Regulatory Impact Analysis for the Petroleum 

Refineries NSPS 
EPA-452/R-08-002 

April 2008 

Regulatory Impact Analysis for the Petroleum Refineries NSPS 

Prepared By: 

RTI International 

3040 Cornwallis Road 

Research Triangle Park, NC 27709 

Prepared for: 

U.S. Environmental Protection Agency 

Office of Air Quality Planning and Standards (OAQPS) 

HEID, ABCG 

(MD-C439-02) 

Research Triangle Park, NC 27711 

Contract No. EP-D-06-003 

Task Order No. 37 

U.S. Environmental Protection Agency 

Office of Air Quality Planning and Standards 

HEID, ABCG 

(MD-C439-02) 

Research Triangle Park, NC 27711 
iii 

CONTENTS 

Section Page

1 Executive Summary ...................................................................................................... 1-1

2 Introduction ................................................................................................................... 2-1

2.1 Introduction .......................................................................................................... 2-1

2.2 Reason for Today’s Action: Market Failure or Other Social Purpose ................. 2-2

2.2.1 Externality, Common Property Resource, and Public Good ................... 2-2

2.2.2 Market Power ........................................................................................... 2-2

2.2.3 Inadequate or Asymmetric Information ................................................... 2-3

2.2.4 Other Social Purposes .............................................................................. 2-3

2.3 References ............................................................................................................ 2-4

3 Industry Profile ............................................................................................................. 3-1

3.1 Introduction .......................................................................................................... 3-1

3.2 The Supply Side ................................................................................................... 3-1

3.2.1 Production Process, Inputs, and Outputs ................................................. 3-2

3.2.2 Emissions and Controls in Petroleum Refining ....................................... 3-9

3.2.3 Costs of Production ................................................................................ 3-10

3.3 The Demand Side ............................................................................................... 3-11

3.3.1 Product Characteristics .......................................................................... 3-12

3.3.2 Uses and Consumers .............................................................................. 3-13

3.3.3 Substitution Possibilities in Consumption ............................................. 3-15

3.4 Industry Organization ........................................................................................ 3-15

3.4.1 Market Structure .................................................................................... 3-15

3.4.2 Characteristics of U.S. Petroleum Refineries and Petroleum 

Refining Companies ............................................................................... 3-19

3.5 Markets .............................................................................................................. 3-24

3.5.1 U.S. Petroleum Consumption ................................................................ 3-24

3.5.2 U.S. Petroleum Production .................................................................... 3-28
iv 

3.5.3 International Trade ................................................................................. 3-29

3.5.4 Market Prices ......................................................................................... 3-31

3.5.5 Profitability of Petroleum Refineries ..................................................... 3-32

3.5.6 Industry Trends ...................................................................................... 3-33

3.6 References .......................................................................................................... 3-36 

Appendix A: Parent Company Information for Petroleum Refineries ............................. A-1 

4 NSPS Regulatory Options, Costs and Emission Reductions from Complying 

with the NSPS ............................................................................................................... 4-1

4.1 Background Information on the Setting of NSPS ................................................ 4-1

4.2 Summary of the Final NSPS and Changes Since Proposal.................................. 4-2

4.2.1 Final Amendments to the NSPS .............................................................. 4-2

4.2.2 Final Requirements for New FCCU and New FCU ................................ 4-3

4.2.3 Final Requirements for New Sulfur Recovery Plants (SRP) ................... 4-5

4.2.4 Final Requirements for New Fuel Gas Combustion Devices .................. 4-7

4.2.5 Final Work Practice Standards ................................................................. 4-8

4.2.6 Modification and Reconstruction Provisions ......................................... 4-10

4.3 Model Facility, Source Projections, and Cost Assumptions .............................. 4-10

4.3.1 FCCUs.................................................................................................... 4-11

4.3.2 Fluid Coking Units (FCU) ..................................................................... 4-13

4.4 Emissions Estimation by Unit Type .................................................................. 4-13

4.4.1 FCCUs.................................................................................................... 4-14

4.4.2 FCUs ...................................................................................................... 4-15

4.5 Control Technologies in Analysis ...................................................................... 4-16

4.6 Cost Analysis for Control Options ..................................................................... 4-18

4.7 Summary of Cost, Environmental, Energy, and Economic Impacts ................. 4-19

4.7.1 Secondary Impacts ................................................................................. 4-20

4.8 Limitations and Uncertainties Associated with the Cost Analyses ................... 4-22

4.9 References .......................................................................................................... 4-24
v 

Appendix B: Summary of Significant Comments and Responses, and Rationales 

for NSPS Emission Limits ........................................................................... B-1 

5 Economic Impact Analysis: Methods and Results ........................................................ 5-1

5.1 Market Model ....................................................................................................... 5-1

5.2 Model Baseline .................................................................................................... 5-1

5.3 Model Parameters ................................................................................................ 5-2

5.4 Results .................................................................................................................. 5-3

5.5 Executive Order 13211 (Energy Effects) ............................................................. 5-5

5.6 Limitations ........................................................................................................... 5-5

5.7 References ............................................................................................................ 5-6

6 Small Business Analysis ............................................................................................... 6-1

6.1 Data and Methods for Flexibility Analysis .......................................................... 6-1

6.2 Results of Small Business Analysis ..................................................................... 6-2

7 Human Health Benefits of Emissions Reductions ........................................................ 7-1

7.1 Calculation of Human Health Benefits ................................................................ 7-1

7.2 Characterization of Uncertainty in the Benefits Estimates ................................ 7-11

7.3 Updating the Benefits Data Underlying the Benefit-per-Ton Estimates ........... 7-12 

7.4 Comparison of Benefits and Costs ..................................................................... 7-12

7.5 References .......................................................................................................... 7-13

Appendix C: Overview of Economic Model Equations ....................................................C-1 
vi 

LIST OF TABLES 

Number Page

3-1 Types and Characteristics of Raw Materials used in Petroleum Refineries ................. 3-8

3-2 Major Refinery Product Categories .............................................................................. 3-8

3-3 Labor, Material, and Capital Expenditures for Petroleum Refineries 

(NAICS 324110) ......................................................................................................... 3-11

3-4 Costs of Materials Used in Petroleum Refining Industry ........................................... 3-12

3-5 Major Refinery Products ............................................................................................. 3-14

3-6 Market Concentration Measures of the Petroleum Refining Industry: 

1985 to 2003 ............................................................................................................... 3-18

3-7 Number of Petroleum Refineries, by State ................................................................. 3-20

3-8 Full Production Capacity Utilization Rates for Petroleum Refineries ........................ 3-21

3-9 Characteristics of Small Businesses in the Petroleum Refining Industry ................... 3-25

3-10 Total Petroleum Products Supplied (millions of barrels per year) ............................. 3-28

3-11 U.S. Refinery and Blender Net Production (millions of barrels per year) .................. 3-29

3-12 Value of Product Shipments of the Petroleum Refining Industry .............................. 3-30

3-13 Imports of Major Petroleum Products (millions of barrels per year) .......................... 3-30

3-14 Exports of Major Petroleum Products (millions of barrels per year) .......................... 3-31

3-15 Average Price of Major Petroleum Products Sold to End Users (cents per 

gallon) ......................................................................................................................... 3-31

3-16 Producer Price Index Industry Data: 1995 to 2006 ..................................................... 3-32

3-17 Mean Ratios of Profit before Taxes as a Percentage of Net Sales for Petroleum 

Refiners, Sorted by Value of Assets ........................................................................... 3-32

3-18 Net Profit Margins for Publicly Owned, Small Petroleum Refiners: 2006 ................ 3-33

3-19 Forecasted Average Price of Major Petroleum Products Sold to End Users in 

2005 Currency (cents per gallon) ................................................................................ 3-34

3-20 Total Petroleum Products Supplied (millions of barrels per year) ............................. 3-34

3-21 Selected Refinery Construction Projects: 2008–2011 ................................................ 3-35

3-22 Full Production Capacity Utilization Rates for Petroleum Refineries ........................ 3-36

4-1 Model Facility Descriptions ........................................................................................ 4-12

4-2 Emissions for Fuel Gas Combustion Devices ............................................................. 4-16

4-3 National Incremental Emission Reductions and Cost Impacts for Petroleum 

Refinery Units Subject to Final Standards Under 40 CFR Part 60, Subpart Ja 

(Fifth Year After Proposal)a

 ........................................................................................ 4-21

5-1 Baseline Market Data: 2012 .......................................................................................... 5-2

5-2 Estimates of Price Elasticity of Demand and Supply ................................................... 5-3

5-3 Summary of Intermediate Run Economic Impacts by Petroleum Product: 2012 ......... 5-4
vii 

6-1 Characteristics of Small Businesses in the Petroleum Refining Industry ..................... 6-2

7-1 General Summary of Range of Benefits Estimates for Selected Options in the 

Final NSPSa

 ................................................................................................................... 7-3

7-2 Summary of Monetized Benefits for Selected Options at 3% Discount Rate in 

2012 (millions of 2006$) .............................................................................................. 7-5

7-3 Summary of Monetized Benefits for Selected Options at 7% Discount Rate in 

2012 (millions of 2006$) .............................................................................................. 7-6

7-4 Estimated Range of Monetized Benefits in 2012 for All Options of New Process 

Units (thousands of 2006$)a .......................................................................................... 7-7

7-5 Estimated Range of Monetized Benefits in 2012 for All Options of 

Modified/Reconstructed Process Units (thousands of 2006$)a ..................................... 7-9
viii 

LIST OF FIGURES 

Number Page

3-1 Outline of the Refining Process .................................................................................... 3-3

3-2 Desalting Process .......................................................................................................... 3-3

3-3 Atmospheric Distillation Process .................................................................................. 3-4

3-4 Vacuum Distillation Process ......................................................................................... 3-5

3-5 Petroleum Refinery Expenditures ............................................................................... 3-10

3-6 Employment Distribution of Companies Owning Petroleum Refineries (N=49) ....... 3-22

3-7 Average Revenue of Companies Owning Petroleum Refineries by Employment 

(N=49) ......................................................................................................................... 3-22

3-8 Revenue Distribution of Companies Owning Petroleum Refineries (N=49) ............. 3-23

3-9 Total Petroleum Products Supplied (millions of barrels per year) ............................. 3-28

7-1 Monetized Benefits for Selected Options for Final Petroleum Refineries NSPS 

at 3% Discount Rate by PM2.5 Precursor Emitted in 2012a .......................................... 7-4

7-2 Range of Estimated Net Benefits for Selected Options for Final Petroleum 

Refineries NSPSa

 ........................................................................................................ 7-13
1-1 

SECTION 1 

EXECUTIVE SUMMARY 

EPA has characterized the facilities and companies potentially affected by the NSPS by 

examining existing refineries and the companies that own them. EPA projects that new refineries 

and processes will be similar to existing ones, and that the companies owning new sources will 

also be similar to the companies owning existing refineries. EPA has collected data on 150 

existing refineries, owned by 58 companies. Of the affected parent companies, twenty-five are 

identified as small entities based on the Small Business Administration size standard criteria for 

NAICS 324110, for they employ 1,500 or fewer employees. 

EPA estimates that complying with the final NSPS will have an annualized cost of 

approximately $31 million per year (2006 dollars) in the fifth year after proposal. Using these 

costs, EPA estimates that the NSPS will have limited impacts on the market for motor gasoline. 

Based on sales data obtained for the affected small entities, EPA estimates that, due to the 

expected annualized cost savings, that the NSPS will not result in a SISNOSE (a significant 

economic impacts for a substantial number of small entities). 

The final petroleum refineries NSPS is considered subject to the requirements of Circular 

A-4 because EPA expects that the sum of benefits and costs are potentially $1 billion or higher. 

EPA’s estimate of the benefits of the NSPS, based on information from the PM2.5 expert 

elicitation study released in October, 2006, is a range from $220 million to $1.9 billion (2006 

dollars) in the fifth year after proposal. EPA believes that the benefits are likely to exceed the 

costs by a substantial margin under this rulemaking even when taking into account uncertainties 

in the cost and benefit estimates. 
2-1 

SECTION 2 

INTRODUCTION 

The U.S. Environmental Protection Agency’s (EPA’s) Office of Air Quality Planning and 

Standards (OAQPS) is currently revising the existing Subpart J New Source Performance 

Standards (NSPS) for petroleum refineries. In addition, the Agency is adding a Subpart Ja that 

provides new requirements, including new emissions limits for new fluid catalytic cracking units 

(FCCUs), new fluid coking units, and new flares. This final regulation include emissions limits 

for new and modified/reconstructed sources, and these limits are set for sulfur dioxide (SO2), 

nitrogen oxides (NOx), coarse particulate matter (PM10), volatile organic compounds (VOC), and 

other pollutants. This regulatory impact analysis (RIA), prepared in response to requirements 

under Executive Order 12866, presents the results of analyses undertaken in support of this final 

rule including compliance costs, benefits, economic impacts, and impacts to small businesses. 

2.1 Introduction 

The petroleum refining industry comprises establishments primarily engaged in refining 

crude petroleum into refined petroleum. Examples of refined petroleum products include 

gasoline, kerosene, asphalt, lubricants, solvents, and a variety of other products. Petroleum 

refining falls under the North American Industrial Classification System (NAICS) 324110. 

This RIA is organized as follows: 

 Section 1: Executive Summary, 

 Section 2: Introduction, 

 Section 3 and an Appendix A: Profile of the Petroleum Refinery Industry, 

 Section 4: NSPS Regulatory Alternatives, and Costs and Emission Reductions From 

Complying with the NSPS, and an Appendix B: Summary of Significant Comments 

and Responses, And Rationales for NSPS Emission Limits 

 Section 5: Economic Impacts of the NSPS, 

 Section 6: Potential Impacts on Small Businesses, 

 Section 7: Benefits of the NSPS, 

 Appendix C: Alternative Calculation of Welfare Impacts Considering Cost Savings, 

and 

 Appendix D: Overview of Economic Model Equations 
2-2 

2.2 Reason for Today’s Action: Market Failure or Other Social Purpose 

The petroleum refinery NSPS is of sufficient impact to be considered as falling under the 

requirements of Circular A-4, an addendum to the existing requirements for Executive Order 

12866 (OMB, 2003). This final regulation is being issued in response to a court-ordered 

settlement between U.S. EPA and various parties requiring review of the existing NSPS. 

As discussed in Circular A-4, among the reasons a regulation such as this one may also 

be issued is to address market failure. The major types of market failure include: externality, 

market power, and inadequate or asymmetric information. Correcting market failures is a reason 

for regulation, but it is not the only reason. Other possible justifications include improving the 

functioning of government, removing distributional unfairness, or promoting privacy and 

personal freedom. 

2.2.1 Externality, Common Property Resource, and Public Good 

An externality occurs when one party’s actions impose uncompensated benefits or costs 

on another party. Environmental problems are a classic case of externality. For example, the 

smoke from a factory may adversely affect the health of local residents while soiling the property 

in nearby neighborhoods. If bargaining were costless and all property rights were well defined, 

people would eliminate externalities through bargaining without the need for government 

regulation. From this perspective, externalities arise from high transactions costs and/or poorly 

defined property rights that prevent people from reaching efficient outcomes through market 

transactions. 

Resources that may become congested or overused, such as fisheries or the broadcast 

spectrum, represent common property resources. “Public goods,” such as defense or basic 

scientific research, are goods where provision of the good to some individuals cannot occur 

without providing the same level of benefits free of charge to other individuals. 

2.2.2 Market Power 

Firms exercise market power when they reduce output below what would be offered in a 

competitive industry in order to obtain higher prices. They may exercise market power 

collectively or unilaterally. Government action can be a source of market power, such as when 

regulatory actions exclude low-cost imports. Generally, regulations that increase market power 

for selected entities should be avoided. However, there are some circumstances in which 

government may choose to validate a monopoly. If a market can be served at lowest cost only 

when production is limited to a single producer B local gas and electricity distribution services, 

for example B a natural monopoly is said to exist. In such cases, the government may choose to 
2-3 

approve the monopoly and to regulate its prices and/or production decisions. Nevertheless, you 

should keep in mind that technological advances often affect economies of scale. This can, in 

turn, transform what was once considered a natural monopoly into a market where competition 

can flourish. 

2.2.3 Inadequate or Asymmetric Information 

Market failures may also result from inadequate or asymmetric information. Because 

information, like other goods, is costly to produce and disseminate, your evaluation will need to 

do more than demonstrate the possible existence of incomplete or asymmetric information. Even 

though the market may supply less than the full amount of information, the amount it does 

supply may be reasonably adequate and therefore not require government regulation. Sellers 

have an incentive to provide information through advertising that can increase sales by 

highlighting distinctive characteristics of their products. Buyers may also obtain reasonably 

adequate information about product characteristics through other channels, such as a seller 

offering a warranty or a third party providing information. 

Even when adequate information is available, people can make mistakes by processing it 

poorly. Poor information-processing often occurs in cases of low probability, high-consequence 

events, but it is not limited to such situations. For instance, people sometimes rely on mental 

rules-of-thumb that produce errors. If they have a clear mental image of an incident which makes 

it cognitively “available,” they might overstate the probability that it will occur. Individuals 

sometimes process information in a biased manner, by being too optimistic or pessimistic, 

without taking sufficient account of the fact that the outcome is exceedingly unlikely to occur. 

When mistakes in information processing occur, markets may overreact. When it is timeconsuming or costly for consumers to evaluate complex information about products or services 

(e.g., medical therapies), they may expect government to ensure that minimum quality standards 

are met. However, the mere possibility of poor information processing is not enough to justify 

regulation. If you think there is a problem of information processing that needs to be addressed, 

it should be carefully documented. 

2.2.4 Other Social Purposes 

There are justifications for regulations in addition to correcting market failures. A 

regulation may be appropriate when you have a clearly identified measure that can make 

government operate more efficiently. In addition, Congress establishes some regulatory 

programs to redistribute resources to select groups. Such regulations should be examined to 

ensure that they are both effective and cost-effective. Congress also authorizes some regulations 
2-4 

to prohibit discrimination that conflicts with generally accepted norms within our society. 

Rulemaking may also be appropriate to protect privacy, permit more personal freedom or 

promote other democratic aspirations. 

2.3 References 

U.S. Office of Management and Budget. Circular A-4, September 17, 2003. Found on the 

Internet at <http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf>. 
3-1 

SECTION 3 

INDUSTRY PROFILE 

3.1 Introduction 

The U.S. Environmental Protection Agency’s (EPA’s) Office of Air Quality Planning and 

Standards (OAQPS) is currently revising the existing Subpart J New Source Performance 

Standards (NSPS) for petroleum refineries. In addition, the Agency is adding a Subpart Ja that 

provides new requirements, including new emissions limits for new and modified and 

reconstructed fluid catalytic cracking units (FCCUs), new fluid coking units, new process 

heaters, and new flares. These standards include emissions limits for reductions of sulfur dioxide 

(SO2), nitrogen oxides (NOx), coarse particulate matter (PM10), volatile organic compounds, 

(VOC) and other pollutants. This industry profile of the petroleum refining industry provides 

information that will support subsequent regulatory impact analyses (RIAs) and economic 

impact analyses (EIAs) that will assess the impacts of these standards. 

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 56 parent 

companies were refining petroleum in the continental United States . 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 3.2 provides a detailed 

description of the inputs, outputs, and processes involved in petroleum refining. Section 3.3 

describes the applications and users of finished petroleum products. Section 3.4 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 3.5 contains market-level data on prices and quantities and discusses trends and 

projections for the industry. 

3.2 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 
3-2 

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. 

3.2.1 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 over several stages. This section 

describes the typical stages involved in this process as well as the inputs and outputs. 

3.2.1.1 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 3-1. 

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 3-2. 

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 
3-3 

Figure 3-1. 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. 

Figure 3-2. 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. 
3-4 

(which have a much higher boiling point) at the bottom of the tower. These fractions include heavy 

fuel oil and asphalt residue (EPA, 1995). 

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 3-3. As these fractions condense, they will be drawn off their 

respective trays and potentially sent downstream for further processing (OSHA, 2003; EPA, 1995). 

Figure 3-3. 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 3-4. 

Downstream Processing. To produce the petroleum products desired by the market 

place, most fractions must be further refined after distillation or “downstream.” These 
3-5 

Figure 3-4. 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 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). 

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). 

3.2.1.2 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). 
3-6 

Wastewater typically contains a variety of contaminants (such as hydrocarbons, 

suspended solids, phenols, ammonia, sulfides, and other compounds) and must be treated 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, 
3-7 

and other equipment that surround heating or cooling 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). 

3.2.1.3 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 3-1 lists the most common chemicals used by 

petroleum refineries, their characteristics, and their applications. 

 

1

 A barrel is a unit of volume that is equal to 42 U.S. gallons. 
3-8 

Table 3-1. 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. 

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). 

3.2.1.4 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 3-2 briefly describes these product categories. A more detailed discussion of 

petroleum fuel products can be found in Section 3.3. 

Table 3-2. 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. 
3-9 

3.2.2 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). 

3.2.2.1 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). 

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). 
3-10 

3.2.2.2 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). 

3.2.3 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 3-5). 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. 

Payroll

3%

Materials

94%

Total Capital

3%

Average Percentage 

(1995–2006)

Figure 3-5. 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 
3-11 

breakdown of how much petroleum refiners spent on each of these factors of production over 

this 11-year period is provided in Table 3-3. A more exhaustive assessment of the costs of 

materials used in petroleum refining is provided in Table 3-4. 

Table 3-3. 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. 

3.3 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. 
3-12 

Table 3-4. 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. 

3.3.1 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 
3-13 

automobiles has different characteristics than the oil lubricating the car’s engine. However, as 

discussed in Section 3.1.4, finished petroleum products can be categorized into three broad 

groups based on their intended uses (EIA, 1999a): 

 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 3-5 along with a 

description of each product’s characteristics and primary uses. 

3.3.2 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, 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 
3-14 

Table 3-5. 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. 

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). 
3-15 

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). 

3.3.3 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). 

For example, equipment at large manufacturing plants often can use either residual fuel 

oil or natural gas. Often coal and natural gas can be easily substituted for residual fuel oil at 

electricity utilities. As a result, we would expect demand in these industries to be more sensitive 

to price (in the short run) than in others (EIA, 1999a). 

However, over time, demand for petroleum products could become more elastic. For 

example, automobile users could purchase more fuel-efficient vehicles or relocate to areas that 

would allow them to make fewer trips. Technological advances could also create new products 

that compete with petroleum products that currently have no substitutes. An example of such a 

technological advance would be the invention of ethanol (an alcohol produced from biomass), 

which can substitute for gasoline in spark-ignition motor vehicles (EIA, 1999a). 

