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Economic Impact and Small Business Analysis for
Petroleum Refinery NESHAP — Heat Exchange
Systems
-------
EPA-452/R-09-005
October 2009
Economic Impact and Small Business Analysis for Petroleum Refinery NESHAP -
Heat Exchange Systems
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Health and Environmental Impacts Division
Air Benefits and Costs Group
Research Triangle Park, NC
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October 2009
Economic Impact and Small Business Analysis for Petroleum Refinery NESHAP -
Heat Exchanger Systems
Background
This final action amends the national emission standards for petroleum refineries
to add maximum achievable control technology standards for heat exchange systems.
This action also amends the general provisions cross reference table, clarifies dates, and
corrects section references.
In developing this rule, we first issued an advanced notice of proposed
rulemaking (ANPR) on March 29, 2007. The purpose of the ANPR, which covered the
sources subject to the Refinery MACT 1 rule and other source categories, was to solicit
additional emissions data and any corrections to the data we already had. We issued an
initial proposed rule for the petroleum refineries subject to the Refinery MACT 1 on
September 4, 2007, and held a public hearing in Houston, Texas on November 27, 2007.
In response to public comments on the initial proposal, we collected additional
information and revised our impact analyses. Based on the results of these additional
analyses, we issued a supplemental proposal on November 10, 2008, that established a
new MACT floor for heat exchange systems and proposed an additional option under the
residual risk and technology review (RTR) for storage vessels. A public hearing for the
supplemental proposal was held in Research Triangle Park, North Carolina on November
25, 2008. We are now taking final action to perform the RTR of the Refinery MACT 1
standard.
As explained later in this report, this final rule includes a MACT standard for heat
exchanger systems at petroleum refineries.
This report presents the economic and small business impacts associated with this
final rule. The report contains a profile of the affected industry, background information
on the requirements included in the final rule, information on the costs of the final rule,
and the economic and small business impacts associated with this final rule.
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1.0 Industry Profile
1.1 Introduction
At its core, the petroleum refining industry comprises establishments primarily
engaged in refining crude petroleum into finished petroleum products. Examples of these
petroleum products include gasoline, kerosene, asphalt, lubricants, and solvents, among
others.
Firms engaged in petroleum refining are categorized under the North American
Industry Classification System (NAICS) code 324110. In 2006, 149 establishments
owned by 58 parent companies were refining petroleum. That same year, the petroleum
refining industry shipped products valued at over $489 billion (U.S. Department of
Commerce, Bureau of the Census, 2007).
This industry profile report is organized as follows. Section 1.2 provides a
detailed description of the inputs, outputs, and processes involved in petroleum refining.
Section 1.3 describes the applications and users of finished petroleum products. Section
1.4 discusses the organization of the industry and provides facility- and company-level
data. In addition, small businesses are reported separately for use in evaluating the impact
on small business to meet the requirements of the Small Business Regulatory
Enforcement and Fairness Act (SBREFA). Section 1.5 contains market-level data on
prices and quantities and discusses trends and projections for the industry.
1.2 The Supply Side
Estimating the economic impacts of any regulation on the petroleum refining
industry requires a good understanding of how finished petroleum products are produced
(the "supply side" of finished petroleum product markets). This section describes the
production process used to manufacture these products as well as the inputs, outputs, and
by-products involved. The section concludes with a description of costs involved with the
production process.
1.2.1 Production Process, Inputs, and Outputs
Petroleum pumped directly out of the ground, known as crude oil, is a complex
mixture of hydrocarbons (chemical compounds that consist solely of hydrogen and
carbon) and various impurities such as salt. To manufacture the variety of petroleum
products recognized in every day life, this tar-like mixture must be refined and processed
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over several stages. This section describes the typical stages involved in this process as
well as the inputs and outputs.
1.2.1.1 The Production Process
The process of refining crude oil into useful petroleum products can be separated
into two phases and a number of supporting operations. These phases are described in
detail in the following section. In the first phase, crude oil is desalted and then separated
into its various hydrocarbon components (known as "fractions"). These fractions include
gasoline, kerosene, naphtha, and other products (EPA, 1995).
In the second phase, the distilled fractions are converted into petroleum products
(such as gasoline and kerosene) using three different types of downstream processes:
combining, breaking, and reshaping (EPA, 1995). An outline of the refining process is
presented in Figure 1-1.
Desalting. Before separation into fractions, crude oil is treated to remove salts,
suspended solids, and other impurities that could clog or corrode the downstream
equipment. This process, known as "desalting," is typically done by first heating the
crude oil, mixing it with process water, and depositing it into a gravity settler tank.
Gradually, the salts present in the oil will be dissolved into the process water (EPA,
1995). After this takes place, the process water is separated from the oil by adding
demulsifier chemicals (a process known as chemical separation) and/or by applying an
electric field to concentrate the suspended water globules at the bottom of the settler tank
(a process known as electrostatic separation). The effluent water is then removed from
the tank and sent to the refinery wastewater treatment facilities (EPA, 1995). This process
is illustrated in Figure 1-2.
Atmospheric Distillation. The desalted crude oil is then heated in a furnace to
750°F and fed into a vertical distillation column at atmospheric pressure. After entering
the tower, the lighter fractions flash into vapor and travels up the tower. This leaves only
the heaviest fractions (which have a much higher boiling point) at the bottom of the
tower. These fractions include heavy fuel oil and asphalt residue (EPA, 1995).
-------
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Figure 1-1. Outline of the Refining Process
Source: U.S. Department of Labor, Occupational Safety and Health Administration (OSHA). 2003. OSHA
Technical Manual, Section IV: Chapter 2, Petroleum Refining Processes. TED 01-00-015. Washington,
DC: U.S. DOL. Available at . As obtained on
October 23, 2006.
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Process
water
Electrical
power
Alternate
Unrefined
crude
Desalted
crude
tf
Cjh^tx;^
GRAVITY
SETTLER
Heater Emulsifier
Effluent
water
-f,
Figure 1-2. Desalting Process
Source: U.S. Department of Labor, Occupational Safety and Health Administration (OSHA). 2003. OSHA
Technical Manual, Section IV: Chapter 2, Petroleum Refining Processes. TED 01-00-015. Washington,
DC: U.S. DOL. Available at . As obtained on
October 23, 2006.
As the hot vapor rises, its temperature is gradually reduced. Lighter fractions
condense onto trays located at successively higher portions of the tower. For example,
motor gasoline will condense at higher portion of the tower than kerosene because it
condenses at lower temperatures. This process is illustrated in Figure 1-3. As these
fractions condense, they will be drawn off their respective trays and potentially sent
downstream for further processing (OSHA, 2003; EPA, 1995).
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Gas (butane ard lighter)
4-
Gasclin^ {light naphtha)
GAS
SEPARATOR
6 asc lin e
si
b
0.=
Crude
oil
Pump
Figure 1-3. Atmospheric Distillation Process
Source: U.S. Department of Labor, Occupational Safety and Health Administration (OSHA). 2003. OSHA
Technical Manual, Section IV: Chapter 2, Petroleum Refining Processes. TED 01-00-015. Washington,
DC: U.S. DOL. Available at . As obtained on
October 23, 2006.
Vacuum Distillation. The atmospheric distillation tower cannot distil the heaviest
fractions (those at the bottom of the tower) without cracking under requisite heat and
pressure. So these fractions are separated using a process called vacuum distillation. This
process takes place in one or more vacuum distillation towers and is similar to the
atmospheric distillation process, except very low pressures are used to increase
volatization and separation. A typical first-phase vacuum tower may produce gas oils or
lubricating-oil base stocks (EPA, 1995). This process is illustrated in Figure 1-4.
Downstream Processing. To produce the petroleum products desired by the
market place, most fractions must be further refined after distillation or "downstream."
These downstream processes change the molecular structure of the hydrocarbon
molecules by breaking them into smaller molecules, joining them to form larger
molecules, or shaping them into higher quality molecules (EPA, 1995).
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To vacuum system
Residuum
Vacuum
gas oil
lubricating oils
Vacuum
residuum
Furnace
Figure 1-4. Vacuum Distillation Process
Source: U.S. Department of Labor, Occupational Safety and Health Administration (OSHA). 2003. OSHA
Technical Manual, Section IV: Chapter 2, Petroleum Refining Processes. TED 01-00-015. Washington,
DC: U.S. DOL. Available at . As obtained on
October 23, 2006.
Downstream processes include thermal cracking, coking, catalytic cracking,
catalytic hydrocracking, hydrotreating, alkylation, isomerization, polymerization,
catalytic reforming, solvent extraction, merox, dewaxing, propane deasphalting and other
operations (EPA, 1995).
1.2.1.2 Supporting Operations
In addition to the processes described above, there are other refinery operations
that do not directly involve the production of hydrocarbon fuels, but serve in a supporting
role. Some of the major supporting operations are described in this section.
Wastewater Treatment. Petroleum refining operations produce a variety of
wastewaters including process water (water used in process operations like desalting),
cooling water (water used for cooling that does not come into direct contact with the oil),
and surface water runoff (resulting from spills to the surface or leaks in the equipment
that have collected in drains).
Wastewater typically contains a variety of contaminants (such as hydrocarbons,
suspended solids, phenols, ammonia, sulfides, and other compounds) and must be treated
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before it is recycled back into refining operations or discharged. Petroleum refineries
typically utilize two stages of wastewater treatment. In primary wastewater treatments,
oil and solids present in the wastewater are removed. After this is completed, wastewater
can be discharged to a publicly owned treatment facility or undergo secondary treatment
before being discharged directly to surface water. In secondary treatment,
microorganisms are used to dissolve oil and other organic pollutants that are present in
the wastewater (EPA, 1995; OSHA, 2003).
Gas Treatment and Sulfur Recovery. Petroleum refinery operations such as
coking and catalytic cracking emit gases with a high concentration of hydrogen sulfide
mixed with light refinery fuel gases (such as methane and ethane). Sulfur must be
removed from these gases in order to comply with Clean Air Act's SOX emission limits
and to recover saleable elemental sulfur.
Sulfur is recovered by first separating the fuel gases from the hydrogen sulfide
gas. Once this is done, elemental sulfur is removed from the hydrogen sulfide gas using a
recovery system known as the Claus Process. In this process, hydrogen sulfide is burned
under controlled conditions producing sulfur dioxide. A bauxite catalyst is then used to
react with the sulfur dioxide and the unburned hydrogen sulfide to produce elemental
sulfur. However, the Claus process only removed 90% of the hydrogen sulfide present in
the gas stream, so other processes must be used to recover the remaining sulfur (EPA,
1995).
Additive Production. A variety of chemicals are added to petroleum products to
improve their quality or add special characteristics. For example, ethers have been added
to gasoline to increase octane levels and reduce CO emissions since the 1970s.
The most common ether additives being used today are methyl tertiary butyl ether
(MTBE), and tertiary amyl methyl ether (TAME). Larger refineries tend to manufacture
these additives themselves by reacting isobutylene (a by-product of several refinery
processes) with methanol (OSHA, 2003).
Heat Exchangers, Coolers, and Process Heaters. Petroleum refineries require
very high temperatures to perform many of their refining processes. To achieve these
temperatures, refineries use fired heaters fueled by refinery or natural gas, distillate, and
residual oils. This heat is managed through heat exchanges, where are composed of
bundles of pipes, tubes, plate coils, and other equipment that surround heating or cooling
10
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water, steam, or oil. Heat exchanges facilitate the indirect transfer of heat as needed
(OSHA, 2003).
Pressure Release and Flare Systems. As liquids and gases expand and contract
through the refining process, pressure must be actively managed to avoid accident.
Pressure-relief systems enable the safe handling of liquids and gases that that are released
by pressure-relieving devices and blow-downs. According to the OSHA Technical
Manual, "pressure relief is an automatic, planned release when operating pressure reaches
a predetermined level. A blow-down normally refers to the intentional release of material,
such as blow-downs from process unit startups, furnace blow-downs, shutdowns, and
emergencies" (OSHA, 2003).
Blending. Blending is the final operation in petroleum refining. It is the physical
mixture of a number of different liquid hydrocarbons to produce final petroleum products
that have desired characteristics. For example, additives such as ethers can be blended
with motor gasoline to boost performance and reduce emissions. Products can be blended
in-line through a manifold system, or batch blended in tanks and vessels (OSHA, 2003).
1.2.1.3 Inputs
The inputs in the production process of petroleum products include general inputs
such as labor, capital, and water. The inputs specific to this industry are crude oil and the
variety of chemicals used in producing petroleum products. These two specific inputs are
discussed below.
Crude Oil. Contrary to popular conception, crude oils are complex,
heterogeneous mixtures. Crude oils contain many different hydrocarbon compounds that
vary in appearance and composition from one oil field to another. An "average" crude oil
contains about 84% carbon; 14% hydrogen; and less than 2% sulfur, nitrogen, oxygen,
metals, and salts (OSHA, 2003).
In 2004, the petroleum refining industry used 5.6 billion barrels of crude oil in the
production of finished petroleum products (EIA, 2005).l
Common Refinery Chemicals. In addition to crude oil, a variety of chemicals
are used in the production of petroleum products. The specific chemicals used will
depend on specific characteristics of the product in question. Table 1-1 lists the most
A barrel is a unit of volume that is equal to 42 U.S. gallons.
11
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common chemicals used by petroleum refineries, their characteristics, and their
applications.
In 2004, the petroleum refining industry used 581 million barrels of natural gas
liquids and other liquids in the production of finished petroleum products (EIA, 2005).
1.2.1.4 Types of Product Outputs
The petroleum refining industry produces a number of products that tend to fall
into one of three categories: fuels, finished nonfuel products, and feedstock for the
petrochemical industry. Table 1-2 briefly describes these product categories. A more
detailed discussion of petroleum fuel products can be found in Section 1.3.
Table 1-1. Types and Characteristics of Raw Materials used in Petroleum
Refineries
Type Description
Grade Oil Heterogeneous mixture of different hydrocarbon compounds.
Oxygenates Substances which, when added to gasoline, increase the amount of oxygen in that
gasoline blend. Ethanol, methyl tertiary butyl ether (MTBE), ethyl tertiary butyl
ether (ETBE), and methanol are common oxygenates.
Caustics Caustics are added to desalting water to neutralize acids and reduce corrosion.
