosen Alternative
HAP Emission
Reduction
(Mg/yr x 103)
48.0
VOC Emission
Reduction
(Mg/yr x 103)
252
Chosen Alternative
HAP Cost-
Effectiveness*
($/Mg)
$1,645
VOC Cost-
Effectiveness*
($/Mg)
$317
NOTES: "Cost-effectiveness is computed as estimated annualized economic costs divided by estimated emissions
reduced. Comparisons are made between the chosen alternative and the baseline conditions.
108
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-------
REFERENCES
1.
2.
3.
4.
5.
6.
Oommen, Roy. Letter from Roy Oommen to James Durham, U.S.
Environmental Protection Agency. November 23, 1993.
Oommen, Roy. Letter from Roy Oommen, Radian, to Larry
Sorrels, U.S. Environmental Protection Agency. January
26, 1994.
Oommen, Roy. Letter from Roy Oommen, Radian, to James
Durham, U.S. Environmental Protection Agency. Chemical
and Petroleum Branch. November 10, 1993.
Zarate, Marco. Letter from Marco A. Zarate to James
Durham. U.S. Environmental Protection Agency. Chemical
and Petroleum Branch. November 30, 1993.
Murphy, Pat. Letter from Patrick Murphy, Radian, to James
Durham, U.S. Environmental Protection Agency. December 3,
1993.
U.S. Office of Management and Budget. Transmittal
Memorandum No. 64. Guidelines and Discount Rates for
Benefit-Cost Analysis of Federal Programs. Circular
Number A-94. Washington, DC. October 29, 1992.
109
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5.0 PRIMARY ECONOMIC IMPACTS AND CAPITAL AVAILABILITY
ANALYSIS
5.1
INTRODUCTION
Estimates of the primary economic impacts resulting from
implementation of the NESHAP and the results of the capital
availability analysis are presented in this chapter. Primary
impacts include changes in the market equilibrium price and
output levels, changes in the value of shipments or revenues to
domestic producers, and plant closures. The capital availability
analysis assesses the ability of affected firms to raise capital
and the impacts of control costs on plant profitability.
5.2 ESTIMATES OF PRIMARY IMPACTS
The partial equilibrium model is used to analyze the market
outcome of the final regulation. The purchase of emission
control equipment will result in an upward vertical shift in the
domestic supply curve for refined petroleum products. The height
of the shift is determined by the after-tax cash flow required to
offset the per unit increase in production costs. Since the
control costs vary for each of the domestic refineries, the post-
control supply curve is segmented, or a step function.
Underlying production costs for each refinery are unknown;
therefore, a worst case scenario has been assumed. The plants
with the highest control costs per unit of production are assumed
to also have the highest pre-control per unit cost of production.
110
-------
Thus, firms with the highest per unit cost of emission control
are assumed to be marginal in the post-control market.
Foreign supply is assumed to have the same price elasticity of
supply as domestic supply. The U.S. had a negative trade balance
for each of the refined products in 1992 with the exception of
distillate fuel oil that had a slightly positive trade balance of
$1.1 million. Therefore net exports are negative for all
products except distillate fuel oil in the baseline model.
Foreign and domestic post-control supply are added together to
form the total post-control market supply. The intersection of
this post-control supply with market demand will determine the
new market equilibrium price and quantity. Post-control domestic
output is derived by deducting post-control imports from the
post-control output.
Table 5-1 reveals the primary impacts predicted by the partial
equilibrium model. The range of anticipated price increases for
the five products vary from $0.03 to $0.14 per barrel produced
for residual fuel oil and jet fuel, respectively. The percentage
increases for each product are less than 1 percent and range from
0.24 percent to 0.53 percent.
Production is expected to decrease by 12.52 million barrels
per year for all products, an overall decrease in domestic
production of 0.24 percent. The estimated annual reductions in
production of the individual products range from 0.65 million
barrels to 5.67 million barrels for jet fuel and motor gas,
respectively. The production percentage decreases range from
0.13 percent to 0.50 percent for jet fuel and residual fuel oil,
respect ively.
Value of domestic shipments or revenues for domestic producers
are expected to increase for the five products approximately
$107.41 million annually. The predicted changes in revenues for
individual products range from an increase of $55.63 million in
motor gasoline revenues to a decrease in residual fuel revenues
of $11.92 million annually. The percent changes range from an
increase of 0.41 percent in jet fuel to a decrease of 0.26
percent in residual fuel oil revenues. Economic theory predicts
that revenue increases are expected to occur when prices are
111
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increased for inelastic goods, all other factor held constant.
This revenue increase results given that the percentage increase
in price exceeds the percentage decrease in quantity for goods
with inelastic demand. All of the refined petroleum products
follow the expected trend except residual fuel oil. Residual
fuel oil has the highest trade deficit of the five products with
over 40 percent of domestic demand being satisfied by imports.
The magnitude of residual fuel oil imports causes domestic
residual fuel oil revenues to decrease in the post-control
market.
It is anticipated that between 0 and 7 refineries may close as
a result of the decrease in production predicted by the model.
Those refineries with the highest per unit control costs are
assumed to be marginal in the post-control market. Refineries
that have post-control supply prices that exceed the market
equilibrium price are assumed to close. This assumption is
consistent with the perfect competition theory that presumes all
firms in the industry are price takers. Firms with the highest
per unit control costs may not have the highest underlying cost
of production. This is a worst case assumption that is likely to
bias the results and as a result, overstate the number of plant
closures and other adverse effects of the emission controls.
The estimated primary impacts reported depend on the set of
parameters used in the partial equilibrium model. One of the
parameters, the price elasticity of demand, consists of a range
for four of the five refined products. The midpoint of the range
of elasticities was used to estimate the reported primary and
secondary impacts. A sensitivity analysis of this assumption is
contained in Appendix B. Sensitivity analyses were performed for
the low and high end of the ranges of elasticities. In general,
the sensitivity analysis shows that the estimated primary impacts
are relatively insensitive to reasonable changes of price
elasticity of demand estimates.
112
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TABLE 5-1. SUMMARY OF PRIMARY IMPACTS
Estimated Impacts'
Refined Product
Motor gasoline
Amount
Percentage
Jet fuel
Amount
Percentage
Residual fuel
Amount
Percentage
Distillate fuel
Amount
Percentage
LPG
Amount
Percentage
Price
Increases2
$0.09
0.29%
$0.14
0.53%
$0.03
0.24%
$0.08
0.29%
$0.07
0.26%
Production
Decreases3
(5.67)
(0.22%)
(0.65)
(0.13%)
(1.62)
(0.50%)
(2.78)
(0.26%)
(1.80)
(0.25%)
Value of
Domestic
Shipments4
$55.63
0.07%
$53.22
0.41%
($11.92)
(0.26%)
$8.06
0.03%
$2.42
0.01%
NOTES: ' Brackets indicate decreases or negative values.
'Prices are shown in price per barrel ($1992).
'Annual production quantities are shown in millions of barrels.
'Values of domestic shipments are shown in millions of 1992 dollars.
113
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5.3
CAPITAL AVAILABILITY ANALYSIS
The capital availability analysis involves examining pre- and
post-control values of selected financial ratios. These ratios
include rate of return on investment, times interest earned
coverage ratio, and the debt-equity ratio. (Each of these ratios
are explained in detail in Section 3.4.) Data were not available
to estimate the ratios for many refineries in the industry.
Consequently, these ratios have been analyzed on an industrywide
basis. The industrywide ratios represent an average for the
industry. Individual firms within the industry may have
financial ratios that differ significantly from the average. Net
income was averaged for a five-year period (1986 thorough 1990)
to avoid annual fluctuations that may occur in income due to
changes in the business cycle. Debt and equity capital are not
subject to annual fluctuations; therefore, the most recent data
available (1990) was used in the analysis.
The financial statistics provide insight regarding firms'
abilities to raise capital to finance the investment in emission
control equipment. Table 5-2 shows the estimated impact on
financial ratios for the industry.
TABLE 5-2. ANALYSIS OF FINANCIAL RATIOS
Financial Ratios Pre-Control Ratios Post-Control Ratios
Rate of return on
investment
Coverage Ratio (or
Times Interest
Earned)
Debt-Equity Ratio
5.91%
7.08
62.75%
5.91%
7.07
62.76%
As the table shows, the financial ratios remain virtually
unchanged as a result of the proposed emission controls.
114
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5.4 LIMITATIONS
Several qualifications of the primary impact results are
required. A single national market for a homogenous product is
assumed in the partial equilibrium analysis. However, there are
some regional trade barriers that would protect individual
refineries. The analysis also assumes that the refineries with
the highest control costs are marginal in the post-control
market. Refineries that are marginal in the post-control market
have per unit control costs that significantly exceed the
average. This may be the result of the engineering method used
to assign costs to individual refineries. Additionally, the cost
allocation methodology assigns all of the control costs to the
five petroleum products of interest. The result of the foregoing
list of qualifications is overstatement of the impacts of the
chosen alternative on the market equilibrium price and quantity,
revenues, and plant closures. Finally, some refineries may find
it profitable to expand production in the post-control market.
This would occur when a firm found its post-control incremental
unit costs to be smaller than the post-control market price.
Expansion by these firms would result in a smaller decrease in
output and increase in price than would otherwise occur.
The results of the sensitivity analysis are reported in
Appendix B. These results show slightly more adverse impacts
when demand is more elastic. The analysis is relatively
insensitive to reasonable variations in the price elasticity of
demand.
The capital availability analysis also has limitations.
First, future baseline performance may not resemble past levels.
The tools used in the analysis are limited in scope and do not
fully describe the financial position of individual firms within
the industry but are more reflective of industry averages.
5.5
SUMMARY
The estimated impacts of the emission controls are relatively
insiginificant. Predicted price increases and reductions in
domestic output are less than 1 percent for each of the refined
115
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products. Between 0 and 7 refineries are at risk of closure from
implementation of the standard, with this estimate more likely
closer to zero than seven based on four assumptions made in the
analysis mentioned in the chapter. The value of domestic
shipments or revenues to domestic producers for the 5 petroleum
products combined are anticipated to increase. Emission control
costs are small relative to the financial resources of affected
producers, and on average, refineries should not find it
difficult to raise the capital necessary to finance the purchase
and installation of emission controls.
116
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6.0 SECONDARY ECONOMIC IMPACTS
6.1
INTRODUCTION
Implementation of emission controls may have an impact on
secondary markets including the labor market, the energy market,
foreign trade, and regional effects. The potential changes in
employment, use of energy inputs, balance of trade, and regional
refinery distribution are presented.
6.2 LABOR MARKET IMPACTS
The estimated labor impacts associated with the NESHAP are
based on the results of the partial equilibrium analyses of the
five refined petroleum products and are reported in Table 6-1.
The number of workers employed by firms in SIC 2911 is estimated
to decrease by approximately 114 workers as a result of the
proposed emission controls. The loss in number of workers
depends primarily on the reduction in production reported in
Chapter 5. Gains in employment anticipated to result from
operation and maintenance of control equipment have not been
included in the analysis due to lack of reliable data. Estimates
of employment losses do not consider potential employment gains
in industries that produce substitute products. Similarly,
losses in employment in industries that use petroleum products as
an input or in industries that provide complement goods are not
considered. The changes in employment reflected in this analysis
are only direct employment losses due to reductions in domestic
production of refined petroleum products.