3.4 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. 

3.4.1 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. 
3-16 

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. 

3.4.1.1 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 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 
3-17 

would still face competition from each other. In an unconcentrated industry, competition among 

existing firms would work to keep prices at competitive levels. 

3.4.1.2 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 3-6 for selected years between 1985 and 2003. 

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). 
3-18 

Table 3-6. 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. 

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 a 

growth to a moderate level of concentration (FTC, 2004). 

3.4.1.3 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 3.3 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. 

3.4.1.4 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 
3-19 

individual petroleum refiners would be able to significantly influence market prices given the 

current structure of the market. 

3.4.2 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. 

3.4.2.1 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 is listed in 

Table 3-7. 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. 

3.4.2.2 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, 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-bycompany 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 3-8 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 
3-20 

Table 3-7. 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. 

utilization ratio in petroleum industry represents the utilization of the atmospheric crude oil 

distillation units. 

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 
3-21 

Table 3-8. 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. 

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 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. 

3.4.2.3 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 and an Operable Atmospheric Crude Oil Distillation capacity of no more than 

125,000 barrels per calendar day total (SBA, 2008). We applied this definition in defining a 

small business refiner in our proposal RIA. However, as part of a response to a comment made 

on the proposal, we define a small business only as having 1,500 or fewer employees. 

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 56 parent companies owning refineries in the United 

States and was able to collect employment and sales data for 49 (88%) of them. 

The distribution of employment across companies is illustrated in Figure 3-6. As this 

figure shows, 25 companies (53% of the 49 total) employee 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 3-7). A distribution of the number of firms earning different levels of 

revenue is presented in Figure 3-8. 
3-22 

0%

10%

20%

30%

40%

50%

60%

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

1500

>1500

Share of Firms (%)

Figure 3-6. Employment Distribution of Companies Owning Petroleum Refineries (N=49) 

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 3-7. Average Revenue of Companies Owning Petroleum Refineries by Employment 

(N=49) 

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/>. 
3-23 

0%

10%

20%

30%

40%

50%

60%

70%

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

$100

$100-

$500

$500-

$1000

>$1000

Share of Firms (%)

Figure 3-8. Revenue Distribution of Companies Owning Petroleum Refineries (N=49) 

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/>. 

Employment, crude capacity, and location information are provided in Table 3-9 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 3.4.2.1, 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 productconsuming areas to lower transportation costs and serving niche product markets (FTC, 2004). 

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 
3-24 

refineries owned by small businesses tend to be located in relatively rural areas (see Table 3-9). 

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. 

To obtain a better sense of where the customers of these small refiners are located, RTI 

spoke with representatives from four different companies. Three of these representatives 

indicated that they primarily serve customers outside their local areas. In particular, two of these 

businesses were primarily fuel producers that used pipelines to deliver their product to customers 

up to 300 miles away. 

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 3.4.1.3, 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. 

3.5 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. 

3.5.1 U.S. Petroleum Consumption 

Figure 3-9 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). 
3-25 

Table 3-9. Characteristics of Small Businesses in the Petroleum Refining Industry 

Parent Company 

Parent 

Company 

Type 

Cumulative 

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 TX

C

American Refining Group 

Private 10,000 350 310 American 

Refining Group 

Bradford PA McKean 

County 

PAC

Arabian American Development Co 

Public 0 80 118 South Hampton 

Resources Inc. 

Silsbee TX Hardin 

County 

TXC

Calcasieu Refining Co. 

Private 30,000 638 51 Calcasieu 

Refining Co. 

Lake Charles LA Calcasieu 

Parish 

LAPa

Calumet Specialty Products 

Public 63,320 1,641 350 Calumet Specialty 

Products 

Shreveport LA Caddo Parish LA

Pa

Calumet Specialty Products 

Cotton Valley LA Caddo Parish LA

Pa

Calumet Specialty Products 

Princeton LA Caddo Parish LA

Pa

Countrymark Cooperative, Inc. 

Private 23,000 87 300 Countrymark 

Cooperative, Inc. 

Mt. Vernon IN Posey County IN

C

Cross Oil & Refining Co. Inc. 

Private 7,200 49 110 Cross Oil & 

Refining Co. Inc. 

Smackover AR Union 

County 

AC

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

Resources LLC 

Coffeyville KS Montgomery 

County 

KC

Foreland Refining Co. 

Private 2,000 56 100 Foreland Refining 

Co. 

Tonopah/Eagle Springs 

NV Nye County N

Frontier Oil Corp Private 153,000 4,000 727 Frontier Oil & 

Refining Co. 

Cheyenne WY Laramie 

County 

WC

Frontier Oil Corp El Dorado KS Butler 

County 

KC

Gary-Williams Co Private 54,000 97 200 Wynnewood 

Refining Co. 

Wynnewood OK Garvin 

County 

OC
3-26 

Table 3-9. 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 Esc

Co

Greka Integrated Inc Private 9,500 22 145 Greka Integrated Inc Santa Maria CA San

Co

Gulf Atlantic Operations LLC 

Private 16,700 9 32 Gulf Atlantic 

Operations LLC 

Mobile Bay AL Mo

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

Navajo Refining Co. Artesia NM Ed

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

Co

Hunt Southland Refining 

Lumberton MS Lam

Hunt Southland Refining 

Sandersville MS Lam

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

Pelican Refining Co. LLC 

Private 0 29 62 Pelican Refining Co. 

LLC 

Lake Charles LA Ca

Par

Placid Refining Inc. Private 56,000 1,400 200 Placid Refining Inc. Port Allen LA We

Ro

San Joaquin Refining Co., Inc. 

Private 15,000 288 20 San Joaquin Refining 

Co., Inc. 

Bakersfield CA Ke

Somerset Oil Inc Private 5,500 55 150 Somerset Refinery 

Inc. 

Somerset KY Pul

Trigeant Ltd. Private 0 5 50 Trigeant Ltd. Corpus Christi TX Nu
3-27 

Table 3-9. 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. Public 212,200 4,200 416 Western Refining, 

Inc. 

El Paso TX El 

Giant Refining Co. Yorktown VA YoGiant Refining Co. Bloomfield NM San 

Co

Giant Refining Co. Gallup NM Mc

Co

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

Co

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

Co. 

Newcastle WY We

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) 10

Available through American Fact Finder <http://factfinder.census.gov/home/saff/main.html?_lang=en>. As obtained on February 21
3-28 

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 3-9). This reduced growth was primarily the result of less jet fuel and residual fuel 

being consumed in recent years (Table 3-10). 

6,800

7,000

7,200

7,400

7,600

7,800

2000 2001 2002 2003 2004 2005 2006

Figure 3-9. Total Petroleum Products Supplied (millions of barrels per year) 

Table 3-10. 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). 1996–2007 . “Petroleum Supply 

Annuals, 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. 

3.5.2 U.S. Petroleum Production 

Table 3-11 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 
3-29 

Table 3-11. 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). 1996–2007. “Petroleum Supply 

Annuals, 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. 

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 3.4.2). 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 

petroleum products rebounded, increasing 1% over 2004 levels. Additional production data are 

presented in Table 3-12, which reports the value of shipments of products produced by the 

petroleum refining industry between 1997 and 2006. 

3.5.3 International Trade 

International trade is a growing component of the U.S. Petroleum refining industry. This 

trend is demonstrated in Tables 3-13 and 3-14. Between 1995 and 2006, imports and exports of 

petroleum products increased by more than 50%. While imports of most major petroleum 

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). 
3-30 

Table 3-12. 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/ 

m01as-2.pdf>. As obtained on March 4, 2008. 

Table 3-13. 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).1996–2007. “Petroleum Supply 

Annuals, 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. 
3-31 

Table 3-14. 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). 1996–2007. “Petroleum Supply 

Annuals, 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. 

3.5.4 Market Prices 

The average nominal prices of major petroleum products sold to end users are provided 

for selected years in Table 3-15.2 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. 

Table 3-15. 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 

Note: Prices do not include taxes. 

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. 

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 3-16 by comparing the producer price index (PPI) for the petroleum refining industry 

 

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. 
3-32 

Table 3-16. 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. 

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. 

3.5.5 Profitability of Petroleum Refineries 

Estimates of the mean profit (before taxes) to net sales ratios for petroleum refiners are 

reported in Table 3-17 for the 2006–2007 fiscal year. These ratios were calculated by Risk 

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. 

Table 3-17. 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. 

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 
3-33 

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 3.4.2.3 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 for in Table 3-18. 

Table 3-18. 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>. 

3.5.6 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 
3-34 

policies affecting the energy sector will remain unchanged throughout the projection period 

(EIA, 2007c). 

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 

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 3-19). These 

lower prices will, in turn, encourage more petroleum products to be consumed (Table 3-20). 

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%. 

Table 3-19. 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 3-20. 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. 

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 2008 Worldwide Construction Update survey alone 
3-35 

catalogued over 40 refining construction projects that have been announced in the United States. 

Table 3-21 lists selected refinery construction projects. The projects listed include two refinery 

expansion projects and six new processes (distillation units, delayed cokers, and mild 

hydrocrackers). 

Table 3-21. 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 15,000 2008 

 New vacuum distillation unit 15,000 2008 

Holly Corp, Woods Cross, UT New Mild hydrocracker 15,000 2008 

Artesia, NM New Mild hydrocrackert 15,000 2008 

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

Placid Refining Inc. New crude distillation unit 25,000 2010 

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

Source: Oil and Gas Journal. April 7, 2008.Worldwide Construction Update. 

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 3-22). 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. 
3-36 

Table 3-22. 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. 

3.6 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. 

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. 
3-37 

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. 

Oil and Gas Journal. April 7, 2008.Worldwide Construction Update.. 

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. 
3-38 

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. 

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). 1996–2007. “Petroleum 

Supply Annuals, 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. 
3-39 

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. 

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/1339048/000095 

013407005096/h44360e10vk.htm>. 
A-1 

APPENDIX A: 

PARENT COMPANY INFORMATION FOR PETROLEUM REFINERIES 
A-2 

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) Em

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 16Big West Oil Co. Salt Lake City UT 29,400 D Subsidiary Flying J Inc Private 11,350 16BP Whiting IN 410,000 F Subsidiary BP PLC Public 274,316 97BP Texas City TX 437,000 F Subsidiary BP PLC Public 274,316 97BP Prudhoe Bay AK 12,500 F Subsidiary BP PLC Public 274,316 97BP Carson CA 260,000 F Subsidiary BP PLC Public 274,316 97BP Ferndale WA 225,000 F Subsidiary BP PLC Public 274,316 97BP Toledo OH 131,000 F Subsidiary BP PLC Public 274,316 97Calcasieu 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 62

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

Chevron Corporation Public 210,118 62

Chevron USA Inc. Portland OR D Subsidiary 

Chevron Corporation Public 210,118 62

Chevron USA Inc. Pascagoula MS 330,000 D Subsidiary 

Chevron Corporation Public 210,118 62
A-3 

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)

Em

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

Chevron Corporation Public 210,118 62

Chevron USA Inc. Richmond CA 242,901 D Subsidiary 

Chevron Corporation Public 210,118 62

Chevron USA Inc. 

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

Chevron Corporation Public 210,118 62

Citgo Corpus Christi TX 156,000 F Subsidiary 

Petróleos de Venezuela S.A. (PDVSA) 

Government 

Owned NA 49

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

Petróleos de Venezuela S.A. (PDVSA) 

Government 

Owned NA 49

Citgo Petroleum Savannah GA 28,000 F Subsidiary 

Petróleos de Venezuela S.A. (PDVSA) 

Government 

Owned NA 49

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

Petróleos de Venezuela S.A. (PDVSA) 

Government 

Owned NA 49

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 
A-4 

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)

Em

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 2

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 2Ergon-West Virginia Inc. Newell (Congo) WV 20,000 D Subsidiary Ergon, Inc. Private 1,300 2ExxonMobil 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 82

Flint Hills Resources Corpus Christi TX 288,126 D Subsidiary 

Koch Industries Inc Private 51,500 85

Flint Hills Resources North Pole AK 210,000 D Subsidiary 

Koch Industries Inc Private 51,500 85
A-5 

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)

Emp

Flint Hills Resources Rosemount MN 279,300 D Subsidiary 

Koch Industries Inc Private 51,500 85

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 1

Hunt Southland Refining Sandersville MS 11,000 D Subsidiary 

Hunt Refining Co. Private 4,871 1

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 7

Lunday-Thagard Co. South Gate CA 8,500 D Subsidiary World Oil Corp Private 277 
A-6 

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 
A-7 

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

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 
A-8 

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) Em

Sinclair Oil Corp. Sinclair WY 66,000 D Subsidiary 

Sinclair Companies Private 5,500 7

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 5

Suncor Energy Denver CO 32,000 F Subsidiary 

Suncor Energy Inc Public 13,583 5

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 3Tesoro Salt Lake City UT 58,000 D Subsidiary Tesoro Corp Public 18,104 3Tesoro Anacortes WA 120,000 D Subsidiary Tesoro Corp Public 18,104 3Tesoro Golden Eagle CA 166,000 D Subsidiary Tesoro Corp Public 18,104 3Tesoro Kapolei HI 93,500 D Subsidiary Tesoro Corp Public 18,104 3Tesoro Kenai AK 72,000 D Subsidiary Tesoro Corp Public 18,104 3Total 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 7

US Oil & Refining Co. Tacoma WA 37,850 NA NA Valero Energy Corpus Christi TX 142,000 D 91,833 21,836 Public 
A-9 

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) Em

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. 
4-1 

SECTION 4 

NSPS REGULATORY OPTIONS, COSTS AND EMISSION REDUCTIONS FROM 

COMPLYING WITH THE NSPS 

This section of the RIA provides descriptions of the regulatory options considered in the 

developing of this final NSPS, and also the costs and emission reductions estimated for each 

option. An appendix to this section (Appendix B) provides details on the rationale behind the 

choice of each option that is included in this NSPS. 

4.1 Background Information on the Setting of NSPS 

New source performance standards (NSPS) implement CAA section 111(b) and are 

issued for categories of sources which cause, or contribute significantly to, air pollution which 

may reasonably be anticipated to endanger public health or welfare. The primary purpose of the 

NSPS is to attain and maintain ambient air quality by ensuring that the best demonstrated 

emission control technologies are installed as the industrial infrastructure is modernized. Since 

1970, the NSPS have been successful in achieving long-term emissions reductions in numerous 

industries by assuring cost-effective controls are installed on new, reconstructed, or modified 

sources. 

Section 111 of the CAA requires that NSPS reflect the application of the best system of 

emission reductions which (taking into consideration the cost of achieving such emission 

reductions, any non-air quality health and environmental impact and energy requirements) the 

Administrator determines has been adequately demonstrated. This level of control is commonly 

referred to as best demonstrated technology (BDT). 

Section 111(b)(1)(B) of the CAA requires EPA to periodically review and revise the 

standards of performance, as necessary, to reflect improvements in methods for reducing 

emissions. As a result of our periodic review of the NSPS for petroleum refineries (40 CFR part 

60, subpart J), we proposed amendments to the current standards of performance and separate 

standards of performance for new process units (72 FR 27278, May 14, 2007). In response to 

several requests, we extended the 60-day comment period from July 13, 2007, to August 27, 

2007 (72 FR 35375, June 28, 2007). We also issued a notice of data availability (72 FR 69175, 

December 7, 2007) (NODA) to notify the public that additional information had been added to 

the docket; the NODA also extended the public comment period on the proposed rule to January 

7, 2008. We received a total of 38 comments from refineries, industry trade associations, and 

consultants; State and local environmental and public health agencies; environmental groups; 

and members of the public during the extended comment period and 8 additional comments on 
4-2 

the NODA. These final rules reflect our full consideration of all of the comments we received. 

Detailed responses to the comments are contained in the Response to Comments document 

which is included in the docket for this rulemaking. 

4.2 Summary of the Final NSPS and Changes Since Proposal 

We are promulgating several amendments to provisions in the existing NSPS in 40 CFR 

part 60, subpart J. Many of these amendments are technical clarifications and corrections that are 

also included in the final standards in 40 CFR part 60, subpart Ja. For example, we are revising 

the definition of “fuel gas” to indicate that vapors collected and combusted to comply with 

certain wastewater and marine vessel loading provisions are not considered fuel gas. 

Consequently, these vapors are exempt from the sulfur dioxide (SO2) treatment standard in 40 

CFR 60.104(a)(1) and are not required to be monitored. In a related amendment, we are 

clarifying that monitoring is not required for fuel gases that are identified as inherently low 

sulfur or demonstrated to contain a low sulfur content. We are also revising the coke burn-off 

equation to account for oxygen (O2)-enriched air streams. Other amendments include 

clarification of definitions and correction of grammatical and typographical errors. 

The final standards in 40 CFR part 60, subpart Ja include emission limits for fluid 

catalytic cracking units (FCCU), fluid coking units (FCU), sulfur recovery plants (SRP), and fuel 

gas combustion devices. Subpart Ja also includes work practice standards for minimizing 

emissions of volatile organic compounds (VOC) from flares and SO2 emissions from fuel gas 

combustion devices and for reducing emissions of VOC from delayed coking units. Only those 

affected facilities that begin construction, modification, or reconstruction after May 14, 2007 will 

be affected by the standards in 40 CFR part 60, subpart Ja. Units for which construction, 

modification, or reconstruction began on or before May 14, 2007 must continue to comply with 

the applicable standards under the current NSPS in 40 CFR part 60, subpart J, as amended. 

4.2.1 Final Amendments to the NSPS 

As proposed, we are amending the definition of “fuel gas” to specifically exclude vapors 

that are collected and combusted in an air pollution control device installed to comply with a 

specified wastewater or marine vessel loading emissions standard. The thermal combustion 

control devices themselves are still considered to be affected fuel gas combustion devices if they 

combust other gases that meet the definition of fuel gas, and all auxiliary fuel gas fired to these 

devices are subject to the fuel gas limit; however, continuous monitoring is not required for the 

vapors collected from wastewater or marine vessel loading operations that are being incinerated 
4-3 

because these gases are not considered to be fuel gases under the definition of “fuel gas” in 

subpart J. 

We are also exempting certain fuel gas streams from all continuous monitoring 

requirements. Monitoring is currently not required for combustion in a flare of process upset 

gases or flaring of gases from relief valve leakage or emergency malfunctions. Additionally, 

monitoring is not required for inherently low sulfur fuel gas streams. These streams include pilot 

gas flames, gas streams that meet commercial-grade product specifications with a sulfur content 

of 30 parts per million by volume (ppmv) or less, fuel gases produced by process units that are 

intolerant to sulfur contamination, and fuel gas streams that an owner or operator can 

demonstrate are inherently low-sulfur. Owners and operators are required to document the 

exemption for which each fuel gas stream applies and ensure that the stream remains qualified 

for that exemption. 

We proposed to amend the definition of “Claus sulfur recovery plant” in 40 CFR 

60.101(i) to clarify that the SRP may consist of multiple units and that primary sulfur pits are 

considered part of the Claus SRP based on a recent applicability determination. However, due to 

concerns regarding retroactive non-compliance, we are not amending this definition in the final 

amendments for subpart J. Similarly, we proposed revisions to the subpart J definitions of 

“oxidation control system” and “reduction control system” in 40 CFR 60.101(j) and 40 CFR 

60.101(k), respectively, to clarify that these systems were intended to recycle the sulfur back to 

the Claus SRP. The proposed amendments needlessly limit the types of tail gas treatment 

systems that can be used; therefore, we are not amending these definitions in the final 

amendments for subpart J. 

4.2.2 Final Requirements for New FCCU and New FCU 

The final standards for new fluid catalytic cracking units include emission limits for 

particulate matter (PM), SO2, nitrogen oxides (NOx), and carbon monoxide (CO). The final 

standards include no universal opacity limit because the opacity limit in subpart J is intended to 

ensure compliance with the PM limit. Subpart Ja requires that sources use direct PM monitoring, 

bag leak detection systems, or parameter monitoring (along with annual emission tests) to ensure 

compliance with the PM limit. A provision for a site-specific opacity operating limit is provided 

for units that meet the PM emission limits using a cyclone. 

For PM emissions from new FCCU and new FCU, we proposed a PM limit of 0.5 pounds 

(lb)/1,000 lb coke burnoff in the regenerator or (if a PM continuous emission monitoring system 

(CEMS) is used), 0.020 grains per dry standard cubic feet (gr/dscf) corrected to 0% excess air. 
4-4 

We have revised the final PM standards to establish separate limits for modified or reconstructed 

FCCU (1 lb/1,000 lb coke burn or 0.040 gr/dscf corrected to 0% excess air) and newly 

constructed FCCU (0.5 lb/1,000 lb coke burn or 0.020 gr/dscf corrected to 0% excess air). The 

final PM limit for new, modified, or reconstructed FCU is 1 lb/1,000 lb coke burn or 0.040 

gr/dscf corrected to 0% excess air). 

Initial compliance with the PM emission limits for FCCU and FCU is determined using 

EPA Method 5, 5B or 5F (40 CFR part 60, appendix A) instead of being restricted to only EPA 

Method 5 as previously proposed. Procedures for computing the PM emission rate using the total 

PM concentration, effluent gas flow rate, and coke burn-off rate are the same as in 40 CFR part 

60, subpart J, as amended. To demonstrate ongoing compliance, an owner or operator must 

monitor PM emission control device operating parameters and conduct annual PM performance 

tests, use a PM CEMS, or operate bag leak detection systems and conduct annual PM 

performance tests. A new alternative allows refineries with wet scrubbers as PM control devices 

to use the approved alternative in 40 CFR 63.1573(a) for determining exhaust gas flow rate 

instead of a continuous parameter monitoring system (CPMS). An alternative to the requirements 

for monitoring the pressure drop from wet scrubbers that are equipped with jet ejectors or 

atomizing spray nozzles is to conduct a daily check of the air or water pressure to the nozzles and 

record the results of each inspection. The final rule also includes procedures for establishing an 

alternative opacity operating limit for refiners that use continuous opacity monitoring systems 

(COMS); this alternative is allowed only for units that choose to comply with the PM limit using 

cyclones. If operating parameters are used to demonstrate ongoing compliance, the owner or 

operator must monitor the same parameters during the initial performance test, and develop 

operating parameter limits for the applicable parameters. The operating limits must be based on 

the three-run average of the values for the applicable parameters measured over the three test 

runs. If ongoing compliance is demonstrated using a PM CEMS, the CEMS must meet the 

conditions in Performance Specification 11 (40 CFR part 60, appendix B) and the quality 

assurance (QA) procedures in Procedure 2, 40 CFR part 60, appendix F. The relative response 

audits must be conducted annually (in lieu of annual performance tests for units not employing a 

PM CEMS) and response correlation audits must be conducted once every 5 years. 

