1

 

 

Economic Impact and Small Business Analysis for 

Petroleum Refinery NESHAP –– Heat Exchange 

Systems

 

 
2

May 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 
3

 May 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. 

Finally, this action 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. 
4

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 
5

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). 
6

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 <http://www.osha.gov/dts/osta/otm/otm_iv/otm_iv_2.html>. As obtained on 

October 23, 2006. 
7

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 <http://www.osha.gov/dts/osta/otm/otm_iv/otm_iv_2.html>. 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). 
8

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 <http://www.osha.gov/dts/osta/otm/otm_iv/otm_iv_2.html>. 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). 
9

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 <http://www.osha.gov/dts/osta/otm/otm_iv/otm_iv_2.html>. 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 
10

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 
11

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).1

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 

 

1

 A barrel is a unit of volume that is equal to 42 U.S. gallons. 
12

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 

Crude 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 

Hydrofluoric Acid 

Sulfuric acid and hydrofluoric acid are used primarily as catalysts in alkylation 

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 <http://www.osha.gov/dts/osta/otm/otm_iv/otm_iv_2.html>. As obtained on 

October 23, 2006. 
13

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 <http://www.osha.gov/dts/osta/otm/otm_iv/otm_iv_2.html>. 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 (NH3), hydrogen sulfide 

(H2S), and volatile organic compounds (VOCs). 

1.2.2.1 Gaseous and VOC Emissions 

As previously mentioned, CO, SOx, NOx, NH3, and H2S 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). 
14

The majority of gas streams exiting each refinery process contain varying 

amounts of refinery fuel gas, H2S, and NH3. 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 H2S, 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, NH3, 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. 
15

Payroll

3%

Materials

94%

Total Capital

3%

Average Percentage 

(1995–2006)

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. 
16

Table 1-3. Labor, Material, and Capital Expenditures for Petroleum Refineries 

(NAICS 324110) 

 Payroll ($millions) Materials ($millions) Total Capital ($millions) 

Year Reported 2005 Reported 2005 Reported 2005 

1995 3,791 4,603 112,532 136,633 5,937 7,209 

1996 3,738 4,435 132,880 157,658 5,265 6,247 

1997 3,885 4,595 127,555 150,865 4,244 5,020 

1998 3,695 4,415 92,212 110,187 4,169 4,982 

1999 3,983 4,682 114,131 134,146 3,943 4,635 

2000 3,992 4,509 180,568 203,967 4,685 5,292 

2001 4,233 4,743 158,733 177,838 6,817 7,638 

2002 4,386 4,947 166,368 187,646 5,152 5,811 

2003 4,752 5,227 185,369 203,893 6,828 7,510 

2004 5,340 5,635 251,467 265,369 6,601 6,966 

2005 5,796 5,796 345,207 345,207 10,525 10,525 

2006 5,984 5,751 396,980 381,546 11,175 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://factfinder.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 

<http://www.census.gov/prod/2006pubs/am0531gs1.pdf>. 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 

<http://www.census.gov/prod/2003pubs/m01as-1.pdf>. 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 

<http://www.census.gov/prod/2001pubs/m99-as1.pdf>. 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 

<http://www.census.gov/prod/3/98pubs/m96-as1.pdf>. 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 

<http://www.census.gov/prod/2/manmin/ 

asm/m95as1.pdf>. 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): 
17

Table 1-4. Costs of Materials Used in Petroleum Refining Industry 

 2002 1997 

Material 

Delivered 

Cost ($106) 

Percentage 

of Material 

Costs 

Delivered 

Cost ($106) 

Percentage 

of Material 

Costs 

Petroleum Refineries NAICS 324110 

Total materials 157,415,200 100.0% 118,682,535 100.0% 

Domestic crude petroleum, including lease 

condensate 

63,157,497 40.1% 47,220,759 39.8% 

Foreign crude petroleum, including lease 

condensate 

69,102,574 43.9% 48,172,988 40.6% 

Foreign unfinished oils (received from 

foreign countries for further processing) 

2,297,967 1.5% 2,373,376 2.0% 

Ethane (C2) (80% purity or more) D D 

Propane (C3) (80% purity or more) 118,257 0.1% 269,928 0.2% 

Butane (C4) (80% purity or more) 1,925,738 1.2% 1,567,875 1.3% 

Gas mixtures (C2, C3, C4) 1,843,708 1.2% 952,009 0.8% 

Isopentane and natural gasoline 810,530 0.5% 1,381,100 1.2% 

Other natural gas liquids, including plant 

condensate 

455,442 0.3% 1,427,123 1.2% 

Toluene and xylene (100% basis) 159,563 0.1% N 

Additives (including antioxidants, 

antiknock compounds, and inhibitors) 

40,842 0.0% 262,228 0.2% 

Other additives (including soaps and 

detergents) 

709 0.0% 200,005 0.2% 

Animal and vegetable oils D D 

Chemical catalytic preparations D 647,040 0.5% 

Sodium hydroxide (caustic soda) (100% 

NaOH) 

129,324 0.1% 41,741 0.0% 

Sulfuric acid, excluding spent (100% 

H2SO4) 

189,912 0.1% 56,514 0.0% 

Metal containers 9,450 0.0% 60,531 0.1% 

Plastics containers D N 

Paper and paperboard containers D 18,404 0.0% 

Cost of materials received from petroleum 

refineries and lube manufacturers 

8,980,758 5.7% 4,981,370 4.2% 

All other materials and components, parts, 

containers, and supplies 

5,722,580 3.6% 4,233,383 3.6% 

Materials, ingredients, containers, and 

supplies, nsk 

576,175 0.4% 4,779,890 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 

<http://www.census.gov/ 

prod/ec02/ec0231i324110.pdf>. As obtained on October 23, 2006. 
18

 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. 
19

Table 1-5. Major Refinery Products 

Product Description 

Fuels 

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 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. 

Liquefied petroleum gas 

(LPG) 

LPG consists principally of propane (C3H8) and butane (C4H10). It is primarily used 

as a fuel in domestic heating, cooking, and farming operations. 

Distillate fuel oil 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 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. 