They are also added to desalted crude in order to reduce the amount of corrosive
chlorides in the tower overheads. They are used in some refinery treating processes
to remove contaminants from hydrocarbon streams.
Leaded Gasoline Additives Tetraethyl lead (TEL) and tetramethyl lead (TML) are additives formerly used to
improve gasoline octane ratings but are no longer in common use except in
aviation gasoline
Sulfuric Acid and Sulfuric acid and hydrofluoric acid are used primarily as catalysts in alkylation
Hydrofluoric Acid processes. Sulfuric acid is also used in some treatment processes.
Source: U.S. Department of Labor, Occupational Safety and Health Administration (OSHA). 2003. OSHA
Technical Manual, Section IV: Chapter 2, Petroleum Refining Processes. TED 01-00-015. Washington,
DC: U.S. DOL. Available at . As obtained on
October 23, 2006.
12
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Table 1-2. Major Refinery Product Categories
Product Category Description
Fuels Finished Petroleum products that are capable of releasing energy. These products
power equipment such as automobiles, jets, and ships. Typical petroleum fuel
products include gasoline, jet fuel, and residual fuel oil.
Finished nonfuel products Petroleum products that are not used for powering machines or equipment. These
products typically include asphalt, lubricants (such as motor oil and industrial
greases), and solvents (such as benzene, toluene, and xylene).
Feedstock Many products derived from crude oil refining, such as ethylene, propylene,
butylene, and isobutylene, are primarily intended for use as petrochemical
feedstock in the production of plastics, synthetic fibers, synthetic rubbers, and other
products.
Source: U.S. Department of Labor, Occupational Safety and Health Administration (OSHA). 2003. OSHA
Technical Manual, Section IV: Chapter 2, Petroleum Refining Processes. TED 01-00-015. Washington,
DC: U.S. DOL. Available at . As obtained on
October 23, 2006.
1.2.2 Emissions and Controls in Petroleum Refining
Petroleum refining leads to emissions of metals; spent acids; numerous toxic
organic compounds; and gaseous pollutants, including carbon monoxide (CO), sulfur
oxides, (SOX), nitrogen oxides (NOX), particulates, ammonia (NHs), hydrogen sulfide
(H2S), and volatile organic compounds (VOCs).
7.2.2.1 Gaseous and VOC Emissions
As previously mentioned, CO, SOX, NOX, NHs, and H^S emissions are produced
along with petroleum products. Sources of these emissions from refineries include
fugitive emissions of the volatile constituents in crude oil and its fractions, emissions
from the burning of fuels in process heaters, and emissions from the various refinery
processes themselves.
Fugitive emissions occur as a result of leaks throughout the refinery. Although
individual leaks may be small, the sum of all leaks can result in a lot of hazardous
emissions. These emissions can be reduced by purchasing leak-resistant equipment and
maintaining an ongoing leak detection and repair program (EPA, 1995).
The numerous process heaters used in refineries to heat process streams or to
generate steam (boilers) for heating or other uses can be potential sources of SOX, NOX,
CO, and hydrocarbons emissions. Emissions are low when process heaters are operating
properly and using clean fuels such as refinery fuel gas, fuel oil, or natural gas. However,
if combustion is not complete, or the heaters are fueled using fuel pitch or residuals,
emissions can be significant (EPA, 1995).
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The majority of gas streams exiting each refinery process contain varying
amounts of refinery fuel gas, IH^S, and NHs These streams are directed to the gas
treatment and sulfur recovery units described in the previous section. Here, refinery fuel
gas and sulfur are recovered using a variety of processes. These processes create
emissions of their own, which normally contain H^S, SOX, and NOX gases (EPA, 1995).
Emissions can also be created by the periodic regeneration of catalysts that are
used in downstream processes. These processes generate streams that may contain
relatively high levels of CO, particulates, and VOCs. However, these emissions are
treated before being discharged to the atmosphere. First, the emissions are processed
through a CO boiler to burn CO and any VOCs, and then through an electrostatic
precipitator or cyclone separator to remove particulates (EPA, 1995).
1.2.2.2 Wastewater and Other Wastes
Petroleum refining operations produce a variety of wastewaters including process
water (water used in process operations like desalting), cooling water (water used for
cooling that does not come into direct contact with the oil), and surface water runoff
(resulting from spills to the surface or leaks in the equipment that have collected in
drains). This wastewater typically contains a variety of contaminants (such as
hydrocarbons, suspended solids, phenols, NHs, sulfides, and other compounds) and is
treated in on-site facilities before being recycled back into the production process or
discharged.
Other wastes include forms of sludges, spent process catalysts, filter clay, and
incinerator ash. These wastes are controlled through a variety of methods including
incineration, land filling, and neutralization, among other treatment methods (EPA,
1995).
1.2.3 Costs of Production
Between 1995 and 2006, expenditures on input materials accounted for the largest
cost to petroleum refineries—amounting to 94% of total expenses (Figure 1-5). These
material costs included the cost of all raw materials, containers, scrap, and supplies used
in production or repair during the year, as well as the cost of all electricity and fuel
consumed.
14
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Average Percentage
(1995-2006)
Materials
94%
Total Capital
3%
Payroll
3%
Figure 1-5. Petroleum Refinery Expenditures
Labor and capital accounted for the remaining expenses faced by petroleum
refiners. Capital expenditures include permanent additions and alterations to facilities and
machinery and equipment used for expanding plant capacity or replacing existing
machinery. A detailed breakdown of how much petroleum refiners spent on each of these
factors of production over this 11-year period is provided in Table 1-3. A more
exhaustive assessment of the costs of materials used in petroleum refining is provided in
Table 1-4.
1.3 The Demand Side
Estimating the economic impact the regulation will have on the petroleum
refining industry also requires characterizing various aspects of the demand for finished
petroleum products. This section describes the characteristics of finished petroleum
products, their uses and consumers, and possible substitutes.
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Table 1-3. Labor, Material, and Capital Expenditures for Petroleum Refineries
(NAICS324110)
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Payroll
Reported
3,791
3,738
3,885
3,695
3,983
3,992
4,233
4,386
4,752
5,340
5,796
5,984
(Smillions)
2005
4,603
4,435
4,595
4,415
4,682
4,509
4,743
4,947
5,227
5,635
5,796
5,751
Materials
Reported
112,532
132,880
127,555
92,212
114,131
180,568
158,733
166,368
185,369
251,467
345,207
396,980
(Smillions)
2005
136,633
157,658
150,865
110,187
134,146
203,967
177,838
187,646
203,893
265,369
345,207
381,546
Total Capital
Reported
5,937
5,265
4,244
4,169
3,943
4,685
6,817
5,152
6,828
6,601
10,525
11,175
(Smillions)
2005
7,209
6,247
5,020
4,982
4,635
5,292
7,638
5,811
7,510
6,966
10,525
10,741
Note: Adjusted for inflation using the producer price index industry for total manufacturing industries
(Table 5-6).
Sources: U.S. Department of Commerce, Bureau of the Census. 2007. 2006 Annual Survey of
Manufactures. Obtained through American Fact Finder Database <
http ://factfmder. census, gov/home/saff/main. html?_lang=en>.
U.S. Department of Commerce, Bureau of the Census. 2006. 2005 Annual Survey of Manufactures.
M05(AS)-1. Washington, DC: Government Printing Office. Available at
. As obtained on October 23, 2007.
U.S. Department of Commerce, Bureau of the Census. 2003a. 2001 Annual Survey of Manufactures.
M01(AS)-1. Washington, DC: Government Printing Office. Available at
. As obtained on October 23, 2006.
U.S. Department of Commerce, Bureau of the Census. 2001.1999 Annual Survey of Manufactures.
M99(AS)-1 (RV). Washington, DC: Government Printing Office. Available at
. As obtained on October 23, 2006.
U.S. Department of Commerce, Bureau of the Census. 1998.1996 Annual Survey of Manufactures.
M96(AS)-1 (RV). Washington, DC: Government Printing Office. Available at
. As obtained on October 23, 2006.
U.S. Department of Commerce, Bureau of the Census. 1997.1995 Annual Survey of Manufactures.
M95(AS)-1. Washington, DC: Government Printing Office. Available at
. As obtained on October 23, 2006.
1.3.1 Product Characteristics
Petroleum refining firms produce a variety of different products. The
characteristics these products possess largely depend on their intended use. For example,
the gasoline fueling our automobiles has different characteristics than the oil lubricating
the car's engine. However, as discussed in Section 1.1.4, finished petroleum products can
be categorized into three broad groups based on their intended uses (EIA, 1999a):
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Table 1-4. Costs of Materials Used in Petroleum Refining Industry
Material
Petroleum Refineries NAICS 324110
Total materials
Domestic crude petroleum, including lease
condensate
Foreign crude petroleum, including lease
condensate
Foreign unfinished oils (received from
foreign countries for further processing)
Ethane (C2) (80% purity or more)
Propane (C3) (80% purity or more)
Butane (C4) (80% purity or more)
Gas mixtures (C2, C3, C4)
Isopentane and natural gasoline
Other natural gas liquids, including plant
condensate
Toluene and xylene (100% basis)
Additives (including antioxidants,
antiknock compounds, and inhibitors)
Other additives (including soaps and
detergents)
Animal and vegetable oils
Chemical catalytic preparations
Sodium hydroxide (caustic soda) (100%
NaOH)
Sulfuric acid, excluding spent (100%
H2S04)
Metal containers
Plastics containers
Paper and paperboard containers
Cost of materials received from petroleum
refineries and lube manufacturers
All other materials and components, parts,
containers, and supplies
Materials, ingredients, containers, and
supplies, nsk
2002
Delivered
Cost ($106)
157,415,200
63,157,497
69,102,574
2,297,967
D
118,257
1,925,738
1,843,708
810,530
455,442
159,563
40,842
709
D
D
129,324
189,912
9,450
D
D
8,980,758
5,722,580
576,175
Percentage
of Material
Costs
100.0%
40.1%
43.9%
1.5%
0.1%
1.2%
1.2%
0.5%
0.3%
0.1%
0.0%
0.0%
0.1%
0.1%
0.0%
5.7%
3.6%
0.4%
1997
Delivered
Cost ($106)
118,682,535
47,220,759
48,172,988
2,373,376
D
269,928
1,567,875
952,009
1,381,100
1,427,123
N
262,228
200,005
D
647,040
41,741
56,514
60,531
N
18,404
4,981,370
4,233,383
4,779,890
Percentage
of Material
Costs
100.0%
39.8%
40.6%
2.0%
0.2%
1.3%
0.8%
1.2%
1.2%
0.2%
0.2%
0.5%
0.0%
0.0%
0.1%
0.0%
4.2%
3.6%
4.0%
Source: U.S. Department of Commerce, Bureau of the Census. 2004. 2002 Economic Census, Industry
Series—Shipbuilding and Repair. Washington, DC: Government Printing Office. Available at
-------
• fuels—petroleum products that are capable of releasing energy such as
motor gasoline
• nonfuel products—petroleum products that are not used for powering
machines or equipment such as solvents and lubricating oils
• petrochemical feedstocks—petroleum products that are used as a raw
material in the production of plastics, synthetic rubber, and other goods
A list of selected products from each of these groups is presented in Table 1-5 along with
a description of each product's characteristics and primary uses.
18
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Table 1-5. Major Refinery Products
Product
Description
Fuels
Kerosene
Liquefied petroleum gas
(LPG)
Distillate fuel oil
Residual fuels
Petroleum coke
Gasoline A blend of refined hydrocarbons, motor gasoline ranks first in usage among petroleum
products. It is primarily used to fuel automobiles and lightweight trucks as well as
boats, recreational vehicles, lawn mowers, and other equipment. Other forms of
gasoline include Aviation gasoline, which is used to power small planes.
Kerosene is a refined middle-distillate petroleum product that finds considerable use
as a jet fuel. Kerosene is also used in water heaters, as a cooking fuel, and in lamps.
LPG consists principally of propane (CsHg) and butane (C4Hio). It is primarily used
as a fuel in domestic heating, cooking, and farming operations.
Distillate fuel oil includes diesel oil, heating oils, and industrial oils. It is used to
power diesel engines in buses, trucks, trains, automobiles, as well as other machinery.
Residual fuels are the fuels distilled from the heavier oils that remain after
atmospheric distillation, they find their primary use generating electricity in electric
utilities. However, residual fuels can also be used as fuel for ships, industrial boiler
fuel, and commercial heating fuel.
Coke is a high carbon residue that is the final product of thermal decomposition in the
condensation process in cracking. Coke can be used as a low-ash solid fuel for power
plants.
Finished Nonfuel Products
Coke In addition to use as a fuel, petroleum coke can be used a raw material for many
carbon and graphite products such as furnace electrodes and liners.
Asphalt Asphalt, used for roads and roofing materials, must be inert to most chemicals and
weather conditions.
Lubricants Lubricants are the result of a special refining process that produce lubricating oil base
stocks, which are mixed with various additives. Petroleum lubricating products
include spindle oil, cylinder oil, motor oil, and industrial greases.
Solvents A solvent is a fluid that dissolves a solid, liquid, or gas into a solution. Petroleum
based solvents, such as Benzyme, are used top manufacture detergent and synthetic
fibers. Other solvents include toluene and xylene.
Feedstock
Ethylene Ethylene is the simplest alkene and has the chemical formula C2H4. It is the most
produced organic compound in the world and it is used in the production of many
products. For example, one of ethylene's derivatives is ethylene oxide, which is a
primary raw material in the production of detergents.
Propylene Propylene is an organic compound with the chemical formula CsHe. It is primarily
used the production of polypropylene, which is used in the production of food
packaging, ropes, and textiles.
Sources: U.S. Department of Labor, Occupational Safety and Health Administration (OSHA). 2003. OSHA
Technical Manual, Section IV: Chapter 2, Petroleum Refining Processes. TED 01-00-015. Washington,
DC: U.S. DOL. Available at . As obtained on
October 23, 2006.
U.S. Department of Energy, Energy Information Administration (EIA). 1999.
1.3.2 Uses and Consumers
Finished petroleum products are rarely consumed as final goods in themselves.
Instead, they are used as primary inputs in the creation of a vast number of other goods
and services. For example, goods created from petroleum products include fertilizers,
19
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pesticides, paints, thinners, cleaning fluids, refrigerants, and synthetic fibers (EPA, 1995).