For NOx emissions from affected FCCU and FCU, we proposed a limit of 80 ppmv based 

on a 7-day rolling average (dry basis corrected to 0% excess air) and co-proposed having no limit 

for FCU. We are adopting the 80 ppmv NOx emission limits for FCCU and FCU as proposed. 

Initial compliance with the 80 ppmv emission limit is demonstrated by conducting a performance 

evaluation of the CEMS in accordance with Performance Specification 2 in 40 CFR part 60, 
4-5 

appendix B, with Method 7 (40 CFR part 60, appendix A) as the reference method. Ongoing 

compliance with these emission limits is determined using the CEMS to measure NOx emissions 

as discharged to the atmosphere, averaged over 7-day periods. 

No changes have been made to the proposed SO2 emission limits for affected FCCU and 

FCU. The final SO2 emission limits are to maintain SO2 emissions to the atmosphere less than or 

equal to 50 ppmv on a 7–day rolling average basis, and less than or equal to 25 ppmv on a 

365-day rolling average basis (both limits corrected to 0% moisture and 0% excess air). Initial 

compliance with the final SO2 emission limits is demonstrated by conducting a performance 

evaluation of the SO2 CEMS in accordance with Performance Specification 2 in 40 CFR part 60, 

appendix B with Method 6, 6A, or 6C of 40 CFR part 60, appendix A as the reference method. 

Ongoing compliance with both SO2 emission limits is determined using the CEMS to measure 

SO2 emissions as discharged to the atmosphere, averaged over the 7-day and 365-day averaging 

periods. 

No changes have been made since proposal to the CO limits. The final CO emission limit 

for affected fluid catalytic cracking units and FCU is 500 ppmv (1-hour average, dry at 0% 

excess air). Initial compliance with this emission limit is demonstrated by conducting a 

performance evaluation for the CEMS in accordance with Performance Specification 4 in 40 

CFR part 60, appendix B, with Method 10 or 10A in 40 CFR part 60, appendix A as the 

reference method. For Method 10, the integrated sampling technique is to be used. Ongoing 

compliance with this emission limit is determined on an hourly basis using the CEMS to measure 

CO emissions as discharged to the atmosphere. An exemption from monitoring may be requested 

for an FCCU or FCU if the owner or operator can demonstrate that “average CO emissions” are 

less than 50 ppmv (dry basis). This limit and the compliance procedures are the same as in the 

existing NSPS for FCCU. As proposed, units that are exempted from the CO monitoring 

requirements must comply with control device operating parameter limits. 

4.2.3 Final Requirements for New Sulfur Recovery Plants (SRP) 

For new, modified, and reconstructed SRP with a capacity greater than 20 long tons per 

day (LTD), we proposed a limit of 250 ppmv total sulfur (combined SO2 and reduced sulfur 

compounds) as SO2 (dry basis at 0% excess air determined on a 12-hour rolling average basis). 

The refinery could comply with the limit for each process train or release point or with a flow 

rate weighted average of 250 ppmv for all release points. For affected SRP with a capacity less 

than 20 LTD, we proposed a mass emissions limit for total sulfur equal to 1 weight percent or 

less of sulfur recovered (determined hourly on a 12-hour rolling average basis). 
4-6 

In this final rule, we are adopting the current limits in subpart J (which include separate 

emission limits for oxidative and reductive systems) for affected SRP with a capacity greater 

than 20 LTD. For these affected SRP, the final limits for SRP having an oxidation control system 

or a reduction control system followed by incineration is 250 ppmv (dry basis) of SO2 at 0% 

excess air. For an affected SRP with a reduction control system not followed by incineration, the 

final limit is 300 ppmv of reduced sulfur compounds and 10 ppmv of hydrogen sulfide (H2S), 

each calculated as ppm SO2 by volume (dry basis) at 0% excess air. If the SRP consists of 

multiple process trains or release points, the limits apply to each process train or release points. 

A new alternative allows refineries to use a correlation to calculate their effective emission limit 

for Claus SRP that use oxygen enrichment in the Claus burner. For an affected SRP with a 

capacity of 20 LTD or less, the sulfur recovery efficiency standard is based on a sulfur recovery 

efficiency of 99%. However, due to the difficulties associated with on-going monitoring of SRP 

recovery efficiency, in this final rule, we are promulgating concentration limits that correlate 

with a sulfur recovery efficiency of 99%. For a Claus unit with an oxidative control system or 

any small SRP followed by an incinerator the emission limit is 2,500 ppmv (dry basis) of SO2 at 

0% excess air. For all other small SRP, the emission limit is 3,000 ppmv reduced sulfur 

compound and 100 ppmv H2S, each calculated as ppm SO2 by volume (dry basis) at 0% excess 

air. A similar correlation is provided for small Claus SRP that use oxygen enrichment, similar to 

that provided for large SRP. The standards for small SRP apply to all release points from the 

SRP combined (note that secondary sulfur storage units are not considered part of the SRP). We 

are not promulgating the H2S limit of 10 ppmv (dry basis, at 0% excess air determined on a 12-

hour rolling average basis) or related operating limits that were included in §60.102a(e) and (f) 

of the proposed rule. 

Initial compliance with the emission limit for large SRP (capacity greater than 20 LTD) is 

demonstrated by conducting a performance evaluation for the SO2 CEMS in accordance with 

either Performance Specification 2 (40 CFR part 60, appendix B) for SRP with oxidation control 

systems or reduction control systems followed by incineration or Performance Specification 5 

(40 CFR part 60, appendix B) for SRP with reduction control systems not followed by 

incineration. 

Ongoing compliance with the SO2 limits for large SRP is determined using an SO2

CEMS (for oxidative or reductive systems followed by incineration) or a CEMS that uses an air 

or O2 dilution and oxidation system to convert the reduced sulfur to SO2 and then measures the 

total resultant SO2 concentration (for reductive systems not followed by incineration). An O2
4-7 

monitor is also required for converting the measured combined SO2 concentration to the 

concentration at 0% O2. 

Initial and ongoing compliance requirements for small SRPs are the same as for large 

SRPs. 

4.2.4 Final Requirements for New Fuel Gas Combustion Devices 

In the subpart Ja proposal, we divided fuel gas combustion units into two separate 

affected sources: “process heaters” and “other fuel gas combustion devices.” In response to 

comments, we have eliminated the proposed definition of “other fuel gas combustion devices” 

and revised the standards to either refer to fuel gas combustion devices, which include process 

heaters, or to refer specifically to process heaters. This revision makes the definition of “fuel gas 

combustion devices” consistent with subpart J. We have also added a definition of “flare.” 

We proposed a primary sulfur oxides emission limit for fuel gas combustion devices of 

20 ppmv or less SO2 (dry at 0% excess air) on a 3-hour rolling average basis and 8 ppmv or less 

on a 365-day rolling average basis. We also proposed an alternative limit of 160 ppmv H2S or, in 

the case of coker-derived fuel gas, for total reduced sulfur (TRS) on a 3-hour rolling average 

basis and 60 ppmv or less on a 365-day rolling average basis. We are promulgating the 20 ppmv 

and 8 ppmv limits for SO2 as proposed. We are also promulgating the alternative limit, except 

that the limits are expressed and measured as H2S in all cases. The alternative H2S limit is 162 

ppmv or less in the fuel gas on a 3-hour rolling average basis and 60 ppmv or less in the fuel gas 

on a 365-day rolling average basis. The final rule does not include an alternative TRS limit for 

SO2. 

Initial compliance with the 20 ppmv SO2 limit or the 162 ppmv H2S concentration limits 

is demonstrated by conducting a performance evaluation for the CEMS. The performance 

evaluation for an SO2 CEMS is conducted in accordance with Performance Specification 2 in 40 

CFR part 60, appendix B. The performance evaluation for an H2S CEMS is conducted in 

accordance with Performance Specification 7 in 40 CFR part 60, appendix B. Ongoing 

compliance with the sulfur oxides emission limits is determined using the applicable CEMS to 

measure either SO2 in the exhaust gas to the atmosphere or H2S in the fuel gas, averaged over the 

3-hour and 365-day averaging periods. 

Similar to clarifications for 40 CFR part 60, subpart J, the definition of “fuel gas” 

includes exemptions for vapors collected and combusted in an air pollution control device 

installed to comply with specified wastewater or marine vessel loading provisions. We are also 
4-8 

streamlining the process for an owner or operator to demonstrate that a fuel gas stream not 

explicitly exempted from continuous monitoring is inherently low sulfur. 

For new, modified, or reconstructed process heaters with a rated capacity greater than 20 

million British thermal units per hour (MMBtu/hr), we proposed a NOx limit of 80 ppmv (dry 

basis, corrected to 0% excess air) on a 24-hour rolling average basis. The final NOx emission 

limit for affected process heaters is 40 ppmv on a 24-hour rolling average basis (dry at 0% 

excess air) for process heaters greater than 40 MMBtu/hr. For process heaters greater than 100 

MMBtu/hr capacity, initial compliance with the 40 ppmv emission limit is demonstrated by 

conducting a performance evaluation of the CEMS in accordance with Performance 

Specification 2 in 40 CFR part 60, appendix B. For process heaters between 40 MMBtu/hr and 

100 MMBtu/hr capacity, initial compliance is demonstrated using EPA Method 7. For process 

heaters greater than 100 MMBtu/hr capacity, ongoing compliance with this emission limit is 

determined using the CEMS to measure NOx emissions as discharged to the atmosphere, 

averaged over 24-hour periods. For process heaters between 40 MMBtu/hr and 100 MMBtu/hr 

capacity, ongoing compliance with this emission limit is determined using biennial performance 

tests. 

4.2.5 Final Work Practice Standards 

We proposed three work practice standards to reduce SO2, VOC, and NOx emissions 

from flares and from startup, shutdown, and malfunction events and to reduce VOC and SO2 

emissions from delayed coking units. We also co-proposed to require only one of these work 

practice standards: the requirement to depressure delayed coking units. This proposed standard 

required new delayed coking units to depressure to 5 pounds per square inch gauge (psig) during 

reactor vessel depressuring and vent the exhaust gases to the fuel gas system. 

We are promulgating a work practice standard for delayed coking units and modified 

requirements to reduce emissions from flares. The final work practice standard for delayed 

cokers requires affected delayed coking units to depressure to 5 pounds per square inch gauge 

(psig) during reactor vessel depressuring. We are requiring the exhaust gases to be vented to the 

fuel gas system as proposed or to a flare. 

To reduce SO2 emissions from the combustion of sour fuel gases, the final rule requires 

refineries to conduct a root cause analysis of any emissions limit exceedance or process start-up, 

shutdown, upset, or malfunction that causes a discharge into the atmosphere, either directly or 

indirectly, from any fuel gas combustion unit subject to the provisions of subpart Ja that exceeds 
4-9 

500 pounds per day (lb/day) of SO2. Recordkeeping and reporting requirements apply in the 

event of such a discharge. 

We are not promulgating the proposed definition of “fuel gas producing unit” and the 

proposed requirement for “no routine flaring.” Instead, we are promulgating the following 

requirements: (1) flare fuel gas flow rate monitoring; (2) a flare fuel gas flow rate limit; and (3) a 

flare management plan. Affected flares cannot exceed 250,000 standard cubic feet per day (scfd) 

on a 30-day rolling average basis. In cases where the flow exceeds this value, this would require 

installation of a flare gas recovery system or other methods to reduce flaring from the affected 

flare. A provision is provided for an exclusion from the flow limitation for times when the 

refinery can demonstrate that the refinery produces more fuel gas than it needs to fuel the 

refinery combustion devices (i.e., it is fuel gas rich) or that the flow is due to an upset or 

malfunction, provided the refinery follows procedures outlined in the flare management plan. 

The flare management plan should address potential causes of fuel gas imbalances (i.e., excess 

fuel gas) and records to be maintained to document these periods. To demonstrate compliance 

with the flow limitations, flow rate monitors must be installed and operated. As described in 40 

CFR 60.103a(a), the flare management plan must include a diagram illustrating all connections 

to each affected flare, identification of the flow rate monitoring device and a detailed description 

of the manufacturer’s specifications regarding quality assurance procedures, procedures to 

maintain to minimize flaring during planned start-up and shut down events, and procedures for 

implementing root cause analysis when daily flow to the flare exceeds 500,000 scfd. The root 

cause analysis procedures should address the evaluation of potential causes of upsets or 

malfunctions and records to be maintained to document the cause of the upset or malfunction. 

Excess emission events for the flow rate limit of 250,000 scfd and the result of root cause 

analysis must be reported in the semi-annual compliance reports. 

Because affected flares are also affected fuel gas combustion devices, the root cause 

analysis for SO2 emissions exceeding 500 lbs/day also applies to flares. However, compliance 

with the 500 lb/day root cause analysis will also require continuous monitoring of total reduced 

sulfur of all gases flared. Although all fuel gas combustion devices are required to comply with 

continuous H2S monitoring of fuel gas, flares routinely accept gases from upsets, malfunctions 

and startup and shutdown events, and H2S or sulfur monitoring is not specifically required for 

these gases. In subpart Ja, we explicitly require TRS monitoring to ensure that the 500 lb/day 

SO2 trigger is accurately measured. We also note that for affected flares, the RCA trigger is 500 

lbs/day, not 500 lbs/day in excess of an emissions limit. 
4-10 

4.2.6 Modification and Reconstruction Provisions 

Existing affected facilities that commence modification or reconstruction after May 14, 

2007, are subject to the final standards in 40 CFR part 60, subpart Ja. A modification is any 

physical or operational change to an existing affected facility which results in an increase in the 

emission rate to the atmosphere of any pollutant to which a standard applies (see 40 CFR 60.14). 

Changes to an existing affected facility that do not result in an increase in the emission rate, as 

well as certain changes that have been exempted under the General Provisions (see 40 CFR 

60.14(e)), are not considered modifications. 

In response to comments regarding the work practice standards for flares and fuel gas 

producing units, we re-evaluated the work practice standards and have decided to define a flare 

as the affected source rather than a fuel gas producing unit. The intermittent operation of a flare 

makes it difficult to use the criteria of 40 CFR 60.14 to determine when a flare is modified; 

therefore, we have specified in the final rule the criteria that define a modification to a flare. A 

flare is considered to be modified if: (1) any piping from a refinery process unit or fuel gas 

system is newly connected to the flare or (2) the flare is physically modified to increase flow 

capacity . 

Special provisions are included for NOx emissions from certain existing process heaters 

that were modified or reconstructed between proposal and promulgation of this final rule in order 

to avoid the retroactive application of the more stringent NOx emissions limit in the final rule. 

Existing process heaters with a rated capacity of greater than 40 MMBtu/hr for which 

modification or reconstruction commenced after May 14, 2007, and on or before the date of 

publication of this final rule in the Federal Register are subject to the same NOx emission limit 

as proposed (80 ppmv, dry basis corrected to 0% excess air on a 24-hour rolling average basis). 

Petroleum refinery process units are subject to the final standards in 40 CFR part 60, 

subpart Ja if they meet the criteria under the reconstruction provisions, regardless of changes in 

emission rate. Reconstruction means the replacement of components of an existing facility such 

that (1) the fixed capital cost of the new components exceeds 50% of the fixed capital cost that 

would be required to construct a comparable entirely new facility; and (2) it is technologically 

and economically feasible to meet the applicable standards (40 CFR 60.15). 

4.3 Model Facility, Source Projections, and Cost Assumptions 

EPA developed control options for this final to limit emissions of particulate matter, 

sulfur dioxide, nitrous oxides and volatile organic compounds from new and modified processes 

at petroleum refineries, including FCCUs, SRUs, cokers, and process heaters. EPA has estimated 
4-11 

the costs of complying with the final NSPS under each of the options, using a model facility 

approach. During the 5-year period of analysis (or the analysis of impacts in the fifth year after 

proposal), EPA assumes the industry will invest in enough new processes to be equivalent to an 

average of three new refineries per year, or a total of 15 new refineries. Further, the new sources 

are assumed to be 40% new processes or facilities and 60% modified or reconstructed facilities 

or processes. 

Table 4-1 illustrates the assumptions used to characterize the model facilities and 

processes upon which the costs of complying with the rule are based. More details follow on 

these assumptions. 

To project the number of new, reconstructed, and modified process units over the next 5 

years, we used many of the same assumptions as in the analysis for subpart GGG, including the 

average number of process units at a refinery (Parrish, Randall, and Coburn, 2006). That analysis 

assumes that there are 0.8 FCCUs and 0.4 coking units per refinery and that 15 refineries’ worth 

of process units become subject (i.e., are either new, reconstructed, or modified) over the 5 years 

following proposal. We also assumed that 40% of the FCCUs are new and 60% are reconstructed 

or modified. 

4.3.1 FCCUs 

We identified four scenarios to characterize FCCUs, one for new process units and three 

for reconstructed and modified process units. In this analysis, currently refers to the situation 

prior to new NSPS requirements and baseline refers to the requirements if no new standards are 

implemented(in most cases, baseline is compliance with subpart J). 

1. New (baseline = comply with subpart J) 

2. Currently subject to subpart J (baseline = continue to comply with subpart J) 

3. Currently subject to consent decree (baseline = continue to comply with consent 

decree requirements, assuming these are equal to or more stringent than subpart J) 

4. Currently subject to MACT (baseline = comply with subpart J) 

We assumed that the currently existing process units that are reconstructed or modified are 

broken down into Scenarios 2, 3, and 4 as follows: 

 10% are subject to MACT and not subpart J (Scenario #4). 
4-12 

Table 4-1. Model Facility Descriptions 

Model Facility Description Items Included in the Costs 

Number 

Facilities 

New facility/major new expansion  FCCU PM, SO2, and NOx controls 

 11 new process heaters with NOx controls 

 New fuel gas combustion device 

 Implement work practice standards a

2 

New FCCU  FCCU PM, SO2, and NOx controls 

 2 new process heaters with NOx controls 

 Modified/reconstructed fuel gas combustion device 

 Implement work practice standardsb

1 

New processes  2 process heaters with NOx controls 

 Modified/reconstructed fuel gas combustion device 

 Implement work practice standardsb

6 

Small business with new processes  SRU tail gas treatment 

 3 process heaters with retrofit NOx controls 

 Modified/reconstructed fuel gas combustion device 

 Implement work practice standardsb

1 

Multi-process and FCCU revamp  FCCU PM, SO2, and NOx retrofit controls 

 9 new process heaters with NOx controls 

 Modified/reconstructed fuel gas combustion device 

 Implement work practice standardsa

3 

Multi-process and FCCU revamp (no 

delayed coker unit [DCU]) 

 FCCU PM, SO2, and NOx controls 

 9 new process heaters with NOx controls 

 Modified/reconstructed fuel gas combustion device 

 Implement work practice standardsb

2 

FCCU revamp  FCCU PM, SO2, and NOx controls 

 2 process heaters with retrofit NOx controls 

 Modified/reconstructed fuel gas combustion device 

 Implement work practice standardsb

4 

Fluid coking unit revamp  FCCU PM, SO2, and NOx controls 

 7 new process heaters with NOx controls 

 Modified/reconstructed fuel gas combustion device 

 Implement work practice standardsb

1 

Modified processes  3 process heaters with retrofit NOx controls 

 Modified/reconstructed fuel gas combustion device 

 Implement work practice standardsb

8 

Small business with modified processes  SRU tail gas treatment 

 3 process heaters with retrofit NOx controls 

 Modified/reconstructed fuel gas combustion device 

 Implement work practice standardsb

1 

a Work practice standards include: fuel gas recovery for fuel gas producing units; flare minimization plan for 

planned start-up and shutdown; sulfur shedding plan; root-cause analysis; and delayed coking depressurization gas 

recovery. 

b All of the work practices above except delayed coking depressurization gas recovery. 
4-13 

 76.5% are units subject to a consent decree (Scenario #3). For purposes of this 

analysis, average consent decree requirements are assumed to be 1.0 kg PM/Mg coke 

burn (using Method 5B or 5F), 50 ppmv SO2 over a 7-day average, and 25 ppmv SO2

over a 365-day average. 

 The remaining 13.5% are subject to subpart J (Scenario #2). 

The assumptions outlined above translate into the following values: 

 12 total new, reconstructed, or modified FCCUs (multiply estimate of 0.8 FCCU per 

refinery by 15 refineries’ worth of process units) 

 4.8 FCCUs are new 

 7.2 FCCUs are reconstructed or modified 

– 1 is currently subject to subpart J 

– 5.5 are currently subject to consent decree 

– 0.7 are currently subject to MACT only 

4.3.2 Fluid Coking Units (FCU) 

We assumed that there will be six new, reconstructed, or modified coking units over the 

next 5 years. Based on industry trends, we anticipate that five of these will be delayed coking 

units and only one will be a fluid coking unit.1

 We assumed that the single fluid coking unit will 

become subject through modification or reconstruction rather than new construction. At baseline, 

this fluid coking unit would comply with subpart J, which includes no requirements for coking 

units. 

We assumed that 30 refineries will construct, reconstruct, or modify a fuel gas 

combustion device over the next 5 years. This estimate is based in part on the assumed average 

numbers of process units at a refinery from the analysis for subpart GGG (Parrish, Randall, and 

Coburn, 2006). Industry representatives have indicated that most fuel gas systems are 

centralized. Therefore, the entire system that includes the new, reconstructed, or modified 

combustion device will essentially have to meet subpart Ja standards in order for the new or 

reconstructed fuel gas combustion device to comply with subpart Ja. 

4.4 Emissions Estimation by Unit Type 

For both FCCUs and fluid coking units, PM and SO2 controls were evaluated together 

because a wet scrubber installed to reduce PM will also achieve SO2 reductions. The other 

control device considered for FCCUs was an electrostatic precipitator (ESP) for PM reduction 

and catalyst additives for SO2 emission reduction. This option is not technically feasible for a 

 

1

 10–26 meeting minutes. 
4-14 

fluid coking unit; therefore, the analysis for the one affected fluid coking unit assumed a wet 

scrubber as the control device. 

4.4.1 FCCUs 

We assumed a model FCCU size of 50,000 barrels (bbl) per day. This model FCCU also 

has a volumetric flow rate of 140,000 dry standard cubic feet per minute (dscfm) and a coke 

burn-off rate of 800,000 pounds (lb) per day. It operates at 95% of capacity. 