Petroleum coke 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 C3H6. 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 <http://www.osha.gov/dts/osta/otm/otm_iv/otm_iv_2.html>. 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, 
20

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). 
21

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 sparkignition 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 

Motor 

Gasoline Jet Fuel 

Distillate 

Fuel Oil 

Residual Fuel 

Oil 

Liquefied 

Petroleum 

Gases 

Demand elasticity −0.29 −0.15 −0.75 −0.68 −0.8 

Supply elasticity 1.24 1.24 1.24 1.24 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. 
22

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 
23

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 Herfindahl-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 1985 1990 1996 2000 2001 2002 2003 

Herfindahl-Hirschmann Index (HHI) 493 437 412 611 686 743 728 

Four-firm concentration ratio (CR4) 34.4 31.4 27.3 40.2 42.5 45.4 44.4 

Eight-firm concentration ratio (CR8) 54.6 52.2 48.4 61.6 67.2 70.0 69.4 

Source: Federal Trade Commission (FTC). 2004. “The Petroleum Industry: Mergers, Structural Change, 

and Antitrust Enforcement.” Available at <http://www.ftc.gov/opa/2004/08/oilmergersrpt.shtm>. As 

obtained on February 6, 2007. 
24

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). 
25

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 
26

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 Number of Petroleum Refineries 

Alabama 4 

Alaska 6 

Arkansas 2 

California 21 

Colorado 2 

Delaware 1 

Georgia 1 

Hawaii 2 

Illinois 4 

Indiana 2 

Kansas 3 

Kentucky 2 

Louisiana 18 

Michigan 1 

Minnesota 2 

Mississippi 4 

Montana 4 

Nevada 1 

New Jersey 6 

New Mexico 3 

North Dakota 1 

Ohio 4 

Oklahoma 5 

Oregon 1 

Pennsylvania 5 

Tennessee 1 

Texas 25 

Utah 5 

Virginia 1 

Washington 5 

West Virginia 1 

Wisconsin 1 

Wyoming 5 

Total 149 

Source: U.S. Department of Energy, Energy Information Administration (EIA). 2006b. “Refinery Capacity 

Report 2006.” Available at 

<http://www.eia.doe.gov/oil_gas/petroleum/data_publications/refinery_capacity_data/ 

refcapacity.html/>. 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, 
27

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 

Petroleum Refineries 

Capacity Utilization Rates 

(NAICS 324110) 

Gross Input to Atmospheric 

Crude Oil Distillation Units 

(1,000s of barrels per day) 

Operational Capacity 

(1,000s of barrels per day) 

2000 92.6 15,299 16,525 

2001 92.6 15,352 16,582 

2002 90.7 15,180 16,744 

2003 92.6 15,508 16,748 

2004 93.0 15,783 16,974 

2005 90.6 15,578 17,196 

2006 89.7 15,602 17,385 

Source: U.S. Department of Energy, Energy Information Administration (EIA). 2007a. “Refinery 

Utilization and Capacity.” Available at <http://tonto.eia.doe.gov/dnav/pet/ 

pet_pnp_unc_dcu_nus_m.htm>. 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 
28

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). 
29

0%

10%

20%

30%

40%

50%

60%

<100 100-250 250-500 500-1000 1000-

1500

>1500

Share of Firms (%)

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 

<http://smallbusiness.dnb.com/default.asp?bhcd2=1107465546>. 

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 <http://www.hoovers.com/free/>. 

$0

$20,000

$40,000

$60,000

$80,000

$100,000

<100 100-250 250-500 500-1000 1000-

1500

>1500

Average Revenue ($millions)

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 

<http://smallbusiness.dnb.com/default.asp?bhcd2=1107465546>. 

Gale Research Inc. 2007. Ward’s Business Directory of U S Private and Public Companies. Detroit: Gale 

Research. 
30

Hoovers. 2007. Free Content, Company Information. Available at <http://www.hoovers.com/free/>. 

0%

10%

20%

30%

40%

50%

60%

70%

<$5 $5-$10 $10-$50 $50-

$100

$100-

$500

$500-

$1000

>$1000

Share of Firms (%)

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 

<http://smallbusiness.dnb.com/default.asp?bhcd2=1107465546>. 

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 <http://www.hoovers.com/free/>. 

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. 
31 

Table 1-10. Characteristics of Small Businesses in the Petroleum Refining Industry 

Parent Company 

Parent 

Company 

Type 

Cummulative Crude 

Capacity 

(bbl/cd) 

Parent 

Company 

Sales 

($Millions)

Parent 

Company 

Employment (#) Facility Name Facility City Facility State Facility County 

AGE Refining & Manufacturing 

Private 12,200 287 52 AGE Refining & 

Manufacturing 

San Antonio TX Bexar County 

American Refining Group 

Private 10,000 350 310 American Refining 

Group 

Bradford PA McKean 

County 

Arabian American Development Co 

Public 0 80 118 South Hampton 

Resources Inc. 

Silsbee TX Hardin 

County 

Calcasieu Refining Co. 

Private 30,000 638 51 Calcasieu Refining 

Co. 

Lake Charles LA Calcasieu 

Parish 

Calumet Specialty Products 

Shreveport LA Caddo Parish 

Calumet Specialty Products 

Cotton Valley LA Caddo Parish 

Calumet Specialty Products 

Public 63,320 1,641 350 

Calumet Specialty Products 

Princeton LA Caddo Parish 

Countrymark Cooperative, Inc. 

Private 23,000 87 300 Countrymark 

Cooperative, Inc. 

Mt. Vernon IN Posey County 

Cross Oil & Refining Co. Inc. 

Private 7,200 49 110 Cross Oil & 

Refining Co. Inc. 

Smackover AR Union Count

CVR Energy Inc. Public 112,000 3,038 577 Coffeyville 

Resources LLC 

Coffeyville KS Montgomery 

County 

Foreland Refining Co. 

Private 2,000 56 100 Foreland Refining 

Co. 

Tonopah/Eagle Springs 

NV Nye County 

Frontier Oil & Refining Co. 

Cheyenne WY Laramie 

County 

Frontier Oil Corp Private 153,000 4,000 727 

Frontier Oil Corp El Dorado KS Butler Count

Gary-Williams Co Private 54,000 97 200 Wynnewood 

Refining Co. 

Wynnewood OK Garvin 

County 
32 

Table 1-10. Characteristics of Small Businesses in the Petroleum Refining Industry (continued) 

Parent Company 

Parent 

Company 

Type 

Cumulative 

Crude 

Capacity 

(bbl/cd) 

Parent 

Company 

Sales 

($Millions) 

Parent 

Company 

Employment (#) Facility Name Facility City Facility State 

Goodway Refining LLC Private 4,100 3 18 Goodway Refining 

LLC 

Atmore AL 

Greka Integrated Inc Private 9,500 22 145 Greka Integrated Inc Santa Maria CA Gulf Atlantic Operations LLC 

Private 16,700 9 32 Gulf Atlantic 

Operations LLC 

Mobile Bay AL 

Holly Corp. Public 99,700 4,023 859 Holly Corp. Woods Cross UT 

Navajo Refining Co. Artesia NM Hunt Refining Co. Tuscaloosa AL 

Hunt Southland Refining 

Lumberton MS 

Hunt Refining Co. Private 45,500 4,871 1,100 

Hunt Southland Refining 

Sandersville MS 

Lion Oil Co. Private 70,000 247 425 Lion Oil Co. El Dorado AR 

Pelican Refining Co. LLC 

Private 0 29 62 Pelican Refining Co. 