117
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TABLE 6-1. SUMMARY OF SECONDARY REGULATORY IMPACTS
Refined Product
Motor gasoline
Amount
Percentage
Jet fuel
Amount
Percentage
Residual fuel
Amount
Percentage
Distillate fuel
Amount
Percentage
LPGs
Amount
Percentage
Total five products
Amount
Estimated
Labor Input2
(52)
( 0.22%)
(6)
(0.13%)
(15)
( 0.50%)
(25)
( 0.26%)
(16)
( 0.25%)
(0-114)
(0-0.16%)
Impacts1
Energy Input3
($5.79)
(0.22%)
($ .52)
( 0.13%)
($ .71)
( 0.50%)
($2.27)
( 0.26%)
($1.56)
(0.25%)
($10.85)
(0.24%)
NOTES: ' Brackets indicate reduction or negative value.
'indicates estimated reduction in number of jobs.
^Reduction in energy use in millions of 1992 dollars.
118
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The loss in employment is relatively small. The magnitude of
predicted job losses directly results from the relatively small
decrease in production anticipated and the relatively low labor
intensity in the industry.
6.3 ENERGY INPUT MARKET
The method used to estimate reductions in energy input use
relates the energy expenditures to the level of production. An
estimated decrease in energy use of $10.85 million annually is
expected for the industry. The individual product energy use
changes are reported in Table 6-1. As production decreases, the
amount of energy input utilized by the refining industry also
declines. The changes in energy use do not consider the
increased energy use associated with operating and maintaining
emission control equipment. Insufficient data were available to
consider such changes in energy costs.
6.4 FOREIGN TRADE
The implementation of the NESHAP will increase the cost of
production for domestic refineries relative to foreign
refineries, all other factors being equal. This change in the
relative price of imports will cause domestic imports of refined
petroleum products to increase and domestic exports to decrease.
The balance of trade overall for refined petroleum products is
currently negative (imports exceed exports). The NESHAP will
likely cause the balance of trade to become more negative. Net
exports are likely to decline by 2.26 million barrels per year.
The range of net export decreases varies from 0.21 million
barrels to 0.91 million barrels for LPGs and residual fuel oil,
respectively. The related percent range from 0.54 percent to
40.92 percent for LPGs and distillate fuel oil, respectively.
The large percentage decrease in exports of distillate is the
result of the product having a very small positive trade balance
in the pre-control market. The dollar value of the total decline
in net exports is expected to amount to $68.22 million annually.
119
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The predicted changes in the trade balance are reported in Table
6-2.
6.5
REGIONAL IMPACTS
No significant regional impacts are expected from
implementation of the NESHAP. The number of refineries at risk
of closure are estimated to be between 0 and 7 nationwide, with
the number more likely being closer to 0 than 7. Due to the
manner used to estimate control costs for the individual refinery
and the method of allocating the costs to products, the
facilities predicted to close do not necessarily represent the
facilities most likely to close. However, the facilities
postulated in the model are dispersed through the United States
and not specific to a geographical region. Employment impacts
are directly related to plant closure and production decreases.
Employment impacts are also dispersed throughout the country.
6.6
LIMITATIONS
The estimates of the secondary impacts associated with the
emission controls are based on changes predicted by the partial
equilibrium model. The limitations described in the Primary
Economic Impacts chapter is equally applicable to Secondary
Economic Impacts. As previously noted, the employment losses do
not consider potential employment gains for operating the
emission control equipment. Likewise, the gains or losses in
markets indirectly affected by the regulations, such as
substitute product markets, complement products markets, or in
markets that use petroleum products as an input, have not been
considered. It is important to note that the potential job
losses predicted by the model are only those directly linked to
predicted production losses in the petroleum refining industry.
120
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TABLE 6-2. FOREIGN TRADE (NET EXPORTS) IMPACTS
Estimated Impacts1
Refined Product
Motor Gasoline
Jet fuel
Residual fuel
Distillate fuel
LPG
Total
Amount2
(0.43)
(0.23)
(0.91)
(0.48)
(0.21)
(2.26)
Percentage
(0.54%)
(1.41%)
(0.81%)
(40.92%)
(0.54%)
(0.98%)
Dollar Value
of Net Export
Change5
($21.92)
($8.14)
($16.81)
($12.67)
($ 8.68)
($68.22)
NOTES: 'Brackets indicate reductions or negative values.
'Millions of barrels.
3Millions of dollars ($1992).
121
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6.7
SUMMARY
The estimated secondary economic impacts are relatively
insignificant. Between 0 and 114 job losses may occur nationwide.
Energy input reductions are estimated to be $10.85 million
annually. A decrease is net exports of 2.26 million barrels
annually in refined products, a decrease of about 1 percent, is
anticipated to occur. No significant regional impacts are
expected.
122
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7.0 POTENTIAL SMALL BUSINESS IMPACTS
7.1
INTRODUCTION
The Regulatory Flexibility Act of 1980, as well as the EPA
Regulatory Flexibility Guidelines (April, 1992) requires that
special consideration be given to the effects of all proposed
regulations on small business entities. The Act requires that a
determination be made as to whether the subject regulation will
have a significant impact on a substantial number of small
entities. A substantial number is considered to be greater than
20 percent of the small entities identified. The following
criteria are provided for assessing whether the impacts are
significant. Whenever any of the following criteria are met, the
impact on small business entities is determined to be
significant:
1. Annual compliance costs (annualized capital, operating,
reporting, etc.) increase as a percentage of cost of
production for small entities for the relevant process or
product by more than 5 percent;
2. Compliance costs as a percent of sales for small entities
are at least 10 percent higher than compliance costs as a
percent of sales for large entities;
3. Capital costs of compliance represent a significant
portion of capital available to small entities,
123
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considering internal cash flow plus external financing
capabilities; and
4. The requirements of the regulation are likely to result in
closure of small entities.
It should be noted that the EPA Regulatory Flexibility
Guidelines call for a final Regulatory Flexibility Analysis if
there are any small entity impacts estimated to occur from a
regulatory action. The four criteria above are used here because
they are we11-recognized.
7.2
METHODOLOGY
Data are not readily available to estimate the small business
impacts for two of the criteria (Numbers One and Three)
established in the introduction. The information necessary to
make such comparisons are generally considered proprietary by
small business firms. Consequently, the analysis will focus on
the remaining two criteria of the potential closure of small
businesses and a comparison of the compliance costs as a
percentage of sales for small and large business entities.
The closure method of analysis will focus on the number of
petroleum refineries expected to close as a result of the
proposed emission controls and the relative size of the firms at
risk. Alternatively, a measure of annual compliance costs
including MRR costs relating to motor gasoline as a percentage of
motor gasoline sales will also be considered. The ratio of costs
to sales will be compared for small refineries to the same ratio
for all other refineries. The applicable ratios for the other
refined petroleum products may differ in magnitude from those
reported, but the differential between the ratios for small
businesses and larger business should remain relatively the same.
7.3
SMALL BUSINESS CATEGORIZATION
124
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Consistent with Title IV, Section 410H of the CAA, a petroleum
refinery is classified as a small business if it has less than
1,500 employees or if its production is less than or equal to
50,000 barrels of oil per day. A refinery must also be
unaffiliated with a larger business entity to be considered a
small business entity. Information necessary to distinguish
refinery size by number of employees was not readily available.
However, daily production data were available from the Oil and
Gas Journal Refinery Survey (1-1-92). Based upon this size
criterion, there were 63 refineries that were small business
entities in January 1992.
7.4 SMALL BUSINESS IMPACTS
The results of the partial equilibrium analysis lead to the
conclusion that approximately seven refineries are at risk of
closure. This estimate represents approximately three percent of
the domestic refineries in operation and eleven percent of those
designated to be small businesses. The estimated number of
closures is therefore less than 20 percent of the small
refineries. However, it is important to note that the firms
designated in the model as at greatest risk for closure were
small refineries.
Compliance costs as a percentage of sales were computed both
for 63 small refineries and for those refineries that are not
considered small. The cost to sales ratio for the small
businesses were 0.191 percent of sales while the cost to sales
ratio for all other refineries was 0.082 percent. The
differential between these two rates exceeds ten percent, and
consequently, a conclusion is drawn that a significant number of
small businesses are adversely affected by the proposed
regulations.
125
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126
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APPENDIX A
PRODUCTION CAPACITY OF OPERABLE PETROLEUM
REFINERIES BY FIRM AND REFINERY
(AS OF JANUARY 1, 1991)
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-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992
(Barrels per Stream Day. Except Where Noted)
State/Reflner/tocation
Atmospheric Crude Oil Distillation Capacity
Barrels per
Calendar Day
Operating | Idle
Barrels per
Stream Day
Operating | Idle
Vacuum
Distillation
Downstream Charge Capacity
Thermal
Cracking
Catalytic Cracking
Fresh | Recycled
Catalytic
Reforming
Alabama.
Coastal Mobile Refining Co.
Hunt Refining Co.
Tuscaloosa ...
*140,1<»
26.600
33300
:. fl 144,300
28,000
35,000
45JOOO
10.000
15.000
12,000
0
*12.000
27,200
0
"7.200
LLSE'Petrolegm Marketing
Saraland (Mobile) .
80.000
81.300
20.000
20.000
0 - 236,700
54000
Arco Alaska Inc.
Anchorage 12.000 - 0 14,500 0 00 00
.Prudhoe Bay ........ 15.000 0 16,000 0 0 000
Mapco Petroleum Inc.
North Pole 116.500 0 119,000 0 5.000 0 0 0
Petro Star Inc.
North Pole 7.000 0 7,200 0 0 0 00
tesoro Petroleum Corp.
Kenai 72,000 0 80,000 0 0 00 0
:'^pw£.-~^..-^:L...^..^.:..^U 10,000' ' 0 '^IZ.OOO " 0'':/'J'7,000- 0 " " 0 '«
Sunbelt Refining Co.
Coolidge 10,000 0 12.000 0 7,000 000
Arkansas .,...,...,...... _ ^- 60,700 0 63,200 . .. 0 . " :::;23,600 "0 "19,100 775
Berry Petroleum Co.
Stephens . 5,700 0 6.000 0 1,800 000
Cross Oil & Refining Co. Inc.
Smackover , 7,000 0 7,200 0 3.300 000
Lion Oil Co.
Ef Dorado 48,000 0 50,000 0 18,500 0 19,100 775
California^ ;....... . ......,._...i. 1.896,100 * 190,325;; ^2,014,800 .'204,500 '^$^Q]-y.l£ffi^l^&4&
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
loarreis peroueam uay, I-AWC^/I ..n^
Location
Catalytic
Hydro-
cracking
Catalytic
Hydro-
treating
Fuels
Solvent
Desjphalting
Alkylates
Asphalt
Aromatlcs
Isomers
Lubricants
Hydrogen
Marketable
Petroleum
Coke
SuHur 1
(short ton J
day)!
^.JJ^ -
Chiclasaw
.»