In order to determine emission reductions beyond subpart J for each option, we first 

estimated emissions attributed to meeting subpart J. Based on industry trends and control device 

capabilities, we assumed that 35% of the FCCUs would meet subpart J with a wet scrubber and 

65% would meet subpart J using an ESP and catalyst additives. We assumed the basic model wet 

scrubber could meet the subpart J PM limit with an 80% control efficiency and would average 

about 25 ppmv SO2. The model ESP also had a control efficiency of 80% for PM. For SO2, we 

calculated that the 9.8 kg/Mg coke burn is equivalent to about 265 ppmv. 

We estimated emissions of PM as the total of filterable PM that is less than 10 

micrometers (μm) in diameter (PM10), filterable PM that is less than 2.5 (μm) in diameter 

(PM2.5), and condensable PM. At baseline, an FCCU meeting subpart J with a wet scrubber 

would emit 236 tons PM per year and an ESP would emit 305 tons PM per year. (A wet scrubber 

has a lower operating temperature than an ESP, which provides improved removal of 

condensable PM and results in lower PM emissions.) Based on the assumptions described above, 

we estimated baseline PM emissions for the 12 FCCUs at 3,370 tons per year (1,350 tons per 

year from new FCCUs and 2,020 tons per year from reconstructed and modified FCCUs). For 

this model FCCU, we estimated emissions of SO2 as 1,540 tons per year for catalyst additives 

meeting 265 ppmv and 145 tons per year for wet scrubbers and catalyst additives meeting 25 

ppmv. Based on the assumptions described above, we estimated baseline SO2 emissions for the 

12 FCCUs at 9,600 tons per year (5,050 tons per year from new FCCUs and 4,560 tons per year 

from reconstructed and modified FCCUs).

To determine the emissions for each option, we assumed that the ratio of ESPs to wet 

scrubbers chosen for new FCCUs would change depending on the particular emission limits 

being considered. For example, as the SO2 limit tightens, a wet scrubber becomes more costeffective compared to the catalyst additives. On the other hand, we have no data to support an 

assumption that wet scrubbers could achieve the Option 5 PM limit of 0.15 kg/Mg coke burn, so 

we assumed that for Option 5, all FCCUs would be controlled with an ESP and catalyst 

additives. In addition to these considerations, we considered for reconstructed and modified 
4-15 

FCCUs with an existing control device whether cost-effectiveness or technical limitations for 

each option would drive an operator to change the control device. For example, for Option 5, all 

wet scrubbers would be removed in favor of ESPs that can meet the lower PM limit. 

For each of the five options, we again estimated PM emissions as a total of filterable 

PM10 and PM2.5 and condensable PM. The total values vary for each option and for the specific 

control device chosen. In addition to the SO2 emissions described for baseline, we estimated 

emissions of 290 tons per year for catalyst additives meeting 50 ppmv. We also assumed that wet 

scrubbers designed to meet 0.5 kg PM/Mg coke burn would achieve 12.5 ppmv SO2, which we 

calculated to be equivalent to 73 tons per year. 

4.4.2 FCUs 

We assumed a model fluid coking unit size of 40,000 bbl/day. This model coking unit 

also has a volumetric flow rate of 200,000 dscfm. At baseline, there are no requirements for fluid 

coking units, so there are no emission reductions for either PM or SO2. For Option 1, we 

assumed that a basic wet scrubber would be chosen. We estimated emission reductions of 1,710 

tons PM per year (based on 84% efficiency) and 20,600 tons SO2 per year (based on estimates of 

94% efficiency and uncontrolled SO2 emissions of 3.0 lb/bbl).2 For Option 2, we assumed that an 

enhanced wet scrubber would be chosen to meet the emission limits. We estimated emission 

reductions of 1,970 tons PM per year (based on 97% efficiency) and 21,200 tons SO2 per year 

(also based on an estimate of 97% efficiency). 

We assumed that an average amine treatment system for fuel gas combustion devices 

would have an average gas flow rate of 10,000 standard cubic feet per minute (scfm). We 

developed this model system based on information from various sources (Polasek, Bullin, and 

Donnelly, 1982; Fedich, Woerner, and Chitnis, 2004; Voltz, Corley, and Fedich, 2004). Based on 

this flow rate and an emission limit of 20 ppmv, one system would emit 0.27 pounds (lbs) of SO2

per minute (min), or 70 tons per year (tons/yr). Nationwide (i.e., for 30 systems), the total 

emissions are 2,100 tons per year. The emissions from one system, nationwide emissions, and 

the reduction from the baseline for each of the three options are shown in Table 4-2. 

 

2

 Valero submittal (test report specifically). 
4-16 

Table 4-2. Emissions for Fuel Gas Combustion Devices 

Option 

Emissions from One System Nationwide Emissions 

(tons SO2/yr) 

Reduction from Baseline 

(lb SO2/min) (tons SO2/yr) (tons SO2/yr) 

1 0.13 35 1,050 1,050 

2 0.10 26 786 1,310 

3 0.07 17 524 1,570 

4.5 Control Technologies in Analysis 

The following NOx control techniques were included in the cost analysis for the control 

options: 

 Flue Gas Recirculation. Flue gas recirculation (FGR) uses flue gas as an inert 

material to reduce flame temperatures. In a typical flue gas recirculation system, flue 

gas is collected from the heater or stack and returned to the burner via a duct and 

blower. The addition of flue gas with the combustion air reduces the oxygen content 

of the inlet air stream to the burner. The lower oxygen level in the combustion zone 

reduces flame temperatures, which in turn reduces NOx emissions. The normal NOx

control efficiency range for FGR is 30% to 50%. When coupled with low-NOx

burners (LNB) the control efficiency increases to 50%–72%.

 Low-NOx Burners. Low-NOx burner (LNB) technology utilizes advanced burner 

design to reduce NOx formation through the restriction of oxygen, flame temperature, 

and/or residence time. The two general types of low NOx burners are staged fuel and 

staged air burners. Staged fuel LNBs are particularly well-suited for boilers and 

process heaters burning process and natural gas, which generate higher thermal NOx. 

The estimated NOx control efficiency for LNBs where applied to petroleum refining 

fuel burning equipment is generally around 40%.

 Ultra-low NOx Burners. Ultra-low NOx burners (ULNBs) may incorporate a variety 

of techniques including induced flue gas recirculation (IFGR), steam injection, or a 

combination of techniques. These burners combine the benefits of flue gas 

recirculation and low-NOx burner control technologies. Rather than a system of fans 

and blowers (like FGR), the burner is designed to recirculate hot, oxygen-depleted 

flue gas from the flame or firebox back into the combustion zone. This leads to a 

reduction in the average oxygen concentration in the flame without reducing the 

flame temperature below temperatures necessary for optimal combustion efficiency. 

The estimated NOx control efficiency for ULNBs in high temperature applications is 

50%. Newer designs have yielded efficiencies of between 75% and 85%. When 

coupled with selective catalytic reduction, efficiencies in the range of 85% to 97% 

can be obtained. 

 Controlling Excess Oxygen in Complete Combustion FCCU Catalyst 

Regenerators. Most of the previous control options are specific to process heaters 

and carbon monoxide (CO) boilers. However, controlling the oxygen concentration in 
4-17 

the FCCU regenerator exhaust at approximately 0.5% has been seen to reduce NOx

concentrations by 20% to 40% as compared to NOx concentrations when the 

regenerator exhaust oxygen concentration is between 1% and 2%. As such, complete 

combustion FCCU regenerators with active excess oxygen controls are expected to 

have similar performance as partial combustion FCCUs followed by CO boilers that 

use low-NOx burners or flue gas recirculation. 

 Selective Non-Catalytic Reduction. In the selective non-catalytic reduction (SNCR) 

process, urea or ammonia-based chemicals are injected into the flue gas stream to 

convert nitric oxide (NO) to nitrogen gas (N2) and water. Without the participation of 

a catalyst, the reaction requires a high temperature range to obtain activation energy. 

The optimum operating temperature for SNCR is 1,600°F to 2,100°F. At 

temperatures above 2,000°F, NOx control efficiency decreases rapidly. The normal 

NOx control efficiency range for SNCR is 50% to 70%. SNCR systems are usually 

lower in capital cost than SCR systems for the same application. One advantage of 

this technology is the fact that no liquid or solid waste is generated. SNCR 

technology has been applied to CO boilers, process heaters and boilers in the 

petroleum refining sector where control efficiencies are consistent with the range 

mentioned above. 

 LoTOxTM Technology. The LoTOxTM process (i.e., low-temperature oxidation) is a 

patented technology that uses ozone to oxidize NOx to nitric pentoxide and other 

higher order nitrogen oxides, all of which are water soluble and easily removed from 

exhaust gas in a wet scrubber. The system operates optimally at temperatures below 

300°F. Thus, ozone is injected after scrubber inlet quench nozzles and before the first 

level of scrubbing nozzles. Outlet NOx emission levels have been reduced to less than 

20 parts per million by volume (ppmv), and often as low as 10 ppmv, when inlet NOx

concentrations ranged from 50 to 200 ppmv (an 80% to 90% reduction efficiency). 

 Selective Catalytic Reduction. Selective catalytic reduction (SCR) is a postcombustion NOx control technology in which ammonia (NH3) is injected into the 

post-combustion gas stream in the presence of a catalyst. A catalyst bed containing 

metals in the platinum family is used to lower the activation energy required for NOx

decomposition. The reaction of NH3 and NOx is favored by the presence of excess 

oxygen. The NH3 oxidation to NOx increases with increasing temperature. The 

normal NOx control efficiency range for SCR is 70% to 90%. There are at least three 

SCRs currently in-use at refineries to control FCCU NOx emissions. 

 Combination System. Combination systems have used combustion controls followed 

by SCR or SNCR technology in order to reduce costs of NOx removal from a flue 

gas. For example, LNB has been combined with SNCR technology to minimize the 

capital and operating cost for NOx removal as well as improve the control efficiency. 

 Catalyst Additives. An additional NOx emission control option specific for the 

FCCU is the use of catalyst additive, such as X-NOx and DENOX (from GraceDavison; Bruhin et al., 2003). Non-platinum combustion promoter additives appear to 

achieve a 30% to 50% emission reduction. Additional catalyst additives have had 

limited success at further reducing the NOx emissions from the FCCU, and the results 

of these other additives have been quite varied. 
4-18 

Not all of these control technologies are applicable to all units. For example, use of catalyst 

additives is applicable only to FCCUs, while the use of low-NOx burners are not applicable to 

complete combustion FCCU catalyst regenerators. For each source type, costs for four control 

scenarios were developed in 2005 dollars; the control scenarios ranged between 35% and 95% 

NOx emission reduction efficiencies. As the baseline emissions of different FCCUs can span a 

fairly significant range of outlet NOx concentrations, representative baseline concentrations were 

assigned a weighting factor to simulate the distribution of baseline NOx emissions. For each 

representative baseline NOx concentration, the control scenario needed to achieve a given 

emission limit was assigned to the fraction of FCCUs represented by that concentration. The 

overall costs for a given scenario were then calculated based on the weighting attributed to that 

uncontrolled NOx concentration range. Although this basic approach was used for each NOx

emission source type, the specific costing methodologies for each of the three types of sources 

are presented in separate sections to clearly identify the differences in the costs developed for the 

different sources. 

For SO2 and VOC, and PM control technologies, please refer to the technical memoranda in the 

public docket for this rulemaking. 

4.6 Cost Analysis for Control Options 

EPA examined control options for individual refinery processes as well as work practice 

options affecting the refinery as a whole. This section describes these control options and the 

estimated costs of implementing them. 

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.3

 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 guidance provided in the Office of Management 

and Budget’s (OMB’s) (2003) Circular A-4.4

 Equipment lives for the control technologies 

employed in this analysis can vary greatly (usually from 10 to 25 years). 

Four sources of information were considered in reviewing the appropriateness of the 

current NSPS requirements for new sources: (1) source test data from recently installed control 

systems; (2) applicable State and local regulations; (3) control vendor emission control 

 

3

 Available on the Internet at http://epa.gov/ttn/catc/products.html#cccinfo. 4

 Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf. 
4-19 

guarantees; and (4) consent decrees. (A significant number of refineries, representing over 80% 

of the national refining capacity, are subject to consent decrees that limit the emissions from 

subpart J process units.) In addition, we received a total of 46 comments during the public 

comment periods associated with the proposed rule and NODA. These comments were received 

from refineries, industry trade associations, and consultants; state and local environmental and 

public health agencies; environmental groups; and members of the public. In response to these 

public comments, most of the cost and emission reduction impact estimates were recalculated, 

resulting in several changes to the final amendments and new standards. A summary of the 

remainder of the comments received during the comment period and responses thereto can be 

found in the docket for the final amendments and new standards (Docket ID No. EPA–OAR–

HQ–2007–0011). The docket also contains further details on all the analyses summarized in the 

responses below. 

Once we identified potential emission limits for various process units, we evaluated each 

limit in conjunction with control technology, costs, and emission reductions to determine the 

Best Demonstrated Technology (BDT) for each process unit. In responding to the public 

comments, we re-evaluated the costs and cost-effectiveness of the control options and reevaluated our BDT determinations. In our BDT determinations, we took all relevant factors into 

account, including cost considerations, which are generally consistent with other Agency 

decisions. It is important to note that, due to the different health effects associated with different 

pollutants, the acceptable cost-effectiveness of a control option is pollutant dependent. These 

pollutant-specific factors were considered in our BDT determinations. 

The cost methodology incorporates the calculation of annualized costs and emission 

reductions associated with each of the options presented. Cost-effectiveness is the annualized 

cost of control divided by the annual emission reductions achieved. Incremental costeffectiveness refers to the difference in annualized cost from one option to the next divided by 

the difference in emission reductions from one option to the next. For NSPS regulations, as 

mentioned earlier in this chapter, the standard metric for expressing costs and emission 

reductions is the impact on all affected facilities in the fifth year after proposal. Details of the 

calculations can be found in the public docket. 

4.7 Summary of Cost, Environmental, Energy, and Economic Impacts 

We are presenting estimates of the impacts for the final requirements of subpart Ja that 

change the performance standards: the emission limits for fluid catalytic cracking units, sulfur 

recovery plants, fluid coking units, fuel gas combustion devices, and process heaters, as well as 
4-20 

the work practice standards for flares and delayed coking units. The cost, environmental, and 

economic impacts presented in this section are expressed as incremental differences between the 

impacts of petroleum refining process units complying with the final subpart Ja and the current 

NSPS requirements of subpart J (i.e., baseline). The impacts are presented for petroleum refining 

process units that commence construction, reconstruction, or modification over the next 5 years. 

In order to determine the incremental costs and emission reductions of this final rule, we 

first estimated baseline impacts. For new sources, baseline costs and emission reductions were 

estimated for complying with subpart J; incremental impacts for subpart Ja were estimated as the 

costs to comply with subpart J subtracted from the costs to comply with final subpart Ja. Sources 

that are modified or reconstructed over the next 5 years must comply with subpart J in the 

absence of final subpart Ja. We assumed that prior to reconstruction or modification, these 

sources will either be subject to a consent decree (equivalent to more than 80% of the industry by 

capacity), complying with subpart J or equivalent limits, and/or complying with 40 CFR part 63, 

subpart UUU (MACT II). Baseline costs and emission reductions were estimated as the effort 

needed to comply with subpart J from one of those three starting points. The costs and emission 

reductions to comply with final subpart Ja were estimated from those starting points as well. 

When considering and selecting emission limits for the final rule, we evaluated the costeffectiveness of each option for new sources separately from reconstructed and modified sources. 

In most cases, our selections for each process unit and pollutant were consistent for modified and 

reconstructed units and new units. In this section, we are presenting our costs and emission 

reductions for the overall rule. We estimate that the final amendments for new and modified and 

reconstructed sources together will reduce emissions of PM by 1,300 tons/yr, SO2 by 17,000 

tons/yr, NOx by 11,000 tons/yr, and VOC by 1,400 tons/yr from the baseline. The estimated 

increase in annual cost, including annualized capital costs, is $31,000,000 (2006 dollars). The 

estimated nationwide 5-year incremental emissions reductions and cost impacts for the final 

standards are summarized in Table 4-3. A summary of the impacts by all options considered in 

the course of preparing the final NSPS, for new and for modified and reconstructed sources, is 

available in Appendix B. 

4.7.1 Secondary Impacts 

Indirect or secondary air quality impacts of this final rule will result from the increased 

electricity usage associated with the operation of control devices. Assuming that plants will 

purchase electricity from a power plant, we estimate that the final standards will increase 

secondary emissions of criteria pollutants, including PM, SO2, NOx, and CO from power plants. 
4-21 

Table 4-3. National Incremental Emission Reductions and Cost Impacts for Petroleum 

Refinery Units Subject to Final Standards Under 40 CFR Part 60, Subpart Ja 

(Fifth Year After Proposal)a

Process Unit 

Total 

Capital 

Cost 

($1,000) 

Total 

Annual 

Cost 

($1,000/yr)

Annual 

Emission 

Reductions 

(tons PM/yr)

Annual 

Emission 

Reductions 

(tons 

SO2/yr) 

Annual 

Emission 

Reductions 

(tons 

NOx/yr) 

Annual 

Emission 

Reductions 

(tons 

VOC/yr) 

CostEffectiveness 

($/ton) 

FCCU 8,500 6,400 240 4,300 2,600 890 

FCU 14,000 4,000 1,000 5,900 660 530 

SRP 1,700 730 420 1,700 

Fuel gas 

combustion 

devices 

34,000 12,000 5,200 2,300 

Process heaters 23,000 12,000 7,500 1,600 

Flaring 40,000 −6,600 80 5 206 −23,000 

Delayed coking 

units 

17,000 1,600 440 25 3,400 

Sulfur pits 8,300 1,000 300 3,400 

Total 150,000 30,700 1,300 17,000 11,000 1,400 1,070 

a

 All costs are in 2006 dollars. 

For new, modified or reconstructed sources, this final rule will increase secondary PM emissions 

by 56 Megagrams per year (Mg/yr) (62 tons/yr); secondary SO2 emissions by about 1,400 Mg/yr 

(1,500 tons/yr); secondary NOx emissions by about 530 Mg/yr (580 tons/yr). 

As explained earlier, we expect that affected facilities will control emissions from fluid 

catalytic cracking units by installing and operating ESP or wet gas scrubbers. We also expect that 

the emissions from the affected FCU will be controlled with a wet scrubber. For these process 

units, we estimated solid waste impacts for both types of control devices and water impacts for 

wet gas scrubbers. In addition, the controls needed by small sulfur recovery plants will generate 

condensate. We project that this final rule will generate 1.6 billion gallons of water per year for 

the 5 years following proposal. We also estimate that this final rule will generate 2,200 Mg/yr 

(2,400 tons/yr) of solid waste over those 5 years. 

Energy impacts as defined in this preamble section consist of the electricity and steam 

needed to operate control devices and other equipment that would be required under the final 

rule. Our estimate of the increased energy demand includes the electricity needed to produce the 

required amounts of steam as well as direct electricity demand. We project that this final rule 

will increase overall energy demand by about 410 gigawatt-hours per year (1,400 billion British 
4-22 

thermal units per year). An analysis of energy impacts that accounts for reactions in affected 

markets to the costs of this final rule can be found in the section on Executive Order 13211 found 

later in this RIA. 

4.8 Limitations and Uncertainties Associated with the Cost Analyses 

Limitations and uncertainties associated with the cost analyses presented above are 

presented here. 

1. Assumptions behind the cost savings estimated for this NSPS. These annualized cost 

savings are driven by the recovery of natural gas associated with the minimization of 

flaring. The calculation presumes that all refiners owning new and modified or 

reconstructed that must comply with the NSPS will be able to accomplish this, 

particularly since they are estimated to receive a return on their investment. However, 

opportunity costs may exist to make such an investment more financially difficult 

than we may expect. Smaller refiners may have less capital available to them than 

larger refiners, and may find the investment in necessary capital and development of a 

flare gas minimization plan more challenging than larger refiners. In addition, there 

may be varying abilities among refiners to develop such minimization plans with their 

current labor force due to tightness in labor markets, though such difficulties could be 

remedied beyond the short run. Finally, many refiners have a minimum rate of return 

that must be met before an investment to expand capacity, or for other reasons, is 

carried out. For example, the Ad Hoc Coalition of Small Business Refineries asserted 

in a comment on the proposed petroleum refineries NSPS that an acceptable rate of 

return of well above 10% served as a minimum for investment purposes at their 

refineries.5

 It also should be noted, however, that the natural gas price that underlies 

the estimate of cost savings is $7/Mcf (1,000 cubic feet), which is the average natural 

gas price in 2006, the base year for the cost analysis. Current spot prices for natural 

gas exceed $10/Mcf, and there is potential for further increases in such natural gas 

prices to as high as $20/Mcf in the future by some estimates.6

 An increase in natural 

gas price may lead to additional incentive for refiners to engage in flare gas 

minimization. 

2. Effect of consent decrees on overall impact estimates. As mentioned in the preamble 

for this final NSPS, the estimates of impacts in this RIA are based on a baseline that 

includes consent decrees reached by the U.S. Department of Justice (DOJ) as part of 

the Refinery Enforcement Initiative with refiners representing 77% of U.S. refinery 

capacity. Consent decrees continue to take place, however. For example, Holly Oil 

and Refining Co. in Woods Cross, UT, just entered into a consent decree this month 

with the U.S. DOJ to reduce emissions of SO2, NOx, and VOC from their refinery. 

With this act, refiners representing 87% of U.S refinery capacity are now under a 

 

5

 Comments by Ad Hoc Coalition of Small Business Refiners to U.S. EPA, August 27, 2007. Comments on 

Proposed subpart Ja Rule: Standards for New, Modified, and Reconstructed Process Units at Petroleum 

Refineries. 72 FR 27178. p. 6. 6

 Wall Street Journal, April 18, 2008. “Surge in Natural Gas Price Stoked by New Global Trade.” 
4-23 

consent decree.7

 As more refiners are covered by consent decrees, the impacts 

associated with this NSPS will be less. 