LLC 

Lake Charles LA 

Placid Refining Inc. Private 56,000 1,400 200 Placid Refining Inc. Port Allen LA San Joaquin Refining Co., Inc. 

Private 15,000 288 20 San Joaquin Refining 

Co., Inc. 

Bakersfield CA 

Somerset Oil Inc Private 5,500 55 150 Somerset Refinery 

Inc. 

Somerset KY 

Trigeant Ltd. Private 0 5 50 Trigeant Ltd. Corpus Christi TX 
33 

Table 1-10. Characteristics of Small Businesses in the Petroleum Refining Industry (continued) 

Parent Company 

Parent 

Company 

Type 

Cumulative 

Crude 

Capacity 

(bbl/cd) 

Parent 

Company 

Sales 

($Millions)

Parent 

Company 

Employment (#) Facility Name Facility City Facility State 

Western Refining, Inc. El Paso TX Giant Refining Co. Yorktown VA Giant Refining Co. Bloomfield NM 

Western Refining, Inc. Public 212,200 4,200 416 

Giant Refining Co. Gallup NM 

World Oil Corp Private 8,500 277 475 Lunday-Thagard Co. South Gate CA 

Wyoming Refining Co. Private 12,500 340 107 Wyoming Refining 

Co. 

Newcastle WY 

Total 2,128,860 59,738 12,688 

Sources: Dun & Bradstreet. 2007. 2007 D&B Million Dollar Directory. Pennsylvania: Dun & Bradstreet Inc. 

 Dun & Bradstreet Small Business Solutions. Small Business Database. Available at <http://smallbusiness.dnb.com/default.asp?bhcd2

 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 <http://www.hoovers.com/free/>. 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) 10Available through American Fact Finder < http://factfinder.census.gov/home/saff/main.html?_lang=en>. As obtained on February 21
34 

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 
35 

6,800

7,000

7,200

7,400

7,600

7,800

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 

Motor 

Gasoline Jet Fuel 

Distillate 

Fuel Oil 

Residual 

Fuel Oil 

Liquefied 

Petroleum 

Gases 

Other 

Products Total 

2000 3,101 631 1,362 333 816 967 7,211 

2001 3,143 604 1,404 296 746 978 7,172 

2002 3,229 591 1,378 255 789 969 7,213 

2003 3,261 576 1,433 282 757 1,003 7,312 

2004 3,333 597 1,485 316 780 1,076 7,588 

2005 3,343 613 1,503 336 741 1,057 7,593 

2006 3,377 596 1,522 251 749 1,055 7,551 

Source: U.S. Department of Energy, Energy Information Administration (EIA). “Petroleum Supply Annuals 1996–

2007, Volume 1.” Available at <http://www.eia.doe.gov/oil_gas/petroleum/data_publications/petroleum_ 

supply_annual/psa_volume1/psa_volume1.html>. 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 
36 

Table 1-12. U.S. Refinery and Blender Net Production (millions of barrels per year) 

Year 

Motor 

Gasoline Jet Fuel 

Distillate 

Fuel Oil 

Residual 

Fuel Oil 

Liquefied 

Petroleum 

Gases 

Other 

Products Total 

2000 2,910 588 1,310 255 258 990 6,311 

2001 2,928 558 1,349 263 243 968 6,309 

2002 2,987 553 1,311 219 245 990 6,305 

2003 2,991 543 1,353 241 240 1,014 6,383 

2004 3,025 566 1,396 240 236 1,057 6,520 

2005 3,036 564 1,443 229 209 1,015 6,497 

2006 3,053 541 1,475 232 229 1,032 6,561 

Source: U.S. Department of Energy, Energy Information Administration (EIA). “Petroleum Supply Annuals 1996–

2007, Volume 1.” Available at <http://www.eia.doe.gov/oil_gas/petroleum/data_publications/petroleum_ 

supply_annual/psa_volume1/psa_volume1.html>. 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 152,756 180,671 

1998 114,439 136,746 

1999 140,084 164,651 

2000 210,187 237,425 

2001 195,898 219,476 

2002 186,761 210,647 

2003 216,764 238,425 

2004 290,280 306,328 

2005 419,063 419,063 

2006 489,051 470,037 

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/m01as2.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). 
37 

Table 1-14. Imports of Major Petroleum Products (millions of barrels per year) 

Year 

Motor 

Gasoline Jet Fuel 

Distillate 

Fuel Oil 

Residual 

Fuel Oil 

Liquefied 

Petroleum 

Gases 

Other 

Products Total 

1995 97 35 71 68 53 262 586 

1996 123 40 84 91 61 322 721 

1997 113 33 83 71 62 345 707 

1998 114 45 77 101 71 324 731 

1999 139 47 91 86 66 344 774 

2000 156 59 108 129 79 343 874 

2001 166 54 126 108 75 400 928 

2002 182 39 98 91 67 396 872 

2003 189 40 122 119 82 397 949 

2004 182 47 119 156 96 520 1,119 

2005 220 69 120 193 120 587 1,310 

2006 173 68 133 128 121 687 1,310 

Source: U.S. Department of Energy, Energy Information Administration (EIA). “Petroleum Supply Annuals 1996–

2007, Volume 1.” Available at <http://www.eia.doe.gov/oil_gas/petroleum/data_publications/petroleum_ 

supply_annual/psa_volume1/psa_volume1.html>. As obtained on October 31, 2007. 

Table 1-15. Exports of Major Petroleum Products (millions of barrels per year) 

Year 

Motor 

Gasoline Jet Fuel 

Distillate 

Fuel Oil 

Residual 

Fuel Oil 

Liquefied 

Petroleum 

Gases 

Other 

Products Total 

1995 38 8 67 49 21 128 312 

1996 38 17 70 37 19 138 319 

1997 50 13 56 44 18 147 327 

1998 46 9 45 50 15 139 305 

1999 40 11 59 47 18 124 300 

2000 53 12 63 51 27 157 362 

2001 48 10 44 70 16 159 347 

2002 45 3 41 65 24 177 356 

2003 46 7 39 72 20 186 370 

2004 45 15 40 75 16 183 374 

2005 49 19 51 92 19 183 414 

2006 52 15 79 103 21 203 472 

Source: U.S. Department of Energy, Energy Information Administration (EIA). “Petroleum Supply Annuals 1996–

2007, Volume 1.” Available at <http://www.eia.doe.gov/oil_gas/petroleum/data_publications/petroleum_ 

supply_annual/psa_volume1/psa_volume1.html>. 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. 