Tuseatoosa .*...
Saraland (Mobile)
Alaska ^i-^mK
Anchorage «~ »
Prudhoe Bay..
North Po!a
North Po!e
Kenai
Arizona ^ ,
Coolidge ._»
Arkansas ~
Stephens .
Smackover
El Dorado
California.. ,
Los An§e!es -...-
Lono Beach
El Sejundo -....
Richmond .....«...»..
Santa Maria « -« -
* Delayed Coking
Refinery did not open
^ /-% * 59,306 v "
0 0
o 'g.soo
"7.500
5.000
0 C15.000
""22.000
ISMi^^liS^SS^
0 0
0 0
0 0
o '. o
9.000 0
*« ^fso 1^\V 1>0,780V
22,000 "75.000
"40.000
818.000
18.000
0 0
4SJXO e100.000
"^.ooo
°14,000
13Z500 ^.OOO
"60,000
'65.000
"18.200
0 0
b Low Pressure
hC5andCs
ire"S'l&31fe**PReSed
0 0 17,500 0 800 0 « 400
0 0 8,000 0 00 00
0 0 9,500 0 0 0 6 400
0 o 0 0 8800 00 0
'' n 1 SOO 2400 4000 '0 13 ' ' 0"
0000 0000
0 0 O'O 0 00 0
0 0 1.500 2.400 0 0 00
00 0 0 000 0
0000 h4.000 0 13 0
0 '" 0 ; .2,000 0 Q 0 0 0
0 0 2.000 0 0000
S.500 4,500 ;::: 10,550; '?S> S'000 - - 5'2?5- ^ - -°
00 800 0 0000
0 ' 0 2,050 0 0 3,235 1 0
5.500 4.500 7.700 0 h5,000 0 0 0
J3.000 114,400 95,783 ' '0 , 12,900 ' 30,262 , 998 78,970
0 14,000 0 0 0 0 70 11.000
0 0 0 0 0 000
0 8.000 0 0 0 0 130 16.500
55.000 7.000 11.000 0 0 11.000 150 0
0 0 6.800 0 0 000
c Heavy Gas Oil 6 NaptURef. Feeds 'Distillate J High Pressure
'Other/Residual 'Fluid Coking * VtsteaWng Other/Gas 0,l
no inputs to the crude oil distillation unit during 1 991 . but did report inputs to the vacuum distillation unit
14U
0
80
60
'15
0
0
0
0
15
0
0
^\t
0
0
31
1 4,397
280
0
840
672
0
Source: Energy Information Administration (EIA) Form EIA-820. "Annual Refinery Report."
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
'
State/Refiner/Location
Atmospheric Crude 0
Barrels pw
Calendar Day
Operating
I Distillation Capacity
Barrels per
Stream Day
Idle Operating
Idle
I 1
Vacuum
Distillation
Thermal
Cracking
Cai
rtarae Capacity
latytlc Cracking
Fresh
Recycled
Catalytic
Reforming
California (Continued)
Eco Asphalt Inc.
Uxig Beach* ~
Exxon Co. U.S.A.
Benicia -
Fletcher OB'* Refining Co.
Carson .-. -
Golden West Refining Co.
Santa Fe Springs
Huntway Refining Co.
Benicia
Wilmington
Kern Oil & Refining Co.
Bakersfield
Lunday Thagard Co.
South Gale
Mobil Oil Corp.
Torrance
Pacific Refining Co.
Hercules
Paramount Petroleum Corp.
Paramount
Powerine Oil Co.
Santa Fe Springs
San Jpaquin Refining Co. Inc.
Bakersfield
Shell Oil Co.
Martinez
Sunland Refining Corp.
Bakersfield
Tenby Inc.
Oxnard
Texaco Refining 4 Marketing Inc.
Bakersfield
Wilmington (Los Angeles)
Tosco Refining Co.
Martinez (Avon)'.
Ultramar Refining
Wilmington
0
128,000
0
47.000
8,600
5.500
21,400
0
123.000
55,000
46,500
45.000
14.300
144,100
0
4,000
48,000
64,000
131.900
68,000
10550 0
0 132,000
29.675 0
0 50,000
0 9,000
0 6.000
0 23,000
8,100 0
0 130,000
0 57,000
0 48,000
0 46,800
10,000 15,000
0 147,000
12,000 0
0 5,000
0 52.000
0 70.000
0 148.000
0 70.000
11,000
0
31.000
0
0
0
0
8,500
0
0
0
0
12,000
0
17,000
0
0
0
0
0
7.000
67.000
19.000
25,000
7.600
4.900
0
7.000
95.000
25,000
28.000
26,000
12,000
101,500
0
0
24.000
54,000
118.000
40,000
0
127500
0
k13.800
0
0
0
0
*48.000
k1 1,000
0
*10.000
k5.000
'22,000
0
0
'14.000
75,000
148.000
*23.000
0
67.000
12,000
13.500
0
0
0
0
63.000
0
0
12500
0
66,000
0
0
0
30.000
60.000
36.000
0
0
0
0
0
0
0 .
0
0
0
0
0
0
1.000
0
0
0
0
2,000
0
0
'sa.ooo
'5.100
'19.000
0
0
'2.800
0
136.000
'11.200
'11500
'9,800
0
b28,000
0
0
'23,000
'40,000
b23,OQO
'20.000
b14.300
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1 , 1 992 (Continued)
(Barrels per Stream Day, Except Where Noted)
Location
Dowratrtai
Catalytic
Hydro-
cracking
in Charge Caw
Catalytic
Hydro-
treating
citvlCont.)
Fuels
Solvent
Deasphaltlng
! !
Alkylatea i Asphalt j Aromatics
Production C
Isomers
aoscltv
Lubricants
Hydrogen
(MMcfd)
Marketable
Petroleum
Coke
ri
(shol
i nag Beach .-
.'
i -
Carson .'
Santa Fe Springs
Benicia ...« ~
Wilmington
Bakers field
South Gate
Torrance _
Hercules
Paramount
Santa Fe Springs
Bakers field
Martinez
BaRersfield
Oxnard
BakersfieW
Wilmington (Los Angeles) .
Martinez (Avon)
Wilmington
4 Delayed Coking
0
32.000
0
11.000
0
C
0
0
21.700
4,000
0
8,000
0
28.000
. 0
0
14,300
26.000
26.000
0
b Low Pressure
"c.andC.
0
"37.000
"49.000
25.000
"17.000
C12.000
d12.000
0
0
ds,ooo
0
C68,000
""21,000
"28.000
"n.200
87.000
Xsoo
C13,SOO
dio.ooo
e6,000
0
C50.000
d1 8.000
e34.000
24.600
0
' 0
C16.000
d14.000
30.000
"22.000
15.000
'56.000
"12.000
*28,000
C41,000
"l5,000
0
0
0
0
0
0
0
0
0
C
0
0
o_
0
0
0
0
0
0
0
0
14,000
0
3.000
0
0
0
0 '
17.000
0
0
2.600
0
9,000
0
0
0
6,300
.13,000
10,500
0 Heavy Gas Oil
1 Otherflesidual
3,850 '
0
6.800
13.000
4,500
2.800
0
5,833
0
2.000
15.000
0
8,000
11.000
0
1.200
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
d Naph./Ref. Feeds
' Fluid Coking
0
0
0
0
0
0
0
0
0
0
0
B1.500
0
0
0
0
'0
0
0
94.000
0
0
0
0
0
0
0
0
0
0
0
0
4,000
4,500
0
0
0
0
0
0
8 Distillate
k Visbreaking
0
104
0
11
0
0
0
0
137
0
0
19
0
103
0
0
21
70
80
0
0 1
5,500 J
1
1
1
0 1
0 I
0 1
0 1
0 1
0 1
14,500 J
0 1
0 1
2.500 1
1
1
° 1
700 1
1
1
1
0 I
0
4,200 1
I
9,850 |
1.500 I
1
1,250 I
| High Pressure 1
1 Other/Gas Oil 1
E = Estimated. MMcfd = Million cubic feet per day.
* Refinery did not operate during 1991. ** Reported no inputs to the crude oil distillation unit during 1991, but did report inputs to the vacuum distillation unit
Source: Energy Information Administration (EIA) Form EIA-820, "Annual Refinery Report."
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
State/'Reiiner/Loeation
' Atmospheric Cmdt Oil Distillation Capacity
! Barrel! per 1 Barrel* per
Calendar Day Stream Day
1 Operating ' Idle ! Operating Idle
Vacuum j
Distillation j
Thermal
Cracking
earn Charge Capacity
Catalytic Cracking
Fresh ! Recycled
Catalytic
Reforming
California (Continued)
Arrcyo Grande (Santa Maria)
Rodeo (San Franasco)
Wilmington (Los Angeles)
i
WilcoCorp. '
Oildale ,
Colorado"" ' ' : v
Colorado Refining Co,
Commerce City
Conoco Inc.
Commerce Ci:y
LardmarK Petroleum Inc.
Fruita
Star Enterprise
Delaware City
Georgia ....._ _ - -
A^-oco 0.1 Co.
Savannah
Yo.pg Refining Corp.
Hawaii
C-.evro-. U.S A. Ire
Hcr.c.jiu : :....
HEwa>a~ hoeper.cs. Rei.nery Inc.
EwaBeac.l
Illinois -.- -
Ca'k 0:: & Refining Corp
E-e Island
Ha-::'ord
Indian ReVvr.g
La*rencevi!'e
Ma-a:-cn Oil Co.
Rco^son
Mcoi 0 ' Cc'p
s'
40.000
73.100
108.000
0
' ""'^^.njan'^
28.000
48.000
0
140,000'"?
140.000
5,540
0
E 5.540
,.... _. 146,300
52.800
93.500
. 952,600
64,600
57.000
55.000
' . 175.000
180.0CO
0
o-
120.000
0
::- 40,000.;
0
0
10,000
(" :, o
0
28,000 '
28.000
EO
0
0
0
0
0
0
0
0
0
43,000
81.800
111.000
0
' 85JDOO
35.000
50.000
0
152,000
152.000
6,000
0
E 6.000,
150,000
55,000
95.000
1,004,000
68.000
60.000
57.000
180.000
200.000
0
0
125.000
0
16,000
0
0
16,000
0
0
30,000
30.000
EO
0
0
0
0
0
0
0
0
0
32,000
42,100
89.000
10.000
43/P/
10.000
23,000
10,000
;::;;: 95,000
95.000
"Yol
0
EO
74,250
31.250
43,000
376,900
27.000
18,000
23.000
50.000
88.000
23,200
23,700
40.000
0
^,4^00^
0
*
0
*4.200
45,000
'45,000
'<:':?-f:i'j:*;:.;n"!'j
0
EO
0
0
0
126,300
0
a14.500
0
21.700
'5,000
^.OOO
0
0
47.000
0
^27^00
8,500
19.000
0
67,0001*;
67.000
?OT&'-
0
EO
20,0.00
20.000
0
385,000
25,000
26.000
30.000
42.000
98.000
0
0
0
0
XOQO
0
1.000
0
i-ls,p6ol ."