3. New source bias. An NSPS is an example of what is known as a “vintage 

differentiated regulation (VDR),” which is a term often used to describe regulations 

that are fixed with respect to the date of entry of regulated units, with later vintages 

facing more stringent standards. Often, units produced before a given date are 

exempted or “grandfathered” from regulation. Reasons that are given for their being 

commonly applied in regulatory policy is that it is more efficient and cost-effective to 

control a given amount of pollution at a new plant as compared to retrofitting an 

existing plant. Also, there may be greater equity in not changing environmental 

regulations for facilities that have already been built, and instead focus on only new 

facilities. However, there may be incentive for existing firms to desire 

implementation of VDRs, for these can be used to erect entry barriers to restrict 

competition and protect rents created by existing command-and-control standards. 

Thus, there are efficiency and equity considerations inherent in the setting of an 

NSPS like this one for the petroleum refineries industry, as well as potential concerns 

about it being a possible barrier to entry, though this depends on the degree of 

stringency in the NSPS. This NSPS may create economic inefficiency by 

discouraging technological innovation and investment/modernization among 

regulated sources. Insofar as refiners that manage to avoid triggering NSPS will be 

rewarded, while those that do invest/modernize in capacity expansions may trigger it, 

the rule will impose efficiency losses on the economy that are not captured well by 

the economic impact model used in the RIA All of these considerations could affect 

the actual estimates of impacts associated with this NSPS; it may become more 

difficult to build new and modified and reconstructed process units (cost savings 

notwithstanding), while existing units and refiners may receive an advantage in terms 

of some protection against entry of new firms and process units. Overall efficiency 

from a social welfare standpoint may also be affected. 

4. Projections of new and modified and reconstructed sources. We project that during 

the 5-year period of analysis, EPA assumes the industry will invest in enough new 

processes to be equivalent to an average of three new refineries per year, or a total of 

15 new refineries. Further, the new sources are assumed to be 40% new processes or 

facilities and 60% modified or reconstructed facilities or processes. Our baseline 

estimates of emissions and process units, and thus our incremental analysis options 

that are applied to these baseline estimates, depend strongly on these estimates. Many 

of these estimates are taken from industry trade journals (e.g., Oil and Gas Journal). 

The certainty of these estimates is only as high as that of the experts’ capabilities that 

prepare these estimates. 

 

7

 Quoted from the U.S. EPA Web site for the Refinery Enforcement Initiative at 

http://www.epa.gov/compliance/resources/cases/civil/caa/oil/index.html. 
4-24 

4.9 References 

Bruhin et al., 2003 

Fedich, R.B., A.C. Woerner, and G.K. Chitnis. May 2004. Selective H2S Removal. Hydrocarbon 

Engineering, Vol. 9, No. 5, pp. 89-92. 

Parrish, K., D. Randall, and J. Coburn. October 30, 2006. Data and Assumptions used in the 

Equipment Leaks Cost Analysis for Petroleum Refineries. Memorandum to Karen 

Rackley, EPA/SPPD. Docket Item No. EPA-HQ-OAR-2006-0699-0034. 

Polasek, J.C., J.A. Bullin, and S.T. Donnelly. 1982. Alternative Flow Schemes to Reduce Capital 

and Operating Costs of Amine Sweetening Units. Proceedings of the 1982 AIChE Spring 

National Meeting, New York, NY: American Institute of Chemical Engineers. 

Stavins, Robert N. “The Effects of Vintage-Differentiated Environmental Regulation.” 

Resources for the Future, Discussion Paper 05-12, March 2005. Available at 

<http://www.rff.org/Documents/RFF-DP-05-12.pdf>. 

Voltz, B.L., J.D. Corley, and R.B. Fedich. November 2004. Benefits of a TGCU Amine Solvent 

Changeover. Sour Oil & Gas Advanced Technology 2004 International Conference.
B-1 

APPENDIX B: 

SUMMARY OF SIGNIFICANT COMMENTS AND RESPONSES, AND RATIONALES 

FOR NSPS EMISSION LIMITS 

Below is a summary of the public comments and our responses to them organized by 

source type and pollutant controlled. Within this appendix is the rationale for the emission limits 

included in the final NSPS for each source type and pollutant. 

B.1 PM Limits for Fluid Catalytic Cracking Units 

Comment: Several commenters opposed the proposed tightening of the FCCU PM 

standards relative to subpart J and the concurrent change in PM monitoring methods. Some 

commenters supported the co-proposal to keep the 1 kilogram per Megagram (kg/Mg) PM 

emission limit based on Method 5B and/or 5F; other commenters either did not oppose or 

supported the 0.5 kg/Mg emission limit for new “grassroots” units, provided EPA demonstrates 

it is cost-effective and that the limit is based on EPA Method 5B or 5F. 

Several commenters suggested that the costs in Table 11 of the proposal preamble are 

significantly underestimated. Commenters contended that the single “model plant” approach 

used in EPA’s cost analysis does not realistically consider important factors such as the inherent 

sulfur content of the feed, partial-burn versus full-burn regeneration, FCCU/regenerator size, and 

sources that are already well-controlled due to other regulations. Commenters asserted that the 

purchased equipment costs escalated from estimates that are 20 to 30 years old are 

underestimated. Several commenters provided estimates of costs and emission reductions for 

several actual projects, which they stated indicate that EPA’s costs are significantly 

underestimated and that the proposed standards are much less cost-effective than presented by 

EPA. 

Response: In response to these comments, we have revised our analysis to consider each 

unique existing FCCU in the United States. By doing so, we fully account for plant size, partialburn versus full-burn regeneration, existing control configuration, and specific consent decree 

requirements. (Details on the specific revisions to the analysis can be found in the docket.) With 

a revised analysis, we were able to more directly assess the impacts of process modifications or 

reconstruction of existing equipment. We also assessed the effects of PM and SO2 standards 

separately in this analysis. 

In our revised analysis, we considered three options for PM: (1) maintain the existing 

subpart J standard of 1.0 kg/Mg of coke burn-off (filterable PM as measured by Method 5B or 
B-2 

5F); (2) 0.5 kg/Mg of coke burn-off (filterable PM as measured by Method 5B or 5F); and 

(3) 0.5 kg/Mg of coke burn-off (PM as measured by Method 5). Similar to the analysis for the 

proposed standards, costs and emission reductions for each option were estimated as the 

increment between complying with subpart J and subpart Ja. We note that none of the available 

data suggest that a 0.5 kg/Mg coke burn emission limit that includes both filterable and 

condensable PM (as measured using EPA Method 202) is achievable in practice, so we disagree 

with the comments suggesting this level is appropriate to consider as an option for a total PM 

limit in this rulemaking. 

Option 1 includes the same emissions and requirements for PM as the current 40 CFR 

part 60, subpart J, so we do not expect an incremental difference in costs or emission reductions. 

The PM limit in Option 2 is the same numerical limit that was proposed in subpart Ja, but the PM 

emissions are determined using Methods 5B and 5F. These test methods are commonly used for 

PM tests of FCCU and are the methods that were used to generate a majority of the test data we 

reviewed. Option 3 is a limit of 0.5 kg/Mg coke burn using Method 5 and is the performance 

level that was proposed for subpart Ja. The impacts of these three options for new FCCU are 

presented in Table B-1; the impacts for modified and reconstructed FCCU are presented in Table 

B-2. 

Table B-1. National Fifth Year Impacts of Options for PM Limits Considered for New 

Fluid Catalytic Cracking Units Subject to 40 CFR Part 60, Subpart Jaa

Option 

Capital Cost 

($1,000) 

Total Annual Cost

($1,000/yr) 

Emission Reduction

(tons PM/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 0 0 0 N/A N/A 

2 3,600 1,100 240 5,600 5,600 

3 7,100 1,700 300 6,700 11,000 

a

 PM cost-effectiveness calculated for PM-fine, assuming 83.3% of the PM is PM-fine. 

Table B-2. National Fifth Year Impacts of Options for PM Limits Considered for 

Reconstructed and Modified Fluid Catalytic Cracking Units Subject to 40 

CFR Part 60, Subpart Jaa

Option 

Capital Cost 

($1,000) 

Total Annual Cost

($1,000/yr) 

Emission Reduction

(tons PM/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 0 0 0 N/A N/A 

2 75,000 12,000 690 21,000 21,000 

3 100,000 15,000 810 23,000 37,000 

a

 PM cost-effectiveness calculated for PM-fine, assuming 83.3% of the PM is PM-fine. 

The available data and impacts for the options considered suggest that BDT for new 

FCCU is different than BDT for modified and reconstructed FCCU. For new FCCU, the option 
B-3 

and incremental costs for Options 1 and 2 are reasonable compared to the emission reduction 

achieved. The incremental cost between Option 2 and Option 3 of $11,000 per ton PM-fine 

would generally be considered reasonable, but there are uncertainties in the achievability of 

Option 3. Although there were few test data points using Method 5-equivalent test methods, we 

concluded at proposal that both electrostatic precipitators and wet scrubbers can achieve this 

level of PM emissions. However, the data supporting Option 3 are not extensive, and it is unclear 

at this time whether a limit of 0.5 kg/Mg of coke burn as measured by Method 5 could be met by 

all configurations of FCCU. In addition, we prefer to develop a single performance standard that 

considers all condensable PM rather than implementing phased standards targeting different 

fractions of condensable PM. We agree with the commenters that Method 202 appears to have 

bias and reproducibility issues when applied to the FCCU vent. We note that the Agency is 

working to improve Method 202, and when it achieves consistent and accurate results for FCCU, 

the Agency will consider the best way to implement Method 202 for reduction of condensable 

PM from petroleum refinery FCCU. Therefore, we conclude that Option 2, control of PM 

emissions (as measured by Methods 5B and 5F) to 0.5 kg/Mg of coke burn or less, is BDT for 

newly constructed FCCU. This option achieves PM emission reductions of 240 tons per year 

(tons/yr) from a baseline of 910 tons/yr at a cost of $5,600 per ton of PM. 

For modified and reconstructed FCCU, the overall cost for Option 1 was reasonable, but 

neither the overall costs nor the incremental costs were reasonable for Options 2 and 3. These 

costs support the suggestion that for FCCU currently complying with subpart J or a consent 

decree, the costs to achieve further emission reductions are not reasonable. Therefore, we 

conclude that control of PM emissions (as measured by Methods 5B and 5F) to 1.0 kg/Mg of 

coke burn or less is BDT for reconstructed and modified FCCU. 

B.2 SO2 Limits for Fluid Catalytic Cracking Units 

Comment: Several commenters supported the co-proposal for modified and reconstructed 

FCCU to meet subpart J and not the 25 ppmv 365-day rolling average limit for SO2. Commenters 

provided data to suggest that the retrofits of existing sources are not cost effective, particularly if 

catalyst additives cannot be used. The current subpart J includes three compliance options: (1) if 

using an add-on control device, reduce SO2 emissions by at least 90% or to less than 50 ppmv, 

(2) if not using an add-on control device, limit sulfur oxides emissions (calculated as SO2) to no 

more than 9.8 kg/Mg of coke burn-off, or (3) process in the fluid catalytic cracking unit fresh 

feed that has a total sulfur content no greater than 0.30% by weight. Several commenters 

objected to the elimination of the additional compliance options in the existing subpart J for 

subpart Ja because: (1) there are no data to show that the SO2 limits proposed in subpart Ja are 
B-4 

BDT for all FCCU regenerator configurations; (2) the three options are already established as 

BDT and, therefore, the CAA requires that EPA make them available; and (3) the substantial 

cost and other burdens for a reconstructed or modified FCCU already complying with one of the 

alternative options in subpart J to change to daily Method 8 monitoring or to install CEMS were 

not addressed in the proposal. 

Response: We completely revised our impacts analysis to evaluate SO2 standards for 

every existing FCCU that may become subject to subpart Ja through modification or 

reconstruction. We did not have access to the inherent sulfur content of the feed for each FCCU, 

so SO2 emissions are still estimated using average emission factors relevant to the type of control 

device used for FCCU not subject to consent decree requirements. Nonetheless, we significantly 

revised the impact analysis to fully account for FCCU-specific throughput, existing controls, and 

consent decree requirements. (Details on the specific revisions to the analysis can be found in 

Docket ID No.) We evaluated two options: (1) current subpart J, including all three compliance 

options; and (2) 50 ppmv SO2 on a 7-day average and 25 ppmv on a 365-day average. Data are 

not available on which to base a more stringent control level. 

Option 1 includes the same emissions and requirements as the current standard (40 CFR 

part 60, subpart J), so we do not expect an incremental difference in costs or emission reductions. 

Based on information provided by vendors and data submitted by petroleum refiners, Option 2 

can be met with catalyst additives or a wet scrubber. Of 38 FCCU currently subject to a 50/25 

ppmv SO2 limit through consent decrees, 26 used wet scrubbers and 12 used catalyst additives or 

other (unspecified) techniques. Given the number of FCCU currently meeting the 50/25 ppmv 

SO2 emission limit, we conclude that this limit is technically feasible. 

The data in the record suggest that all systems with wet scrubbers can meet the 50/25 

ppmv SO2 emission limit. We believe that the owner or operator of an existing FCCU that does 

not already have a wet scrubber and is modified or reconstructed such that it becomes subject to 

subpart Ja can use catalyst additives to meet the 50/25 ppmv SO2 emission limit. Therefore, the 

cost of Option 2 is calculated using catalyst additives as the method facilities choose for meeting 

the standard. The impacts of these options are presented in Table B-3. 
B-5 

Table B-3. National Fifth Year Impacts of Options for SO2 Limits Considered for New, 

Reconstructed, and Modified Fluid Catalytic Cracking Units Subject to 40 

CFR Part 60, Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual Cost 

($1,000/yr) 

Emission Reduction

(tons SO2/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 0 0 0 N/A N/A 

2 0 3,000 4,400 700 700 

Based on the data we reviewed to select the options and the estimated impacts of those 

options, we conclude that Option 2, control of SO2 emissions to 25 ppmv or less averaged over 

365 days and 50 ppmv or less averaged over 7 days, is technically feasible and cost-effective for 

new, reconstructed, and modified fluid catalytic cracking units. This option has no capital cost 

and achieves SO2 emission reductions of 4,400 tons/yr from a baseline of 5,900 tons/yr at a cost 

of $700 per ton of SO2. Therefore, we conclude that control of SO2 emissions to 25 ppmv or less 

averaged over 365 days and 50 ppmv or less averaged over 7 days is BDT for new, 

reconstructed, or modified fluid catalytic cracking units. 

B.3 NOx Limit for Fluid Catalytic Cracking Units 

Comment: Several commenters stated that they would support a NOx limit of 80 ppmv 

for new sources only, provided a corrected impact analysis considers the different characteristics 

of FCCU and demonstrates that the NOx limit for new sources is truly cost-effective. 

Commenters supported the co-proposal for modified and reconstructed FCCU to meet subpart J 

and not be subject to a NOx emission limit. A few commenters provided cost data showing the 

cost of NOx controls is high for modified and reconstructed units due to the high cost and space 

needed for add-on controls. A large number of existing FCCU in the U.S. are covered by consent 

decrees, so significant NOx reductions have already been (or will soon be) achieved, and an 

additional incremental reduction to 20 or 40 ppmv over a 365-day average are not widely 

demonstrated and would not be cost-effective. 

One commenter stated that selective noncatalytic reduction (SNCR), selective catalytic 

reduction (SCR), and catalyst additives have not been demonstrated over significant periods of 

operational life. Commenters also cited environmental side-effects, such as the generation of 

ammonia compounds that contribute to condensable PM emissions, as a reason not to require 

these types of controls. Technologies like flue gas recirculation or advanced burner design are 

typically only cost-effective for new units and may be technically infeasible for existing FCCU. 
B-6 

If a limit is necessary for modified or reconstructed FCCU, one commenter suggested 

that recent catalyst additive trials support an emission limit of approximately 150 ppmv on a 

7-day rolling average; this limit would only be achievable if a 24-hour CO averaging time was 

provided since lowering NOx tends to increase CO emissions in FCCU. The commenter noted 

that this limit is equivalent to the 0.15 pounds per million British thermal units (lb/MMBtu) 

standard for reconstructed and modified heaters and boilers in NSPS subpart Db. 

Other commenters supported the inclusion of a NOx limit for FCCU and opposed the coproposal of no NOx standard for modified and reconstructed FCCU. The commenters disagreed 

with the feasibility and cost analyses for modified and reconstructed FCCU and stated that 

FCCU under a consent decree are achieving lower levels that are demonstrated and achievable 

and therefore BDT. Given the significant hazards to human health and the environment posed by 

NOx emissions, the commenters recommended limits of 20 ppmv over a 365-day rolling average 

and 40 ppmv over a 7-day rolling average for all FCCU. The commenters noted that these limits 

have been successfully achieved under consent decrees and they are technically feasible on new 

units at reasonable costs without additional controls. 

The commenters recommending more stringent NOx limits for FCCU stated that 80 ppmv 

does not represent an adequate level of control given the evolution of emerging technologies. In 

addition, a BDT of 80 ppmv on 7-day rolling average does not look “toward what may be fairly 

projected for the regulated future” as required by Portland Cement I (486 F. 2d 375 at 384 (D.C. 

Cir. 1973)) and other court decisions. 

Response: As shown by the disparate comments received, many commenters suggest 

lower NOx emission limits are achievable, while other commenters do not believe the proposed 

NOx emission limits are cost-effective. While we do acknowledge that lower NOx emission 

limits are technically achievable, the incremental cost of achieving these lower limits was high 

when we evaluated options for the proposed standards. Therefore, we concluded at proposal that 

20 or 40 ppmv NOx limits were not BDT. In our BDT assessment, we evaluated the various 

methods to meet alternative NOx limits as BDT rather than identifying one technology. One of 

the reasons for this is that each technology has its own advantages and limitations. While nonplatinum oxidation promoters and advanced oxidation controls do not achieve the same reduction 

in NOx emissions as add-on control devices such as SCR, they do so without any significant 

secondary impacts. As discussed in the preamble to the proposed standards and noted by several 

commenters, the injection of ammonia, whether to enhance electrostatic precipitator performance 

or to reduce NOx emissions (as with SCR and SNCR), increases the condensable PM emissions 

from the unit, and SCR also have spent catalyst disposal issues. As such, the added NOx
B-7 

reduction of SCR and SNCR must be balanced with these secondary impacts. Part of the basis 

for selecting control methods to achieve an 80 ppmv NOx emission limit as BDT included both 

cost and secondary impacts. This approach is necessary when conducting our BDT analysis, thus 

ensuring the best overall environmental benefit from the subpart Ja standards. 

To ensure that we addressed the commenters’ concerns, we re-evaluated the impacts for 

FCCU NOx controls. We also collected additional data from continuous NOx monitoring systems 

for a variety of FCCU NOx control systems. These data suggest that as refiners gain more 

experience with the NOx control systems (including catalyst additive improvements), NOx

control performance has improved over the past year or two. These data suggest that 80 ppmv 

and, for some control systems, 20 ppmv are technically achievable. Therefore, we evaluated 

three outlet NOx emission level options as part of the BDT determination: (1) 150 ppmv; (2) 80 

ppmv; and (3) 20 ppmv. Each NOx concentration is averaged over 7 days. To estimate impacts 

for Option 1, we assumed that some units have current NOx emissions below 150 ppmv, and all 

other units can meet this level with combustion controls (e.g., limiting excess O2 or using nonplatinum catalyst combustion promoters and other NOx-reducing catalyst additives in a complete 

combustion catalyst regenerator or a combination of NOx-reducing combustion promoters and 

catalyst additives with low-NOx burners (LNB) in a CO boiler after a partial combustion catalyst 

regenerator). Data collected from FCCU complying with consent decrees show that Option 2 can 

also be met using combustion controls; therefore, we estimated impacts for Option 2 using a 

similar method as Option 1. The main difference is that a larger number of FCCU must use 

combustion controls to meet the emission limit (i.e., the FCCU with current NOx emissions 

between 150 and 80 ppmv would not need controls under Option 1 but would need controls 

under Option 2). Option 3 is the level at which we expect all units to install more costly control 

technology such as LoTOxTM or SCR. The estimated fifth-year emission reductions and costs for 

each option for new FCCU are summarized in Table B-4; the impacts for modified and 

reconstructed FCCU are summarized in Table B-5. 

Table B-4. National Fifth Year Impacts of Options for NOx Limits Considered for New 

Fluid Catalytic Cracking Units Subject to 40 CFR Part 60, Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual Cost

($1,000/yr) 

Emission Reduction 

(tons NOx/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 860 320 370 880 880 

2 1,200 640 860 750 650 

3 12,000 3,600 1,400 2,600 5,800 
B-8 

Table B-5. National Fifth Year Impacts of Options for NOx Limits Considered for 

Modified and Reconstructed Fluid Catalytic Cracking Units Subject to 40 

CFR Part 60, Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual Cost

($1,000/yr) 

Emission Reduction 

(tons NOx/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 2,800 1,000 860 1,200 1,200 

2 3,700 1,600 1,800 920 660 

3 45,000 11,000 3,200 3,600 6,800 

Options 1 and 2 provide cost-effective NOx control with limited or no secondary impacts. 

The costs of Option 1 and Option 2 are commensurate with the emission reductions for new 

FCCU as well as modified and reconstructed FCCU. Option 3 would impose compliance costs 

that are not warranted for the emissions reductions that would be achieved, as shown by the 

incremental cost-effectiveness values between Option 2 and Option 3. 

In evaluating these options, we also considered the secondary impacts. In addition to the 

direct PM impacts of SNCR and SCR, SCR and LoTOxTM units require additional electrical 

consumption. The increased energy consumption for Option 3 is 40,000 MW-hr/yr for new, 

modified, and reconstructed units. We also evaluated the secondary PM, CO2, SO2, and NOx

emission impacts of the additional electrical consumption for Option 3. Based on the energy 

impacts, Option 3 will generate secondary emissions of PM, SO2, NOx and CO2 of 6, 150, 57, 

and 37,400 tons/yr, respectively. 

Based on the impacts shown in Table B-4 and Table B-5, and taking secondary impacts 

into account, we conclude that BDT is Option 2, a NOx emission limit of 80 ppmv, for all 

affected FCCU. For new FCCU, this option achieves NOx emission reductions of 860 tons/yr 

from a baseline of 1,500 tons/yr at a cost of $750 per ton of NOx. For modified and reconstructed 

FCCU, this option achieves NOx emission reductions of 1,800 tons/yr from a baseline of 3,600 

tons/yr at a cost of $920 per ton of NOx. 