Similarly, fuels made from petroleum are used to run vehicles and industrial machinery
and generate heat and electrical power. As a result, the demand for many finished
petroleum products is derived from the demand for the goods and services they are used
to create.
The principal end users of petroleum products can be separated into five sectors:
• Residential sector—private homes and residences
• Industrial sector—manufacturing, construction, mining, agricultural, and
forestry establishments
• Transportation sector—private and public vehicles that move people and
commodities such as automobiles, ships, and aircraft
• Commercial sector—nonmanufacturing or nontransportation business
establishments such as hotels, restaurants, retail stores, religious and
nonprofit organizations, as well federal, state, and local government
institutions
• Electric utility sector—privately and publicly owned establishments that
generate, transmit, distribute, or sell electricity (primarily) to the public;
nonutility power producers are not included in this sector
Of these end users, the transportation sector consumes the largest share of
petroleum products, accounting for 67% of total consumption in 2005 (EIA, 2006a). In
fact, petroleum products like motor gasoline, distillate fuel, and jet fuel provide virtually
all of the energy consumed in the transportation sector (EIA, 1999a).
Of the three petroleum product categories, end-users primarily consume fuel. Fuel
products account for 9 out of 10 barrels of petroleum used in the United States (EIA,
1999a). In 2005, motor gasoline alone accounted for 49% of demand for finished
petroleum products (EIA, 2006a).
1.3.3 Substitution Possibilities in Consumption
A major influence on the demand for finished petroleum products is the
availability of substitutes. In some sectors, like the transportation sector, it is currently
difficult to switch quickly from one fuel to another without costly and irreversible
equipment changes, but other sectors can switch relatively quickly and easily (EIA,
1999a).
20
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For example, equipment at large manufacturing plants often can use either
residual fuel oil or natural gas. Often coal and natural gas can be easily substituted for
residual fuel oil at electricity utilities. As a result, we would expect demand in these
industries to be more sensitive to price (in the short run) than in others (EIA, 1999a).
However, over time, demand for petroleum products could become more elastic.
For example, automobile users could purchase more fuel-efficient vehicles or relocate to
areas that would allow them to make fewer trips. Technological advances could also
create new products that compete with petroleum products that currently have no
substitutes. An example of such a technological advance would be the invention of
ethanol (an alcohol produced from biomass), which can substitute for gasoline in spark-
ignition motor vehicles (EIA, 1999a).
1.3.4 Model Parameters
Essential components of an economic impact analysis are supply and demand
price elasticities. These elasticities measure the responsiveness of producers and
consumers to prices changes and determine how the social costs of a regulatory program
are distributed between the two groups of stakeholders. Economic theory suggests
consumers will bear a higher share of the economic welfare losses if the supply of a
petroleum product is more responsive to price changes than is the demand for that
product. A summary of the estimates of demand and supply elasticities for commonly
produced petroleum products is provided in Table 1-6.
Table 1-6. Estimates of Price Elasticity of Demand and Supply
Market
Demand elasticity
Supply elasticity
Motor
Gasoline
-0.29
1.24
Jet Fuel
-0.15
1.24
Distillate
Fuel Oil
-0.75
1.24
Residual Fuel
Oil
-0.68
1.24
Liquefied
Petroleum
Gases
-0.8
1.24
Sources: U.S. Environmental Protection Agency. 1995. Economic Impact
Analysis for Petroleum Refineries NESHAP. EPA-452/R-95-003, Final Report.
Washington DC: Government Printing Office.
21
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1.4 Industry Organization
This section examines the organization of the U.S. petroleum refining industry,
including market structure, firm characteristics, plant location, and capacity utilization.
Understanding the industry's organization helps determine how it will be affected by new
emissions standards.
1.4.1 Market Structure
Market structure characterizes the level and type of competition among petroleum
refining companies and determines their power to influence market prices for their
products. For example, if an industry is perfectly competitive, then individual producers
cannot raise their prices above the marginal cost of production without losing market
share to their competitors. Understanding pricing behavior in the petroleum refining
industry is crucial for performing subsequent EIAs.
According to basic microeconomic theory, perfectly competitive industries are
characterized by unrestricted entry and exit of firms, large numbers of firms, and
undifferentiated (homogenous) products being sold. Conversely, imperfectly competitive
industries or markets are characterized by barriers to entry and exit, a smaller number of
firms, and differentiated products (resulting from either differences in product attributes
or brand name recognition of products). This section considers whether the petroleum
refining industry is competitive based on these three factors.
1.4.1.1 Barriers to Entry
Firms wanting to enter the petroleum refining industry may face at least two
major barriers to entry. First, according to a 2004 Federal Trade Commission staff study,
there are significant economies of scale in petroleum refinery operations. This means that
costs per unit fall as a refinery produces more finished petroleum products. As a result,
new firms that must produce at relatively low levels will face higher average costs than
firms that are established and produce at higher levels, which will make it more difficult
for these new firms to compete (Nicholson, 2005). This is known as a technical barrier to
entry.
Second, legal barriers could also make it difficult for new firms to enter the
petroleum refining industry. The most common example of a legal barrier to entry is
patents—intellectual property rights, granted by the government, that give exclusive
monopoly to an inventor over his invention for a limited time period. In the petroleum
refining industry, firms rely heavily on process patents to appropriate returns from their
22
-------
innovations. As a result, firms seeking to enter the petroleum refining industry must
develop processes that respect the novelty requirements of these patents, which could
potentially make entry more difficult for new firms (Langinier, 2004). A second example
of a legal barrier would be environmental regulations that apply only to new entrants or
new pollution sources. Such regulations would raise the operating costs of new firms
without affecting the operating costs of existing ones. As a result, new firms may be less
competitive.
Although neither of these barriers are impossible for new entrants to overcome,
they can make it more difficult for new firms to enter the market for manufactured
petroleum products. As a result, existing petroleum refiners could potentially raise their
prices above competitive levels with less worry about new firms entering the market to
compete away their customers with lower prices. It was not possible during this analysis
to quantify how significant these barriers would be for new entrants or what effect they
would have on market prices. However, existing firms would still face competition from
each other. In an unconcentrated industry, competition among existing firms would work
to keep prices at competitive levels.
1.4.1.2 Measures of Industry Concentration
Economists often use a variety of measures to assess the concentration of a given
industry. Common measures include four-firm concentration ratios (CR4), eight-firm
concentration ratios (CR8), and Herfmdahl-Hirschmann indexes (HHI). The CR4s and
CR8s measure the percentage of sales accounted for by the top four and eight firms in the
industry. The HHIs are the sums of the squared market shares of firms in the industry.
These measures of industry concentrated are reported for the petroleum refining industry
(NAICS 324110) in Table 1-7 for selected years between 1985 and 2003.
Table 1-7. Market Concentration Measures of the Petroleum Refining Industry:
1985 to 2003
Measure
Herfindahl-Hirschmann Index (HHI)
Four-firm concentration ratio (CR4)
Eight-firm concentration ratio (CR8)
1985
493
34.4
54.6
1990
437
31.4
52.2
1996
412
27.3
48.4
2000
611
40.2
61.6
2001
686
42.5
67.2
2002
743
45.4
70.0
2003
728
44.4
69.4
Source: Federal Trade Commission (FTC). 2004. "The Petroleum Industry: Mergers, Structural Change,
and Antitrust Enforcement." Available at . As
obtained on February 6, 2007.
23
-------
Between 1990 and 2000, the HHI rose from 437 to 611, which indicates an
increase in market concentration over time. This increase is partially due to merger
activity during this time period. Between 1990 and 2000, over 2,600 mergers occurred
across the petroleum industry; 13% of these mergers occurred in the industry's refining
and marketing segments (GAO, 2007).
Unfortunately, there is no objective criterion for determining market structure
based on the values of these concentration ratios. However, accepted criteria have been
established for determining market structure based on the HHIs for use in horizontal
merger analyses (U.S. Department of Justice and the Federal Trade Commission, 1992).
According to these criteria, industries with HHIs below 1,000 are considered
unconcentrated (i.e., more competitive); industries with HHIs between 1,000 and 1,800
are considered moderately concentrated (i.e., moderately competitive); and industries
with higher HHIs are considered heavily concentrated. Based on this criterion, the
petroleum refining industry continues to be unconcentrated even after an increase in
merger activity.
A more rigorous examination of market concentration was conducted in a 2004
Federal Trade Commission (FTC) staff study. This study explicitly accounted for the fact
that a refinery in one geographic region may not exert competitive pressure on a refinery
in another region if transportation costs are high. This was done by comparing HHIs
across Petroleum Administration for Defense Districts (PADDs). PADDs separate the
United States into five geographic regions or districts. They were initially created during
World War II to help manage the allocation of fuels during wartime. However, they have
remained in use as a convenient way of organizing petroleum market information (FTC,
2004).
This study concluded that these geographic markets were not highly concentrated.
PADDs I, II, and III (East Coast, Midwest, and Gulf Coast) were sufficiently connected
that they exerted a competitive influence on each other. The HHI for these combined
regions was 789 in 2003, indicating a low concentration level. Concentration in PADD
IV (Rocky Mountains) was also low in 2003, with an HHI of 944. PADD V gradually
grew more concentrated in the 1990s after a series of significant refinery mergers. By
2003, the region's HHI was 1,246, indicating growth to a moderate level of concentration
(FTC, 2004).
24
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1.4.1.3 Product Differentiation
Another way firms can influence market prices for their product is through
product differentiation. By differentiating one's product and using marketing to establish
brand loyalty, manufacturers can raise their prices above marginal cost without losing
market share to their competitors.
While we saw in Section 1.3 that there are a wide variety of petroleum products
with many different uses, individual petroleum products are by nature quite homogenous.
For example, there is little difference between premium motor gasoline produced at
different refineries (Mathtech, 1997). As a result, the role of product differentiation is
probably quite small for many finished petroleum products. However, there are examples
of relatively small refining businesses producing specialty products for small niche
markets. As a result, there may be some instances where product differentiation is
important for price determination.
1.4.1.4 Competition among Firms in the Petroleum Refining Industry
Overall, the petroleum industry is characterized as producing largely generic
products for sale in relatively unconcentrated markets. Although it is not possible to
quantify how much barriers to entry and other factors will affect competition among
firms, it seems unlikely that individual petroleum refiners would be able to significantly
influence market prices given the current structure of the market.
1.4.2 Characteristics of U.S. Petroleum Refineries and Petroleum Refining
Companies
A petroleum refinery is a facility where labor and capital are used to convert
material inputs (such as crude oil and other materials) into finished petroleum products.
Companies that own these facilities are legal business entities that conduct transactions
and make decisions that affect the facility. The terms "facility," "establishment," and
"refinery" are synonymous in this study and refer to the physical location where products
are manufactured. Likewise, the terms "company" and "firm" are used interchangeably to
refer to the legal business entity that owns one or more facilities. This section presents
information on refineries, such as their location and capacity utilization, as well as
financial data for the companies that own these refineries.
1.4.2.1 Geographic Distribution of U.S. Petroleum Refineries
There are approximately 149 petroleum refineries operating in the United States,
spread across 33 states. The number of petroleum refineries located in each of these states
25
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is listed in Table 1-8. This table illustrates that a significant portion of petroleum
refineries are located along the Gulf of Mexico region. The leading petroleum refining
states are Texas, California, and Louisiana.
Table 1-8. Number of Petroleum Refineries, by State
State
Alabama
Alaska
Arkansas
California
Colorado
Delaware
Georgia
Hawaii
Illinois
Indiana
Kansas
Kentucky
Louisiana
Michigan
Minnesota
Mississippi
Montana
Nevada
New Jersey
New Mexico
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total
Number of Petroleum Refineries
4
6
2
21
2
1
1
2
4
2
3
2
18
1
2
4
4
1
6
3
1
4
5
1
5
1
25
5
1
5
1
1
5
149
Source: U.S. Department of Energy, Energy Information Administration (EIA). 2006b. "Refinery Capacity
Report 2006." Available at
. As obtained on October 23, 2006.
1.4.2.2 Capacity Utilization
Capacity utilization indicates how well current refineries meet demand. One
measure of capacity utilization is capacity utilization rates. A capacity utilization rate is
the ratio of actual production volumes to full-capacity production volumes. For example,
26
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if an industry is producing as much output as possible without adding new floor space for
equipment, the capacity utilization rate would be 100 percent. On the other hand, if under
the same constraints the industry were only producing 75 percent of its maximum
possible output, the capacity utilization rate would be 75 percent. On an industry-basis,
capacity utilization is highly variable from year to year depending on economic
conditions. It is also variable on a company-by-company basis depending not only on
economic conditions, but also on company's strategic position in its particular industry.
While some plants may have idle production lines or empty floor space, others need
additional space or capacity.
Table 1-9 lists the capacity utilization rates for petroleum refineries from 2000 to
2006. It is interesting to note the significant drop in capacity utilization in 2005. This
would seem counter intuitive since there does not appear to be evidence that demand for
petroleum products is not dropping. To understand why this might be the case, one must
first realize that the capacity utilization ratio in petroleum industry represents the
utilization of the atmospheric crude oil distillation units.
Table 1-9. Full Production Capacity Utilization Rates for Petroleum Refineries
Year
2000
2001
2002
2003
2004
2005
2006
Petroleum Refineries
Capacity Utilization Rates
(NAICS 324110)
92.6
92.6
90.7
92.6
93.0
90.6
89.7
Gross Input to Atmospheric
Crude Oil Distillation Units
(1,000s of barrels per day)
15,299
15,352
15,180
15,508
15,783
15,578
15,602
Operational Capacity
(1,000s of barrels per day)
16,525
16,582
16,744
16,748
16,974
17,196
17,385
Source: U.S. Department of Energy, Energy Information Administration (EIA). 2007a. "Refinery
Utilization and Capacity." Available at . As obtained on January, 2007.
This is calculated for the petroleum industry by dividing the gross input to
atmospheric crude oil distillation units (all inputs involved in atmospheric crude oil
distillation, such as crude oil) by the industry's operational capacity.
In 2004, operational capacity increased from 16,974,000 barrels per calendar day
to 17,196,000 barrels per calendar day. However, gross inputs fell from 15,783,000
barrels per calendar day in 2004 to 15,578,000 in 2005. This indicates that capacity
utilization sagged due to a drop in production inputs. In 2006, gross inputs grew 0.15% to
27
-------
15,602,000 barrels per day. However, since operational capacity grew much faster (from
17,196,000 to 17,385,000 or 1.00%), capacity utilization rates for the industry continued
to fall.