 

2

 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. 
38 

Table 1-16. Average Price of Major Petroleum Products Sold to End Users (cents per 

gallon) 

Product 1995 2000 2002 2004 2005 2006 

Motor gasoline 76.5 110.6 94.7 143.5 182.9 212.8 

No. 1 distillate fuel 62 98.8 82.8 126.2 183.2 213.7 

No. 2 distillate fuel 56 93.4 75.9 123.5 177.7 209.1 

Jet fuel 54 89.9 72.1 120.7 173.5 199.8 

Residual fuel oil 39.2 60.2 56.9 73.9 104.8 121.8 

Source: U.S. Department of Energy, Energy Information Administration (EIA). 2007b. “Refiner Petroleum Product 

Prices by Sales Type.” Available at <http://tonto.eia.doe.gov/ dnav/pet/pet_pri_refoth_dcu_nus_m.htm>. 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 

 Petroleum Refining (NAICS 32411) Total Manufacturing Industries 

Year PPI 

Annual Percentage 

Change in PPI PPI 

Annual Percentage 

Change in PPI 

1995 74.5 3% 124.2 3% 

1996 85.3 14% 127.1 2% 

1997 83.1 −3% 127.5 0% 

1998 62.3 −25% 126.2 −1% 

1999 73.6 18% 128.3 2% 

2000 111.6 52% 133.5 4% 

2001 103.1 –8% 134.6 1% 

2002 96.3 −7% 133.7 −1% 

2003 121.2 26% 137.1 3% 

2004 151.5 25% 142.9 4% 

2005 205.3 36% 150.8 6% 

2006 241.0 17% 156.9 4% 

Source: U.S. Bureau of Labor Statistics (BLS). 2007. “Producer Price Index Industry Data: Customizable Industry 

Data Tables.” Available at <http://www.bls.gov/ppi/>. 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 
39 

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 

Total 

Number of 

Statements 

0 to 

500,000 

500,000 to 

2 Million 

2 Million 

to 10 

Million 

10 Million 

to 50 

Million 

50 Million 

to 100 

Million 

100 Million 

to 250 

Million 

All 

Firms 

4/1/2006–

3/31/2007 

44 — — 4.6 6.5 — — 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). 
40 

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 

Net Income 

($millions) 

Total Revenue 

($millions) 

Net Profit Margin 

(%) 

Arabian American Development Co. 7.9 98.5 8.0% 

Calumet Specialty Products Partners 93.9 1,641.0 5.7% 

CVR Energy Inc. 191.6 3,037.6 6.3% 

Holly Corporation 266.6 4,023.2 6.6% 

Western Refining, Inc. 204.8 4,199.5 4.9% 

Sources: Arabian American Development Co. April 6, 2007. 10K for year ended December 31, 2006. EDGAR 

Database. Available at <http://www.sec.gov/Archives/edgar/data/7039/000095013407007709/0000950134-07-

007709-index.htm>. 

 Calumet Specialty Products Partners. February 23, 2007. 10K for year ended December 31, 2006. EDGAR 

Database. Available at <http://www.sec.gov/Archives/edgar/data/1340122/000095013407003992/ 

h43776e10vk.htm>. 

 CVR Energy Inc. 2006. Google Finance. Available at <http://finance.google.com/finance?q=NYSE:CVI> As 

obtained on February 28, 2008. 

Holly Corporation. March 1, 2007. 10K for year ended December 31, 2006. EDGAR Database. Available at 

<http://www.sec.gov/Archives/edgar/data/48039/000095013407004555/d44106e10vk.htm>. 

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/h44360e10vk.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. 
41 

Table 1-20. Forecasted Average Price of Major Petroleum Products Sold to End Users in 

2005 Currency (cents per gallon) 

Product 2007 2008 2009 2010 2011 2012 2013 2014 2015 

Motor gasoline 257.4 241.3 227.3 217.3 209.2 204.7 201.1 195.2 194.9 

Jet fuel 175.4 158.3 152.0 147.2 140.0 135.8 135.5 132.9 133.5 

Distillate fuel 253.8 236.6 224.1 215.9 205.0 197.2 194.7 190.3 191.0 

Residual fuel oil 123.5 125.8 120.6 113.9 107.7 102.8 96.6 95.9 98.0 

LPGs 257.4 241.3 227.3 217.3 209.2 204.7 201.1 195.2 194.9 

Source: U.S. Department of Energy, Energy Information Administration (EIA). 2007c. “Annual Energy Outlook.” 

Available at <http://www.eia.doe.gov/oiaf/archive/aeo07/pdf/0383(2007).pdf>. As obtained on January 21, 2007. 

Table 1-21. Total Petroleum Products Supplied (millions of barrels per year) 

Year 

Motor 

Gasoline Jet Fuel 

Distillate 

Fuel Oil 

Residual 

Fuel Oil 

Liquefied 

Petroleum 

Gases 

Other 

Products Total 

2007 3,388 622 1,600 275 819 940 7,643 

2008 3,407 646 1,613 278 824 953 7,721 

2009 3,446 675 1,631 281 815 955 7,804 

2010 3,479 713 1,654 287 809 937 7,879 

2011 3,520 728 1,682 289 811 961 7,990 

2012 3,563 739 1,710 294 812 958 8,076 

2013 3,610 749 1,735 303 812 967 8,177 

2014 3,663 758 1,755 306 814 953 8,249 

2015 3,716 766 1,774 300 815 970 8,341 

Source: U.S. Department of Energy, Energy Information Administration (EIA). 2007c. “Annual Energy Outlook.” 

Available at <http://www.eia.doe.gov/oiaf/archive/aeo07/pdf/0383(2007).pdf>. As obtained on January 21, 2007. 

Table 1-22. Selected Refinery Construction Projects: 2008–2011 

Company and Location Project 

Projected Added 

Capacity 

(barrels per day) 

Expected 

Completion 

Cenex Harvest States, Laurel, MT New delayed coker unit N/A 2008 

Frontier Oil Corp, El Dorado, KS New crude distillation 

unit 

N/A 2008 

 New vacuum distillation 

unit 

N/A 2008 

Marathon Petroleum Co. LLC, Garyville, LA New crude distillation 

unit 

180,000 2009 

 New delayed coker unit N/A 2009 

Motiva Enterprises LLC, Port Arthur, TX Refinery expansion 325,000 2010 

Sinclair Oil Corp, Tulsa, OK Refinery expansion 45,000 2011 

Source: Oil and Gas Journal. November 19, 2007. Worldwide Construction Update. 
42 

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 

Petroleum Refineries 

Capacity Utilization Rates 

(NAICS 324110) 

Gross Input to Atmospheric 

Crude Oil Distillation Units 

(1,000s of barrels per day) 

Operational Capacity 

(1,000s of barrels per day) 

2007 88.8% 15,630 17,597 

2008 88.1% 15,587 17,684 

2009 88.6% 15,712 17,737 

2010 89.1% 15,879 17,822 

2011 89.9% 16,055 17,852 

2012 90.9% 16,267 17,897 

2013 91.4% 16,378 17,914 

2014 91.6% 16,433 17,940 

2015 92.2% 16,628 18,031 

Source: U.S. Department of Energy, Energy Information Administration (EIA). 2007c. “Annual Energy Outlook.” 