B.4 PM and SO2 Limits for Fluid Coking Units 

Comment: Several commenters stated that EPA’s proposed standards for FCU under 

subpart Ja are inappropriate and not cost-effective. Commenters asserted that based on the 

significant differences between FCU and FCCU operations, a separate BDT determination is 

needed for FCCU and FCU. An FCU has higher particulate loading; a heavier feedstock that 

typically contains a higher concentration of sulfur, increasing the SO2 and sulfur trioxide (SO3) 

emissions; and a wider range of feedstocks with considerable variability in the nitrogen content. 
B-9 

The commenters noted that the impacts analysis performed for the FCU has shortcomings similar to those in the impacts analysis for FCCU (e.g., the analysis did not properly 

consider the additional costs and technical difficulties of meeting the proposed emission limits 

for modified or reconstructed sources, existing units are already controlled). One commenter 

provided site-specific engineering cost estimates to indicate that the PM controls are much less 

cost-effective (i.e., more expensive on a cost per ton basis) than EPA estimates. The commenter 

requested that EPA consider instances when wastewater limitations require regenerative wet 

scrubbers and amend the impact estimates accordingly. One commenter stated that a newly 

installed regenerative wet scrubber system on an existing FCU could not meet the proposed Ja 

PM standards. 

Response: As described in the preamble to the proposed standards, we assumed that one 

of the larger existing FCU will become a modified or reconstructed source in the next 5 years. 

The two larger FCU in the United States are both subject to consent decrees: one has installed 

controls and the other is in the process of installing controls. The remaining two FCU are 

significantly smaller than the original model FCU; therefore, a new analysis was conducted using 

a smaller model FCU indicative of the size of the two remaining FCUs that are not subject to 

consent decree requirements. In our new analysis, we also assumed this FCU has approximately 

one-half the sulfur content as the larger FCU for which we have data, based on information 

received regarding the variability in sulfur content across different FCU in the public comments. 

In addition to revising our impact analysis, we also collected additional source test data 

from the one FCU operating a newly installed wet scrubber system to better characterize the 

control system’s performance. At proposal, we had one FCU source test, which suggested that 

the FCU wet scrubber could meet a PM limit of 0.5 kg/Mg coke burn. However, following 

proposal, we received an additional performance test for this same FCU wet scrubber with an 

emission rate between 0.5 and 1.0 kg/Mg coke burn. There was no indication of unusual 

performance during either of these two tests, so we conclude that these tests demonstrate the 

variability of the emission source and control system. Based on the available data, therefore, we 

conclude that an appropriate PM performance level to consider for a BDT analysis is 1.0 kg/Mg 

coke burn using EPA Method 5B for a FCU with a wet scrubber. We also conclude that the PM 

emission limit initially proposed for FCU had not been adequately demonstrated as an emission 

limit with which one must comply at all times. 

Using our revised model FCU and based on the additional source test data, we reevaluated BDT for PM and SO2 emissions from FCU based on two options: (1) no new 

standards, or current subpart J; and (2) a PM limit of 1.0 kg/Mg coke burn (as measured using 
B-10 

Methods 5B and 5F), a short-term SO2 limit of 50 ppmv averaged over 7 days, and a long-term 

SO2 limit of 25 ppmv averaged over 365 days. Unlike the FCCU, catalyst additives cannot be 

used in a FCU to reduce SO2, so a wet scrubber is the most likely technology (and the one 

demonstrated technology) that would be used to meet the PM and SO2 limits of Option 2. 

Therefore, we estimated costs for an enhanced wet scrubber to meet both the PM and SO2 limits. 

The resulting emission reductions and costs for both of the options are shown in Table B-6. 

Table B-6. National Fifth Year Impacts of Options for PM and SO2 Limits Considered for 

Fluid Coking Units Subject to 40 CFR Part 60, Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual 

Cost ($1,000/yr) 

Emission 

Reduction (tons 

PM/yr) 

Emission 

Reduction (tons 

SO2/yr) 

Cost-Effectiveness 

($/ton PM and 

SO2) 

1 0 0 0 0 N/A 

2 10,000 3,200 1,000 5,900 460 

2a 100,000 18,600 1,000 5,900 2,700 

One commenter indicated that we should consider the costs of a regenerative wet 

scrubber. This type of system is not needed in most applications, however, in the event such a 

system were needed, we estimated the cost of a regenerative wet scrubber to meet Option 2. The 

results of this analysis are also provided in Table B-6 as Option 2a. As seen in Table B-6, even 

under the most conservative assumptions the costs associated with the PM and SO2 emission 

reductions are reasonable. 

Based on the available technology and the costs presented in Table B-6 , we conclude 

that BDT is Option 2, which requires technology that reduces PM emissions to 1.0 kg/Mg of 

coke burn and reduces SO2 emissions to 50 ppmv averaged over 7 days and 25 ppmv averaged 

over 365 days. This option achieves PM emission reductions of 1,000 tons/yr from a baseline of 

1,100 tons/yr and SO2 emission reductions of 5,900 tons/yr from a baseline of 6,100 tons/yr at a 

cost of $460 per ton of PM and SO2 combined. 

B.5 NOx Limit for Fluid Coking Units 

Comment: A number of commenters opposed the co-proposal of no NOx standard for 

FCU, and some disagreed with EPA’s 80 ppmv NOx limit for FCU. These commenters 

recommended limits of 20 ppmv as a 365-day rolling average and 40 ppmv as a 7-day rolling 

average for FCU, as has been successfully achieved under consent decrees. The commenters 

noted that these limits are achievable on new units without additional controls. 
B-11 

One commenter supported the co-proposal that no new NOx standard be established for 

FCU. 

Response: Similar to the revised analysis for PM and SO2 impacts, we re-evaluated BDT 

for the FCU NOx controls assuming a smaller FCU will be modified or reconstructed. We 

evaluated three options: (1) no new standards, which is the current subpart J; (2) outlet NOx

concentration of 80 ppmv; and (3) outlet NOx concentration of 20 ppmv. Similar to the analysis 

for FCCU NOx and depending on the baseline emissions for the FCU, we anticipate that Option 

2 can be met using combustion controls and Option 3 will require add-on control technology. 

The results of this analysis are shown in Table B-7. 

Table B-7. National Fifth Year Impacts of Options for NOx Limits Considered for Fluid 

Coking Units Subject to 40 CFR Part 60, Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual Cost

($1,000/yr) 

Emission 

Reduction 

(tons NOx /yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 0 0 0 N/A N/A 

2 3,700 850 660 1,300 1,300 

3 6,000 1,300 750 1,700 5,000 

The costs for Option 1 and Option 2 are commensurate with the emission reductions, but 

the incremental impacts for Option 3 are not reasonable, as shown in Table B-7. Option 3 

achieves an additional 90 tons per year NOx reduction, but the incremental costs of achieving this 

reduction is $5,000 per ton of NOx removed. The cost of achieving this 12% additional emission 

reduction nearly triples the total annualized cost of operating the controls. Based on these 

projected impacts, we support our original determination that BDT is Option 2, or technology 

needed to meet an outlet NOx concentration of 80 ppmv or less. This option achieves NOx

emission reductions of 660 tons/yr from a baseline of 800 tons/yr at a cost of $1,300 per ton of 

NOx. 

B.6 SO2 Limit for Small Sulfur Recovery Plants (SRP) 

Comment: One commenter stated that no new requirements should be added for SRP less 

than 20 LTD because the controls are not cost-effective. The commenter provided data on tail 

gas treatment projects but noted that these costs are for larger SRP, and controls for smaller SRP 

will be less cost-effective. Several commenters noted that if EPA does establish standards for 

smaller SRP, the monitoring and compliance evaluation methods for the 99% control standard 

are not clearly specified in the rule and could create difficulties in documenting compliance for 

small Claus plants. Therefore, the small SRP should be allowed to comply with the 250 ppm SO2
B-12 

emission limit provided to large SRP. One commenter suggested that non-Claus units should be 

subject to a 95% recovery efficiency standard. 

Response: To ensure that we addressed the commenters’ concerns regarding costeffectiveness, we re-evaluated the impacts for small SRP. We adjusted our cost estimated 

upward based on capital costs provided by industry representatives. We evaluated three SO2

control options as part of the BDT determination for SRP less than 20 LTD: (1) no new 

standards, or current subpart J; (2) 99% sulfur recovery; and (3) 99.9% sulfur recovery. As noted 

in the preamble to the proposed standards, 95% sulfur recovery is equivalent to the efficiency of 

a two-stage Claus unit without controls. Also as noted in the preamble to the proposed standards 

(section V.D), the 99% and 99.9% recovery levels are achievable for SRP of all sizes by various 

types of SRP or tail gas treatments. 

The estimated fifth-year emission reductions and costs for new SRP are summarized in 

Table B-8; the impacts for modified and reconstructed SRP are summarized in Table B-9. These 

values reflect the impacts only for SRP smaller than 20 LTD; there are no additional cost impacts 

for larger Claus units because they would already have to comply with the existing standards in 

subpart J. 

Table B-8. National Fifth Year Impacts of Options for SO2 Limits Considered for New 

Small Sulfur Recovery Plants Subject to 40 CFR Part 60, Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual Cost

($1,000/yr) 

Emission Reduction

(tons SO2/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 0 0 0 N/A N/A 

2 130 63 42 1,500 1,500 

3 590 230 52 4,500 18,000 

Table B-9. National Fifth Year Impacts of Options for SO2 Limits Considered for 

Modified and Reconstructed Small Sulfur Recovery Plants Subject to 40 CFR 

Part 60, Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual Cost

($1,000/yr) 

Emission Reduction

(tons SO2/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 0 0 0 N/A N/A 

2 1,600 670 380 1,800 1,800 

3 7,800 2,600 470 5,700 23,000 

The costs for Option 1 and Option 2 are reasonable considering the emission reductions 

achieved, but the incremental impacts shown in Table B-8 and Table B-9 for Option 3 are 
B-13 

beyond the costs that the Agency believes are reasonable for these small units to achieve an 

additional 90 tons per year of SO2 emissions. The additional equipment needed to achieve these 

reductions quadruples the capital costs. Based on these projected impacts and available 

performance data, we support our original determination that BDT is Option 2, or 99% sulfur 

recovery. For new SRP, this option achieves SO2 emission reductions of 42 tons/yr from a 

baseline of 150 tons/yr at a cost of $1,500 per ton of SO2. For modified and reconstructed SRP, 

this option achieves SO2 emission reductions of 380 tons/yr from a baseline of 1,400 tons/yr at a 

cost of $1,800 per ton of SO2. We note that we are also revising the format of the standard in 

response to public comments in terms of sulfur outlet concentrations. Based on the targeted 

recovery efficiency of 99%, the emission limit for small SRU is either 2,500 ppmv SO2 or 3,000 

ppmv reduced sulfur compounds and 100 ppmv of H2S, both of which are determined on a dry 

basis, corrected to 0% O2. 

B.7 NOx Limit for Process Heaters 

Comment: Several commenters stated that the 80 ppmv NOx limit for process heaters is 

not stringent enough. Considering recent settlement negotiations and regulation development, 

NOx emissions reductions well below 80 ppmv can be achieved cost effectively. The 

commenters stated that NOx emissions of less than 40 ppmv at 0% O2 are achievable with 

combustion modifications such as LNB, ultra low-NOx burners (ULNB), and flue gas 

recirculation technologies; post-combustion controls such as SCR, SNCR, and LoTOxTM achieve 

NOx reductions an order of magnitude below those from combustion modifications. The 

commenters noted that Bay Area Air Quality Management District (BAAQMD) Regulation 9, 

Rule 10, requires process heaters to meet a 0.033 lb/MMBtu NOx limit (roughly 32 ppmv NOx at 

0% oxygen). One commenter stated that 30 ppmv has been demonstrated under consent decrees 

to be an achievable level and ample technology exists. The commenters also noted that 7 to 10 

ppmv NOx limits (at 3% oxygen) have been achieved in practice. One commenter stated that 

NSPS subparts J and Ja should impose NOx emission limits on all fuel gas combustion devices 

that are at least as stringent as the most stringent consent decree. Some consent decrees require 

next generation ULNB designed to achieve NOx emissions rates of 0.012 to 0.020 lb/MMBtu (12 

to 20 ppmv NOx at 0% oxygen). Commenters recommending more stringent requirements 

suggested limits ranging from 7 ppmv NOx (at 3% oxygen) to 30 ppmv for new process heaters 

fueled by refinery fuel gas. 

Other commenters stated that alternative monitoring options should be provided to small 

fuel gas combustion units due to the high costs of CEMS relative to the emissions from the small 

units. One commenter suggested an exemption from the fuel gas monitoring requirements for 
B-14 

process heaters less than 50 MMBtu/hr. Another commenter recommended an exemption from 

the fuel gas monitoring requirements for process heaters less than 40 MMBtu/hr as used by 

South Coast Air Quality Management District (SCAQMD). 

Response: We revisited the BDT determination based on the public comments and 

revised the methodology used to calculate the cost and emission reduction impacts for the 

proposed standards. We evaluated three options as part of the BDT determination. Each option 

consists of a potential NOx emission limit and applicability based on process heater size. These 

differ slightly from the proposal options based on commenter suggestions. Option 1 would limit 

NOx emissions to 80 ppmv or less for all process heaters with a capacity greater than 20 

MMBtu/hr (the proposed standards). Option 2 would limit NOx emissions to 40 ppmv or less for 

all process heaters with a capacity greater than 40 MMBtu/hr. This option is similar to many 

consent decrees that set an emission limit of 0.040 lb/MMBtu (roughly 40 ppmv NOx at 0% 

oxygen) for process heaters greater than 40 MMBtu/hr. Option 3 would limit NOx emissions to 

20 ppmv or less for all process heaters with a capacity greater than 40 MMBtu/hr. In each option, 

the NOx concentration is based on a 24-hour rolling average. 

The estimated fifth-year emission reductions and costs for each option for new process 

heaters are summarized in Table B-10; impacts for modified and reconstructed process heaters 

are summarized in Table B-11. Similar to the proposal analysis, we considered LNB, ULNB, 

flue gas recirculation, SCR, SNCR, and LoTOxTM as feasible technologies. We believe that 

nearly all process heaters at refineries that will become subject to subpart Ja can meet Option 1 

or Option 2 using combustion controls (LNB or ULNB). Most process heaters would need to use 

more efficient control technologies, such as LoTOxTM or SCR, to meet the NOx concentration 

limit in Option 3. Options 2 and 3 include a minimum 40 MMBtu/hr size threshold because the 

incremental cost-effectiveness for NOx control options for the proposed standard of 80 ppmv for 

Table B-10. National Fifth Year Impacts of Options for NOx Limits Considered for New 

Process Heaters Subject to 40 CFR Part 60, Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual Cost

($1,000/yr) 

Emission Reduction 

(tons NOx/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 9,000 7,300 4,800 1,500 1,500 

2 9,000 7,500 5,200 1,400 500 

3 110,000 30,000 5,900 5,100 37,000 
B-15 

Table B-11. National Fifth Year Impacts of Options for NOx Limits Considered for 

Modified and Reconstructed Process Heaters Subject to 40 CFR Part 60, 

Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual Cost

($1,000/yr) 

Emission Reduction 

(tons NOx/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 12,000 4,000 2,100 1,900 1,900 

2 14,000 4,300 2,200 1,900 2,100 

3 64,000 15,000 2,500 5,900 39,000 

units with smaller capacities ranged from $3,500/ton to $4,100/ton of NOx reduced, which was 

determined not to be reasonable for these small heaters, which would primarily be located at 

small refineries. 

Based on the impacts in Tables B-10 and B-11, the costs of Options 1 and 2 are 

reasonable compared to the emission reductions. The incremental cost between Options 2 and 3 

of almost $40,000/ton of NOx is not commensurate with the additional 1,000 tons of emission 

reduction achieved for new and modified or reconstructed process heaters. Moreover, the capital 

costs of Option 3 are about $150 million greater than the capital costs for Option 2, which are 

only $23 million. Therefore, we conclude that BDT for process heaters greater than 40 

MMBtu/hr is technology that achieves an outlet NOx concentration of 40 ppmv or less, or 

Option 2. For new process heaters, this option achieves NOx emission reductions of 5,200 tons/yr 

from a baseline of 7,500 tons/yr at a cost of $1,400 per ton of NOx. For modified and 

reconstructed process heaters, this option achieves NOx emission reductions of 2,200 tons/yr 

from a baseline of 3,200 tons/yr at a cost of $1,900 per ton of NOx. Although we agree that lower 

NOx concentrations are achievable, we determined that the incremental cost to achieve these 

lower NOx concentrations was not reasonable. 

B.8 Fuel Gas Combustion Devices 

Comment: Several commenters contended that the proposed standards for fuel gas 

combustion devices were not stringent enough; EPA should ensure that the best demonstrated 

emission control technologies are installed as the industry is modernized. Given the significant 

hazards to human health and the environment posed by SO2 emissions, the commenters 

suggested that the 365-day average limits should be 40 ppmv TRS and 5 ppmv SO2. The 

commenters also recommended that EPA tighten the 3-hour concentration limit to 100 ppmv 

TRS. On the other hand, another commenter contended that although amine treatment 

applications for product gases can achieve H2S concentrations of 1 to 5 ppmv, a tighter standard 

is not BDT for refinery fuel gas. 
B-16 

Several commenters objected to the addition of the 60 ppmv H2S and 8 ppmv SO2 limits 

(365-day rolling average) in the proposed subpart Ja standards for fuel gas combustion devices 

because they are infeasible and/or not cost-effective. According to commenters, EPA 

erroneously assumed that the additional reductions could be achieved with existing equipment. 

Although this may be true in some cases, some refineries would need to add additional amine 

adsorber/regenerator capacity and some may also need to add additional sulfur recovery capacity 

(e.g., an additional Claus train and tail gas treatment unit). One commenter requested an 

exemption be provided for refineries that cannot meet the tighter long-term standard by simply 

increasing their amine circulation rates. One commenter stated that there will be little 

incremental environmental benefit from the long-term limit, and it unnecessarily penalizes 

refineries that designed their amine systems to treat to levels near the proposed annual standard. 

The commenters provided cost data for examples of projects requiring new amine adsorption 

units to show that the proposed standards are not cost-effective. 

A number of commenters particularly opposed the proposed revision to include TRS 

limits for fuel gas produced from coking units or any fuel gas mixed with fuel gas produced from 

coking units. One commenter noted that some State and local agencies have specific TRS 

standards, but these requirements were not based on a BDT assessment. According to 

commenters, EPA has included no technical basis for the achievability of the TRS fuel gas 

standard or explanation of why control of TRS is limited to fuel gas generated by coking units. 

The commenters recommended that EPA postpone adoption of a TRS limit until it has gathered 

and evaluated adequate data to conclude that the limit is technically feasible and cost effective. 

Commenters stated that EPA did not address the cost-effectiveness and non-air quality 

impacts of the TRS standards and did not define BDT for the removal of TRS. One commenter 

stated that without an established de minimis level, an entire fuel gas system could be subject to 

the TRS limits if any amount of coker gas enters the fuel gas system. Amine scrubbing systems 

are selective to H2S and are not suitable to other TRS compounds such as mercaptans, according 

to the commenters. The non-H2S TRS compounds are not amenable to amine treating and there 

is no technology readily in-place at refineries for reducing non-H2S TRS compounds. Therefore, 

removing these other TRS compounds would require significant capital outlay for new 

equipment, costs that were not considered in the impacts analysis, according to the commenters. 

One commenter provided an example of a treatment system installed to meet a facilitywide fuel gas total sulfur standard of 40 ppmv; the commenter estimated the capital cost of the 

entire system to be $150-million. The commenter also indicated that low-BTU gas from 

flexicoking units would need to be specially treated at a capital cost of $61 million to achieve a 
B-17 

total sulfur content of less than 150 ppmv, and the treatment would increase energy consumption, 

resulting in increases in NOx, CO, and CO2 emissions. Another commenter provided an order-ofmagnitude engineering estimate of $50-million to treat TRS down to 45 ppmv (long-term 

average). Based on one commenter’s experience with a new fuel gas treating facility, non-acidic 

TRS cannot be treated down to the proposed levels utilizing Merox-amine treatment. A costeffective solution could be natural gas blending at the affected combustion device; however, this 

option has the negative effect of reducing the production of refinery fuel gas and therefore 

reducing the refinery’s capacity for making gasoline. 

Several commenters stated that the original BDT determination was based on amine 

scrubbing of H2S and not on SO2; the SO2 standard was simply a compliance option that was 

calculated to be equivalent to the H2S concentration limit at 0% excess air. They also asserted 

that EPA cannot use the SO2 option as a basis for the TRS standard because the SO2 option is not 

BDT. On the other hand, one commenter requested that EPA clarify the fuel gas standards in 

subpart J to expressly indicate that the 20 ppm SO2 limit is a valid compliance option (instead of 

including it only in the monitoring section). According to the commenter, focus has been on H2S 

due to the structure of the requirements of subpart J, and permits rarely require that combustion 

sources demonstrate compliance with the 20 ppmv SO2 limit. The commenter stated that refiners 

clearly should be allowed to comply with the broader, more comprehensive SO2 limit. 

A few commenters noted that, as H2S is part of TRS, the TRS standard is even more 

stringent than the H2S standard. One commenter recommended that no change in the fuel gas 

standards be made or that the standards focus on H2S only with an alternative emission limit for 

SO2. One commenter stated that EPA developed the 160 ppmv H2S standard to be more stringent 

than the 20 ppmv SO2 standard specifically because H2S did not represent all of the sulfur in the 

fuel gas. Commenters stated that using an F-factor approach (Method 19, 40 CFR part 60, 

appendix A), the TRS limit that is equivalent to the 20 ppmv SO2 emission limit is 260 ppmv and 

the TRS limit that is equivalent to the 8 ppmv SO2 emission limit is 104 ppmv. 

Response: We initially assumed that fuel gas generated by the coking unit was mixed 

with other fuel gases that were mostly H2S and that increasing the amine circulation rate would 

result in additional H2S removal that could be used to meet the proposed standard. However, 

based on a review of the available data, non-H2S sulfur content in coker fuel gas may be 300 to 

500 ppmv. At these levels, specific treatment to reduce these other sulfur compounds would be 

needed. As indicated by one commenter, a plant-wide total sulfur limit of 40 ppmv has been 

achieved in practice in at least one refinery using a treatment train consisting of a Merox system, 

sponge oil absorbers, MEA absorbers, and caustic wash towers. Therefore, total sulfur fuel gas 
B-18 

treatment methods are demonstrated. We evaluated the cost of this treatment based on 

information provided in the public comments. 