1.4.2.3 Characteristics of Small Businesses Owning U.S. Petroleum Refineries
According to the Small Business Administration (SBA), a small business in the
petroleum refining industry is defined for government procurement purposes as having
1,500 or fewer employees (SBA, 2008).
As of January 2006, there were 149 petroleum refineries operating in the
continental United States with a cumulative capacity of processing over 17 million
barrels of crude per calendar day (EIA, 2006c). RTI identified 58 parent companies
owning refineries in the United States and was able to collect employment and sales data
for 47 (84%) of them.
The distribution of employment across companies is illustrated in Figure 1-6. As
this figure shows, 25 companies (53%) of these 47 employ fewer than 1,500 workers and
would be considered small businesses. These firms earned an average of $1.04 billion of
revenue per year, while firms employing more than 1,500 employees earned an average
of $84.2 billion of revenue per year (Figure 1-7). A distribution of the number of firms
earning different levels of revenue is presented in Figure 1-8.
Employment, crude capacity, and location information are provided in Table 1-9
for each of companies employing 1,500 employees or less. Similar information can be
found for all 56 companies owning petroleum refineries in Appendix A.
In Section 1.4.2.1, we discussed how petroleum refining operations are
characterized by economies of scale—that the cost per unit falls as a refinery produces
more finished petroleum products. This means that smaller petroleum refiners face higher
per unit costs than larger refining operations because they produce fewer petroleum
products. As a result, some smaller firms have sought to overcome their competitive
disadvantage by locating close to product-consuming areas to lower transportation costs
and serving niche product markets (FTC, 2004).
28
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60% -
.. cno/ .
(/) OU /o
E
^
o 30/o -
re
5 1 n% -
rn ,— ,
<100 100-250 250-500 500-1000 1000- >1500
1500
Figure 1-6. Employment Distribution of Companies Owning Petroleum Refineries
(N=47)
Sources: Dun & Bradstreet. 2007a. 2007 D&B Million Dollar Directory. Pennsylvania: Dun & Bradstreet
Inc.
Dun & Bradstreet Small Business Solutions. Small Business Database. Available at
.
Gale Research Inc. 2007. Ward's Business Directory of U.S. Private and Public Companies. Detroit:
Gale Research.
Hoovers. 2007. Free Content, Company Information. Available at .
t/»
$100,000 !
$80,000
> $60,000
o
£
o
« $20,000
o
<100 100-250 250-500 500-1000 1000- >1500
1500
Figure 1-7. Average Revenue of Companies Owning Petroleum Refineries by
Employment (N=47)
Sources: Dun & Bradstreet. 2007. 2007 D&B Million Dollar Directory. Pennsylvania: Dun & Bradstreet
Inc.
Dun & Bradstreet Small Business Solutions. Small Business Database. Available at
.
Gale Research Inc. 2007. Ward's Business Directory of U S Private and Public Companies. Detroit: Gale
Research.
29
-------
Hoovers. 2007. Free Content, Company Information. Available at .
70% -i
v>
E
i%
i%
M_ 40%
a, 30%
ro 20%
w 10%
0%
n
<$5 $5-$10 $10450 $50-
$100
$100- $500- >$1000
$500 $1000
Figure 1-8. Revenue Distribution of Companies Owning Petroleum Refineries
(N=47)
Sources: Dun & Bradstreet. 2007. 2007 D&B Million Dollar Directory. Pennsylvania: Dun & Bradstreet
Inc.
Dun & Bradstreet Small Business Solutions. Small Business Database. Available at
.
Gale Research Inc. 2007. Ward's Business Directory of U S Private and Public Companies. Detroit: Gale
Research.
Hoovers. 2007. Free Content, Company Information. Available at .
A good example of a firm locating close to prospective customers is Countrymark
Cooperative, Inc., which was started in the 1930s for the express purpose of providing
farmers in Indiana with a consistent supply of fuels, lubricants, and other products. A
good example of a firm producing niche products is Calumet Lubricants, which focuses
on developing and manufacturing naphthenic specialty oils.
However, recent developments are making these factors less important for success
in the industry. For example, the entry of new product pipelines is eroding the locational
advantage of smaller refineries (FTC, 2004). This trend can possibly be illustrated by the
fact that most refineries owned by small businesses tend to be located in relatively rural
areas (see Table 1-10). The median population density of counties occupied by small
refineries is 94 people per square mile. This could suggest that refineries do not rely on
the population surrounding them to support their refining operations.
30
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Table 1-10. Characteristics of Small Businesses in the Petroleum Refining Industry
Parent Company
AGE Refining &
Manufacturing
American Refining
Group
Arabian American
Development Co
Calcasieu Refining
Co.
Calumet Specialty
Products
Countrymark
Cooperative, Inc.
Cross Oil & Refining
Co. Inc.
CVR Energy Inc.
Foreland Refining
Co.
Frontier Oil Corp
Gary-Williams Co
Cummula- Parent Parent
Parent tive Crude Company Company
Company Capacity Sales Employ-
Type (bbl/cd) (SMillions) ment (#) Facility Name
Private 12,200 287
Private 10,000 350
Public 0 80
Private 30,000 638
Public 63,320 1,641
Private 23,000 87
Private 7,200 49
Public 112,000 3,038
Private 2,000 56
Private 153,000 4,000
Private 54,000 97
52 AGE Refining &
Manufacturing
310 American Refining
Group
118 South Hampton
Resources Inc.
5 1 Calcasieu Refining
Co.
350 Calumet Specialty
Products
Calumet Specialty
Products
Calumet Specialty
Products
300 Countrymark
Cooperative, Inc.
110 Cross Oil &
Refining Co. Inc.
577 Coffeyville
Resources LLC
100 Foreland Refining
Co.
727 Frontier Oil &
Refining Co.
Frontier Oil Corp
200 Wynnewood
Refining Co.
Facility City
San Antonio
Bradford
Silsbee
Lake Charles
Shreveport
Cotton Valley
Princeton
Mt. Vernon
Smackover
Coffeyville
Tonop ah/Eagle
Springs
Cheyenne
El Dorado
Wynnewood
Facility Facility
State County
TX
PA
TX
LA
LA
LA
LA
IN
AR
KS
NV
WY
KS
OK
Bexar County
McKean
County
Hardin
County
Calcasieu
Parish
Caddo Parish
Caddo Parish
Caddo Parish
Posey County
Union County
Montgomery
County
Nye County
Laramie
County
Butler County
Garvin
County
Facility
County
Population
Density
County ID (2000)
TXBexar
County
PAMcKean
County
TXHardm
County
LACalcasieu
Parish
LACaddo Parish
LACaddo Parish
LACaddo Parish
INPosey County
ARUnion
County
K SMontgomery
County
NVNye County
WYLaramie
County
KSButler
County
OKGarvin
County
1,117
47
54
171
286
286
286
66
44
56
2
30
42
34
(Continued)
-------
Table 1-10. Characteristics of Small Businesses in the Petroleum Refining Industry (continued)
Parent Company
Goodway Refining LLC
Greka Integrated Inc
Gulf Atlantic
Operations LLC
Holly Corp.
Hunt Refining Co.
Lion Oil Co.
Pelican Refining Co.
LLC
Placid Refining Inc.
San Joaquin Refining
Co., Inc.
Somerset Oil Inc
Trigeant Ltd.
Parent
Company
Type
Private
Private
Private
Public
Private
Private
Private
Private
Private
Private
Private
Cumulative
Crude
Capacity
(bbl/cd)
4,100
9,500
16,700
99,700
45,500
70,000
0
56,000
15,000
5,500
0
Parent
Company
Sales
(SMillions)
3
22
9
4,023
4,871
247
29
1,400
288
55
5
Parent
Company
Employ-
ment (#)
18
145
32
859
1,100
425
62
200
20
150
50
Facility Name
Goodway Refining
LLC
Greka Integrated Inc
Gulf Atlantic
Operations LLC
Holly Corp.
Navajo Refining Co.
Hunt Refining Co.
Hunt Southland
Refining
Hunt Southland
Refining
Lion Oil Co.
Pelican Refining Co.
LLC
Placid Refining Inc.
San Joaquin Refining
Co., Inc.
Somerset Refinery
Inc.
Trigeant Ltd.
Facility City
Atmore
Santa Maria
Mobile Bay
Woods Cross
Artesia
Tuscaloosa
Lumberton
Sandersville
El Dorado
Lake Charles
Port Allen
Bakersfield
Somerset
Corpus Christi
Facility
State
AL
CA
AL
UT
NM
AL
MS
MS
AR
LA
LA
CA
KY
TX
Facility
County
Escambia
County
Santa Barbara
County
Mobile County
Davis County
Eddy County
Tuscaloosa
County
Lamar County
Lamar County
Union County
Calcasieu
Parish
West Baton
Rouge Parish
Kern County
Pulaski County
Nueces County
Facility
County
Population
Density
(2000)
41
146
324
785
12
125
79
79
44
171
113
81
85
375
(Continued)
-------
Table 1-10. Characteristics of Small Businesses in the Petroleum Refining Industry (continued)
Parent Company
Western Refining, Inc.
World Oil Corp
Wyoming Refining Co.
Total
Cumulative
Parent Crude
Company Capacity
Type (bbl/cd)
Public 212,200
Private 8,500
Private 12,500
2,128,860
Parent
Company
Sales
(SMillions)
4,200
277
340
59,738
Parent
Company
Employ-
ment (#)
416
475
107
12,688
Facility Name
Western Refining, Inc.
Giant Refining Co.
Giant Refining Co.
Giant Refining Co.
Lunday-Thagard Co.
Wyoming Refining
Co.
Facility City
El Paso
Yorktown
Bloomfield
Gallup
South Gate
Newcastle
Facility
State
TX
VA
NM
NM
CA
WY
Facility
County
El Paso County
York County
San Juan
County
McKinley
County
Los Angeles
County
Weston County
Facility
County
Population
Density
(2000)
671
533
21
14
2,344
3
Sources: Dun & Bradstreet. 2007. 2007 D&B Million Dollar Directory. Pennsylvania: Dun & Bradstreet Inc.
Dun & Bradstreet Small Business Solutions. Small Business Database. Available at .
Gale Research Inc. 2007. Ward's Business Directory of U S Private and Public Companies. Detroit: Gale Research.
Hoovers. 2007. Free Content, Company Information. Available at . As obtained on April 11, 2007.
U.S. Department of Commerce, Bureau of the Census. 2000. "Population Density by County: Census 2000 Summary File 1 (SF 1) 100-Percent Data".
Available through American Fact Finder < http://factfinder.census.gov/home/saff/main.html?_lang=en>. As obtained on February 21, 2008.
-------
Capacity information for the 29 refineries owned by small businesses also suggests that
fewer small businesses are focusing on developing specialty products or serving local customers
as major parts of their business plan. For example, in 2006 these 29 refineries had a collective
crude refining capacity of 778,920 barrels per calendar day or 857,155 barrels per stream day
(EIA, 2006c). Approximately 21% of this total capacity was devoted to producing specialty
products or more locally focused products such as aromatics, asphalt, lubricants, and petroleum
coke. The remaining 79% was used to produce gasoline, kerosene, diesel fuel, and liquefied
petroleum gases. As discussed in Section 1.4.1.3, fuel products tend to be quite homogenous
(gasoline from one refinery is not very different from gasoline from another refinery), and they
are also normally transported by pipeline.
1.5 Markets
This section provides data on the volume of petroleum products produced and consumed
in the United States, the quantity of products imported and exported, and the average prices of
major petroleum products. The section concludes with a discussion of future trends for the
petroleum refining industry.
1.5.1 U.S. Petroleum Consumption
Figure 1-9 illustrates the amount of petroleum products supplied between 2000 and 2006
(measured in millions of barrels of oil). These data represent the approximate consumption of
petroleum products because it measures the disappearance of these products from primary
sources (i.e., refineries, natural gas processing plants, blending plants, pipelines, and bulk
terminals).
Between 2000 and 2004, U.S. consumption of petroleum products increased by 5%.
Consumption grew steadily from 2001 and 2004 before leveling off and slightly declining in
2006 (Figure 1-9). This reduced growth was primarily the result of less jet fuel and residual fuel
being consumed in recent years (Table 1-11).
1.5.2 U.S. Petroleum Production
Table 1-12 reports the number of barrels of major petroleum products produced in the
United States between 2000 and 2006. U.S. production of petroleum products at refineries and
blenders grew steadily between 1995 and 2003. However, production declined by 0.35% in
2005. This drop was possibly the result of damage inflicted by two hurricanes (Hurricane Katrina
and Hurricane Rita) on the U.S. Gulf Coast—the location of many U.S. petroleum refineries
(Section 1.4.2). According to the American Petroleum Institute, approximately 30% of the U.S.
refining industry was shut down as a result of the damage (API, 2006). In 2006, production of
34
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7,000
6,800
2000 2001 2002 2003 2004 2005 2006
Figure 1-9. Total Petroleum Products Supplied (millions of barrels per year)
Table 1-11. Total Petroleum Products Supplied (millions of barrels per year)
Year
2000
2001
2002
2003
2004
2005
2006
Motor
Gasoline
3,101
3,143
3,229
3,261
3,333
3,343
3,377
Distillate
Jet Fuel Fuel Oil
631
604
591
576
597
613
596
,362
,404
,378
,433
,485
,503
,522
Residual
Fuel Oil
333
296
255
282
316
336
251
Liquefied
Petroleum
Gases
816
746
789
757
780
741
749
Other
Products
967
978
969
1,003
1,076
1,057
1,055
Total
7,211
7,172
7,213
7,312
7,588
7,593
7,551
Source: U.S. Department of Energy, Energy Information Administration (EIA). "Petroleum Supply Annuals 1996-
2007, Volume 1." Available at . As obtained on October 31, 2007.
petroleum products rebounded, increasing 1% over 2004 levels. Additional production data are
presented in Table 1-13, which reports the value of shipments of products produced by the
petroleum refining industry between 1997 and 2006.