5,000
"*m
0
EO
.. '."'A
0
0
.3,000
0
0
0
0
0
'34,000
'l6.005
0
22^08
''S.SOO
k
"10.000
'2.500
,:;52|6bo
b4i.ooa
11,000
!*-0-
a
EO
13,000
Q
K
°13.00Q
300,300
'30.500.
f12,OOQ
f
M5.000
"76.00C
46.00S
-------
{ b!e 3, Capacity of Operable Petroleum Refineries by State as of January 1, 1992 (Continued)
> (Barrels per Stream Day, Except Where Noted)
Location
Catalytic
Hydro-
craeking
Catalytic
Hydro-
treating
Fu«I*
Solvent
Deasphaltlng
| |
Alkylates i Asphalt j Aromatlct
Isomers
Lubricant*
Hydrogen
(MMcfd)
Marketable
Petroleum
Coke
Sulfur
(short font/
day)
Arroyo Grande (Santa Maria) 0
ge&o (San Francisco) 32,500
j
WEmioglon (Los Angeles) .
*" :
one* ....
.A ^ VU*" *" >.
ColO r^Q 0 «nntn « «»>« r»» min
Commerce City -
Commerce City
Fruita
Delaware City
Georgia i -V "ir
Savannah .».......»»
Douglasville
Hawaii i»^..i.z;«~»r
Honolulu
Ewa Beach _
Ittl : »"';'" '"';!':^5*K^x?^f
B!ua Island
Hartford
Lawrenceviiie
Robinson
Joliet . .:.
1 Delayed Coking
25.000
0
*> - 5.000 "
0
0
5,000
18.000
?"-'Tr"
0
EO
0
18,000
flPPsflxlI
11.000
0
0
23.000
0 '
Low Pressure
hC5andC6
"23,000
9,500
44.500
"54,000
36.200
'580
35.500'
"g.500
"10.000
12,800
"3.200
"64.000
*59,000
s" ^2,940'
0
E"300
E81,800
E'840
"3,500
0
160*00
"20.500
"12.000
12,000
"tS.OOO
12.000
^.ooo
"55.000
'14.000
"81.000
875,000
0
0
0
0
r **
0
0
0
0
0
0
0
EO
,.,J.,S .y-g-^
0
0
*" v" o
0
0
0
0
0
0
0
10.000
0
; 1.200 '
1.200
0
0
11*.
11,500
0
0
EO
; 4.500
4,500
0
96,500
6,000
8.000
6.000
11,500
25,000
c Heavy Gas Oil
1 Other/Residual
0
0
0
4,000
5,000
0
5.000
0
0
0
"25,560
22,500
E 3,060
- 1,800
1..300
500
54,700
4.500
2.500
4.500
0
0
0
0
0
0
-* -.X:\
0
0
0
1.870 *
1,870
0
-------
3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
. t-i.~~~^ rin\i Pvront Whfiffi Noted) . _^_^__^^_^__^^^-
'Barrels per Stream uay~^^ I 7"
Calendar Day Stream Day
StatemefinerMon I Operating Id* | Operating | IUj«_JJj
Illinois (Continued)
Shell Oil Co. ^0 0 286,000 0
Uno-VenCo..' 0 153i00o 0
>«~ > "... >'._. 449,900 - 0' 463,100 ~ 0
AmocoOilCo. 0 . 380,000 0
Co-jntrymark Cooperative Inc.
(Formerly Indiana Farm Bureau Coop. Assn.) 0 22600 0
Laketon Refining Corp. gsoo 0
Marathon Oil Co.
(Formerly Rock Island Refining) Q S}flm
. ., , ,^ (;tM... 327,300 26,400 - 349,023 27,460
Coastal Refining & Marketing Inc.
(Formerly Coastal Derby Refining Co.) Q Q 0
Augusta ^pp 0 32,000 0
B Dorado JHROO 0 31,300 0
uljrhiia «,OUU x
Farmland Industries Inc. 0 60723 0
rViHawille oo.Buu v
,.,,. , 0 26,400 0 27,460
National Cooperative Refinery Association M Q
Texaco Refining & Marketing Inc. 0 85000 0
Total Petroleum Inc. gOOOO 0
ArVnrYCflC P tv OO.UW v
, ,, ' - 216,900 0 226,300 .,:;/::'«
Downstream Charpe Capacity .
u Th.i Catalytic CmcWng Catalytic
108,000 "18.000 94.000. 0 ",75.000
62.900 *29,100 70.000 3.000 f29.800
203.000 ' "28.000 145.000 4,000 '90,000
7.200 0 8.000 . 200 '4.500
6.000 000. 0
18,000 0 20.500 0 '10.500
130,650 52^00^120,800 * 9,000 94^00'ff
0 o 00 b7,500
15000 0 7,000 2.000 0
lo'.OOO a5.000 19.800 2,500 7.000
19,500 "13.000 23,000 1.500 'l6.00Q
10,000 0 0 0 '5.300
27,000 a22,000 20,000 500 'iS.OOO
33,000 a12,500 31,500 2,500 '25.500
16,150 0 19.500 0 b12,000
6,000
Ashland Oil Inc. 220000 0 92,000 ^2.250 100,000 0 V.OOO
ratlpiisbura 213.400 u ^u.vw tsonn '18,000
Somerset Refinery Inc. 0 6.300 0 0 0 00 'uQOO
Somerset , '. . ' .. ... .... .
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
fRarrolo n,n ^ "
j . , ..._« nun _ "**<,
Jaitellsburg o
omersel _ _ o
1 Delayed Coking b Low Pressure
C29,000
d64i
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
(Barrels per Stream Day, Except Where NOteaj
Barrels per Barrel* per
Calendar Day Stream Day
Stttemefiner/Locatlon Operating 1 Idle | operaung \ MW |U
:miWani - ^ l.^,.,...--^ 2,313.600 343.500 ' 2,426.45* 4QO.OOO-
"^SchasselAniance) 218.000 0 222.000 0
<^LltSSC°" 12.50° ° 13JMO °
Calumet Lubricants Co. LP. ^ Q ^
^£3£ 8.000 ' 0 8.800 0
^KSS?L --- 305.000 0 320.000
^Sake 165,000 0 175,00) 0
CAS Refining Co 0 13500 0 15.000
lonninnc /Mprmentaul u 4O,awu
""SS^ 8.500 o 9.000
Dubach Gas Co.
(Formerly CUbome Gasoline Co.) ^ Q ^ Q
&X°niU£ige -. -21JOOO 0 438.000
Gold Line Refining Ltd.
^^eriCanlmernati0nalRelineVlnC-) 9600 18.000 11.000 19,000
^SnvS;900^ 7.800 0- 8,500
MaralhG0a"S?' 255.°°° ° »""
-"SSL «w» ° 175'°°°
^1^"" 95.000 0 100.000 0
^"InLt^,"900' «*» 0 50.000 0
Phibro Refining Inc.
(Formerly Mil Petroleum Co.) ' Q
Kron Sorinas ,-. DU.UUU v «
SStee^ 40.0°° ° 45'°^
"""SrSSn00" 48.500 ° 49-S°° °
Sabine Resource Group n 12000 0 16.000
Rtop >' $83,700 497,500^ NltjSPK ' SiT^WJ
72,000 *19.000 89,000 2,000 f37500
ooooo
6.000 000 0
0 o 0 0 "1.900
75000 *88.000 150.000 0 b86.000
20.000
78000 '62.000 44.500 0 ' b13.000
"12.000 ".COO
0 0 0 0 0
0 0 00 "3.000
0 o 00 "2,000
183000 Ho.OOO 188.000 0 b60,000
'SO.OQO
oooo o
0 000 0
125.000 0 88.000 0 "sO.OOO
92.500 "33.000 58,000 0 b19.000
'28.00ft
40.000 0 38.000 2,500 b23,000
24.300 0' 0 0 "6,500
22,000 0 28,000 0 'l2.00tt
18,000 000 tt
20,000 0 19,000 2,000 b10.00tt
0 0 00 0
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
(Barrels per Stream Day. Except Where Noted)
Location
CtUlytfc
Hydro-
cracking
Catalytic
Hydro-
trtatlng
Fuel*
Solvtnt
Dt»sphalt!ng
Alkylites
Asphalt
Aromatic*
production c
Isomers
lupacltv
Lubricant*
Hydrogen
(MMcId)
Marfatohl*
Petroleum
Coke
I
'
-------
Table 3 Capacity of Operable Petro.eum Refineries by State as of January i, 1992 (Continued)
lau ._ r . «* rv«., Cv/*ant Whora Noted) __
(Rgrr0ic Pgr Stream Day. Except Where NQieoj
-i 1 Atmospheric Cmdt Oil Dittinatie
Barrel* per 1 Bai
Calendar Day §m
State/Retiner/locatlon j Operating J Wl» 1 Operatm
-ii ' '
Louisiana (Continued)
Shell Oil Co. 215i(x)0 Q 220.00
..r^P^hY"" -Downttwam Chaw Capacity
2S Vacuum TH 1 C^vtlcC«cWng C-alytlc
g | Idla Dltlltlatton Cracking | Frtih ) Htcyeiw | Helonninfl
line TT« 16,000
Star Enterprise ^^ 242<500 0 91.500 k12.000 85.000 5.000 '40.000
Trans-American Refining Co. aooooo
Norco (Good Hope)*. - ° 300'000
, -, .- 118.600 " ' ' I29-0
Michigan . .-," " °'ow
Crystal Refining Co. Q 60
Marathon Oil Co. 0 72C
0 350.000 240,000 k140.000 110.000 0 'iS.OOO
DO ^ 0 ' 36,000 '',:- B % 4W°° 1'000 > '33'0^'a
*
00 0 0 000 0
00 0 WOO 0 27.000 1.000 b1gX»
Total Petroleum Inc. 456QO 0 51.000 0 0 ' 0 19.500 0 "u.OOQ
.'..-.. ..:'.'.'-','" ' ''.''' 26T"tOO ** 27,9 i*'W *
Ashland Oil Inc. 0 69220 0 32:000 0 23.000 0 '23.500
gt pau) o7,l Uv u '
Koch Refining Co. 210
Qi Paul (Pine Bendl 200,000 u i'u
369.400 0 390
000 0 150.000 "61.000 65.000 0 b28.000
,900 !',. ':. 0 ' 274,775 83,500 82,000 "^ 7,000 ':',. ;v-:?6,000
Amerada Hess Corp. ,000o 0 32.000 0 0 '8.500 16,000 7.000 '6.000.
Barren Refining Corp.
(Formerly Petro Source Resources Inc.)
Wcksburo 7'°°°
Chevron U.S.A. Inc. rt fl1
295000 U
r.900 0 7.900 0 0 0 0
3,000 0 243.000 a75.000 66.000 0 bS7,OM
Ergon Inc. 20600 0 22.000 0 17,000 0 0 0
Southland Oil Co.