Based on the public comments and additional data, we revisited the BDT determination 

and assessed three options for increasing SO2 control of fuel gas combustion units: (1) 20 ppmv 

SO2 or 162 ppmv H2S averaged over 3 hours; (2) Option 1 plus 8 ppmv SO2 or 60 ppmv H2S 

averaged over 365 days; and (3) a compliance option of 162 ppmv TRS averaged over 3 hours 

and 60 ppmv TRS averaged over 365 days for fuel gas combustion devices combusting fuel gas 

generated by a coking unit and Option 2 for combustion devices combusting fuel gas not 

generated by a coking unit. Option 1 includes the same limits that are in subpart J, so we do not 

expect any additional costs or emission reductions. To address the commenters’ concerns, we 

revised our proposal analysis to include an assumption that 10% of the affected facilities would 

have to add additional amine capacity to achieve Option 2. We assumed that a separate treatment 

train that can treat TRS would be required to meet Option 3. The estimated fifth-year impacts of 

each of these options for new fuel gas combustion devices are presented in Table B-12; the 

impacts for modified and reconstructed fuel gas combustion devices are presented in Table B-13. 

Table B-12. National Fifth Year Impacts of Options for SO2 Limits Considered for New 

Fuel Gas Combustion Devices Subject to 40 CFR Part 60, Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual Cost

($1,000/yr) 

Emission Reduction 

(tons SO2/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 0 0 0 N/A N/A 

2 1,200 770 520 1,500 1,500 

3 100,000 13,000 930 14,000 31,000 

Table B-13. National Fifth Year Impacts of Options for SO2 Limits Considered for 

Modified and Reconstructed Fuel Gas Combustion Devices Subject to 40 CFR 

Part 60, Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual Cost

($1,000/yr) 

Emission Reduction 

(tons SO2/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 0 0 0 N/A N/A 

2 33,000 11,000 4,700 2,400 2,400 

3 1,700,000 200,000 9,100 22,000 42,000 

Overall costs for Options 1 and 2 are reasonable compared to the emission reduction 

achieved for new, modified and reconstructed fuel gas combustion devices. We further evaluated 

the incremental costs and reductions between the three options and found that they were 

reasonable for Options 1 and 2, while the incremental cost for Option 3 is not. While Option 3 
B-19 

provides significant additional SO2 emission reductions, the additional capital cost of $1.7 billion 

is highly significant and could pose a significant barrier to future refinery upgrades and 

expansions. Based on these impacts and consideration of current operating practices, we 

conclude that BDT is use of technology that reduces the emissions from affected fuel gas 

combustion units to 20 ppmv SO2 or 162 ppmv H2S averaged over 3 hours and 8 ppmv SO2 or 

60 ppmv H2S averaged over 365 days, or Option 2. For new fuel gas combustion devices, this 

option achieves SO2 emission reductions of 520 tons/yr from a baseline of 1,200 tons/yr at a cost 

of $1,500 per ton of SO2. For modified and reconstructed fuel gas combustion devices, this 

option achieves SO2 emission reductions of 4,700 tons/yr from a baseline of 12,000 tons/yr at a 

cost of $2,400 per ton of SO2. 

We note that although we have determined that Option 3 is not BDT and we will not limit 

the amount of SO2 emissions from combustion of sulfur compounds other than H2S in subpart Ja, 

we plan to continue to work with the industry to understand the magnitude of these SO2 

emissions and to identify technologies that can be cost effectively applied to reduce the 

emissions. We have learned through this process that the SO2 emissions from combustion of 

TRS in coker gas are generally not reflected in emission inventories and we plan to explore this 

issue in greater detail in the future to determine where SO2 emissions are underestimated and the 

best way to correct the inventories. 

B.9 Flaring of Refinery Fuel Gas 

Comment: Several commenters supported the proposed work practice standards to 

eliminate routine flaring and develop startup, shutdown, and malfunction (SSM) plans; the 

commenters opposed the co-proposal of no standards. One commenter supported the 

determination that elimination of routine flaring is BDT, citing reductions in hydrocarbon, NOx, 

SO2, and CO2 emissions. One commenter stated that both subparts J and Ja should explicitly 

require that flaring be used only as a last resort in unusual circumstances, such as emergencies 

and not on a routine basis. Commenters asserted that monitoring on an ongoing basis is needed 

to verify that no flaring of nonexempt gases occurs. Commenters stated that subpart Ja should 

also require refiners to install a flare gas recovery system, although such requirements should not 

preclude monitoring requirements. One commenter stated that the NSPS should require a SSM 

plan to eliminate venting or flaring during such planned start-up, shutdown, and maintenance 

activities and explicitly prohibit venting or flaring during these planned activities; proper 

operation and maintenance practices should completely eliminate the need to use flares during 

these activities. One commenter noted that those refineries that have evaluated their startup and 

shutdown procedures to reduce or eliminate direct venting or flaring during planned startup and 
B-20 

shutdown events have demonstrated the best technology; therefore, their actions represent BDT 

and should be adopted in the NSPS. The commenters also supported conducting a root cause 

analysis (RCA) in the event of flaring and other venting releases of 500 lb/day SO2. 

A number of commenters generally supported the intent to reduce flaring and the idea of 

SSM plans to address flaring during planned startups and shutdowns (one commenter also 

included combustion of high sulfur-containing fuel gases during a malfunction), flare 

minimization plans, and RCA for flare events in excess of 500 lb/day. However, they opposed 

the work practice standard for elimination of routine flaring and the proposed creation of fuel gas 

producing units for subpart Ja. The commenters stated that the definition of “fuel gas producing 

unit” is overly broad, making it difficult to determine what constitutes a modification or 

reconstruction, and the proposed work practice standard for these units is infeasible, 

unnecessary, and not cost-effective. Facility operators and regulators would have difficulty 

discerning if a flaring event was caused by an affected fuel gas producing unit or a unit not 

subject to the standard. One commenter indicated that there is no de minimis level by which units 

that produce insignificant quantities of fuel gas can be excluded from the extensive work practice 

standards. 

Commenters recommended that the affected source be the flare, which is already subject 

to the standard as a fuel gas combustion device. The commenters suggested that for each affected 

flare, the facility would develop a written Flare Management Plan designed to minimize flaring 

of fuel gas during all periods of operation. This plan, along with the RCA, would ensure that all 

flaring events with potential excess emissions will be minimized. One commenter noted that 

EPA could require a flare management plan for any flare tied to a fuel gas system that has an 

affected fuel gas combustion device as a better alternative to “fuel gas producing units.” One 

commenter noted that an exemption from the notification requirements for modified or 

reconstructed units could be provided as an incentive for early adoption of the flare management 

plan; another commenter suggested that regulatory incentives such as exemptions from 

monitoring and developing flare minimization plans should be provided for facilities that have 

installed fuel gas recovery systems. One commenter supported this type of requirement for flares 

currently subject to subpart J, assuming a minimum of 9 months is provided for plan 

development and implementation. On the other hand, one commenter noted that the definitions 

of the affected facility under subparts J and Ja are different and recommended that the distinction 

be made stronger so that it is clear that existing process unit facilities are “grandfathered” and 

exempt from the flaring minimization standards. 
B-21 

One commenter suggested that the work practices language should be clarified to indicate 

that routing offgas to the flare gas system would be acceptable if the system was equipped with a 

flare gas recovery system. The prohibition should be specific to the flare itself as some flare gas 

systems are equipped with recovery compressors, the use of which should be encouraged rather 

than discouraged. 

Commenters stressed the need for flares as safety devices; any flare minimization 

program must not interfere with the ability of the refinery owner or operator to use flares for 

safety reasons. The commenters stated that “routine” flaring cannot be adequately defined in 

practice; therefore, restrictions on “routine” flaring will lead to unsafe operations in attempts to 

avoid enforcement actions. The commenters requested that EPA include language in the 

regulation, consistent with the preamble discussion, that: “Nothing in this rule should be 

construed to compromise refinery operations and practices with regard to safety.” 

One commenter indicated that the proposed work practice standards for “no routine 

flaring” interfere with flare minimization plans implemented in response to consent decrees. The 

proposed work practice standard could be interpreted as prohibiting flaring during start-up and 

shutdown, and EPA has not determined this to be BDT. The commenter stated that the 

BAAQMD analysis applies to eliminating flaring during normal operation [similar to proposed 

§60.103a(b)], not during start-up and shutdown as in proposed §60.103a(a). The commenter 

provided cost estimates for one refinery to install a recovery system to eliminate flaring during 

start-up and shutdowns; the costs ranged from $200,000 to $800,000 per ton of VOC reduced 

and higher for other criteria pollutants. Therefore, §60.103a(a) should clearly exclude start-up 

and shutdown gases. 

A few commenters provided overall project costs for flare gas recovery projects 

indicating the annual costs are higher than those in the analysis supporting the proposed work 

practice. One commenter stated that EPA underestimated the cost of fuel gas recovery systems 

and, given the uncertainty in emission reductions, contended that fuel gas recovery systems are 

not cost-effective within the NSPS context. 

A number of commenters provided an alternative to EPA’s proposed work practice 

standards. The suggestions included a 500 lb/day SO2 standard tied with a flare management 

plan as an alternative compliance option (to the H2S concentration limit) for flares. The 

commenters recommended that this alternative compliance option be provided in both subparts J 

and Ja and noted that it could be used as an incentive for the flare management plan to cover all 

flares. One commenter also noted that these requirements should be applicable to flares that 
B-22 

receive process gas, fuel gas, or process upset gas; they should not be applicable to flares used 

solely as an air pollution control device, such as a flare used exclusively to control emissions 

from a gasoline loading rack. Another commenter clarified that if the refinery elects to comply 

with this alternative for any flare, all flares at the refinery would need a flare management plan. 

The commenter noted that EPA could choose to set the 500 lb/day SO2 limit as a total for all 

flares for which the alternative compliance option is chosen (i.e., if the alternative compliance 

option is selected for two flares at a refinery, the total emissions from both flares would be 

limited to 500 lb/day). 

Response: Although commenters suggested that certain provisions be made applicable to 

facilities subject to subpart J, the following provisions are only applicable to facilities subject to 

subpart Ja as CAA section 111 provides that new requirements apply only to new sources. We 

considered these comments and agree that the standards are much more straight-forward when 

the affected facility is defined as the flare. Therefore, we have eliminated “fuel gas producing 

units” as an affected facility in this final rule, and we specifically define a flare as a subset of fuel 

gas combustion device, which is an affected facility in this final rule. A “flare” means “an openflame combustion device used for burning off unwanted gas or flammable gas and liquids. The 

flare is defined to include the burner, igniter, flame arrestors, knockout pots, and piping and 

header systems.” 

There are three general work practice standards that were proposed for “fuel gas 

producing units,” which may be summarized as follows: (1) the “no routine flaring” requirement; 

(2) flare minimization plan for start-up, shutdown, and malfunction events; and (3) a root-cause 

analysis for SO2 releases exceeding 500 lb/day (which was proposed for all affected facilities). 

The “no routine flaring” work practice was not intended to prohibit flaring during SSM events; 

the provisions were intended to apply only during normal operating conditions. We agree with 

the commenter that suggested that nothing in this rule should be construed to compromise 

refinery operations and practices with regard to safety. We also specifically rejected a prohibition 

on flaring for planned start-up and shutdown events. We agree with the commenters that noted 

that numerous refineries have demonstrated that flare minimization during planned start-up and 

shutdown activities can greatly reduce flaring during these events. We do believe, however, that 

a complete elimination of flaring during these events is very site-specific and although it is 

reported to have been achieved at a limited number of refineries, we do not have information to 

suggest that it has been adequately demonstrated for universal application. As “no routine 

flaring” is difficult to define in practice, we have re-evaluated BDT using more specific options. 
B-23 

Option 1 is no additional standards for flares. In Option 2, any routine emissions event or 

any process start-up, shutdown, upset or malfunction that causes a discharge into the atmosphere 

in excess of 500 pounds per day of SO2 from an affected fuel gas combustion devices would 

require a root cause analysis to be performed. This approach is similar to what is included in 

most consent decrees. We are also including a requirement for continuous monitoring of TRS for 

all gases flared (including those from upsets, startups, shutdowns, and malfunction events), in 

order to accurately measure SO2 emissions from affected flares. Option 3 includes: (1) the SO2

root cause analysis in Option 2; (2) a limit on the flare flow rate of 250,000 scfd; and (3) a flare 

management plan for each flare affected facility. The flow limit of 250,000 scfd is based on our 

cost analysis that indicates that for typical gas streams in quantities above this limit, the value of 

recovered fuel completely offsets the costs of installing and operating recovery systems. Many 

refineries have implemented flare gas recovery to reduce energy needs and save money. The 

flare management plan must: (1) include a diagram illustrating all connections to each affected 

flare; (2) identify the flow rate monitoring device and a detailed description of manufacturer’s 

specifications regarding quality assurance procedures; (3) include standard operating procedures 

for planned start-ups and shutdowns of refinery process units that vent to the flare (such as 

staging of process shutdowns) to minimize flaring during these events; (4) include procedures for 

a root cause analysis of any process upset or equipment malfunction that causes a discharge to 

the flare in excess of 500,000 scfd; and (5) include an evaluation of potential causes of fuel gas 

imbalances (i.e., excess fuel gas), upsets or malfunctions and procedures to minimize their 

occurrence and records to be maintained to document periods of excess fuel gas. Excess 

emission events for the flow rate limit of 250,000 scfd and the result of root cause analysis must 

be reported in the semi-annual compliance reports. 

Option 4 is identical to Option 3 except that flaring is limited to 50,000 scfd. This level is 

estimated to be a baseline level that accounts for the flow requirement needed to maintain safe 

operations of the flare (i.e., flow of sweep gas and compressor cycle gas). For both Option 3 and 

Option 4, the limit on the flare flow rate does not apply during malfunctions and unplanned 

startups and shutdowns. The flow rate limits in Options 3 and 4 were developed as surrogate 

VOC, SO2, and NOx emission limits; the limits are based on 30-day rolling average flow rate 

values. 

It is anticipated that a flare gas recovery system will be used to comply with Options 3 

and 4 when a flare is currently used on a continuous basis, and the recovered flare gas offsets 

natural gas purchases. The cost-effectiveness of the flare gas recovery system is primarily 

dependent on the quantity of gas that the system can recover. Many refineries have already 
B-24 

implemented similar work practices through consent decrees and local rules (BAAQMD and 

SCAQMD), and these requirements have had a demonstrated reduction in flaring events. Flare 

gas recovery will reduce SO2, NOx and VOC emissions. However, if a refinery produces more 

fuel gas than the refinery needs to power its equipment, there is no place the refinery can use the 

recovered fuel gas and there is no additional natural gas purchases to offset. In these cases, flare 

gas recovery is not considered technically feasible because the excess fuel gas will have to be 

flared. Therefore, we have included specific provision within the flare management plan to 

address instances of excess fuel gas. For periods when the refinery owner or operator can 

demonstrate, through records of natural gas purchases or other means as described in their flare 

minimization plan, that the refinery is fuel gas rich, compliance with the flow limit is 

demonstrated by implementing the procedures described in the flare management plan. 

Impacts for each of the four options are based on estimates of current flaring quantities 

and include the root cause analysis, flare management plan, and flare gas recovery systems when 

needed. The impacts for each option for new flares are presented in Table B-14; impacts for 

modified and reconstructed flares are presented in Table B-15. 

Table B-14. National Fifth Year Impacts of Options for Work Practices Considered for 

New Flaring Devices Subject to 40 CFR Part 60, Subpart Ja 

Option 

Capital 

Cost 

($1,000) 

Total Annual 

Cost 

($1,000/yr) 

Emission 

Reduction 

(tons SO2/yr)

Emission 

Reduction 

(tons NOx/yr)

Emission 

Reduction 

(tons VOC/yr)

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 0 0 0 0 0 N/A N/A 

2 0 23 15 0 0 1,600 1,600 

3 8,800 (1,300) 16 1 41 (23,000) (31,000) 

4 15,000 (840) 16 1 52 (12,000) 43,000 

Table B-15. National Fifth Year Impacts of Options for Work Practices Considered for 

Modified and Reconstructed Flaring Devices Subject to 40 CFR Part 60, 

Subpart Ja 

Option 

Capital 

Cost 

($1,000) 

Total 

Annual Cost 

($1,000/yr) 

Emission 

Reduction 

(tons SO2/yr)

Emission 

Reduction 

(tons NOx/yr)

Emission 

Reduction 

(tons VOC/yr)

Cost-Effectiveness ($/ton)

Overall Incremental 

1 0 0 0 0 0 N/A N/A 

2 0 92 59 0 0 1,600 1,600 

3 35,000 (5,300) 64 4 165 (23,000) (31,000) 

4 59,000 (3,300) 66 6 207 (12,000) 43,000 
B-25 

Based on these impacts and consideration of technically feasible operating practices, we 

conclude that BDT is Option 3. Option 3 includes a set of work practice standards that include 

root cause analysis for a discharge into the atmosphere in excess of 500 pounds per day of SO2

(over the allowable emissions limit) from a fuel gas combustion device of sulfur recovery plant 

or in excess of 500,000 scfd flow from the flare. It also includes a flare management plan. 

Finally, fuel flow to the flare is limited to 250,000 scfd. To support implementation of these 

requirements, monitoring and reporting of the flow rate and sulfur content is required. For new 

flaring devices, this option achieves SO2 emission reductions of 16 tons/yr from a baseline of 32 

tons/yr, NOx emission reductions of 1 ton/yr from a baseline of 2 tons/yr, and VOC emission 

reductions of 41 tons/yr from a baseline of 67 tons/yr with a net fuel savings of $23,000 per ton 

of combined SO2, NOx, and VOC. For modified and reconstructed flaring devices, this option 

achieves SO2 emission reductions of 64 tons/yr from a baseline of 129 tons/yr, NOx emission 

reductions of 4 tons/yr from a baseline of 7 tons/yr, and VOC emission reductions of 165 tons/yr 

from a baseline of 266 tons/yr with a net fuel savings of $23,000 per ton of combined SO2, NOx, 

and VOC. 

B.10 Delayed Coking Units 

Comment: Several commenters supported the proposal that requires delayed coking units 

to depressure the coke drums to the fuel gas system down to 5 psig. One commenter supported 

venting the delayed coker gas to a flare or to the atmosphere at pressures less than 5 psig; at 

pressures greater than 5 psig, the commenter suggested that the rule should only prohibit gases 

from being sent to a flare and allow any other disposition. That is, the commenter stated that 

EPA should not restrict the disposition of the coker depressurization gas to only the fuel gas 

system. 

One commenter supported inclusion of a coke drum pressure limit above which the coke 

drum exhaust gases must be sent to a recovery system, disagreed that it is technically infeasible 

to divert emissions for recovery at pressures below 5 psig, and urged EPA to require venting 

until the pressure drops below 2 psig. The commenter recently issued a permit including the 2 

psig level, and although the modification has not been completed, the commenter believes the 

requirement is technically feasible. 

A number of commenters objected to the finding that BDT is to depressure delayed 

coking units to the fuel gas system down to 5 psig. Commenters provided examples of coking 

units whose current mode of operations (e.g., set points or timed cycles) may divert to a flare or 

the atmosphere at pressures of approximately 10 to 20 psig and that it would not be cost-effective 
B-26 

to modify these units to comply with the proposed work practice standard. One commenter 

supported the premise that it is cost-effective for delayed coking discharge to be routed to fuel 

gas blowdown, but depressurization down to 5 psig may not be feasible with existing equipment; 

the commenter recommended that the work practice simply require a closed blow down system 

following procedures described in the facility’s SSM plan. At a minimum, an alternative is 

needed for existing units that would require capital expenditure to meet the 5 psig proposal. One 

commenter stated that compressors cannot recover blowdown system gases at pressures below 

the fuel gas recovery compressor suction pressure. The minimum pressure at which a suction 

compressor can operate depends on the design of the coking unit and the blowdown management 

system. Because there is uncertainty surrounding the available emission information, the costs 

are not minimal in most cases, and the emissions are difficult to measure, the commenter stated 

that EPA cannot determine that controls on coker vents is BDT. 

Response: Based on the public comments, we re-evaluated BDT for delayed coking units. 

We considered three options: (1) depressurization down to 15 psig; (2) depressurization down to 

5 psig; and (3) depressurization down to 2 psig. We assumed that the baseline is, on average, 

depressurization down to 15 psig and then venting to the atmosphere. Therefore, there are no 

impacts for Option 1. Impacts for Options 2 and 3 were estimated based on the baseline 

conditions, the size of typical coke drums, and cost information provided in public comments. 

We also collected emissions test data to support and verify the projected emissions and emission 

reductions. The impacts for each option for new delayed coking units are presented in Table 

B-16; impacts for modified and reconstructed delayed coking units are presented in Table B-17. 

Table B-16. National Fifth Year Impacts of Options for Work Practices Considered for 

New Delayed Coking Units Subject to 40 CFR Part 60, Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual 

Cost 

($1,000/yr) 

Emission 

Reduction 

(tons SO2/yr) 

Emission 

Reduction 

(tons VOC/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 0 0 0 0 N/A N/A 

2 2,400 230 170 10 1,200 1,200 

3 24,000 2,300 230 13 9,500 37,000 
B-27 

Table B-17. National Fifth Year Impacts of Options for Work Practices Considered for 

Modified and Reconstructed Delayed Coking Units Subject to 40 CFR Part 60, 

Subpart Ja 

Option 

Capital Cost 

($1,000) 

Total Annual 

Cost 

($1,000/yr) 

Emission 

Reduction 

(tons SO2/yr) 

Emission 

Reduction 

(tons VOC/yr) 

Cost-Effectiveness ($/ton) 

Overall Incremental 

1 0 0 0 0 N/A N/A 

2 14,000 1,400 260 15 4,900 4,900 

3 54,000 5,100 340 19 14,000 45,000 

Based on these impacts and consideration of technically feasible operating practices, we 

confirmed our conclusion at proposal that BDT is depressurization down to 5 psig, or Option 2. 

For new delayed coking units, this option achieves SO2 emission reductions of 170 tons/yr from 

a baseline of 520 tons/yr and VOC emission reductions of 10 tons/yr from a baseline of 29 

tons/yr at a cost of $1,200 per ton of combined SO2 and VOC. For modified and reconstructed 

delayed coking units, this option achieves SO2 emission reductions of 260 tons/yr from a 

baseline of 780 tons/yr and VOC emission reductions of 15 tons/yr from a baseline of 44 tons/yr 

at a cost of $4,900 per ton of combined SO2 and VOC. Although Option 3 has been established 

in one refiner’s permit, this level of depressurization has not been demonstrated in practice. 