1.5.3 International Trade
International trade is a growing component of the U.S. petroleum refining industry. This
trend is demonstrated in Tables 1-14 and 1-15. Between 1995 and 2006, imports and exports of
petroleum products increased by more than 50%. While imports of most major petroleum
35
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Table 1-12. U.S. Refinery and Blender Net Production (millions of barrels per year)
Year
2000
2001
2002
2003
2004
2005
2006
Motor
Gasoline
2,910
2,928
2,987
2,991
3,025
3,036
3,053
Distillate
Jet Fuel Fuel Oil
588
558
553
543
566
564
541
,310
,349
,311
,353
,396
,443
,475
Residual
Fuel Oil
255
263
219
241
240
229
232
Liquefied
Petroleum
Gases
258
243
245
240
236
209
229
Other
Products
990
968
990
1,014
1,057
1,015
1,032
Total
6,311
6,309
6,305
6,383
6,520
6,497
6,561
Source: U.S. Department of Energy, Energy Information Administration (EIA). "Petroleum Supply Annuals 1996-
2007, Volume 1." Available at . As obtained on October 31, 2007.
Table 1-13. Value of Product Shipments of the Petroleum Refining Industry
Year
Millions of $Reported
Millions of $2005
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
152,756
114,439
140,084
210,187
195,898
186,761
216,764
290,280
419,063
489,051
180,671
136,746
164,651
237,425
219,476
210,647
238,425
306,328
419,063
470,037
Note: Numbers were adjusted for inflation using producer price index industry data for Total Manufacturing
Industries (Table 5-6).
Sources: U.S. Department of Commerce, Bureau of the Census. 2007. 2006 Annual Survey of Manufactures.
Obtained through American Fact Finder Database < http://factfinder.census.gov/home/saff/main.html?_lang=en>.
U.S. Department of Commerce, Bureau of the Census. 2003b. 2001 Annual Survey of Manufactures. M01(AS)-2.
Washington, DC: Government Printing Office. Available at < http://www.census.gov/prod/2003pubs/m01as-
2.pdf. As obtained on March 4, 2008.
products grew at approximately the same rate, the growth of petroleum product exports was
driven largely by residual fuel oil and other petroleum products.
However, the United States remains a net importer of petroleum products. In 2006, the
United States imported nearly three times more petroleum products than it exported. These
imported petroleum products accounted for 17% of total petroleum products consumed that year
(1,310 millions of barrels per year/7,551 millions of barrels per year).
36
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Table 1-14. Imports of Major Petroleum Products (millions of barrels per year)
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Motor
Gasoline
97
123
113
114
139
156
166
182
189
182
220
173
Jet Fuel
35
40
33
45
47
59
54
39
40
47
69
68
Distillate
Fuel Oil
71
84
83
77
91
108
126
98
122
119
120
133
Residual
Fuel Oil
68
91
71
101
86
129
108
91
119
156
193
128
Liquefied
Petroleum
Gases
53
61
62
71
66
79
75
67
82
96
120
121
Other
Products
262
322
345
324
344
343
400
396
397
520
587
687
Total
586
721
707
731
774
874
928
872
949
1,119
1,310
1,310
Source: U.S. Department of Energy, Energy Information Administration (EIA). "Petroleum Supply Annuals 1996-
2007, Volume 1." Available at . As obtained on October 31, 2007.
Table 1-15. Exports of Major Petroleum Products (millions of barrels per year)
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Motor
Gasoline
38
38
50
46
40
53
48
45
46
45
49
52
Jet Fuel
8
17
13
9
11
12
10
3
7
15
19
15
Distillate
Fuel Oil
67
70
56
45
59
63
44
41
39
40
51
79
Residual
Fuel Oil
49
37
44
50
47
51
70
65
72
75
92
103
Liquefied
Petroleum
Gases
21
19
18
15
18
27
16
24
20
16
19
21
Other
Products
128
138
147
139
124
157
159
177
186
183
183
203
Total
312
319
327
305
300
362
347
356
370
374
414
472
Source: U.S. Department of Energy, Energy Information Administration (EIA). "Petroleum Supply Annuals 1996-
2007, Volume 1." Available at . As obtained on October 31, 2007.
1.5.4 Market Prices
The average nominal prices of major petroleum products sold to end users are provided
for selected years in Table 1-16.2 As these data illustrate, nominal prices rose substantially
between 2004 and 2006. In particular, the price of motor gasoline rose 48% over this 2-year
period.
Sales to end users are those made directly to the consumer of the product. This includes bulk consumers, such as
agriculture, industry, and utilities, as well as residential and commercial consumers.
37
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Table 1-16. Average Price of Major Petroleum Products Sold to End Users (cents per
gallon)
Product
Motor gasoline
No. 1 distillate fuel
No. 2 distillate fuel
Jet fuel
Residual fuel oil
1995
76.5
62
56
54
39.2
2000
110.6
98.8
93.4
89.9
60.2
2002
94.7
82.8
75.9
72.1
56.9
2004
143.5
126.2
123.5
120.7
73.9
2005
182.9
183.2
177.7
173.5
104.8
2006
212.8
213.7
209.1
199.8
121.8
Source: U.S. Department of Energy, Energy Information Administration (EIA). 2007b. "Refiner Petroleum Product
Prices by Sales Type." Available at . As
obtained on January 11, 2008.
Note: Prices do not include taxes.
The nominal prices domestic petroleum refiners receive for their products have also been
rising much faster than prices received by other U.S. manufacturers. This trend is demonstrated
in Table 1-17 by comparing the producer price index (PPI) for the petroleum refining industry
against the index for all manufacturing industries. Between 1995 and 2006, prices received by
petroleum refineries for their products rose by 223%, while prices received by all manufacturing
firms rose by 26%. The vast majority of this growth in prices has been experienced in the years
after 2002.
Table 1-17. Producer Price Index Industry Data: 1995 to 2006
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Petroleum
PPI
74.5
85.3
83.1
62.3
73.6
111.6
103.1
96.3
121.2
151.5
205.3
241.0
Refining (NAICS 32411)
Annual Percentage
Change in PPI
3%
14%
-3%
-25%
18%
52%
-8%
-7%
26%
25%
36%
17%
Total Manufacturing Industries
PPI
124.2
127.1
127.5
126.2
128.3
133.5
134.6
133.7
137.1
142.9
150.8
156.9
Annual Percentage
Change in PPI
3%
2%
0%
-1%
2%
4%
1%
-1%
3%
4%
6%
4%
Source: U.S. Bureau of Labor Statistics (BLS). 2007. "Producer Price Index Industry Data: Customizable Industry
Data Tables." Available at . As obtained on October 11, 2007.
1.5.5 Profitability of Petroleum Refineries
Estimates of the mean profit (before taxes) to net sales ratios for petroleum refiners are
reported in Table 1-18 for the 2006-2007 fiscal year. These ratios were calculated by Risk
38
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Table 1-18. Mean Ratios of Profit before Taxes as a Percentage of Net Sales for Petroleum
Refiners, Sorted by Value of Assets
Fiscal Year
4/1/2006-
3/31/2007
Total
Number of
Statements
44
Oto
500,000
500,000 to
2 Million
—
2 Million
to 10
Million
4.6
10 Million
to 50
Million
6.5
50 Million
to 100
Million
—
100 Million
to 250
Million
—
All
Firms
6.7
Source: Risk Management Association (RMA). 2008. Annual Statement Studies 2007-2008. Pennsylvania: RMA,
Inc.
Management Associates by dividing net income into revenues for 44 firms in the petroleum
refining industry. They are broken down based on the value of assets owned by the reporting
firms.
As these ratios demonstrate, firms that reported a greater value of assets also received a
greater return on sales. For example, firms with assets valued between $10 and $50 million
received a 6.5% average return on net sales, while firms with assets valued between $2 and $10
million only received a 4.6% average return. The average return on sales for the entire industry
was 6.7%.
Obtaining profitability information specifically for small petroleum refining companies
can be difficult as most of these firms are privately owned. However, five of the small, domestic
petroleum refining firms identified in Section 1.4.2.3 are publicly owned companies—the
Arabian American Development Co., CVR Energy Inc., Calumet Specialty Products Partners,
L.P., Holly Corporation, Western Refining, Inc. Profit ratios were calculated for these companies
using data obtained from their publicly available 2006 income statements. These ratios are
presented in Table 1-19.
1.5.6 Industry Trends
The Energy Information Administration's (EIA's) 2007 Annual Energy Outlook provides
forecasts of average petroleum prices, petroleum product consumption, and petroleum refining
capacity utilization to the year 2030. Trends in these variables are affected by many factors that
are difficult to predict, such as energy prices, U.S. economic growth, advances in technologies,
changes in weather patterns, and future public policy decisions. As a result, the EIA evaluated a
wide variety of cases based on different assumptions of how these factors will behave in the
future. This section focuses on the EIA's "reference case" forecasts, which assume that current
policies affecting the energy sector will remain unchanged throughout the projection period
(EIA, 2007c).
39
-------
According to the 2007 Annual Energy Outlook's reference forecast, world oil prices
(defined as the average price of low-sulfur, light crude oil) are expected to fall significantly over
Table 1-19. Net Profit Margins for Publicly Owned, Small Petroleum Refiners: 2006
Company
Arabian American Development Co.
Calumet Specialty Products Partners
CVR Energy Inc.
Holly Corporation
Western Refining, Inc.
Net Income
(Smillions)
7.9
93.9
191.6
266.6
204.8
Total Revenue
(Smillions)
98.5
1,641.0
3,037.6
4,023.2
4,199.5
Net Profit Margin
(%)
8.0%
5.7%
6.3%
6.6%
4.9%
Sources: Arabian American Development Co. April 6, 2007. 10K for year ended December 31, 2006. EDGAR
Database. Available at .
Calumet Specialty Products Partners. February 23, 2007. 10K for year ended December 31, 2006. EDGAR
Database. Available at .
CVR Energy Inc. 2006. Google Finance. Available at As
obtained on February 28, 2008.
Holly Corporation. March 1, 2007. 10K for year ended December 31, 2006. EDGAR Database. Available at
.
Western Refining, Inc. March 8, 2007. 10K for year ended December 31, 2006. EDGAR Database. Available at <
http://www.sec.gov/Archives/edgar/data/1339048/000095013407005096/h44360elOvk.htm>.
the next 10 years as the amount of oil supplied by non-OPEC and OPEC countries increases.
Since crude oil is the primary input in petroleum refining, a decline in its price would likewise
represent a decline in production costs of petroleum refiners. As a result, the prices of petroleum
products sold to end users are expected to decline over the same period (Table 1-20). These
lower prices will, in turn, encourage more petroleum products to be consumed (Table 1-21).
Between 2007 and 2015, the prices of major petroleum products are expected to fall
approximately 20% to 25%, while consumption of those products is expected to rise by 9%.
Operational capacity of U.S. petroleum refineries is also expected to grow for the foreseeable
future. The expansion of dozens of petroleum refineries has already been announced (Reuters,
2007). The Oil & Gas Journal's 2007 Worldwide Construction Update survey alone catalogued
nearly 40 refining construction projects being pursued in the United States.
40
-------
Table 1-20. Forecasted Average Price of Major Petroleum Products Sold to End Users in
2005 Currency (cents per gallon)
Product
Motor gasoline
Jet fuel
Distillate fuel
Residual fuel oil
LPGs
2007
257.4
175.4
253.8
123.5
257.4
2008
241.3
158.3
236.6
125.8
241.3
2009
227.3
152.0
224.1
120.6
227.3
2010
217.3
147.2
215.9
113.9
217.3
2011
209.2
140.0
205.0
107.7
209.2
2012
204.7
135.8
197.2
102.8
204.7
2013
201.1
135.5
194.7
96.6
201.1
2014
195.2
132.9
190.3
95.9
195.2
2015
194.9
133.5
191.0
98.0
194.9
Source: U.S. Department of Energy, Energy Information Administration (EIA). 2007c. "Annual Energy Outlook."
Available at. As obtained on January 21, 2007.
Table 1-21. Total Petroleum Products Supplied (millions of barrels per year)
Year
2007
2008
2009
2010
2011
2012
2013
2014
2015
Motor
Gasoline
3,388
3,407
3,446
3,479
3,520
3,563
3,610
3,663
3,716
Distillate
Jet Fuel Fuel Oil
622
646
675
713
728
739
749
758
766
,600
,613
,631
,654
,682
,710
,735
,755
,774
Residual
Fuel Oil
275
278
281
287
289
294
303
306
300
Liquefied
Petroleum
Gases
819
824
815
809
811
812
812
814
815
Other
Products
940
953
955
937
961
958
967
953
970
Total
7,643
7,721
7,804
7,879
7,990
8,076
8,177
8,249
8,341
Source: U.S. Department of Energy, Energy Information Administration (EIA). 2007c. "Annual Energy Outlook."
Available at. As obtained on January 21, 2007.
Table 1-22. Selected Refinery Construction Projects: 2008-2011
Projected Added
Company and Location
Cenex Harvest States, Laurel, MT
Frontier Oil Corp, El Dorado, KS
Marathon Petroleum Co. LLC, Garyville, LA
Motiva Enterprises LLC, Port Arthur, TX
Sinclair Oil Corp, Tulsa, OK
Source: Oil and Gas Journal. November 19, 2007.
Capacity
Project (barrels per day)
New delayed coker unit
New crude distillation
unit
New vacuum distillation
unit
New crude distillation
unit
New delayed coker unit
Refinery expansion
Refinery expansion
Worldwide Construction Update.
N/A
N/A
N/A
180,000
N/A
325,000
45,000
Expected
Completion
2008
2008
2008
2009
2009
2010
2011
41
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In particular, several U.S. refineries are planning projects to expand their ability to handle
cheaper and lower-quality varieties of crude oil (known as "heavy crudes"). For example,
ConocoPhillips will be expanding its capacity to handle heavy crude oils at its refinery in
Billings, Montana, to 46,000 barrels per day (Reuters, 2007).
In addition to these expansions, two entirely new refineries could potentially be
constructed within the next 5 years. The first is the Arizona Clean Fuels Refinery in Phoenix.
This facility will cost $3 billion to construct and will be capable of producing 6 million gallons
of gasoline, diesel, and jet fuel per day (Arizona Clean Fuels, 2007). Second, a proposal to
construct the MHA Nation Clean Fuels Refinery in North Dakota is being reviewed. If
constructed, this facility will be capable of producing 15,000 barrels of fuel per day (EPA, 2006).
