Oil refineries are under siege in Los Angeles County.
The newly assertive South Coast Air Quality Management District, responding to pressure from community and environmental activists, is taking several steps to clamp down on emissions from local refineries.
The air quality agency is ending its industry-supported cap-and-trade program and will replace it with stricter pollution control. It’s also proposing rules to limit flaring at the six major refinery operations in the county and will likely eliminate the use of highly toxic hydrofluoric acid at two of those facilities.
Now the agency is coming under increasing pressure to force a more thorough environmental review of a proposed massive merger of two refineries owned by Tesoro Corp.
Environmental and community activists said the air district’s actions are long overdue and don’t go nearly far enough.
“These are actions that should have been done decades ago,” said Julia May, senior scientist with Communities for a Better Environment of Huntington Park, one of the activist groups pushing for more oil refinery regulations.
But oil industry representatives and experts said the crackdown will add costs and possibly deter new investment in the region’s aging refineries.
“No question these AQMD actions will crank up the costs for refineries to do business here over the next decade,” said David Hackett, president of Stillwater Associates, an Irvine energy industry consulting firm. “That certainly won’t be consumer friendly, though exactly how much this will raise the cost of gasoline will depend on what new regulations result from all this.”
Hackett said these actions might also prompt some refinery operators to evaluate their options, including scaling back refining or selling the operations.
“Some may conclude it’s no longer cost-effective to operate here,” he said.
The air quality agency began taking a more aggressive stance against refineries last year after a series of explosions, flaring incidents, and other health and safety problems, principally at ExxonMobil’s Torrance refinery, which is now owned by PBF Energy of Parsippany, N.J.
A more forceful district governing board also has taken shape with the addition of Los Angeles County Supervisor Sheila Kuehl, who took her seat in December. The district oversees air pollution in Orange County, and the urban portions of Los Angeles, Riverside, and San Bernardino counties.
“Neighborhoods adjacent to refineries bear a disproportionate pollution burden and requiring updated technology will help mitigate some of the health and quality of life impacts nearby residents and businesses have had to bear,” Kuehl said in an email.
A major explosion rocked the Torrance refinery in February 2015, prompting a yearlong shutdown and leading to a steep hike in local gasoline prices. Reviews of the accident revealed that the explosion came close to facilities containing hydrofluoric acid, which if released could have killed or injured hundreds in adjacent neighborhoods.
After holding hearings in the community, agency staff started developing three rules: limits on gas flaring; restrictions or a complete ban on the use of hydrofluoric acid, which is currently in use at PBF and Valero Energy Corp. refineries; and stricter requirements for monitoring of emissions from all the facilities.
“There have been a lot of problems at these refineries; the residents are concerned and we are concerned,” said air district spokesman Sam Atwood. “That’s why instead of responding on a case-by-case basis, we stepped back and developed these three rules.”
Oil and refining industry representatives are bracing for higher costs.
“This will be an additional cost, though we can’t quantify that yet since no rules have been (formally) proposed,” said Tom Umenhofer, vice president of operations for the Western States Petroleum Association, which represents major oil producers and refinery operators.
David Campbell, executive secretary-treasurer of United Steelworkers Local 675, estimated that about 8,000 people work at the six major refineries in Los Angeles County. He said there were about 2,000 hourly union workers, 2,000 management/supervisory personnel, and about 4,000 contract workers.
He said that overall, the union welcomes the increased scrutiny coming from the air district but added that the union would not support an outright ban on the use of hydrofluoric acid.
“A ban would impact jobs and the availability of gasoline for consumers, especially since it will take a while to come up with an adequate alternative,” he said.
Campbell said that the main issue with the flaring of gas at PBF’s Torrance refinery – which has had the most flaring incidents – is the lack of a reliable power supply. When power is shut off suddenly, it can lead to buildup in gas pressure that needs to be relieved through flaring.
An executive with PBF did not return a call seeking comment.
Meanwhile, in what is likely to prove an even bigger burden for refinery operators, the air district board last month voted to phase out the 22-year-old cap-and-trade program, known as Reclaim.
Refineries have consistently been some of the biggest facilities in the program, which oil industry representatives said has given them the flexibility to meet declining emissions caps.
But environmental groups and other opponents said the program was too generous to facility participants in setting prices and allocations for emission reduction credits, allowing refineries and other participants to forestall installing pollution control equipment. They sought to have the program scrapped and replaced with traditional “command-control” regulation in which the district requires specific pollution control measures to be taken by specific deadlines.
After the vote to eventually scrap Reclaim, district staffers next week are scheduled to report back to the board on a time table for ending the program and a start to mapping out the replacement command-control regulations. Phil Fine, the air district’s deputy executive officer, said Reclaim could be phased out by about 2025, toward the midpoint for enacting the replacement rules.
But Umenhofer, the oil industry representative, said this will be an aggressive schedule for refinery operators.
“In many cases, you’re talking about pollution control technology that doesn’t exist today,” he said. “And refinery operators won’t have the option of incorporating this new technology when they expand their operations; instead, they will have to go back and retrofit existing operations, which is much more expensive.”
Industry analyst Hackett said that rather than retrofitting equipment, some refinery operators might choose not to make those huge expenditures and instead take units off-line. If that happens, supplies of refined oil and gas could be constrained.
Some might even decide to exit the market instead of facing such a choice, he said.
More immediately, the air district must soon decide whether to certify an environmental impact report for the merger of Tesoro’s refinery operations in Carson and Wilmington, thereby giving final approval for the $460 million project that would create the largest refinery on the West Coast.
Besides consolidating and connecting operations at the adjacent sites, the project calls for construction of eight large fuel storage tanks to replace two smaller current ones.
According to Ken Dami, Tesoro’s director of government and public affairs for Southern California, this additional storage capacity will mean fewer oil vessel trips to the Port of Long Beach, since more oil can be offloaded into the tanks each time.
May, of Communities for a Better Environment, and other opponents of the merger said its real purpose is to allow Tesoro to import dirtier and more volatile crude oil from North Dakota and Canada. They want the district to reopen the environmental review process to take this and other points into account.
Dami said in a statement there would be no change in the type of oil processed after the project is complete.
If the air district decides to reopen the environmental review process, it would send a signal to the industry that rehabilitating or expanding refineries in the county will be quite difficult, analyst Hackett said.
“It will mean Tesoro has taken years to get to this point in its permitting for their integration project and still no permit,” he said. “If you want to buy a refinery, you want to make changes to make it run better and more efficiently. But with these regulations and actions by the AQMD, if you need a permit, you just can’t get one. That will deter much needed investment.”
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