Available at <http://www.eia.doe.gov/oiaf/archive/aeo07/pdf/0383(2007).pdf>. As obtained on January 21, 2007. 

1.6 References 

 American Petroleum Institute (API). 2006. “FYI on Refineries: Operating at Record 

Levels.” Available at <http://new.api.org/aboutoilgas/sectors/refining/upload/ 

FYI_Refineries.pdf>. As obtained on October 31, 2006. 

 Arizona Clean Fuels. 2007. Company Home Page. Available at 

<http://www.arizonacleanfuels.com/>. As obtained on February 5, 2007. 
43 

 Arabian American Development Co. April 6, 2007. 10K for year ended December 31, 

2006. EDGAR Database. Available at <http://www.sec.gov/Archives/edgar/data/ 

7039/000095013407007709/0000950134-07-007709-index.htm>. 

 Calumet Specialty Products Partners. February 23, 2007. 10K for year ended 

December 31, 2006. EDGAR Database. Available at 

<http://www.sec.gov/Archives/edgar/data/ 

1340122/000095013407003992/h43776e10vk.htm>. 

 CVR Energy Inc. 2006. Google Finance. Available at 

<http://finance.google.com/finance?q=NYSE:CVI> As obtained on February 28, 2008. 

 Dun & Bradstreet Small Business Solutions. Small Business Database. Available at 

<http://smallbusiness.dnb.com/default.asp?bhcd2=1107465546>. 

 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 

<http://www.ftc.gov/opa/2004/08/ 

oilmergersrpt.shtm>. 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 <http://www.gao.gov/new.items/d07902t.pdf>. As 

obtained on February 6, 2007. 

 Holly Corporation. March 1, 2007. 10K for year ended December 31, 2006. EDGAR 

Database. Available at 

<http://www.sec.gov/Archives/edgar/data/48039/000095013407004555/ 

d44106e10vk.htm>. 

 Hoovers. 2007. Free Content, Company Information. Available at 

<http://www.hoovers.com/free/>. 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 <http://www.epa.gov/ttnecas1/regdata/IPs/Petroleum%20Refinery%20 

(Sulfur%20Recovery%20Units,%20Catalytic%20Crackin.pdf>. As obtained on October 

31, 2006. 

 Nicholson, Walter. 2005. Microeconomic Theory: Basic Principles and Extensions. 

Mason, OH: South-Western Publishing. 
44 

 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 

<http://uk.reuters.com/article/oilRpt/idUKN199746120070719>. As obtained on 

February 5, 2007. 

 Small Business Administration. 2006. Table of Small Business Size Standards. 

Available at 

<http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_table_pdf.> 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 <http://www.bls.gov/ppi/>. As 

obtained on October 11, 2007. 

 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 

<http://www.census.gov/prod/2/manmin/asm/m95as1.pdf>. 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 <http://www.census.gov/prod/3/98pubs/m96-as1.pdf>. 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://factfinder.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 

Manufactures. M99(AS)-1 (RV). Washington, DC: Government Printing Office. 

Available at <http://www.census.gov/prod/2001pubs/m99-as1.pdf>. As obtained on 

October 23, 2006. 

 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 

<http://www.census.gov/prod/2003pubs/m01as-1.pdf>. 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. 
45 

 U.S. Department of Commerce, Bureau of the Census. 2004. 2002 Economic Census, 

Industry Series—Petroleum Refineries. Washington, DC: Government Printing Office. 

Available at <http://www.census.gov/prod/ec02/ec0231i324110.pdf>. As obtained on 

October 23, 2006. 

 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 

<http://www.census.gov/prod/2005pubs/am0431gs1.pdf>. 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 

<http://www.eia.doe.gov/oil_gas/petroleum/data_publications/petroleum_ 

supply_annual/psa_volume1/psa_volume1.html>. As obtained on October 31, 2007. 

 U.S. Department of Energy, Energy Information Administration (EIA). 2006a. “A 

Primer on Gasoline Prices.” Available at <http://www.eia.doe.gov/bookshelf/brochures/ 

gasolinepricesprimer/printerversion.pdf>. As obtained on October 31, 2007. 

 U.S. Department of Energy, Energy Information Administration (EIA). 1999a. 

“Petroleum: An Energy Profile 1999.” DOE/EIA-0545(99). Available at 

<http://tonto.eia.doe.gov/ 

FTPROOT/petroleum/054599.pdf>. As obtained on October 23, 2006. 

 U.S. Department of Energy, Energy Information Administration (EIA). 2006b. 

“Refinery Capacity Report 2006.” Available at 

<http://www.eia.doe.gov/oil_gas/petroleum/ 

data_publications/refinery_capacity_data/refcapacity.html/>. As obtained on October 23, 

2006. 

 U.S. Department of Energy, Energy Information Administration (EIA). 2006c. 

“Petroleum Supply Annual 2005, Volume 1.” Available at 

<http://www.eia.doe.gov/pub/oil_gas/ 

petroleum/data_publications/petroleum_supply_annual/psa_volume1/historical/2005/psa

_volume1_2005.html>. As obtained on October 31, 2007. 

 U.S. Department of Energy, Energy Information Administration (EIA). 2007a. 

“Refinery Utilization and Capacity.” Available at <http://tonto.eia.doe.gov/dnav/pet/ 

pet_pnp_unc_dcu_nus_m.htm>. 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 <http://tonto.eia.doe.gov/ 

dnav/pet/pet_pri_refoth_dcu_nus_m.htm>. As obtained on January 11, 2008. 
46 

 U.S. Department of Energy, Energy Information Administration (EIA). 2007c. 

“Annual Energy Outlook.” Available at 

<http://www.eia.doe.gov/oiaf/archive/aeo07/pdf/0383(2007).pdf>. As obtained on 

January 21, 2007. 

 U.S. Department of Justice and the Federal Trade Commission. 1992. Horizontal 

Merger Guidelines. Available at <http://www.ftc.gov/bc/docs/horizmer.htm>. 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 

<http://www.osha.gov/dts/osta/ 

otm/otm_iv/otm_iv_2.html>. 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 <http://www.epa.gov/compliance/resources/ 

publications/assistance/sectors/notebooks/petrefsn.pdf>. As obtained on October 23, 

2006. 

 U.S. Environmental Protection Agency. 2006. “Proposed MHA Nation Clean Fuels 

Refinery.” Available at 

<http://www.epa.gov/Region8/compliance/nepa/refinerydeis.html>. As obtained on 

February 6, 2007. 