Overall, the EIA forecasts that U.S. operational capacity will increase by a total of 2%
between 2007 and 2015 (Table 1-23). However, since consumption of petroleum products is
projected to grow much more quickly, the rate of capacity utilization is projected to average 90%
during this period.
Table 1-23. Full Production Capacity Utilization Rates for Petroleum Refineries
Year
2007
2008
2009
2010
2011
2012
2013
2014
2015
Petroleum Refineries
Capacity Utilization Rates
(NAICS 324110)
88.8%
88.1%
88.6%
89.1%
89.9%
90.9%
91.4%
91.6%
92.2%
Gross Input to Atmospheric
Crude Oil Distillation Units
(1,000s of barrels per day)
15,630
15,587
15,712
15,879
16,055
16,267
16,378
16,433
16,628
Operational Capacity
(1,000s of barrels per day)
17,597
17,684
17,737
17,822
17,852
17,897
17,914
17,940
18,031
Source: U.S. Department of Energy, Energy Information Administration (EIA). 2007c. "Annual Energy Outlook."
Available at. As obtained on January 21, 2007.
1.6 References
• American Petroleum Institute (API). 2006. "FYI on Refineries: Operating at Record
Levels." Available at . As obtained on October 31, 2006.
• Arizona Clean Fuels. 2007. Company Home Page. Available at
. As obtained on February 5, 2007.
42
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Arabian American Development Co. April 6, 2007. 10K for year ended December 31,
2006. EDGAR Database. Available at .
Calumet Specialty Products Partners. February 23, 2007. 10K for year ended
December 31, 2006. EDGAR Database. Available at
.
CVR Energy Inc. 2006. Google Finance. Available at
As obtained on February 28, 2008.
Dun & Bradstreet Small Business Solutions. Small Business Database. Available at
.
Dun & Bradstreet. 2007. 2007 D&B Million Dollar Directory. Pennsylvania: Dun &
Bradstreet Inc.
Federal Trade Commission (FTC). 2004. "The Petroleum Industry: Mergers,
Structural Change, and Antitrust Enforcement." Available at
. As obtained on February 6, 2007.
Gale Research Inc. 2007. Ward's Business Directory of U S Private and Public
Companies. Detroit: Gale Research.
General Accounting Office (FTC). 2007. "Energy Markets: Factors That Influence
Gasoline Prices." Available at . As
obtained on February 6, 2007.
Holly Corporation. March 1, 2007. 10K for year ended December 31, 2006. EDGAR
Database. Available at
.
Hoovers. 2007. Free Content, Company Information. Available at
. As obtained on April 11, 2007.
Langinier, Corrine. 2004. "Are Patents Strategic Barriers to Entry?" Journal of
Economics and Business 56:349-361.
MathTech, Inc. 1997. "Industry Profile for the Petroleum Refinery NESHAP."
Available at . As obtained on October
31,2006.
Nicholson, Walter. 2005. Microeconomic Theory: Basic Principles and Extensions.
Mason, OH: South-Western Publishing.
43
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Oil and Gas Journal. 2007. Worldwide Construction Update. November 19, 2007.
Risk Management Association (RMA). 2008. Annual Statement Studies 2007-2008.
Pennsylvania: RMA, Inc.
Reuters. July 19, 2007. "U.S. Refinery Expansion Plans." Available at
. As obtained on
February 5, 2007.
Small Business Administration. 2006. Table of Small Business Size Standards.
Available at
As
obtained on November 30, 2006.
U.S. Bureau of Labor Statistics (BLS). 2007. "Producer Price Index Industry Data:
Customizable Industry Data Tables." Available at . As
obtained on October 11, 2007.
U.S. Department of Commerce, Bureau of the Census. 1997. 1995 Annual Survey of
Manufacture?,. M95(AS)-1. Washington, DC: Government Printing Office. Available at
. As obtained on October 23,
2006.
U.S. Department of Commerce, Bureau of the Census. 1998. 1996 Annual Survey of
Manufacture?,. M96(AS)-1 (RV). Washington, DC: Government Printing Office.
Available at . As obtained on
October 23, 2006.
U.S. Department of Commerce, Bureau of the Census. 2000. "Population Density by
County: Census 2000 Summary File 1 (SF 1) 100-Percent Data". Available through
American Fact Finder < http://factfmder.census.gov/home/saff/main.html?_lang=en>. As
obtained on February 21, 2008.
U.S. Department of Commerce, Bureau of the Census. 2001. 1999 Annual Survey of
Manufacture?,. M99(AS)-1 (RV). Washington, DC: Government Printing Office.
Available at . As obtained on
October 23, 2006.
U.S. Department of Commerce, Bureau of the Census. 2003a. 2001 Annual Survey of
Manufacture?,. M01(AS)-1. Washington, DC: Government Printing Office. Available at
. As obtained on October 23, 2006.
U.S. Department of Commerce, Bureau of the Census. 2003b. 2001 Annual Survey of
Manufactures. M01(AS)-2. Washington, DC: Government Printing Office. Available at <
http://www.census.gov/prod/2003pubs/m01as-2.pdf As obtained on March 4, 2008.
44
-------
U.S. Department of Commerce, Bureau of the Census. 2004. 2002 Economic Census,
Industry Series—Petroleum Refineries. Washington, DC: Government Printing Office.
Available at . As obtained on
October 23, 2006.
U.S. Department of Commerce, Bureau of the Census. 2006. 2005 Annual Survey of
Manufacture?,. M05(AS)-1. Washington, DC: Government Printing Office. Available at
. As obtained on October 23,
2006.
U.S. Department of Commerce, Bureau of the Census. 2007. 2006 Annual Survey of
Manufactures. Obtained through American Fact Finder Database <
http://factfinder. census. gov/home/saff/main.html?_lang=en>.
U.S. Department of Energy, Energy Information Administration (EIA). "Petroleum
Supply Annuals 1996-2007, Volume 1." Available at
. As obtained on October 31, 2007.
U.S. Department of Energy, Energy Information Administration (EIA). 2006a. "A
Primer on Gasoline Prices." Available at . As obtained on October 23, 2006.
U.S. Department of Energy, Energy Information Administration (EIA). 2006b.
"Refinery Capacity Report 2006." Available at
. As obtained on October 23,
2006.
U.S. Department of Energy, Energy Information Administration (EIA). 2006c.
"Petroleum Supply Annual 2005, Volume 1." Available at
. As obtained on October 31, 2007.
U.S. Department of Energy, Energy Information Administration (EIA). 2007a.
"Refinery Utilization and Capacity." Available at . As obtained on January 7, 2008.
U.S. Department of Energy, Energy Information Administration (EIA). 2007b.
"Refiner Petroleum Product Prices by Sales Type." Available at . As obtained on January 11, 2008.
45
-------
U.S. Department of Energy, Energy Information Administration (EIA). 2007c.
"Annual Energy Outlook." Available at
. As obtained on
January 21,2007.
U.S. Department of Justice and the Federal Trade Commission. 1992. Horizontal
Merger Guidelines. Available at . As
obtained on October 28, 2006.
U.S. Department of Labor, Occupational Safety and Health Administration (OSHA).
2003. OSHA Technical Manual, Section IV: Chapter 2, Petroleum Refining Processes.
TED 01-00-015. Washington, DC: U.S. DOL. Available at
. As obtained on October 23, 2006.
U.S. Environmental Protection Agency. 1995. "EPA Office of Compliance Sector
Notebook Project: Profile of the Petroleum Refining Industry." EPA/310-R-95-013.
Washington, DC: U.S. EPA. Available at . As obtained on
February 6, 2007.
Western Refining, Inc. March 8, 2007. 10K for year ended December 31, 2006.
EDGAR Database. Available at .
46
-------
Appendix A. Parent Company Information for Petroleum Refineries"
Facility Name
AGE Refining &
Manufacturing
Alon USA Energy Inc.
American Refining
Group
Big West of C A
Big West Oil Co.
BP
BP
BP
BP
BP
BP
Calcasieu Refining Co.
Calumet Specialty
Products
Calumet Specialty
Products
Calumet Specialty
Products
Cenex Harvest States
Chevron USA Inc.
Chevron USA Inc.
Chevron USA Inc.
Chevron USA Inc.
City
San Antonio
Big Spring
Bradford
Bakersfield
Salt Lake City
Whiting
Texas City
Prudhoe Bay
Carson
Ferndale
Toledo
Lake Charles
Shreveport
Cotton Valley
Princeton
Laurel
Perth Amboy
Salt Lake City
Portland
Pascagoula
State
TX
TX
PA
CA
UT
IN
TX
AK
CA
WA
OH
LA
LA
LA
LA
MT
NJ
UT
OR
MS
Capacity
(bbl/cd)
12,200
67,000
10,000
66,000
29,400
410,000
437,000
12,500
260,000
225,000
131,000
30,000
42,000
13,020
8,300
55,000
80,000
45,000
330,000
Foreign
or
Domestic
D
F
D
D
D
F
F
F
F
F
F
D
D
D
D
D
D
D
D
D
Sales
(Smillion)
287
350
638
1,641
1,641
1,641
11,900
Employment
52
310
51
350
350
350
6,370
Company
Type
(Private or
Public or
Subsidiary)
Private
Subsidiary
Private
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Private
Public
Public
Public
Public
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Owning
Company
Alon Israel Oil
Company LTD
Flying J Inc
Flying J Inc
BPPLC
BPPLC
BPPLC
BPPLC
BPPLC
BPPLC
Chevron
Corporation
Chevron
Corporation
Chevron
Corporation
Chevron
Corporation
Owning
Company
Type
Private
Private
Private
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Sales
(Smillion)
NA
11,350
11,350
274,316
274,316
274,316
274,316
274,316
274,316
210,118
210,118
210,118
210,118
Employment (#)
NA
16,300
16,300
97,000
97,000
97,000
97,000
97,000
97,000
62,500
62,500
62,500
62,500
Source
D&B
D&B
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
D&B
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Year of
Data
Unknown
Unknown
2007
2007
2007
2007
2007
2007
2007
2007
Unknown
2006
2006
2006
2006
2006
2006
2006
(continued)
47
-------
Appendix A. Parent Company Information for Petroleum Refineries (continued)
Facility Name
Chevron USA Inc.
Chevron USA Inc.
Chevron USA Inc.
Citgo
Citgo Asphalt
Refining Co.
Citgo Petroleum
Citgo Petroleum
Corp.
Coffeyville
Resources LLC
ConocoPhillips
ConocoPhillips
ConocoPhillips
ConocoPhillips
ConocoPhillips
ConocoPhillips
ConocoPhillips
ConocoPhillips
ConocoPhillips
City
El Segundo
Richmond
Honolulu (Barber's
Point)
Corpus Christi
Paulsboro
Savannah
Lake Charles
Coffeyville
Westlake
Ponca City
Billings
Borger
Sweeny
Ferndale
Linden
Wood River
LA-
Carson/Wilmington
State
CA
CA
HI
TX
NJ
GA
LA
KS
LA
OK
MT
TX
TX
WA
NJ
IL
CA
Capacity
(bbl/cd)
260,000
242,901
54,000
156,000
32,000
28,000
429,500
112,000
239,400
194,000
58,000
146,000
247,000
96,000
238,000
306,000
139,000
Foreign
or
Domestic
D
D
D
F
F
F
F
D
D
D
D
D
D
D
D
D
D
Sales
(Smillion)
3,038
188,523
188,523
188,523
188,523
188,523
188,523
188,523
188,523
188,523
Employment
577
38,400
38,400
38,400
38,400
38,400
38,400
38,400
38,400
38,400
Company
Type
(Private or
Public or
Subsidiary)
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Owning
Company
Chevron
Corporation
Chevron
Corporation
Chevron
Corporation
Petroleos de
Venezuela S.A.
(PDVSA)
Petroleos de
Venezuela S.A.
(PDVSA)
Petroleos de
Venezuela S.A.
(PDVSA)
Petroleos de
Venezuela S.A.
(PDVSA)
CVR Energy
Inc.
Owning
Company
Type
Public
Public
Public
Government
Owned
Government
Owned
Government
Owned
Government
Owned
Sales
(Smillion)
210,118
210,118
210,118
NA
NA
NA
NA
Employment
(#)
62,500
62,500
62,500
49,180
49,180
49,180
49,180
Source
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Year of
Data
2006
2006
2006
2004
2004
2004
2004
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
(continued)
48
-------
Appendix A. Parent Company Information for Petroleum Refineries (continued)
Facility Name
ConocoPhillips
ConocoPhillips
ConocoPhillips
ConocoPhillips
ConocoPhillips
Countrymark
Cooperative, Inc.
Cross Oil & Refining
Co. Inc.
Delek Refining Ltd
Edgington Oil Co.
Ergon Refining Inc.
Ergon-West Virginia
Inc.
ExxonMobil Corp.
ExxonMobil Corp.
ExxonMobil Corp.
ExxonMobil Corp.
ExxonMobil Corp.
ExxonMobil Corp.
ExxonMobil Oil Corp
Flint Hills Resources
Flint Hills Resources
City
SF - Rodeo
Arroyo Grande
(Santa Maria)
Belle Chasse
Trainer (Marcus
Hook)
Kuparuk
Mt. Vernon
Smackover
Tyler
Long Beach
Vicksburg
Newell (Congo)
Baton Rouge
Billings
Joliet
Beaumont
Torrance
Chalmette
Baytown
Corpus Christi
North Pole
State
CA
CA
LA
PA
AK
IN
AR
TX
CA
MS
WV
LA
MT
IL
TX
CA
LA
TX
TX
AK
Capacity
(bbl/cd)
76,000
44,200
247,000
185,000
14,000
23,000
7,200
58,000
26,000
23,000
20,000
501,000
60,000
238,500
348,500
149,500
188,160
562,500
288,126
210,000
Foreign
or
Domestic
D
D
D
D
D
D
D
F
F
D
D
D
D
D
D
D
D
D
D
D
Sales
(Smillion)
188,523
188,523
188,523
188,523
188,523
87
49
377,635
377,635
377,635
377,635
377,635
377,635
Employment
38,400
38,400
38,400
38,400
38,400
300
110
82,100
82,100
82,100
82,100
82,100
82,100
Company
Type
(Private or
Public or
Subsidiary)
Public
Public
Public
Public
Public
Private
Private
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Public
Public
Public
Public
Public
Public
Subsidiary
Subsidiary
Subsidiary
Owning
Company
Delek Group
LTD
Alon Israel Oil
Company LTD
Ergon, Inc.