Lumberton 5.800 0
Lumoerron Q 1
Sandersville -. -.-_- . !1^uu.. w -
6.500 00 0 0 0 J
2,500 0 6,875 0 0 0
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
(Barrels per Stream Day, Except Where Noted)
Location
Downstream Charae Cauacitv (ConU
Catalytic
Hydro-
cracking
Catalytic
Hydro-
treating
Fuels
Solvent
Jeasphaltlng
Production Capacity
Alleviates
Asphalt
Aromatic*
Isomers
Lubricants
Hydrogen
(MMeld)
Marketable
Petroleum
Coke
Sulfur
(short ton
day)
,^,3,
Convent 1..._ ......
.1
Norco (Good Hope)
Michigan ..! _..'il. "
Canon City
Detroit ..
A!na
Minnesota ,..__...-,...-- ,
Si Paul
Si. Paul (Pine Bend)
Mississippi .'...:.._
Purvis ..........
Vcksburg
Pascagoula
Vicksburg
Lumberton
SandersviKe
1 Delayed Coking
35.000 'TO.OOO
129,000
28.000
50.000 d40.000
69.500
(32.500
0 d15.000
*25,000
"*<** "^'0 'T,.. 62,300^-' ,
0 0
0 C12,000
d1 7,500
83,000
0 C3.800 '
d22.000
82.000
'2,000
*yf " \jf -.' 225,000
0 C23,000
*7.200
0 C73,000
d43.000
e46.000
68,000 254,000
0 d6.000
e6,000
0 . 0
68.000 C63.000
d48.000
30.000
be.ooo
0 ''S.OOO
0 0
0 0
Low Pressure
"C.andO.
0 15,000
0 14,500
0 .14.000
,.0 10,200
0 0
0 4,200
0 6,000
0, 15,500 'v
0 5.500
0 10.000
0 20,200"
0 4,000
0 0
0 16.200
0 0
0 0
0 0
c Heavy Gas Oil
1 OtheryResidual
0 0
0 0
0 3.000
" 28,000 ^ ; >\T£'
0 0
28.000 0
0 0
-39,000 V ,»
14,000 0
25,000 0
41,700 ' 5,500,
0 0
0 0
20,000 5.500
12.000 0
3,575 0
6,125 0
d Naph./Ref. Feeds
1 Fluid Coking
0
"12.500
"5.000 -
"20.000
^v*,*.;*-
0
0
h1,100
' 23,300
h8,300
h15.000
" /"" 0 "
0
0
0
0
0
0
0
0
0
;*-«-
0
0
0
^ 6
0
0
5,000
0
0
0 .
5.000
0
0
Distillate
k Visbreaking
70
63
0
^
0
0
0
65
0
65
217
0
0
215
2
0
0
5.000
0
0
;-xc*'
0
0
0
''16.000
0
16,000
2l",60D
1,600
0
20.000
0
0
0
111
728
140
V*
0
80
14
519
44
475
1,265
45
0
1.220
0
0
0
j High Pressure
'Other/Gas Oil
E = Estimated. MMctd = Million cubic lee! per day.
* Refinery did not operate during 1991. ** Reported no inputs to the crude oil distillation unit dunng 1991, but did report inputs to the vacuum distillation unit
Source: Energy Information Administration (EIA) Form EIA-820. "Annual Refinery Report.'
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
Barrels per | Barrels per
Calendar Day j Stream Day
State/Refiner/Locatlon Operating Idle | Operating _Jdle J
Montana ' -"','-' ^,,~u.-M.wfwrtwi»"!pV ' ***fft" * ^1*5.500 ',.«-&'
Cenex
Laurel 41.450 0 42.500 0
Conoco Inc.
Billings ' . 49.500 0 52.000 0
Exxon Co:'u.SA
Brings 42.000 0 44.000 0
Montana Refining Co.
Great Falls ..-. 6.700 0 7,000 0
^vada ..l,,,.!^......-; ^ :..'. 7,000 4,500 7,000 4,700
Patro Source Refining Partners
Eagle Springs 7,000 0 7.000 0
Toiopah 0 4,500 0 4,700
riGW Jersey ,..W...MMM....IW«»»««»««**«»«,«««««J»««««*MI 'j.-'.-v:-:. . *. " " ' ' - ' "'
Amerada Hess Corp.
Port Reading (Sewaren) 0000
Chevron U.S.A. Inc.
Perth Amboy 80,000 0 85,000 0
Coastal Eagle Point Oil Co.
Westville 104,500 0 110,000 0
Exxon Co. U.S.A.
Linden (Bayway) - 170.000 0 180,000 0
Mobil Oil Corp.
Paulsboro 100,000 0 107.000 0
Seaview Oil Co.
(Formerly Seaview Petroleum Inc.)
Paulsboro ** 0 44.400 0 47.400
^wiMexleoi;^-;:;^-..-^. 97.800 0 105,207. 0
Bloomfield Refining Co.
Bloomfield 16,800 0 18,107 0
Giant Refining Co.
Gallup '.___._ 20.000 0 21.000 0
Navajo Refining Co.
Ariesia 57,000 0 60.000 0
Thriftway Co.
Bloomfield 4.000 0 6.100 0
Newyork.;.^.^..;..^^"----^'"-^.'-'"'-"'' ' "V : '.' " . *;; ;,4l>85.0 , ;.,:...: " -.- v'StOOO.
C.brc Petroleum Products Inc.
Aiaany 0 41.850 0 45,000
Vacuum Thermal Catalytic Cracking Catalytic
Jistidttlon Cracking Fresh I Recycled Reforming
V- 53/50' ^~7,tt£^£5J»PK '^iJSO 37J30''
12.000 0 13.500 1.500 b12JMO
20.000 0 19.000 1.000 'l4.700
18.000 V.TOO 21.000 3,500 'lO.OOO
3,450 0 2.400 250 'l.030
' .000^ 0 ' -0' 0 .:!*"%;:. '
6,000 0 0 0 0
0 0 0 00
?;l255,200 21,000 260JJOO 37JOO 77,500 , .
0 0 54,000 0 0
46,000 000 0
48.000 0 50.000 12,000 b26.000
66,000 0 120.000 25,000 b28,000
64,200 a21,000 36,000 0 f23,500
31,000 - 0 0 0 0
26,900 ' 0 33,800 4.SDO 30,550
0 0 6.000 500 '4,000
7.900 0 7.800 3,000 (6.800
19.000 0 20.000 1.000 b1 2.500
'5,000
0 000 b2.250
27,000 000 0
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
(Barrels per Stream Day. Except Where Noted)
Location
Downstream Charoe Capacity (Cent.)
Catalytic
Hydro-
cracking
Catalytic
Hydro-
tnsitlng
Fuel*
Solvent
fcasphsltlng
Production Cauacttv
Alkylatta
Asphalt
Aromatfct
I so men
Lubricants
Hydrogen
(MMcfd)
Marketable
Petroleum
Coke
Sulfi
(short!
day
Laurel ._»
Billings .
4 '
BilRnas .:'.'...,
Great Fails ......_.....
Nevada .....................
Eaolo Springs
Tonopah .. .
Port Reading (Sewaren) ....
Perth Amboy .._
V/estville
Linden (Bayway)
Paulsboro
Paulsboro
New Mexico .'.;..'.....
Btoomfseld
Gallup ... « ........
Artesia
Btoomfieid
N««^.g.:.-
Albany
a Delayed Coking
0
0
4.900
0
0
0 -
0
0
17.000
0
0
.0
"'1,000 % ^
0
0
0
1.000
o , "'1
0
jj Low Pressure
"c.andC,
P&«r
"l8.000
15.000
°4,500
"38,000
"15.500
20,000
16,000
l!240
"o
0
0
289,000
0
0
"26.000
'15.000
so.ooo
"48.000
65,000
"23.500
46.500
"15,000
0
"4.000.
"6.600
"20.000
11.000
0
v «
0
* '11.500 "
4.000
7.500
0
0
0
0
0
"- ' 0 v
0
0
0
0
0
0
0
0
0
0
0
«
0
13,760
3.780
6.000
3.400
600
0
0
0
29,500 "
5.500
0
4.000
13,500
6,500
0
11,000
0
1.600
9.400
0
0
0
c Heavy Gas Oil
1 Other/Residual
#.700V '
8.000
6.500
11.000
1.200
1,000 B
1.000
0
'90,000 "
0
35,000
0
38.000
0
17.000
7,100 '
0
700
6,400
0
"17,700
17,700
400
0
0
0
400
0
0
0
' 3,500
0
0
3.SOO
0
0
0
-- 0 %
0
0
0
0
0
0
d NaphJRef. Feeds
1 Fluid Coking
, 5,350 , ft
81.250 0
>3.8oo o
0 0
''soo o
o -o
o- o
0 0
0 0
0 0
0 0
h25,000 0
0 8,500
0 0
- 4.000'; \D\
0 0
h4.000 ' 0
0 0
0 0
0 0
0 0
* Distillate
Vsbreaking
>*J
- 0
0
21
0
0
0
0
'21
0
0
0
10
11
0
' "X
0
0
0
1
0
0
At75
0
0
2.175
0
0
0
" 5,500
0
0
0
0
5,500
0
"'"'" f o
0
0
0
0
0
c
" 37
37
0
0
0
0
3,592
10
0
3,000
433
149
I
0
, -' 2°
0
0
20
0
0
0
[ High Pressure
OthertGasOil
E 3 Estimated. MMc!d = Million cubic feet per day.
* Refinery did not operate during 1991. ** Reported no inputs to the crude oil distillation unit during 1991. but did report inputs to the vacuum distillation unil
Source: Energy Information Administration (EIA) Form EIA-820. "Annual Refinery Report."
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
(Barrels per Stream Day. Except Where Noted)
State/Refiner/Location
Atmospheric Crude Oil Distillation Capacity
Barret* per
Caltndar Day
Operating | Idle
Barrels per
Stream Day
Operating | Idle
Downstream Charm Capacity
Vacuum
Distillation
Thermal
Cracking
Catalytic Cracking
Fresh | Recycled
Catalytic
Reforming
GNC Energy Corp.
Greensboro ...........
Amoco Oil Co.
Mandah.
Ashland Oil Inc.
Canton ;.
BP Oil Corp.
Lima
Tc'edo
Sun Co Inc.
Toledo
Barrett Refining Corp.
Thomas (Custer)
Conoco Inc.
Ponca City
Kerr-McGee Refining Corp.
Sinclair Oil Corp
Tulsa
Sun Co Inc.
Tulsa
Total Petroleum Inc.
Ardmore .
Chevron U.S.A. Inc.
Portland (Willbridge)
Pennsylvania .;;;.... :..^..~; ..;..-
BP Oil Corp.
Chevron U.S.A. Inc.
Philadelphia
Perrzc 1 Producing Co.
Rcjsevilie
*^" "'** ; '-*?' ''-
0
58,000
66,000
145.000
126,100
125,000
_ - 398,500 '
10,500
140,000
45.000
50,000
85,000
68,000
0
168,000
175.000
15,700
3.000
3.000
0
0
0
0
0
0
0
0
0
0
0
0
.-I-- 0'
0
6,700
0
0
0
Q
0
-.-. , 60,1)00 ' -
60,000
, 477,000" '
68,000
150.000
130.000
129,000
" '419,200 "':';
11,200
145.000
50,000
53.000
90,000
70.000
': "..'. .0
0
765,500 :
180,000
180,000
16,500
,3.200 -
3.200
0
9'
0
0
0
0
e- "'**-
0
0
0
0
0
0
0
0
..7,500. . .