 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/h44360e10vk.htm>. 
47

Appendix A. Parent Company Information for Petroleum Refineriesa

Facility Name City State 

Capacity 

(bbl/cd) 

Foreign 

or 

Domestic 

Sales 

($million) Employment

Company 

Type 

(Private or 

Public or 

Subsidiary) 

Owning 

Company 

Owning 

Company 

Type 

Sales 

($million) 

AGE Refining & Manufacturing San Antonio TX 12,200 D 287 52 Private Alon USA Energy Inc. Big Spring TX 67,000 F Subsidiary 

Alon Israel Oil Company LTD Private NA 

American Refining Group Bradford PA 10,000 D 350 310 Private Big West of CA Bakersfield CA 66,000 D Subsidiary Flying J Inc Private 11,350 Big West Oil Co. Salt Lake City UT 29,400 D Subsidiary Flying J Inc Private 11,350 BP Whiting IN 410,000 F Subsidiary BP PLC Public 274,316 BP Texas City TX 437,000 F Subsidiary BP PLC Public 274,316 BP Prudhoe Bay AK 12,500 F Subsidiary BP PLC Public 274,316 BP Carson CA 260,000 F Subsidiary BP PLC Public 274,316 BP Ferndale WA 225,000 F Subsidiary BP PLC Public 274,316 BP Toledo OH 131,000 F Subsidiary BP PLC Public 274,316 Calcasieu Refining Co. Lake Charles LA 30,000 D 638 51 Private Calumet Specialty Products Shreveport LA 42,000 D 1,641 350 Public Calumet Specialty Products Cotton Valley LA 13,020 D 1,641 350 Public Calumet Specialty Products Princeton LA 8,300 D 1,641 350 Public Cenex Harvest States Laurel MT 55,000 D 11,900 6,370 Public Chevron USA Inc. Perth Amboy NJ 80,000 D Subsidiary 

Chevron Corporation Public 210,118 

Chevron USA Inc. Salt Lake City UT 45,000 D Subsidiary 

Chevron Corporation Public 210,118 

Chevron USA Inc. Portland OR D Subsidiary 

Chevron Corporation Public 210,118 

Chevron USA Inc. Pascagoula MS 330,000 D Subsidiary 

Chevron Corporation Public 210,118 
48

Appendix A. Parent Company Information for Petroleum Refineries (continued) 

Facility Name City State 

Capacity 

(bbl/cd) 

Foreign 

or 

Domestic 

Sales 

($million) Employment

Company 

Type 

(Private or 

Public or 

Subsidiary) 

Owning 

Company 

Owning 

Company 

Type 

Sales 

($million)

Chevron USA Inc. El Segundo CA 260,000 D Subsidiary 

Chevron Corporation Public 210,118 

Chevron USA Inc. Richmond CA 242,901 D Subsidiary 

Chevron Corporation Public 210,118 

Chevron USA Inc. 

Honolulu (Barber's Point) HI 54,000 D Subsidiary 

Chevron Corporation Public 210,118 

Citgo Corpus Christi TX 156,000 F Subsidiary 

Petróleos de Venezuela S.A. (PDVSA) 

Government 

Owned NA 

Citgo Asphalt Refining Co. Paulsboro NJ 32,000 F Subsidiary 

Petróleos de Venezuela S.A. (PDVSA) 

Government 

Owned NA 

Citgo Petroleum Savannah GA 28,000 F Subsidiary 

Petróleos de Venezuela S.A. (PDVSA) 

Government 

Owned NA 

Citgo Petroleum Corp. Lake Charles LA 429,500 F Subsidiary 

Petróleos de Venezuela S.A. (PDVSA) 

Government 

Owned NA 

Coffeyville Resources LLC Coffeyville KS 112,000 D 3,038 577 Public 

CVR Energy Inc. 

ConocoPhillips Westlake LA 239,400 D 188,523 38,400 Public ConocoPhillips Ponca City OK 194,000 D 188,523 38,400 Public ConocoPhillips Billings MT 58,000 D 188,523 38,400 Public ConocoPhillips Borger TX 146,000 D 188,523 38,400 Public ConocoPhillips Sweeny TX 247,000 D 188,523 38,400 Public ConocoPhillips Ferndale WA 96,000 D 188,523 38,400 Public ConocoPhillips Linden NJ 238,000 D 188,523 38,400 Public ConocoPhillips Wood River IL 306,000 D 188,523 38,400 Public ConocoPhillips 

LA - Carson/Wilmington CA 139,000 D 188,523 38,400 Public 
49

Appendix A. Parent Company Information for Petroleum Refineries (continued) 

Facility Name City State 

Capacity 

(bbl/cd) 

Foreign 

or 

Domestic 

Sales 

($million) Employment

Company 

Type 

(Private or 

Public or 

Subsidiary) 

Owning 

Company 

Owning 

Company 

Type 

Sales 

($million)

ConocoPhillips SF - Rodeo CA 76,000 D 188,523 38,400 Public ConocoPhillips 

Arroyo Grande (Santa Maria) CA 44,200 D 188,523 38,400 Public 

ConocoPhillips Belle Chasse LA 247,000 D 188,523 38,400 Public ConocoPhillips 

Trainer (Marcus Hook) PA 185,000 D 188,523 38,400 Public 

ConocoPhillips Kuparuk AK 14,000 D 188,523 38,400 Public Countrymark Cooperative, Inc. Mt. Vernon IN 23,000 D 87 300 Private Cross Oil & Refining Co. Inc. Smackover AR 7,200 D 49 110 Private Delek Refining Ltd Tyler TX 58,000 F Subsidiary 

Delek Group LTD Public 6,237 

Edgington Oil Co. Long Beach CA 26,000 F Subsidiary 

Alon Israel Oil Company LTD Private NA 

Ergon Refining Inc. Vicksburg MS 23,000 D Subsidiary Ergon, Inc. Private 1,300 Ergon-West Virginia Inc. Newell (Congo) WV 20,000 D Subsidiary Ergon, Inc. Private 1,300 ExxonMobil Corp. Baton Rouge LA 501,000 D 377,635 82,100 Public ExxonMobil Corp. Billings MT 60,000 D 377,635 82,100 Public ExxonMobil Corp. Joliet IL 238,500 D 377,635 82,100 Public ExxonMobil Corp. Beaumont TX 348,500 D 377,635 82,100 Public ExxonMobil Corp. Torrance CA 149,500 D 377,635 82,100 Public ExxonMobil Corp. Chalmette LA 188,160 D 377,635 82,100 Public ExxonMobil Oil Corp Baytown TX 562,500 D Subsidiary 

ExxonMobil Corp. Public 377,635 

Flint Hills Resources Corpus Christi TX 288,126 D Subsidiary 

Koch Industries Inc Private 51,500 

Flint Hills Resources North Pole AK 210,000 D Subsidiary 

Koch Industries Inc Private 51,500 
50

Appendix A. Parent Company Information for Petroleum Refineries (continued) 

Facility Name City State 

Capacity 

(bbl/cd) 

Foreign 

or 

Domestic 

Sales 

($million) Employment

Company 

Type 

(Private or 

Public or 

Subsidiary) 

Owning 

Company 

Owning 

Company 

Type 

Sales 

($million)

E

Flint Hills Resources Rosemount MN 279,300 D Subsidiary 

Koch Industries Inc Private 51,500 

Foreland Refining Co. 