Ergon, Inc.
ExxonMobil
Corp.
Koch Industries
Inc
Koch Industries
Inc
Owning
Company
Type
Public
Private
Private
Private
Public
Private
Private
Sales
(Smillion)
6,237
NA
1,300
1,300
377,635
51,500
51,500
Employment
(#)
2,803
NA
2,300
2,300
82,100
85,000
85,000
Source
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Year of
Data
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
(continued)
49
-------
Appendix A. Parent Company Information for Petroleum Refineries (continued)
Facility Name
Flint Hills Resources
Foreland Refining Co.
Frontier Oil & Refining
Co.
Frontier Oil Corp
Giant Refining Co.
Giant Refining Co.
Giant Refining Co.
Goodway Refining LLC
Greka Integrated Inc
Gulf Atlantic
Operations LLC
Hess Corporation
Holly Corp.
Hunt Refining Co.
Hunt Southland
Refining
Hunt Southland
Refining
Kern Oil & Refining
Co.
Lion Oil Co.
Little America Refining
Co.
Lunday-Thagard Co.
City
Rosemount
Tonopah/Eagle
Springs
Cheyenne
El Dorado
Yorktown
Bloomfield
Gallup
Atmore
Santa Maria
Mobile Bay
Port Reading
Woods Cross
Tuscaloosa
Lumberton
Sandersville
Bakersfield
El Dorado
Evansville
(Casper)
South Gate
State
MN
NV
WY
KS
VA
NM
NM
AL
CA
AL
NJ
UT
AL
MS
MS
CA
AR
WY
CA
Capacity
(bbl/cd)
279,300
2,000
47,000
106,000
58,600
16,800
20,800
4,100
9,500
16,700
24,700
34,500
11,000
26,000
70,000
24,500
8,500
Foreign
or
Domestic
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
Sales
(Smillion)
56
4,000
3
22
9
23,200
4,023
4,871
NA
247
Employment
100
727
18
145
32
11,610
859
1,100
NA
425
Company
Type
(Private or
Public or
Subsidiary)
Subsidiary
Private
Subsidiary
Private
Subsidiary
Subsidiary
Subsidiary
Private
Private
Private
Public
Public
Private
Subsidiary
Subsidiary
Private
Private
Subsidiary
Subsidiary
Owning
Company
Koch Industries
Inc
Frontier Oil Corp
Western Refining,
Inc.
Western Refining,
Inc.
Western Refining,
Inc.
Hunt Refining
Co.
Hunt Refining
Co.
Sinclair
Companies
World Oil Corp
Owning
Company
Type
Private
Private
Private
Private
Private
Private
Private
Private
Private
Sales
(Smillion)
51,500
4,000
4,200
4,200
4,200
4,871
4,871
5,500
277
Employment
(#)
85,000
727
416
416
416
1,100
1,100
7,000
475
Source
D&B
Hoovers
Hoovers
Hoovers
D&B
D&B
Hoovers
Ward's
Ward's
Ward's
Hoovers
Year of
Data
Unknown
2006
2006
2006
Unknown
Unknown
2006
2007
2007
2007
2007
(continued)
50
-------
Appendix A. Parent Company Information for Petroleum Refineries (continued)
Facility Name
Lyondell-Citgo
Refining Co.
Marathon Petroleum
Co. LLC
Marathon Petroleum
Co. LLC
Marathon Petroleum
Co. LLC
Marathon Petroleum
Co. LLC
Marathon Petroleum
Co. LLC
Marathon Petroleum
Co. LLC
Marathon Petroleum
Co. LLC
Montana Refining Co.
Motiva Enterprises
Motiva Enterprises
Motiva Enterprises
Murphy Oil USA Inc.
Murphy Oil USA Inc.
National Cooperative
Refinery Association
Navajo Refining Co.
Paramount Petroleum
Corp.
Pasadena Refining
Systems Inc.
City
Houston
Robinson
Catlettsburg
Detroit
Canton
St. Paul Park
Texas City
Garyville
Great Falls
Norco
Port Arthur
Convent
Superior
Meraux
McPherson
Artesia
Paramount
Pasadena
State
TX
IL
KY
MI
OH
MN
TX
LA
MT
LA
TX
LA
WI
LA
KS
NM
CA
TX
Capacity
(bbl/cd)
270,200
192,000
222,000
100,000
73,000
70,000
72,000
245,000
8,200
226,500
285,000
235,000
34,300
120,000
81,200
75,000
50,000
100,000
Foreign
or
Domestic
D
D
D
D
D
D
D
D
F
D
D
D
D
D
D
D
F
F
Sales
(Smillion)
32,100
32,100
32,100
Employment
2,700
2,700
2,700
Company
Type
(Private or
Public or
Subsidiary)
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Private
Private
Private
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Owning
Company
Lyondell
Chemical Co
Marathon Oil
Corp
Marathon Oil
Corp
Marathon Oil
Corp
Marathon Oil
Corp
Marathon Oil
Corp
Marathon Oil
Corp
Marathon Oil
Corp
Connacher Oil
and Gas Limited
Murphy Oil Corp
Murphy Oil Corp
Cenex Harvest
States
Holly Corp.
Alon Israel Oil
Company LTD
Petroleo
Brasileiro, S.A.
Owning
Company
Type
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Private
Government
Owned
Sales
(Smillion)
18,600
65,449
65,449
65,449
65,449
65,449
65,449
65,449
NA
14,307
14,307
11,900
4,023
NA
72,347
Employment
(#)
10,880
28,195
28,195
28,195
28,195
28,195
28,195
28,195
NA
7,296
7,296
6,370
859
NA
62,266
Source
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Year
of
Data
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
(continued)
51
-------
Appendix A. Parent Company Information for Petroleum Refineries (continued)
Facility Name
PDV Midwest Refining
Pelican Refining Co.
LLC
Petro Star Inc.
Petro Star Inc.
Placid Refining Inc.
San Joaquin Refining
Co., Inc.
Shell Chemical LP
Shell Chemical LP
Shell Oil Products US
Shell Oil Products US
Shell Oil Products US
Shell Oil Products US -
Deer Park Refining
Limited Partnership
Silver Eagle Refining
Inc.
Silver Eagle Refining
Inc.
Sinclair Oil Corp.
City
Lemont
Lake Charles
North Pole
Valdez
Port Allen
Bakersfield
St. Rose
Saraland
Anacortes
Martinez
Wilmington
Deer Park
Evanston
Woods Cross
Tulsa
State
IL
LA
AK
AK
LA
CA
LA
AL
WA
CA
CA
TX
WY
UT
OK
Capacity
(bbl/cd)
167,000
17,000
48,000
56,000
15,000
55,000
80,000
145,000
155,600
98,500
333,700
3,000
10,250
70,300
Foreign
or
Domestic
F
D
D
D
D
D
F
F
F
F
F
F
D
D
D
Sales
(Smillion)
29
1,400
288
NA
NA
Employment
62
200
20
NA
NA
Company
Type
(Private or
Public or
Subsidiary)
Subsidiary
Private
Subsidiary
Subsidiary
Private
Private
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Private
Private
Subsidiary
Owning
Company
Petroleos de
Venezuela S.A.
(PDVSA)
Arctic Slope
Regional Corp
Arctic Slope
Regional Corp
Royal Dutch
Shell, PLC
Royal Dutch
Shell, PLC
Royal Dutch
Shell, PLC
Royal Dutch
Shell, PLC
Royal Dutch
Shell, PLC
Royal Dutch
Shell, PLC
Sinclair
Companies
Owning
Company
Type
Government
Owned
Private
Private
Public
Public
Public
Public
Public
Public
Private
Sales
(Smillion)
NA
1,500
1,500
312,323
312,323
312,323
312,323
312,323
312,323
5,500
Employment
(#)
NA
5,743
5,743
108,000
108,000
108,000
108,000
108,000
108,000
7,000
Source
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Year of
Data
2006
2006
2006
2006
2006
2006
(continued)
52
-------
Appendix A. Parent Company Information for Petroleum Refineries (continued)
Facility Name
Sinclair Oil Corp.
Somerset Refinery Inc.
South Hampton
Resources Inc.
Suncor Energy
Suncor Energy
Sunoco, Inc.
Sunoco, Inc.
Sunoco, Inc.
Sunoco, Inc.
Sunoco, Inc.
Ten By Inc.
Tesoro
Tesoro
Tesoro
Tesoro
Tesoro
Tesoro
Total SA
Trigeant Ltd.
United Refining Co.
US Oil & Refining Co.
Valero Energy
City
Sinclair
Somerset
Silsbee
Commerce City
Denver
Westville
Marcus Hook
Toledo
Tulsa
Phil. (Girard Pt &
Pt Breeze)
Oxnard
Mandan
Salt Lake City
Anacortes
Golden Eagle
Kapolei
Kenai
Port Arthur
Corpus Christi
Warren
Tacoma
Corpus Christi
State
WY
KY
TX
CO
CO
NJ
PA
OH
OK
PA
CA
ND
UT
WA
CA
HI
AK
TX
TX
PA
WA
TX
Capacity
(bbl/cd)
66,000
5,500
62,000
32,000
145,000
175,000
160,000
85,000
335,000
2,800
58,000
58,000
120,000
166,000
93,500
72,000
232,000
65,000
37,850
142,000
Foreign
or
Domestic
D
D
D
F
F
D
D
D
D
D
D
D
D
D
D
D
F
D
D
D
Sales
(Smillion)
38,715
38,715
38,715
38,715
38,715
NA
175,189
5
NA
91,833
Employment
14,000
14,000
14,000
14,000
14,000
NA
95,070
50
NA
21,836
Company
Type
(Private or
Public or
Subsidiary)
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Public
Public
Public
Public
Public
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Public
Private
Subsidiary
Public
Owning
Company
Sinclair
Companies
Somerset Oil Inc
Arabian
American
Development Co
Suncor Energy
Inc
Suncor Energy
Inc
Tesoro Corp
Tesoro Corp
Tesoro Corp
Tesoro Corp
Tesoro Corp
Tesoro Corp
Red Apple Group
Inc
Owning
Company
Type
Private
Private
Public
Public
Public
Public
Public
Public
Public
Public
Public
Private
Sales
(Smillion)
5,500
55
80
13,583
13,583
18,104
18,104
18,104
18,104
18,104
18,104
4,200
Employment (#)
7,000
150
118
5,152
5,152
3,950
3,950
3,950
3,950
3,950
3,950
7,000
Source
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
D&B
Hoovers
Year of
Data
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2005
Unknown
2006
(continued)
53
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Appendix A. Parent Company Information for Petroleum Refineries (continued)
Facility Name
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Valero Energy
Western Refining, Inc.
Wynnewood Refining
Co.
City
Houston
Texas City
Krotz Springs
Benicia
Wilmington
Norco
Delaware City
Lima
Memphis
Three Rivers
Sunray
Ardmore
Wilmington
Paulsboro
Port Arthur
El Paso
Wynnewood
State
TX
TX
LA
CA
CA
LA
DE
OH
TN
TX
TX
OK
CA
NJ
TX
TX
OK
Capacity
(bbl/cd)
83,000
213,750
80,000
144,000
6,200
185,003
181,500
146,900
180,000
90,000
158,327
83,640
80,887
160,000
260,000
116,000
54,000
Foreign
or
Domestic
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
Sales
(Smillion)
91,833
91,833
91,833
91,833
91,833
91,833
91,833
91,833
91,833
91,833
91,833
91,833
91,833
91,833
91,833
4,200
97
Employment
21,836
21,836
21,836
21,836
21,836
21,836
21,836
21,836
21,836
21,836
21,836
21,836
21,836
21,836
21,836
416
200
Company
Type
(Private or
Public or
Subsidiary)
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Subsidiary
Owning
Company
Gary- Williams
Co
Owning
Company
Type
Private
Sales
(Smillion)
Employment (#)
Source
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Hoovers
Year of
Data
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
Note: All data were collected from the 2007 D&B Million Dollar Direction unless noted other wise. Data collected from the 2006 D&B Small Business Database
are indicated using "D&B" in the source column. Data collected from Ward's Business Directory are identified using "Ward's" in the source column.
a These data are shown with the permission of D&B.
Sources: Dun & Bradstreet. 2007. 2007 D&B Million Dollar Directory. Pennsylvania: Dun & Bradstreet Inc.
Dun & Bradstreet Small Business Solutions. Small Business Database. Available at .
Gale Research Inc. 2007. Ward's Business Directory of U S Private and Public Companies. Detroit: Gale Research.
Hoovers. 2007. Free Content, Company Information. Available at . As obtained on April 11, 2007.
54
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2.0 Requirements for the Final Rule
2.1 Introduction
The current National Emissions Standard for Hazardous Air Pollutant (NESHAP)
from Petroleum Refineries (40 CFR Part 63 Subpart CC) applies to miscellaneous
process vents, storage vessels, wastewater streams, equipment leaks, gasoline loading
racks, and marine vessel loading operations, and is commonly referred to as Refinery
MACT 1. Based on this review, the final amendments add requirements for monitoring
for leaks in heat exchange systems to reduce HAP emissions from these sources.
2.2 Heat Exchange System Monitoring Requirements
The final amendments add provisions for the control of HAP emissions from heat
exchange systems, which includes closed-loop recirculation systems with cooling towers
and once-through cooling water systems. Under these requirements, owners and
operators of heat exchange systems that are in organic HAP service at new and existing
sources are required to conduct monthly sampling and analyses using the Texas
Commission on Environmental Quality's (TCEQ) Modified El Paso method, Revision
Number One, dated January 2003.3 For existing sources, a leak is defined as 6.2 parts per
million by volume (ppmv) total strippable VOC in the stripping gas collected via the
Modified El Paso method. For new sources, a leak is defined as 3.1 ppmv total strippable
VOC collected via the Modified El Paso method. The amendments require the repair of
leaks in heat exchangers in organic HAP service within 45 days of the sampling event in
which the leak is detected, unless a delay in repair is allowed. Delay in repair of the leak
is allowed until the next shutdown if the repair of the leak requires the process unit served
by the leaking heat exchanger to be shut down and the total strippable VOC concentration
is less than 62 ppmv. Delay in repair of the leak is also allowed for up to 120 days if the
total strippable VOC concentration is less than 62 ppmv and if critical parts or personnel
are not available. During the delay, the owner or operator is required to continue
monthly monitoring and to repair the heat exchanger within 30 days if sampling results
3 "Air Stripping Method (Modified El Paso Method) for Determination of Volatile Organic Compound
Emissions from Water Sources," Revision Number One, dated January 2003, Sampling Procedures
Manual, Appendix P: Cooling Tower Monitoring, prepared by Texas Commission on Environmental
Quality, January 31, 2003 (incorporatedby reference—see §63.14).