0
0
0
: ;>o %v
0
0
VIWIQO',/
33,000
41,000
68,000
30,000
^47,000* -
0
45,000
14.000
27,000
29,000
32,000
16,000
16,000
...323,250 ,.: ;;
78.000
80,000
6,500
flu- /
0
0
>31>0tf^
0
a1 8.000
*13.700
0
27^000''
0
^.SOO
0
0
^.SOO
0
...
0
0
0
0
, --. ^v -..
0
26,000
mMv
25,000
34.000
55,000
60.000
"150,000
0
53,000
18.000
19,000
35.000
25,000
'--,-
0
.259,000 .
51,000
62.000
0
o\
0
\, a^sofl
3,600
17,500
0
0
16.500
1,000
5,000
0
0
0
5.000
0
0
0
0
6,800
1,600
5,000
A
0
o
' , 12,100
162300-
b20.00Q
'SS.OOO
'42.000
f45.600
:.rii>i.soo
0
'36.000
b12.500
(12.0SO
*24.000
617.00C-
0
u
199,120
(
-' -.--
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January i, 1992 (Continued)
Location
Downlines
Catalytic
Hydro-
c racking
in Charge Cap:
Catalytic
Hydro-
treating
ifty iCont.)
Fuels
Sotvtnt
Deasphaltlng
Alkylates
Asphalt
Aromatlcs
Isomtrs
Lubricants
Hydrogen
(MMcfd)
Marketable
Petroleum
Coke
H
Grewsboro
Mandan
Canlon
Li ma...«.«
Toledo
Toledo.
Oklahoma .»._,...Li-'
Thomas (Custer)
Ponca City
' V/ynnewood
Tulsa
24,000
35,000
"feo.ooo
d40.000
0
0
5,000
0
0
0
"36,000
630,000
d11,000
d20,000
e5,000
"24,000
'10.000
C26,000
"24,000
Oregon ,_..-...
Portend (Willbridge) _..
Marcus Hook
Philadelphia -
Rouseville
21.000
C4e;boo
d56.000
44,000
"34.000
30.000
"6,500
"8,000
0 "l9,100 0
87,200 * M96.500 9.000
0 "23.000 0
d26,500
7,000
28,200 d40.000 9,000
^ «64000 "'lO,2<»
0
0
4,400
0
5.800
0
" . 0
0
* 0
0
0
0 0
4,400 0
4,400 0
25,800 21,800
7,000 12.000
0
11,000
7.800
0
12.000
5,000
3.000
7,000
7,000
0
51,500
12,500
18,000
a Delayed Coking r Low Pressure
csandC6
f Heavy Gas Oil
1 Other/Residual
0
fl
0
16,000
300
7,000
2,500
18,800
0
0
5.000
3.200
4,600
6.000 0
10,000 ' ' 0^
10,000 0
33.000 - 11,000"
7.000
0
9.000
2,200
0
0
0
0
2,200
4,000
dNaph./Ref. Feeds
1 Fluid Coking
0
5,100
"5.100
16.500
'4,193
0
0
:' 30,460
0
ASOO -
"10,000
h4,000
"8,000
82,800
"1.100
0
B4.000
"1,150
0
0
200
9,500
0
2.000
0
0
7.500
0
4,750
' Distillate
Visbreaking
0
24
48
0
0
10
0
0
56
3,000
3,190
0
' 5,025
0
4,800
0
0
1,225
0
' High Pressure
'Other/Gas Oil
E = Estimated. MMcfd = Million cubic feet per day.
* Refinery did not operate during 1991. ** Reported no inputs to the crude oil distillation unit during 1991. but did report inputs to the vacuum distillation unit
Source: Energy Information Administration (EIA) Form EIA-820, "Annual Refinery Report."
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
(jei on ecu ii uay
r/Uocatlon
Atmospheric Crude 0
Barret* per
Calendar Day
Operating | Idle
Barrel* per
Stream Day
Operating | Idle
nnuin«tr»iim ttimmf CaoicltV
Vacuum
Distillation
Thermal
Cracking
Catalytic Cracking
Freth | Recycled
Catalytic
Reforming
Pennsylvania (Continued)
Petrowax Pennsylvania, he.
Farmer's Valley (Smethport)
Sun Co Inc.
Marcus Hook -
Sun Refining &' Marketing
Philadelphia -
United Refining Co.
Warren
Witco Corp.
Bradford
Tennessee >.....«...«....."">«*<<- "~«'-~-""
Mapco Petroleum Inc.
Memphis
Amoco Oil Co.
Texas City :
Champlin Refining & Chemical Inc.
Corpus Christi .
Chevron U.S.A. Inc.
£1 Paso
Port Arthur
Coastal Refining & Marketing Inc.
Corpus Christi
Crown Central Petroleum Corp.
Pasadena -
Diamond Shamrock Refining & Marketing Co.
Sunray (McKee)
Three Rivers
El Paso Refinery, LP.
El Paso -
Exxon Co. U.S.A.
Baytown
0
175,000
130.000
60,000
9,915
' 76,000 ,
76,000
3,906,750
433,000
130,000
66,000
315,900
85,000
100.000
112,000
53.000
50,000
396;000
6,700 0 7.000
0 185.000 0
0 132,000 0
0 62,000 0
0 10.000 0
*' 0 ' 78,000* " fl
0 78,000 0
--32,000 4,167,700 ' 36,500*
0 460.000 0
0 138.000 0
0 68,000 0
0 324,500 0
0 95.000 0
0 103,000 0
0 115,000 0
0 55.000 0
0 55.000 0
0 418.000 0
3,750
46.000
83,000
26.000
0
^12,000 / * ,
12,000
1,746,400 "
195,000
80.000
54.000
156.000
45.000
38.000
47.000
20.000
30,000
200,000
0
0
0
0
0
-r«
0
369,500
"39.500
"33.500
0
"34,000
k10,000
"12.000
"12,500
0
0
*4.000
*28.ooo
0 0
66.000 0
40.000 0
20.000 200
0 0
.»fcxr ,:«
38,000 . 0
'1,706,500 125,500"
200,000 43,000
76,500 0
22.000 0
120,000 . 6,000
17.500 0
56.000 0
45.000 0
20.000 0
27,000 1.000
180,000 15.000
0
(41.300
'SO.OOO
f16,000
'2.000
14,000 :
b14.000
1,197,300
b60.000
'100.000
b54,000
b25.000
b44,100
'23.000
(27.500
b23,000
(13.000
b40,000
b21,000
*7.000
"123,000
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
(Barrels per Stream Day. Except Where Noted)
Location
Downstream Charge Capacity (Cont.)
Catalytic
Hydro-
cracking
Catalytic
Hydro-
treating
Fuel*
Solvent
Deasphalting
Production Capacity
Alkylates
Asphalt
Aromatic*
Isomera
Lubricant!
Hydrogen
(MMc(d)
Marketable]
Petroleum (
Coko i
Farmer's Valley (Smethpon)
Marcus Hook
t
Philadelphia
Warren
Bradford ._._.. _. .
Memphis ...
Toxas ._M.»».MH...H.w....1.ir *
Texas City
Corpus Christ!
El Paso
Port Arthur
Corpus Christ!
Pasadena
Sunray (McKee)
Three Rivers ,..-. _
El Paso
Baytown
a Delayed Coking
0
0
30.000
0
0
0
347^500 "-"'
120.000
0
0
0
11,000
0
20.000
'0
0
22.000
JJ Low Pressure
"C-andC.
0
^.SOO
*28,800
24.000
"54.000
50.000
d20.000
6,000
d19.000
816,000
3.227,050
C85.000
d168.000
876.000
C58.800
d60.000
S41.700
d25,000
C64.000
d67.000
'1.05.000
"13.900
C22,500
GQQ Artrt
O£,wUv
e24,000
d28.000
87.000
"16,000
"33.000
"14.000
"7.000
C110,000
''lea.soo
1.88.000
'44.100
0
0
0
0
0
\ "0
0
' 103,000
0
0"
0
0
0
0
16.000
7.000
0
35.000
0
12.000
6.000
3.000
0
1 ,2,500' ""
2.500
310,250"
62,000
19.200
5.500
16,900
3,000
10.000
8.700
6.000
6.000
29.000 '
'Heavy Gas Oil
1 Other/Residual
0
0
25.000
8,000
0
3,500
68,525
0
0
5.500
0
5,000
0
5.000
500
0
7.000
0
7.000
0
0
0
0
0
" * 186,425
45,000
5,000
0
16,800
14,500
0
0
0
0
0
d NaphJRef. Feeds
1 Fluid Coking
0
0
0
"6.800
0
-; 4,000 ,..'
h4,000
144,325"* "'
1*28.000
0
h7,200
^,200
hs.ooo
0
0
84.000
0
0-
0
0
0
3.000
-0 ,
0
86,900
0
0
0
7,000
0
0
0
1,000
0
31,200
8 Distillate
Visbreaking
0
7
45
0
0
0
' 729 '*
180
46
0
0
24
0
0
0
0
118
0
0
0
0
0
0
' "52^50
13,800
1.850
0
9.200
3,250
1.500
0
0
800
500
: High Pressure
'Other/Gas Oil
E = Estimated. MMdd = Million cubic feet per day.
* Refinery did not operate during 1991. ** Reported no inputs to the crude oil distillation unit during 1991, but did report inputs to the vacuum distillation unit.
Source: Energy Information Administration (EIA) Form EIA-820. "Annual Refinery Report"
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
(Barrels per Stream Day. Except Where Noted)
State/Refiner/Location
Atmospheric Crude Oil Distillation dp*c!ty
Barrel* per
Calendar Day
Operating
Idle
Barrels per
Stream Day
Operating | Idle
,_ _ ' Pownttream Chera* Cap^lty
Vacuum
Distillation
Thermal
Cracking
Catalytic Cracking
Fresh | Recycled
Catalytic
Reforming
Texas (Continued)
Fina Oil & Chemical Co.
Big Spring
Port Arthur _.
HoweH Hydrocarbons & Chemical Inc.
(Formerly Howell Hydrocarbons Corp.)
San Antonio
Koch Refining Co.
Corpus Christi _
La Gloria Oil & Gas Co.
Tyler .'.
Lcngview Refining Associates
longview '.
Lyondell Petrochemical Co.
Houston ..._
Marathon Oil Co.
Texas City
Mobil Oil Corp.
Beaumont
Peirolite Corp.
Kilgore ...
Phibro Refining Inc.
(Formerly Hill Petroleum Co.)
Houston
Texas City
Phillips 66 Co.
Borger
Sweeny
Pride Refining Inc.
Abilene
Rattlesnake Refining Corp.
Wickett
Shell Oil Co.
Deer Park
Odessa
55,000
144.000
1,900
125,000
SS.OOO
13,300
265.000
70,000
275,000
1,000
70,900
119,600
105,000
175,000
42.750
£6,000
215,900
28,600
0 60.000
0 150,000
0 2,000
0 130,000
0 55.500
0 14,000
0 286,000 .