Tonopah/Eagle Springs NV 2,000 D 56 100 Private 

Frontier Oil & Refining Co. Cheyenne WY 47,000 D Subsidiary Frontier Oil Corp Private 4,000 Frontier Oil Corp El Dorado KS 106,000 D 4,000 727 Private Giant Refining Co. Yorktown VA 58,600 D Subsidiary 

Western Refining, Inc. Private 4,200 

Giant Refining Co. Bloomfield NM 16,800 D Subsidiary 

Western Refining, Inc. Private 4,200 

Giant Refining Co. Gallup NM 20,800 D Subsidiary 

Western Refining, Inc. Private 4,200 

Goodway Refining LLC Atmore AL 4,100 D 3 18 Private Greka Integrated Inc Santa Maria CA 9,500 D 22 145 Private Gulf Atlantic Operations LLC Mobile Bay AL 16,700 D 9 32 Private Hess Corporation Port Reading NJ D 23,200 11,610 Public Holly Corp. Woods Cross UT 24,700 D 4,023 859 Public Hunt Refining Co. Tuscaloosa AL 34,500 D 4,871 1,100 Private Hunt Southland Refining Lumberton MS D Subsidiary 

Hunt Refining Co. Private 4,871 

Hunt Southland Refining Sandersville MS 11,000 D Subsidiary 

Hunt Refining Co. Private 4,871 

Kern Oil & Refining Co. Bakersfield CA 26,000 D NA NA Private Lion Oil Co. El Dorado AR 70,000 D 247 425 Private Little America Refining Co. 

Evansville (Casper) WY 24,500 D Subsidiary 

Sinclair Companies Private 5,500 

Lunday-Thagard Co. South Gate CA 8,500 D Subsidiary World Oil Corp Private 277 
51

Appendix A. Parent Company Information for Petroleum Refineries (continued) 

Facility Name City State 

Capacity 

(bbl/cd) 

Foreign 

or 

Domestic 

Sales 

($million) Employment

Company 

Type 

(Private or 

Public or 

Subsidiary) 

Owning 

Company 

Owning 

Company 

Type 

Sales 

($million) 

Lyondell-Citgo Refining Co. Houston TX 270,200 D Subsidiary 

Lyondell Chemical Co Public 18,600 

Marathon Petroleum Co. LLC Robinson IL 192,000 D Subsidiary 

Marathon Oil Corp Public 65,449 

Marathon Petroleum Co. LLC Catlettsburg KY 222,000 D Subsidiary 

Marathon Oil Corp Public 65,449 

Marathon Petroleum Co. LLC Detroit MI 100,000 D Subsidiary 

Marathon Oil Corp Public 65,449 

Marathon Petroleum Co. LLC Canton OH 73,000 D Subsidiary 

Marathon Oil Corp Public 65,449 

Marathon Petroleum Co. LLC St. Paul Park MN 70,000 D Subsidiary 

Marathon Oil Corp Public 65,449 

Marathon Petroleum Co. LLC Texas City TX 72,000 D Subsidiary 

Marathon Oil Corp Public 65,449 

Marathon Petroleum Co. LLC Garyville LA 245,000 D Subsidiary 

Marathon Oil Corp Public 65,449 

Montana Refining Co. Great Falls MT 8,200 F Subsidiary 

Connacher Oil and Gas Limited Public NA 

Motiva Enterprises Norco LA 226,500 D 32,100 2,700 Private Motiva Enterprises Port Arthur TX 285,000 D 32,100 2,700 Private Motiva Enterprises Convent LA 235,000 D 32,100 2,700 Private Murphy Oil USA Inc. Superior WI 34,300 D Subsidiary Murphy Oil Corp Public 14,307 Murphy Oil USA Inc. Meraux LA 120,000 D Subsidiary Murphy Oil Corp Public 14,307 National Cooperative Refinery Association McPherson KS 81,200 D Subsidiary 

Cenex Harvest States Public 11,900 

Navajo Refining Co. Artesia NM 75,000 D Subsidiary Holly Corp. Public 4,023 Paramount Petroleum Corp. Paramount CA 50,000 F Subsidiary 

Alon Israel Oil Company LTD Private NA 

Pasadena Refining Systems Inc. Pasadena TX 100,000 F Subsidiary 

Petroleo Brasileiro, S.A. 

Government 

Owned 72,347 
52

Appendix A. Parent Company Information for Petroleum Refineries (continued) 

Facility Name City State 

Capacity 

(bbl/cd) 

Foreign 

or 

Domestic 

Sales 

($million) Employment

Company 

Type 

(Private or 

Public or 

Subsidiary) 

Owning 

Company 

Owning 

Company 

Type 

Sales 

($million)

PDV Midwest Refining Lemont IL 167,000 F Subsidiary 

Petróleos de Venezuela S.A. (PDVSA) 

Government 

Owned NA 

Pelican Refining Co. LLC Lake Charles LA D 29 62 Private Petro Star Inc. North Pole AK 17,000 D Subsidiary 

Arctic Slope Regional Corp Private 1,500 

Petro Star Inc. Valdez AK 48,000 D Subsidiary 

Arctic Slope Regional Corp Private 1,500 

Placid Refining Inc. Port Allen LA 56,000 D 1,400 200 Private San Joaquin Refining Co., Inc. Bakersfield CA 15,000 D 288 20 Private Shell Chemical LP St. Rose LA 55,000 F Subsidiary 

Royal Dutch Shell, PLC Public 312,323 

Shell Chemical LP Saraland AL 80,000 F Subsidiary 

Royal Dutch Shell, PLC Public 312,323 

Shell Oil Products US Anacortes WA 145,000 F Subsidiary 

Royal Dutch Shell, PLC Public 312,323 

Shell Oil Products US Martinez CA 155,600 F Subsidiary 

Royal Dutch Shell, PLC Public 312,323 

Shell Oil Products US Wilmington CA 98,500 F Subsidiary 

Royal Dutch Shell, PLC Public 312,323 

Shell Oil Products US - Deer Park Refining Limited Partnership Deer Park TX 333,700 F Subsidiary 

Royal Dutch Shell, PLC Public 312,323 

Silver Eagle Refining Inc. Evanston WY 3,000 D NA NA Private Silver Eagle Refining Inc. Woods Cross UT 10,250 D NA NA Private Sinclair Oil Corp. Tulsa OK 70,300 D Subsidiary 

Sinclair Companies Private 5,500 
53

Appendix A. Parent Company Information for Petroleum Refineries (continued) 

Facility Name City State 

Capacity 

(bbl/cd) 

Foreign 

or 

Domestic 

Sales 

($million) Employment

Company 

Type 

(Private or 

Public or 

Subsidiary) 

Owning 

Company 

Owning 

Company 

Type 

Sales 

($million) 

Sinclair Oil Corp. Sinclair WY 66,000 D Subsidiary 

Sinclair Companies Private 5,500 

Somerset Refinery Inc. Somerset KY 5,500 D Subsidiary Somerset Oil Inc Private 55 South Hampton Resources Inc. Silsbee TX D Subsidiary 

Arabian American Development Co Public 80 

Suncor Energy Commerce City CO 62,000 F Subsidiary 

Suncor Energy Inc Public 13,583 

Suncor Energy Denver CO 32,000 F Subsidiary 

Suncor Energy Inc Public 13,583 

Sunoco, Inc. Westville NJ 145,000 D 38,715 14,000 Public Sunoco, Inc. Marcus Hook PA 175,000 D 38,715 14,000 Public Sunoco, Inc. Toledo OH 160,000 D 38,715 14,000 Public Sunoco, Inc. Tulsa OK 85,000 D 38,715 14,000 Public Sunoco, Inc. 