55
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show that the leak exceeds 62 ppmv total strippable VOC.
All new or existing refineries with a heat exchange system "in organic HAP
service" are required to maintain records of all heat exchangers and which of those heat
exchangers are in organic HAP service, the cooling towers and once-through systems
associated with heat exchangers in organic HAP service, monthly monitoring results, and
information for any delays in repair of a leak.
The final requirements for heat exchange systems will reduce HAP emissions
from cooling towers by 630 ton/yr, and will also reduce VOC emissions by 4,100 ton/yr.
Reducing VOC emissions provides the added benefit of reducing ambient concentrations
of ozone and may reduce fine particulate matter. The annualized nationwide cost impacts
of these final standards for heat exchange systems are estimated to be $3.0 million.
2.4 Other Amendments and Clarifications
The final amendments also clarify certain aspects of the existing NESHAP. For
example, 40 CFR 63.650(a) of subpart CC is amended to replace "gasoline loading
racks" with "Group 1 gasoline loading racks" to clarify the applicability of the
requirements, and cross-references to subparts R and Y of 40 CFR part 63 in the rule text
and in Tables 4 and 5 of subpart CC are amended because subparts R and Y were
amended and the revised cross-references clarify the requirements of subpart CC.
The final amendments include revisions to Table 6 to 40 CFR part 63, subpart CC
(General Provisions Applicability to Subpart CC) to bring the table up to date with
requirements of the General Provisions that have been amended since this table was
created, to correct cross references, and to incorporate additional sections of the General
Provisions that are necessary to implement other subparts that are cross referenced by this
rule.
These amendments effectively clarify the requirements of the existing NESHAP
and are not expected to result in additional costs to the refinery.
2.5 Cost Summary
The total capital investment cost of the final amendments is estimated at $16
million. The controls required by the final amendments are expected to yield a net
savings of $3.0 million (2007 dollars) in the total annualized cost, which includes $2.2
56
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million credit for recovery of lost product and the annualized cost of capital. The final
amendments will achieve a nationwide HAP emission reduction of about 630 ton/yr with
a concurrent reduction in VOC emissions of about 4,700 ton/yr. Table 2-1 summarizes
the cost and emission reduction impacts of the final standards and amendments.
Table 2-1. Nationwide Impacts to Heat Exchange Systems
Affected source
Heat Exchangers
Total capital
investment
($ million)
16
Total
annualized cost
without
recovery
($ million)
5.2
Product
recovery credit
($ million)
(2.2)
Total
annualized
costs
($ million/ yr)
3.0
HAP
emission
reductions
(ton/yr)
630
Cost-
effectiveness
($/ton HAP)
4,700
3.0 Details on Costs and Emission Reductions for Regulatory Options Considered
in the Final Rule
3.1 Heat Exchange System Impacts
Nationwide impacts were developed based on the nationwide number of heat
exchange systems and the proportion of heat exchange systems represented by each
model plant. Detailed information on the number of heat exchange systems and the
proportion represented by model plant can be found in the memorandum containing the
impacts of heat exchange system control options that is in the rulemaking docket.4 Based
on facility-specific crude capacities (EIA, 2006), we estimated that there would be 540
heat exchange systems that receive cooling water from at least one heat exchanger in
HAP service, that approximately 10 percent are already conducting heat exchange system
monitoring sufficient to comply with the rule, and that 486 heat exchange systems would
need to implement the heat exchange system monitoring requirements. The model plant
baseline emissions were multiplied by the number of heat exchange systems represented
by each model plant to develop the nationwide baseline emissions. Table 3-1
summarizes the nationwide baseline emission estimate.
U.S. Environmental Protection Agency. "Cooling Towers: Control Alternatives and Impact Estimates."
Memorandum from Bob Lucas, U.S. EPA/OAQPS to Docket No. EPA-HQ-OAR-2003-0146. October,
2008.
57
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Table 3-1. Nationwide Baseline Emissions for Refinery Heat Exchange Systems
Model Plant Flow rate, gpm
Model Plant 1: 5,000
Model Plant 2: 15,500
Model Plant 3: 42,000
Model Plant 4: 105,000
Totals*
Percent of
total, %
38.9
28.9
28.9
3.4
100%
Nationwide No. of
heat exchange
systems in the leak
size range
210
160
160
18
540
No. that would
need to
implement
requirements
190
140
140
16
486
Baseline
Emissions, TO
HAP, ton/yr
46
100
280
82
520
* Totals may not match reported value column totals due to rounding.
Nationwide emissions associated with monitoring of heat exchange system leaks (i.e.,
controlled basis following implementation of monitoring) were likewise estimated based
on assumptions regarding the length of time of the leak and the number of heat exchange
system leaks that are repaired as soon as possible (50 percent) and the number that delay
repair (50 percent). The nationwide emissions reductions were estimated as the
difference between the baseline and controlled emissions levels.
Nationwide cost impacts for conducting heat exchange system monitoring for the
three alternatives evaluated were estimated based on the control alternative unit costs and
the number of heat exchange systems nationwide that must implement heat exchange
system monitoring requirements to comply with the rule.
Table 3-2 provides a summary of the nationwide impacts. The nationwide emissions
reductions and costs presented in Table 3-2 are expected to span the ranges of cost-
effectiveness for the different control alternatives.
Total annual costs and nationwide impacts were also considered using VOC emission
reduction credits. Heat exchange system monitoring reduces loss of products from heat
exchangers and cooling towers. Therefore, the product not lost as a result can be sold,
and the monitoring costs are offset, to some extent, by the increased product sales. The
VOC credit was calculated assuming the value of VOC to be $1.75/gallon, based on
58
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average crude and gasoline spot prices in 20075. Assuming an average refinery process
stream specific gravity of 0.75, the VOC credit is $560 per ton VOC reduced. Table 3-3
provides a summary of the nationwide impacts considering VOC emission reduction
credits.
Table 3-2. Summary of Nationwide Impacts of Refinery Heat Exchange System
Regulatory Alternatives (without VOC emission reduction credits)
Alternative
MACT Floor
Alternative 1
Alternative 2
Total capital
investment,
million S/yr3
$11
$11
$55
Total
Annualized
Costs,
million S/yr
$4.6
$4.9
$12
Emission
Reduction,
TO HAP tpy
430
450
460
Cost
effective-
ness, S/ton
TO HAP
$10,700
$10,900
$25,400
Incremental cost
effectiveness,
S/ton
NA
$14,600
$1,030,000
Table 3-3. Summary of Nationwide Impacts of Refinery Heat Exchange System
Regulatory Alternatives, with VOC Emission Reduction Credits
Alternative
MACT Floor
Alternative 1
Alternative 2
Total capital
investment,
million S/yr3
$11
$11
$55
Total
Annualized
Costs,
with VOC
credits,
million S/yr
$2.3
$2.5
$9.1
Emission
Reduction,
TO HAP tpy
430
450
460
Cost
effective-
ness,
with VOC
credits S/ton
TO HAP
$5,300
$5,500
$20,000
Incremental cost
effectiveness,
with VOC
credits, S/ton
NA
$8,750
$1,020,000
4.0 Economic and Small Business Impact Analysis - Background Information
The costs presented in this section are calculated based on the control cost
methodology presented in the EPA (2002) Air Pollution Control Cost Manual prepared
by the U.S. Environmental Protection Agency.6 This methodology sets out a procedure by
which capital and annualized costs are defined and estimated, and this procedure is often
used to estimate the costs of rulemakings such as this one. The capital costs presented in
this section are annualized using a 7% interest rate, a rate that is consistent with the
5 Based on September 7, 2007 crude oil crack spread spot prices of $74.96/bbl ($1.78/gal)
for Brent crude and $87.04/bbl ($2.08/gal) for product value per barrel; as reported in
Oil and Gas Journal, September 17, 2007, p. 90.
6 U.S. Environmental Protection Agency (EPA) Air Pollution Control Cost Manual.
Section 1, Chapter 2. EPA-452/B-02-001. July 2002. Available on the Internet at
http://epa.gov/ttn/catc/products.htmltfcccinfo
59
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guidance provided in the Office of Management and Budget's (OMB's) Circular A-4
issued in 2003.7 The annualized compliance costs of the final rule are $3.0 million (2007
dollars). A reduction in product losses of $2.2 million (2007 dollars) is included in the
annualized compliance cost total. The HAP emission reductions for this final rule are
estimate at 630 tons per year and VOC emission reductions are estimated at 4,700 tons
per year
There are two likely reasons why the savings in costs from reduced product losses
are reasonable and credible.
1) The rates of return for capital investments in the refinery industry have been
relatively low for a long period of time.
Rates of return on investment in the refinery industry have averaged about 5.5%
from 1993-2002.8 The refinery industry has, until recently, experienced relatively low
profits as part of their operations as shown by the profit margin data provided earlier in
Section 1.5.5 of this report. This is due to the capital intensive nature of their operations
and a high barrier to entry. Hence, there has been little incentive for refineries to invest
in greater capacity until recently. With the recent increase in profits per barrel of oil
refined, this has begun to change. However, refineries may be slow to invest further in
new capacity or to upgrade existing equipment given that high profitability for refined
product is a recent phenomenon that could change in the future. Also, the DOE/EIA
assumes a 9% after-tax rate of return on investments for capacity expansion as part of
their modeling of energy production in preparing their Annual Energy Outlook forecasts
(http://www.eia.doe.gov/oiaf/aeo/assumption/introduction.html, at p. 5). Thus,
historically low returns on capital investments may lead refineries to be cautious with
investing further in their facilities even if the expected return is positive.
2) There has been limited ability until recently to measure emissions from
particular source categories such as heat exchange systems; hence, there has
U.S. Office of Management and Budget. Circular A-4. Issued on September 17, 2003. Available on the
Internet at http://www. whitehouse. gov/omb/circulars/a004/a-4.html.
! National Petroleum Refiners Association. Written Statement for the U.S. House of Representatives,
Committee on Government Reform, Subcommittee on Energy and Resources. October 19, 2005.
Available on the Internet at http://www.npra.org/news/testimonv/NPRATestimonv&AttachmentslO-19-
O5.r
60
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been little understanding of the possible returns to refinery owners from
reducing leaks from this category.
5.0 Small Business and Economic Impacts
5.1 Small Business Impacts
The Regulatory Flexibility Act generally requires an agency to prepare a
regulatory flexibility analysis of any rule subject to notice and comment rulemaking
requirements under the Administrative Procedure Act or any other statute unless the
agency certifies that the rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses, small organizations,
and small governmental jurisdictions.
For the purposes of assessing the impacts of this rule on small entities, small
entity is defined as: (1) a small business that meets the Small Business Administration
(SBA) size standards for small businesses at 13 CFR 121.201 (a firm having no more
than 1,500 employees; (2) a small governmental jurisdiction that is a government of a
city, county, town, school district, or special district with a population of less than
50,000; and (3) a small organization that is any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.
After considering the economic impacts of this rule on small entities, I certify that
this action will not have a significant economic impact on a substantial number of small
entities. Based on our economic impact analysis, the final amendments will result in a
nationwide annualized costs of about $3.0 million that includes $2.2 million per year
from reductions in product losses previously mentioned in this report. Of the 24 small
refinery-owned entities affected by this final rule, no affected small entity will incur an
impact of an annualized compliance cost of greater than 0.02 percent of its revenue;
therefore, no "significant" adverse economic impacts are expected for any small entity.
Thus, the costs associated with the final amendments will not result in any "significant"
adverse economic impact for any small entity. For more information, please refer to the
economic impact analysis that is in the docket for this rulemaking.
Although the final rule will not have a significant economic impact on a
substantial number of small entities, we nonetheless tried to reduce the impact of the rule
61
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on small entities. We held meetings with industry trade associations and company
representatives to discuss the rule and received comments from them, and have
responded by making revisions that would reduce impacts to small entities.
5.2 Economic Impacts
For economic impacts on all firms and consumers, all of the 58 firms that own an
affected refinery (or more) are estimated to have positive compliance costs associated
with the rule. However, no affected refinery-owned firm will incur an annualized
compliance cost from this rule of no more than 0.02 percent in 2012 (the year of full
implementation for the final rule).
The screening analysis employed here is a "sales test" that computes the
annualized compliance costs as a share of sales for each affected company. The "sales
test" is the impact methodology EPA employs in analyzing small entity impacts. The use
of a "sales test" for estimating small business impacts for a rulemaking such as this one is
consistent with guidance offered by EPA on compliance with SBREFA,9 and is consistent
with guidance published by the US SBA's Office of Advocacy that suggests that cost as a
percentage of total revenues is a metric for evaluating cost increases on small entities in
relation to increases on large entities.10 All other firms are estimated to experience
annualized costs ranging from $17,950 to $291,507. Given that these cost estimates are
quite low relative to firm revenues, and that as mentioned earlier in section 1.0 of this
report that petroleum products such as gasoline have very low price elasticities of
demand associated with them, then the economic impacts on consumer and producers,
both small and large refineries as defined by the SBA, associated with this final rule
should be minimal. More information on the costs per refinery can be found in the
options and impacts memoranda for each source type that are available in the public
docket for this rule.
9 The SBREFA compliance guidance to EPA rulewriters regarding the types of small business analysis that
should be considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf, pp.
24-25.
10 U.S. SBA, Office of Advocacy. A Guide for Government Agencies, How to Comply with the
Regulatory Flexibility Act, Implementing the President's Small Business Agenda and Executive Order
13272, May 2003.
62
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Office of Air Quality Planning and
United States Standards
Environmental Health and Environmental Impacts
Protection Division EPA-452/R-09-005
Agency Research Triangle Park, NC May, 2009
63
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