0 74.000
0 290.000
0 1,400
0 75.000
0 130.700
0 110.000
0 195,000
0 45,000
EO E 10,000
0 227,000
0 29.500
0
0
0
0
0
0
0
0
0
0
0
0
0.
0
0
EO
0
0
25,000
53,000
0
42.000
14.000
5,000
127,000
27,000
86,000
400
39,000
64,000
0
83,000
12,000
EO
91,000
0
0
0
0
12,000
*6.500
0
*45.000
0
"29.500
0
0
k21,000
0
0
0
EO-
*17.000
55.000
0
23.000 0 b20.000
55.000 0 "35.000
0 0 (1.200
50,000 800 b48.000
18.000 800 b12,000
f4.600
0 0 (4,400
85.000 0 b25.000
.'83,000
34,000 0 'lO,500
102,000 0 b46,000
*57.000
00 0
61.000 0 (13.500
44.000 0 b12,100
'n.100
60.000 10.400 '26.000
87,000 12.000 '36,000
0 0 b7.5CO
EO EO Eb2.400
65,000 5,000 b43.000
'20.000
10.500 0 'innnn
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
(Barrels per Stream Day, Except Where Noted)
Location
Downttnim Chirac CiMcHv (Cent)
Catalytic
Hydro-
cracking
Catalytic
Hydro-
treating
Fuels
Sornnt
Jcasphaltlng
Production Caoaeltv 1
AlkylatM
Asphalt
Aromatic!
borne rs
Lubricantt
Hydrogtn
(MMcfd)
Markttabl*
P*trol«um
Cote
Sulfur 1
(short ton J
day) 1
Big Spring
Port Arthur
'.,'
San Anlonio J
Corpus Christ! ...
Tyler ,
Lonoview
Houston
Texas City
Beaumont
KiSgora
Houston .
Texas City
Borger
Sweeny..
Abilene. .. .
Wfckett.... ....'.
Deer Park
Odessa .
a Delayed Coking
0
18,500
0
12.000
0
0
0
0
32,000
0
0
0
0
0
0
EO
65.000
0
JJ Low Pressure
hC5andCs
*6,000
"25.000
*1 7,000
d40,000
32.000
fe.OOO
0
"^54.000
9.000
h 7,000
'7.500
d4.4CO
C82.000
d132.000
'93,000
'6.600
0
.^.OOO
116,000
5.650
0
d14.000
"31.500
29,200
"29,000
"^.soo
'40.000
"WoOO
50,000 .
75.000
'v.soo
£"3.200
Ed2,400
E '2.400
'45.000
"65,000
70.000
J55.800
"11.000
10.000
18.000
0
0
0
0
o
o
0
o
17.000
0
0
o
o
EO
0
0
6,000
5.000
0
9.200
4.700
0
0
10.000
13.000
0
8,500
6,000
14.000
15,450
0
EO
8,100
3,300
c Heavy Gas Oil
1 Other/Residual
8,000
2.000
0
0
0
o
o
o
0
125
8,000
0
0
0
o
EO
5,400
0
1.000
9.500
1.200
18.550
0
0
36,000
2,500
0
0
5,200
0
0
5,575
o
EO
18,700
0
dNaph.«ef. Feeds
'Fluid Coking
0
"8,000
0
"200
B500
h4.000
0
o
o
"20.000
o
o
^,000
81 1.000
"24,600
h16.900
0
EO
0
0
0
0
0
0
0
o
6,600
0
11,000
o
o
o
0
0
o
EO
10,600
0
Distillate
VTsbreaking
0
0
0
0
0
0
0
o
60
0
0
o
50
80
o
EO
65
0
0
0
0
2,000
1,500
0
10,900
o
7.350
0
0
0
0
0
o
EO
0
0
65
170
0
50 I
11 I
0 1
400 I
0
110
o I
100
45
381
420
0
EO
515
0
! High Pressure
'Other/Gas Oil
E = Estimated. MMcfd = Million cubic feet per day.
* Refinery did not operate during 1991. ** Reported no inputs to the crude oil distillation unit during 1991, but did report inputs to the vacuum distillation unit
Source: Energy Information Administration (EIA) Form ElA-820. 'Annual Refinery Report"
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
State/Hetlner/Locstlon
Barrel* per
Calendar Day
Operating | Idle
II DittlBation Capacity I
Barrels per
Stream Day
Operating | Idle
Vacuum
Distillation
Thermal
Cracking
Catalytic Cracking
Fresh | Recycled
Catalytic
Reforming
Texas (Continued)
South Hampton Refining Co.
D1,400
Southwestern Refining Co. Inc.
Corpus Christi «...«.
Star Enterprise .
Port Arthur/Neches
Texas United Refining Corp.
(Formerly Leal Petroleum Corp.)
Nixon -
Tnfinery
Corpus Christi"
Valero Refining Co.
Corpus Christi
Utah , ,_ ,'...,,>m^w.'_.,,',
Amoco Oil Co.
Salt Lake City
Big West Oil Co.
North Salt Lake
Chevron U.S.A. Inc.
Salt Lake City
Crysen Refining Inc.
Woods Cross
Pennzoil Producing Co.
Rooseveit
Phillips 66 Co.
Woods Cross
Virginia.... ...-«,., ..__..,........,.._....
Amoco Oil Co.
Yorktown
Primary Corp.
Washington ._......._.....-_ «-,~»-~,.,.~.
Arco Products Co.
Femdale (Cherry Point)
BP Oil Corp.
Femdale -
V
104.000
250.000
15.900
0
25,000
154,500
40,000
24,000
45,000
12,500
8,000
25.000
- S9.1Dd
53,000
6,100
^24,400 \
174,500
84,300
0 108,000
0 298,000
5,000 17,100
27,000 0
0 28,000
s / 0 163,000 '
0 41,500
0 25.000
0 49.000
0 13,000
0 8.500
0 26,000
' 0 "83.600
0 56.000
0 7.600
" ', t) 558,754' ,"
0 184.000
0 95.000
0
0
7,500
29,000
0
0
0
0
0
0
0
0
0
0
0
'«
0
0
36,000
136.000
0
15,000
24,000
46J980
0
3,800
35,500 .
2,880
0
4,800
59'.600
29,000
0
2|8,806
99.300
35.000
0
0
0
k10.000
0
- 4.SOO
0
0
"8.500
0
0
0
, ; i4,ooo ..
14,000
0
-"**»'
*S2,000
0
52.000
131.000
0
0
65.000
" 55.400
18,000
5.000
18,000
. 0
6,000
8,400
27,500'
27,500
0
7l31,§0a
0
28,500
0
31.500
0
0
0
9/iflO
4,000
1,000
1,000
0
500
2,600
wm
2,000
0
7,000 .
0
0
'30,000
bso.ooo
0
0
b27,000
«*?
(7,600
's.ooo
(7.500
b2,400
'2,000
'e.ooo
f 10,200:;
b!0.20Q
0
135,508;
b57.000
b1 6.500
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
IBauttlb per on cam way, i_<\ww^ ..i.w
Location
Downstrea
Catalytic
Hydro-
c racking
m Ch»ro» Capi
Catalytic
Hydro-
treating
cttvfCont.)
Fuete
Solvent
Deasphaltlng
Alkylates
Asphatt
'
Aromatic*
Isomen
Lubricants
Hydrogen
(MMctd)
Marketable
Petroleum
Coke
Su
(shor
d
Corpus Christ!....
Port Arthur/Neches 22.000
Nixon ........ ------- ................
Corpus Christ!
Corpus Christ!
Salt Lake City
Nsnh Salt Lake
Salt Lake City ....................
Woods Cross.-
Roosevelt
Woods Cross
Yorktown ------ .................. -
0
25.000
2,400
0
0
0
2,400
0
' o,
0
0
Richmond....
Washington
Femdale (Cherry Point) 54.000
Ferndale 0
'fs.soo
«SOO
'BOO
*18.000
d40.000
27.000
d43.000
1.02.000
"20,900
d8.500
*7.000
"1.000
d20.000
"60.000
v, *i>700
d7,600
d6.000
- "7.500
*6,000
0
d2.000
0
230,000
d40,000
e20.000
d17.000
e15.000
0
0
d11.000 5.000
"1.600
26^500 ,*''?... \ 0
'ho.soo
16.000
0
21,500.
0
0
7.500
20.000 14.000
0
11.200
4,000
1.200
4,300
0
0
2,100
0
6,000
8,000
0
5,000,. 11,600., 3,200
1.500
0
1,700
400
6.500
to
"500
"soo
o
"2,500
8,550 .
"3.000
"200
"1,100
0
0
"2.600
19,500
b Low Pressure
"CsandC6
< Heavy Gas Oil
'Other/Residual
NaphJRet Fseds
'Fluid Coking
JOWhle
kWsbreaking
85
0
. o
'1,750
1.750
0
0
0
5.100
15.000
0
a Delayed Coking
"C, . .
* Refe'Sw no^teS?!^ fe"^eSed no mputs to the crude oil delation unit during 1991. but did report inputs to the vacuum delation unit
Source: Energy Information Administration (EIA) Form EIA-820, 'Annual Refinery Report'
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January i, 1992 (Continued)
(Barrels per Stream Day. Except Where Noted)
State/Reflner/Locatlen
Atmospheric Crude Oil Distillation Capacity
Barrel* p«r
Calendar Day
Operating
Idle
Barrels per
Stream Day
Operating | Idle
Downstream Charo* Capacity
Vacuum
Distillation
Thermal
Cracking
Catalytic Cracking
Fresh | Recycled
Catalytic
ncfofTnrn0
Washington (Continued)
Chevron U.SA Inc.
Richmond Beach
Shell Oil Co.
Anacortes._
0
' 89,300
0
92.500
5.000
44.000
0
42,000
0
3,000
0
"26,000
Sound Refjning Inc.
Tacbflia _
Texaco Refining & Marketing Inc.
Anaeories (Pugot Sound) .
11.900
0 12.754
0 140,000
6.000
60,000
0
*24,500
0 0
51.000 4.000
0
30,000
U.S. Oil & Refining Co.
Tacoma._
32.400
34,500
19,500
Vooo
Weal Virginia
Phoenix Refining Co.
Saint Mary's*...
Quaker Stale Corp.
Newell
'Wisconsin ....,...
Murphy Oil U.S.A. Inc.
Superior
''16,000
4,500
11,500
33,200,
33,200
, ,.
Frontier Refining Co.
Cheyenne
Little America Refining Co.
Evansville (Casper)...
Sinclair Oil Corp
.Sinclair
Wyoming Refining Co.
Newcastle
129,725
38,670
24,500
54,000
0 134^d:;$J~l;Jf^K:;!|i|9jOOO ' ~ '", S,00,0 48,500 9,500
0 40,750 0 17,000 ^.OOO 12,000 500
0 25,500
0 55,000
12,000
30,000
0 10,500 5,000
0 21,000 1.000
U.S. Total
Puerto Rico ._...,<
Arochem International Inc.
Ponce _
Caribbean Petroleum Corp.
(Formerly Caribbean Gulf Refining Corp.)