Phil. (Girard Pt & Pt Breeze) PA 335,000 D 38,715 14,000 Public 

Ten By Inc. Oxnard CA 2,800 NA NA Tesoro Mandan ND 58,000 D Subsidiary Tesoro Corp Public 18,104 Tesoro Salt Lake City UT 58,000 D Subsidiary Tesoro Corp Public 18,104 Tesoro Anacortes WA 120,000 D Subsidiary Tesoro Corp Public 18,104 Tesoro Golden Eagle CA 166,000 D Subsidiary Tesoro Corp Public 18,104 Tesoro Kapolei HI 93,500 D Subsidiary Tesoro Corp Public 18,104 Tesoro Kenai AK 72,000 D Subsidiary Tesoro Corp Public 18,104 Total SA Port Arthur TX 232,000 F 175,189 95,070 Public Trigeant Ltd. Corpus Christi TX D 5 50 Private United Refining Co. Warren PA 65,000 D Subsidiary 

Red Apple Group Inc Private 4,200 

US Oil & Refining Co. Tacoma WA 37,850 NA NA Valero Energy Corpus Christi TX 142,000 D 91,833 21,836 Public 
54

Appendix A. Parent Company Information for Petroleum Refineries (continued) 

Facility Name City State 

Capacity 

(bbl/cd) 

Foreign 

or 

Domestic 

Sales 

($million) Employment

Company 

Type 

(Private or 

Public or 

Subsidiary) 

Owning 

Company 

Owning 

Company 

Type 

Sales 

($million) 

Valero Energy Houston TX 83,000 D 91,833 21,836 Public Valero Energy Texas City TX 213,750 D 91,833 21,836 Public Valero Energy Krotz Springs LA 80,000 D 91,833 21,836 Public Valero Energy Benicia CA 144,000 D 91,833 21,836 Public Valero Energy Wilmington CA 6,200 D 91,833 21,836 Public Valero Energy Norco LA 185,003 D 91,833 21,836 Public Valero Energy Delaware City DE 181,500 D 91,833 21,836 Public Valero Energy Lima OH 146,900 D 91,833 21,836 Public Valero Energy Memphis TN 180,000 D 91,833 21,836 Public Valero Energy Three Rivers TX 90,000 D 91,833 21,836 Public Valero Energy Sunray TX 158,327 D 91,833 21,836 Public Valero Energy Ardmore OK 83,640 D 91,833 21,836 Public Valero Energy Wilmington CA 80,887 D 91,833 21,836 Public Valero Energy Paulsboro NJ 160,000 D 91,833 21,836 Public Valero Energy Port Arthur TX 260,000 D 91,833 21,836 Public Western Refining, Inc. El Paso TX 116,000 D 4,200 416 Public Wynnewood Refining Co. Wynnewood OK 54,000 D 97 200 Subsidiary 

Gary-Williams Co Private 

Note: All data were collected from the 2007 D&B Million Dollar Direction unless noted other wise. Data collected from the 2006 D&B 

are indicated using “D&B” in the source column. Data collected from Ward’s Business Directory are identified using “Ward’s” in th

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 <http://smallbusiness.dnb.com/default.asp?bhcd2 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 <http://www.hoovers.com/free/>. As obtained on April 11, 2007. 
55

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 (incorporated by reference—see §63.14). 
56

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 
57

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 

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. 

 

4

 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. 

Affected source 

Total capital 

investment 

($ million) 

Total 

annualized cost 

without 

recovery 

($ million) 

Product 

recovery credit 

($ million) 

Total 

annualized 

costs 

($ million/ yr) 

HAP 

emission 

reductions 

(ton/yr) 

Costeffectiveness 

($/ton HAP) 

Heat Exchangers 16 5.2 (2.2) 3.0 630 4,700 
58

Table 3-1. Nationwide Baseline Emissions for Refinery Heat Exchange Systems 

Model Plant Flow rate, gpm

Percent of 

total, % 

Nationwide No. of 

heat exchange 

systems in the leak 

size range 

No. that would 

need to 

implement 

requirements 

Baseline 

Emissions, TO 

HAP, ton/yr 

Model Plant 1: 5,000 38.9 210 190 46 

Model Plant 2: 15,500 28.9 160 140 100 

Model Plant 3: 42,000 28.9 160 140 280 

Model Plant 4: 105,000 3.4 18 16 82 

Totals* 100% 540 486 520 

 *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 costeffectiveness 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 
59

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 

Total capital 

investment, 

million $/yra

Total 

Annualized 

Costs, 

million $/yr 

Emission 

Reduction, 

TO HAP tpy 

Cost 

effectiveness, $/ton 

TO HAP 

Incremental cost 

effectiveness, 

$/ton 

MACT Floor $11 $4.6 430 $10,700 NA 

Alternative 1 $11 $4.9 450 $10,900 $14,600 

Alternative 2 $55 $12 460 $25,400 $1,030,000 

Table 3-3. Summary of Nationwide Impacts of Refinery Heat Exchange System 

Regulatory Alternatives, with VOC Emission Reduction Credits 

Alternative 

Total capital 

investment, 

million $/yra

Total 

Annualized 

Costs, 

with VOC 

credits, 

million $/yr 

Emission 

Reduction, 

TO HAP tpy 

Cost 

effectiveness, 

with VOC 

credits $/ton 

TO HAP 

Incremental cost 

effectiveness, 

with VOC 

credits, $/ton 

MACT Floor $11 $2.3 430 $5,300 NA 

Alternative 1 $11 $2.5 450 $5,500 $8,750 

Alternative 2 $55 $9.1 460 $20,000 $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.html#cccinfo 
60

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 

 

7

 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. 8

 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/testimony/NPRATestimony&Attachments10-19-

05.pdf 
61

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 
62

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. 
63

United States 

Environmental 

Protection 

Agency 

Office of Air Quality Planning and 

Standards 

Health and Environmental Impacts 

Division 

Research Triangle Park, NC May, 2009