San Juan (Bayamon)
12.555 0 13,500 000 5,000 3.000
..... 14,965.480 730,675 15,811,704 821,760 7,172,055 2,099,550, 5,608,000 280,225
' ., ~ 135,800', 75,600 140,300 ; 80,000 65,000 " 6 14,200 \0
0 75,600
E 42.000 EO E 44,200
0 80.000 0
EO E 20.000
Peerless Oil & Chemical
Ponce
8.800
9.100
EO E 14.200
0 0
EO
"6.50Q
*6.000
'lO.QOO
f2.7SO
3,907,150
'i "73,300 ;
Eb6.533
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
(Barrels per Stream Day, Except Where Noted)
Location
Downstream Charge Capacity (ConL)
Catalytic
Hydro-
cracking
Catalytic
Hydro-
treating
Fuel*
Solvent
Jeasphilling
Production Capacity
Alkylates
Asphalt
Aromatic*
Isomera
Lubricants
Hydrogen
(MMctd)
Marketable
Petroleum
Coke
Richmond Beach
Anacortes
t
Tacoma .'_._
Anacortes (Pugel Sound] ..
Tacoma :..
West Virginia «~^*:
Saint Mary's _
Newell .
Wisconsin ._^...-^,..,,w .;;
Superior
Wyoming ..........,...)>./
Cheyenne
Evansville (Casper)
Snclair
Newcastle ,
U.S. Total .; *_**
Puerto Rico J
Ponce
San Juan (Bayamon)
Ponce.
1 Delayed Coking
0
0
0
0
0
; ^o'^;
0
4.440
0
~Cf?^
0
0
0
0
't.363,130 '
715,600 ^
0
EO
0
I* Low Pressure
hC5andC6
0
7.500
"32.000
20^00
0
"26.000
'16,000
"26,000
e4.000
"6,000
'' 'f ^f r&jL*
5*500
e1,500
"4,000
"9.000
"5.800
%**»
d7.500
'8,000
"3.700
d14.000
812,000
0
9,644,010
134,800
"37.000
Ed6.800
Ee11,000
0
0
17.000
0
4,500
0
"-, o;
0
c
0
0
0 -
0
0
275,900 '
* ^P',
0
EO
0
0
11,000
0
10,500
0
,. " '<
0
0
" , 1,600
1.600
7,150
2,750
0
3,500
900
1,095,080
- : «-
0
EO
0
c Heavy Gas Oil
1 Other/Residual
3.500
0
3.000
0
8,000
c:w
800
0
13,500
' 16>00
7,000
4,400
5,000
0
812,078,
, 1,000.'
0
E 1.000
0
0
0
0
0
0
rv-r
0
0
0
' \ 0
0
0
0
0
'290,495^
..:*#»'
15.200
EO
0
" NaphjRef. Feeds
1 Fluid Coking
0 0
°2,750 0
0 0
0 0
"l.SOO 0
*?' 0' ^56
0 1.200
0 5.056
"2,000 o
'/,M» ' o
81.500 0
0 0
^.OOO 0
0 0
''"' 494,468' - -216,903
Y W^'^oo
"7.500 0
EO EO
0 0
* Distillate
KVrsbreaking
0
0
0
0
0
' ,,'"1
0
1
0
' 'o
0
0
0
0
- 2,644
19
0
EO
0
0 I
0 1
0 1
7,000 1
0 1
c
0 I
1,450 1
450 1
0 1
1,000 1
0 1
355,599 J
'. 'A I
0 1
EO 1
' High Pressure 1
1 Other/Gas Oil 1
E = Estimated. MMdd = Million cubic feet per day.
* Refinery did not operate during 1991. ** Reported no inputs lo the crude oil distillation unit dunng 1991, but did report inputs to the vacuum distillation unit.
Source: Energy Information Administration (EIA) Form EIA-820. 'Annual Refinery Report.'
-------
Table 3. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
State/Refinertloeatlon
Barrets per
Calendar D*y
Operating
Idle
Barrels per
Stream Day
Operating
Idle
n-....t_._ rs..»»
Vacuum
Distillation
Thermal
Cracking
Catalytic Cracking
Fresh
Recycled
Catalytic
Reforming
Puerto Rico (Continued)
Phillips Puerto Rico Core Inc.
Guayama
Sun Co Inc.
Yabucoa.
0
85.000
0 b38,400
'14.400
0 87,000
45.000
b20.000
Amerada'Hess Corp.
Si. Croix
370,000 175.000 400.000 195.000 220.000 "85,000
b90.000
'so.ooo
-------
. Capacity of Operable Petroleum Refineries by State as of January 1,1992 (Continued)
(Barrels per Stream Day, Except Where Noted)
Location
Downstream Charge Caoaeftv (Cent.)
Catalytic
Hydro-
cracking
Catalytic
Hydro-
treating
Fuels
Solvent
^asphalting
., Production Onnnrirv
Alkylatea
Asphalt
Aromatic*
Isomsr*
Lubricants
Hydrogen
(MMcfd)
Marketal
Petroleu
Coke
gOoapma - ° W°
fe'Vatocoa ' 15-600 C10.000
IV ' "20.000
^klt'Ui>da^_L:>OsT^ * 436.600
B-'aCrobe 0 C135,000
? d130,000
£" . 6165,000
: * Delayed Coking j* Low Pressure
«C. "C.andC,
« 56
0 0
0 0
a 4
0 0
c Heavy Gas Oil
1 Other/Residual
0
0
.*
0
15.000
0
«M»
20.000
dNaph./Ref. Feeds
'Fluid Coking
0 -0
0 9.500
'HP*, o
N8.000 0
* Distillate
k VTsbreaking
0 J
19 ol
o m
I
' High Pressure I
' Other/Gas Oil I
E Estimated. MMcfd = Million cubic feet per day.
« Refinery did not operate during 1991. ** Reported no inputs to the crude oil distillation unit during 1991, but did report inputs to the vacuum distillation unit
Source: Energy Information Administration (EIA) Form EIA-820, "Annual Refinery Report"
-------
APPENDIX B
SENSITIVITY ANALYSES
-------
-------
APPENDIX B
SENSITIVITY ANALYSES
INTRODUCTION
The sensitivity analysis contained in this Appendix explores
the degree to which the results presented earlier in this report
are sensitive to the estimates of the price elasticity of demand.
The results presented in this report are based upon the price
elasticities of demand shown in Table B-l for the individual
petroleum products. The range of demand elasticity measures is
also shown. Jet fuel is the only product that has a single
measure of demand elasticity and a sensitivity analysis will not
be conducted for this product. This elasticity measure for jet
fuel is sufficiently small that reasonable deviations in the
measure are unlikely to have an impact on the model results.
TABLE B-l. PRICE ELASTICITY OF DEMAND
Refined Product
Motor gas
Jet fuel
Refined fuel oil
Distilled fuel oil
LPG
Elasticity Midpoint Range of Elasticity
-0.69
-0.15
-0.675
-0.745
-0.8
-0.55 to -0.82
-0.15
-0.61 to -0.74
-0.50 to -0.99
-0.60 to -1.0
The sensitivity analysis results are presented in Tables B-2
and B-3. Table B-2 reports estimates for the low measure of
elasticity and Table B-3 for the high measure.
The results using the low measure of elasticity differ very
little from the reported results. The signs of the changes in
price, quantity, and value of shipments are unchanged and the
relative size of the changes are not significantly altered. The
B-2
-------
results of this analysis tend to present relatively more
favorable results for the industry.
The analysis conducted with the high end of the elasticity
range also does not differ significantly from previously reported
results for price increases and quantity decreases. The change
in value of shipments becomes virtually zero for Distillate and
LPG as a result of the proximity of the elasticity measures to
unitary elastic.
In summary, the sensitivity analysis does not indicate that
the model results are sensitive to reasonable changes in the
price elasticity of demand. This conclusion provides support for
greater confidence in the reported model results.
B-3
-------
TABLE B-2. SENSITIVITY ANALYSIS FOR ESTIMATED PRIMARY IMPACTS
WITH ,
THE LOW MEASURE OF THE PRICE ELASTICITY OF DEMAND1
Refined
Product
Motor Gasoline
Residual Fuel
Distillate
Fuel
LPGs
Market
Price Change
0.31%
0.25%
0.35%
0.30%
Market
Output Change
(0.19%)
(0.49%)
(0.22%)
(0.22%)
Change in
Value of
Shipments
0.12%
(0.24%)
0.13%
0.08%
the
(%)
NOTES: ' Brackets indicate decreases or negative values.
TABLE B-3. SENSITIVITY ANALYSIS FOR ESTIMATED PRIMARY IMPACTS
WITH
THE HIGH MEASURE OF THE PRICE ELASTICITY OF DEMAND1
Refined
Product
Motor Gasoline
Residual Fuel
Distillate
Fuel
LPGs
Market Price
Change (%)
0.25%
0.23%
0.23%
0.22%
Market
Quantity
Change (%)
(0.22%)
(0.51%)
(0.26%)
(0.26%)
Change in the
Value of
Shipments (%)
0.02%
(0.28%)
(0.04%)
(0.04%)
NOTES: ' Brackets indicate decreases or negative values.
B-4
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B-5
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TECHNICAL REPORT DATA
(Please read Instructions on reverse before completing)
1. REPORT NO.
EPA-453/R-95-003
3. RECIPIENT'S ACCESSION NO.
4. TITLE AND SUBTITLE
Economic Impact Analysis for the Petroleum
Refineries NESHAP
5. REPORT DATE
August 1995
6. PERFORMING ORGANIZATION CODE
7. AUTHOR(S)
8. PERFORMING ORGANIZATION REPORT NO.
9. PERFORMING ORGANIZATION NAME AND ADDRESS
U.S. Environmental Protection Agency
Office of Air Quality Planning and
Standards
Air Quality Strategies and Standards
Division
Research Triangle Park, NC 27711
10. PROGRAM ELEMENT NO.
11. CONTRACT/GRANT NO.
12. SPONSORING AGENCY NAME AND ADDRESS
Director
Office of Air Quality Planning and
Standards
Office of Air and Radiation
U.S. Environmental Protection Agency
Research Triangle Park, NC 27711
13. TYPE OF REPORT AND PERIOD COVERED
14. SPONSORING AGENCY CODE
EPA/200/04
15. SUPPLEMENTARY NOTES
16. ABSTRACT
An economic analysis of the industries affected by the Petroleum
Refineries National Emissions Standard for Hazardous Air Pollutants
(NESHAP) was completed in support of this standard. The industry for
which economic impacts was computed was the petroleum refinery industry.
Affected refineries must reduce HAP emissions by the level of
control required in the standard. Several types of economic impacts,
among them product price changes, output changes, job impacts, and
effects on foreign trade, were computed for the selected regulatory
alternative.
17.
KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
b. IDENTIFIERS/OPEN ENDED TERMS
c. COSATI Field/Group
Control Costs
Industry Profile
Economic Impacts
Air Pollution control
18. DISTRIBUTION STATEMENT
Release Unlimited
19. SECURITY CLASS (Report)
Unclassified
21. NO. OF PAGES
150
20. SECURITY CLASS (Page)
Unclassified
22. PRICE
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