Additionally, the difference in the quantity of gas released when the set point is 2 psig rather than 

5 psig is relatively small, 80 tons of SO2 and 4 tons of VOC, and the resulting incremental costeffectiveness from Option 2 to Option 3 is about $40,000/ton, which is much greater. Therefore, 

Option 3, or depressurization down to 2 psig, is not BDT. 

B.11 Summary of Results for New Sources and Modified and Reconstructed Sources 

Below in Table B-18 is a summary of results for the analyses done above for options 

applied to new sources. Table B-19 contains a similar summary for the modified and 

reconstructed sources. 
B-28 

Table B-18. National Incremental Emission Reductions and Cost Impacts for Options Applied to New Pet

Units Subject to Final Standards Under 40 CFR Part 60, Subpart Ja (Fifth Year After Propos

Process 

Unit 

Pollutant 

Controlled Option 

Total 

Capital 

Cost 

($1,000) 

Total 

Annual Cost

($1,000/yr) 

Annual 

Emission 

Reductions

(tons PM/yr)

Annual 

Emission 

Reductions 

(tons SO2/yr) 

Annual 

Emission 

Reductions 

(tons NOx/yr)

Annual 

Emission 

Reductions

(tons 

VOC/yr) 

E

FCCU PM 1 (baseline)  2a 3,600 1,100 235 

 3 7,100 1,700 300  SO2 1 (baseline) 

 2a 0 1,400 1,993 

 NOx 1 900 300 368 

 2a 1,200 600 859 

 3 12,200 3,600 1,382 Small SRP SO2 1 (baseline) 

 2a 100 100 42 

 3 600 200 52 Fuel gas combustion devices 

SO2 1 (baseline) 

 2a 1,200 800 524 

 3 100,200 13,200 926 Process heaters 

NOx 1 9,000 7,300 4,841 

 2a 9,000 7,500 5,237 

 3 110,700 30,100 5,853 
B-29 

Table B-18. National Incremental Emission Reductions and Cost Impacts for Options Applied to New Pet

Units Subject to Final Standards Under 40 CFR Part 60, Subpart Ja (Fifth Year After Propos

Process Unit 

Pollutant 

Controlled Option 

Total 

Capital 

Cost 

($1,000) 

Total 

Annual Cost

($1,000/yr) 

Annual 

Emission 

Reductions

(tons PM/yr)

Annual 

Emission 

Reductions 

(tons SO2/yr) 

Annual 

Emission 

Reductions 

(tons NOx/yr)

Annual 

Emission 

Reductions

(tons 

VOC/yr) 

E

Flare gas minimization 

SO2, VOC 1 (baseline) 

 2 0 23 15 0 0  3a 8,800 −1,300 16 1 41 

 4 15,000 −840 16 1 52 

Delayed coking units 

SO2, VOC 1 

 2a 2,400 200 174 10 

 3 24,000 2,300 227 13 Sulfur pits SO2 1 

 2a 700 100 30 

 3 1,300 200 31 

a Denotes selected option. All costs are in 2006 dollars. 83.3% of the PM emissions are PM2.5. 
B-30 

Table B-19. National Incremental Emission Reductions and Cost Impacts for Options Applied to Modified 

Petroleum Refinery Units Subject to Final Standards Under 40 CFR part 60, subpart Ja (FiftProposal) 

Process 

Unit 

Pollutant 

Controlled Option 

Total 

Capital Cost

($1,000) 

Total 

Annual Cost

($1,000/yr) 

Annual 

Emission 

Reductions

(tons PM/yr)

Annual 

Emission 

Reductions 

(tons SO2/yr) 

Annual 

Emission 

Reductions

(tons NOx/yr)

Annual 

Emission 

Reductions

(tons 

VOC/yr) 

E

FCCU PM 1 (baseline)a 2 75,200 11,900 690  3 101,100 15,500 808  SO2 1 (baseline) 

 2a 0 1,600 2,400 

 NOx 1 2,800 1,000 856  2a 3,700 1,600 1,784  3 44,800 11,500 3,234 FCU PM, SO2 1 (baseline) 

 2a 10,400 3,200 1,000 5,900 

 NOx 1 (baseline)  2 800 200 410  3a 3700 900 657  4 6,000 1,300 745 Small SRP SO2 1 (baseline) 

 2a 1,600 700 381 

 3 7,800 2,600 466 
B-31 

Table B-19. National Incremental Emission Reductions and Cost Impacts for Options Applied to Modified 

Petroleum Refinery Units Subject to Final Standards Under 40 CFR part 60, subpart Ja (FiftProposal) (continued) 

Process Unit 

Pollutant 

Controlled Option 

Total 

Capital Cost

($1,000) 

Total 

Annual Cost

($1,000/yr) 

Annual 

Emission 

Reductions

(tons PM/yr)

Annual 

Emission 

Reductions 

(tons SO2/yr) 

Annual 

Emission 

Reductions 

(tons NOx/yr)

Annual 

Emission 

Reductions

(tons 

VOC/yr) 

E

Fuel gas combustion devices 

SO2 1 (baseline) 

 2a 32,900 11,300 4,700 

 3 1,674,000 198,100 9,100 Process heaters 

NOx 1 11,700 4,000 2,075 

 2a 14,000 4,300 2,244  3 64,100 14,800 2,509 Flare gas minimization 

SO2, VOC 1 (baseline) 

 2 0 100 59 0 0  3a 35,000 −5,300 64 4 165 

 4 59,000 −3,300 66 6 207 

Delayed coking units 

SO2, VOC 1 

 2a 14,400 1,400 261 15 

 3 54,000 5,100 340 19 Sulfur pits SO2 1 

 2a 7,700 900 269 

 3 15,300 1,900 275 

a Denotes selected option. All costs are in 2006 dollars. 83.3% of the PM emissions are PM2.5. 
5-1 

SECTION 5 

ECONOMIC IMPACT ANALYSIS: METHODS AND RESULTS 

The EIA is designed to inform decision makers about the potential economic 

consequences of a regulatory action. The analysis consists of estimating the social costs of a 

regulatory program and the distribution of these costs across stakeholders (consumers and 

producers). As defined in EPA’s (2000) Guidelines for Preparing Economic Analyses,1

 social 

costs are the value of the goods and services lost by society resulting from using resources to 

comply with and implement a regulation and reductions in output. 

5.1 Market Model 

EPA constructed partial equilibrium models of the national markets for five major 

petroleum products (motor gasoline, jet fuel, distillate fuel oil, residual fuel oil, and liquefied 

petroleum gases).2

 These models were used to measure the economic consequences of the 

regulatory program in the intermediate run (when some factors of production are fixed and others 

are variable).3 Partial equilibrium models track the effects of regulatory action in a single market, 

while ignoring interactions with other markets. 

Each of the 5 intermediate-run market models uses a common analytic expression to 

estimate how an increase in the per-unit (per-gallon) costs of producing a product will impact 

that product’s price (Berck and Hoffmann, 2002; Fullerton and Metcalfe, 2002). This expression 

is presented in Equation 5.1. A full description for how it is derived and used is provided in 

Appendix C. 

Δprice = Supply Elasticity

Supply Elasticity – Demand Elasticity × Per-Gallon Cost (5.1) 

This approach follows EPA guidelines for analyzing the economic impacts of a 

regulatory program (EPA, 1999; EPA, 2000). 

5.2 Model Baseline 

Standard EIA practice compares and contrasts the state of a market with and without a 

regulatory policy. EPA selected 2012, the fifth year after proposal, as the baseline year for the 

analysis. Forecasts for the price and consumption of each petroleum product in 2012 were 

 

1

 These guidelines are under review by the Agency. 2

 National market models were selected in order to be consistent with the national-level cost estimates provided by 

the engineering cost analysis. 3

 For a complete discussion of how the intermediate run is defined, please see the OAQPS Economic Analysis 

Resource Document (EPA, 1999). 
5-2 

collected from the Energy Information Administration’s Annual Energy Outlook and reported in 

Chapter 3 (Tables 3-19 and 3-20). However, these data had to be standardized for use in EPA’s 

models. 

First, the 2007 Annual Energy Outlook reports the price of petroleum products in terms 

of 2005 dollars. However, compliance costs were estimated in terms of 2006 dollars. Therefore, 

to ensure that common units were being used, petroleum product prices were converted to 2006 

dollars by dividing the forecasted price in 2012 by the ratio of the Consumer Price Indices (CPI) 

in 2006 and 2005. 

Second, the 2007 Annual Energy Outlook reports the quantity of petroleum products 

consumed in terms of barrels, while the price of petroleum products is reported in terms of 

dollars per gallon. Therefore, to ensure that common units were being used, the number of 

barrels produced each year was divided by 42 (the number of gallons in a barrel). A summary of 

the baseline data used in each of the five market models after these adjustments were made is 

reported in Table 5-1. 

Table 5-1. Baseline Market Data: 2012 

Market 

Motor 

Gasoline Jet Fuel 

Distillate 

Fuel Oil 

Residual 

Fuel Oil 

Liquefied 

Petroleum 

Gases 

Price ($2006/per gallon) $2.11 $1.40 $2.04 $1.06 $1.55 

Quantity (billion gallons/per year) 149.67 31.04 71.83 12.36 34.10 

Sources: 2012 Petroleum product price and consumption forecasts: U.S. Department of Energy, Energy Information 

Administration (EIA). 2007. “Annual Energy Outlook.” Available at <http://www.eia.doe.gov/oiaf/archive/ 

aeo07/pdf/0383(2007).pdf>. As obtained on January 21, 2007. 

 2005 and 2006 Consumer Price Indices: U.S. Department of Energy, Energy Information Administration 

(EIA). 2008. “Short-Term Energy Outlook: Real Petroleum Prices.” Available at <http://www.eia.doe.gov/emeu/ 

steo/pub/fsheets/real_prices.html>. As obtained on April 21, 2008. 

5.3 Model Parameters 

An essential component of partial equilibrium models 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 used in this analysis is provided in Table 5-2. 
5-3 

Table 5-2. Estimates of Price Elasticity of Demand and Supply 

Market 

Motor 

Gasoline Jet Fuel 

Distillate 

Fuel Oil 

Residual Fuel 

Oil 

Liquefied 

Petroleum 

Gases 

Demand elasticity −0.69 −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. 

5.4 Results 

Chapter 4 reports that the estimated change in total annualized costs resulting from the 

regulatory program is approximately $31 million (measured in 2006 dollars). According to the 

2007 Annual Energy Outlook, the forecasted consumption of all petroleum products in 2012 is 

8.08 billion barrels or 339.25 billion gallons. Assuming that the production processes of all 

petroleum products are equally affected, this regulatory program is expected to result in a 

$0.000091 per-gallon increase in the cost of producing petroleum products ($31 million / 339.25 

billion gallons). 

Based on EPA’s partial equilibrium analysis, the costs induced by this regulatory 

program do not have a significant impact on market-level prices or quantities. The results of this 

analysis are summarized in Table 5-3. As this table shows, prices for each of the 5 products rise 

by less than 1 penny (0.003%–0.006%) and the quantity of each petroleum product produced 

declines. Motor gasoline and distillate fuel face the largest absolute quantity reductions (2.8 and 

1.4 million gallons, respectively, or 0.002%), while residual fuel oil sees the largest proportional 

decline in production (0.004%). 

As a result of higher prices, consumers of petroleum products see a decline in surplus. 

For example, consumers of motor gasoline lose $8.78 million of surplus. In addition, producers 

also receive a smaller surplus as a result of higher production costs. In the case of motor 

gasoline, producers lose $4.89 million. Total surplus losses for consumers and producers of 

motor gasoline are estimated to be $13.67 million. The total annualized loss in surplus for all 5 

markets analyzed, which is an estimate of the social cost of this NSPS, is $27.30 million or 

slightly less than the total annualized compliance cost in these markets. 
5-4

Table 5-3. Summary of Intermediate Run Economic Impacts by Petroleum Product: 2012 

Motor Gasoline Jet Fuel Distillate Fuel Oil Residual Fuel Oil 

Change in price 0.003% 0.006% 0.003% 0.006% 

Less than a penny per 

gallon 

Less than a penny per 

gallon 

Less than a penny per 

gallon 

Less than a penny per 

gallon 

Change in quantity −0.002% −0.001% −0.002% −0.004% 

(−2.8 million gallons per 

year) 

(−0.2 million gallons per 

year) 

(−1.4 million gallons per 

year) 

(−0.4 million gallons p

year) 

Welfare Impacts 

($million) 

Welfare Impacts 

($million) 

Welfare Impacts 

($million) 

Welfare Impacts 

($million) 

Change in consumer surplus −$8.78 −$2.53 −$4.10 −$0.73 Change in producer surplus −$4.89 −$0.31 −$2.46 −$0.40 

Change in total surplus −$13.67 −$2.83 −$6.56 −$1.13 
5-5 

In addition to the loss in surplus for consumers and producers of these 5 major petroleum 

products, an additional $3.7 million in costs will affect markets for petroleum products that were 

not explicitly modeled in this analysis. These include markets for asphalt, lubricants, road oil, 

petroleum coke and others. 

5.5 Executive Order 13211 (Energy Effects) 

This rule is not a “significant energy action” as defined in Executive Order 13211, 

“Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” 

(66 FR 28355 [May 22, 2001]) because it is not likely to have a significant adverse effect on the 

supply, distribution, or use of energy. We prepared an analysis of the impacts on energy markets 

as part of our economic impact analysis for today’s action. Our analysis shows that there is a 

reduction in output of the five petroleum products included in this analysis of between 0.2 and 

2.8 million gallons, or a decrease in output of less than 0.01%, in the fifth year after proposal of 

this action. In addition, our analysis shows that prices increase less than 0.001% in the fifth year 

after proposal of this action for all petroleum products analyzed. Given such a small increase in 

domestic prices, no significant increase in our dependence on foreign energy supplies should 

take place. Finally, today’s action will have no adverse effect on crude oil supply, coal 

production, electricity production, and energy distribution. Based on the findings from the 

analysis of impacts on energy markets, we conclude that today’s action is not a “significant 

energy action” as defined in Executive Order 13211. For more information on this analysis, 

please refer to the economic impact analysis shown earlier in this chapter. 

5.6 Limitations 

The results of economic should be viewed with the following limitations in mind. First, 

the models used are based on the assumption of a national competitive market, which may 

influence the findings because the markets for petroleum products such as motor gasoline are 

regional. Regional price and quantity impacts could be different from the average impacts 

reported in this analysis if local market structures, production costs, or demand conditions are 

substantially different from those used in this analysis. Second, the models use a market supply 

function and analyze supply behavior at or near a single market baseline equilibrium using a 

supply elasticity parameter. Therefore, they do not address facility-level impacts such as closures 

or changes in employment. Although developing a facility-level model could potentially provide 

these outputs, this type of model requires substantial amounts of detailed data for individual 

facilities and a level of effort beyond the scope of this analysis. As a result, EPA conducted a 

cost-to-sales ratio analysis to assess impacts on firms, specifically small firms (see Section 6). 
5-6 

5.7 References 

Berck, P., and S. Hoffmann. 2002. “Assessing the Employment Impacts.” Environmental and 

Resource Economics 22:133–156. 

Fullerton, D., and G. Metcalf. 2002. “Tax Incidence.” In A. Auerbach and M. Feldstein, eds., 

Handbook of Public Economics, Vol. 4. Amsterdam: Elsevier. 

U.S. Department of Energy, Energy Information Administration (EIA). 2007. “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 Energy, Energy Information Administration (EIA). 2008. “Short-Term 

Energy Outlook: Real Petroleum Prices.” Available at <http://www.eia.doe.gov/emeu/ 

steo/pub/fsheets/real_prices.html>. As obtained on April 21, 2008. 

U.S. Environmental Protection Agency (EPA). 1995. Economic Impact Analysis for Petroleum 

Refineries NESHAP. EPA-452/R-95-003, Final Report. Washington DC: Government 

Printing Office. 

U.S. Environmental Protection Agency (EPA). 1999. OAQPS Economic Analysis Resource 

Document. Research Triangle Park, NC: EPA. Available at 

<http://www.epa.gov/ttn/ecas/ econdata/6807-305.pdf>. 

U.S. Environmental Protection Agency (EPA). September 2000. Guidelines for Preparing 

Economic Analyses. EPA 240-R-00-003. Washington, DC: EPA. Available at 

<http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/Guidelines.html>. 
6-1 

SECTION 6 

SMALL BUSINESS ANALYSIS 

The Regulatory Flexibility Act (RFA) 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.1

 This section begins by describing the data and methods used for performing this 

small business analysis and end by reporting the results of the analysis. 

6.1 Data and Methods for Flexibility Analysis 

The impact of the rule on small businesses is assessed using the ratio of compliance costs 

to the annual revenue of the ultimate parent company. This is known as the cost-to-sales ratio or 

CSR and it can be computed using the following equation: 

j

n

i

TR

TACC

CSR

∑

= (6.1) 

where 

TACC = total annual compliance costs, 

i = indexes the number of affected plants owned by company j, 

n = number of affected plants, and 

TRj = total annual revenue of a representative ultimate parent company j in each 

industry 

If the CSR is less than 1%, then the regulatory program is considered to not have a 

significant impact on the parent company in question. This approach assumes affected firms 

absorb the control costs, rather than pass them onto consumers in the form of higher prices. 

In Chapter 3, 25 small companies owning petroleum refineries classified as small 

according. As previously discussed, small businesses in the petroleum refining industry (NAICS 

code 324100) are defined for the purposes of this rule as having 1,500 or fewer employees.2

 

 

1

 Small entities include small businesses, small organizations, and small governmental jurisdictions. 

2

 Refer to http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf for more 

information on SBA small business size standards. 
6-2 

Table 6-1 duplicates sales employment data for these 25 small companies originally 

reported in Chapter 3. 

Table 6-1. Characteristics of Small Businesses in the Petroleum Refining Industry 

Facility Name Refineries (#) 

Parent 

Company Sales 

($Millions) 

Parent Company 

Employment (#) 

AGE Refining & Manufacturing 1 287 52 

American Refining Group 1 350 310 

Arabian American Development Co 1 80 118 

Calcasieu Refining Co. 1 638 51 

Calumet Specialty Products 3 1,641 350 

Countrymark Cooperative, Inc. 1 87 300 

Cross Oil & Refining Co. Inc. 1 49 110 

CVR Energy Inc. 1 3,038 577 

Foreland Refining Co. 1 56 100 

Frontier Oil Corp 2 4,000 727 

Gary-Williams Co 1 97 200 

Goodway Refining LLC 1 3 18 

Greka Integrated Inc 1 22 145 

Gulf Atlantic Operations LLC 1 9 32 

Holly Corp. 2 4,023 859 

Hunt Refining Co. 3 4,871 1,100 

Lion Oil Co. 1 247 425 

Pelican Refining Co. LLC 1 29 62 

Placid Refining Inc. 1 1,400 200 

San Joaquin Refining Co., Inc. 1 288 20 

Somerset Oil Inc 1 55 150 

Trigeant Ltd. 1 5 50 

Western Refining, Inc. 4 4,200 416 

World Oil Corp 1 277.3 475 

Wyoming Refining Co. 1 340 107 

We note here, that we inadvertently used a different small business size standard for small refiners in the proposed 

NSPS. The small business analysis for the final rulemaking incorporates the correct SBA small business size 

standard of 1,500 employees per ultimate parent refiner. The effect of this correction on the affected small refiner 

universe is an increase of one small firm. There is no effect on our determination of no significant economic 

impact on a substantial number of small entities (to be shown later) as a result of this correction. 

6.2 Results of Small Business Analysis 

As described in Chapter 4, the EPA estimates that small businesses will invest in two new 

or modified process units during the five-year period of analysis. Investing in these process units 

would require the small businesses to incur an average $1.5 million per facility in annualized 

compliance cost and earn an average $0.6 million per facility in cost savings as a result of the 

final NSPS—a net total annualized compliance cost of $910 thousand per facility. 
6-3 

Literature on the petroleum refining industry was examined to identify and characterize 

small firms likely to be affected by the rule, The Oil & Gas Journal’s 2008 Worldwide 

Construction Update survey catalogued over 40 refining construction projects that have been 

announced in the United States. Among the companies announcing construction projects,3

 three 

were identified by EPA as small businesses—Frontier Oil Corp, Holly Corp, and Placid Refining 

Inc. EPA therefore estimates that three small businesses will invest in new or modified process 

units during the five-year period of analysis. 

As indicated in Table 6-1, each of these companies earned over $1 billion in revenue in 

the base year for this analysis (2006). Assuming that these three small businesses (out of 25 total 

small businesses identified by EPA) are representative of the small businesses that will invest in 

new or modified process units over the five year period of analysis, their cost to sales ratios 

would be less than 1%. As a result, the final NSPS is not expected to have a significant impact 

on small companies. 

After considering the economic impact of today’s action on small entities, I certify that 

this action will not have a significant economic impact on a substantial number of small entities. 

Of the affected entities, none are estimated to incur annualized compliance cost over 1% of sales. 

Although this proposed action would not have a significant economic impact on any 

small entities, EPA nonetheless has tried to reduce the impact of this action on small entities by 

incorporating specific standards for small sulfur recovery plants and streamlining procedures for 

exempting inherently low-sulfur fuel gases from continuous monitoring. In addition, EPA has 

updated this small business analysis to incorporate capacity data for small refiners provided in a 

comment by the Ad Hoc Coalition of Small Business Refiners. 

 

3

 Construction projects included in the Oil & Gas Journal’s analysis include new, expanded, and upgraded 

processes. 
7-1 

SECTION 7 

HUMAN HEALTH BENEFITS OF EMISSIONS REDUCTIONS 

7.1 Calculation of Human Health Benefits 

In order to estimate the human health benefits of reducing emissions from refineries 

through this final rulemaking, EPA used the benefits transfer approach and methodology 

described in EPA’s benefits analysis the Technical Support Document (TSD)1

 accompanying the 

recent National Ambient Air Quality Standards (NAAQS) for Ozone.2

 In that RIA, EPA applied 

a benefits transfer approach to estimate the PM2.5 co-benefits resulting from reductions in 

emissions of NOx; EPA is adapting that method to estimate the health benefits for the projected 

emission reductions of PM2.5 precursor pollutants associated with this final rulemaking. 

EPA did not perform an air quality modeling assessment of the emission reductions 

resulting from installing controls on these refineries because of the time and resource constraints 

and the limited value of such an analysis for the purposes of developing the regulatory approach 

for this final rule. This lack of air quality modeling limited EPA’s ability to perform a 

comprehensive benefits analysis for this final rulemaking since our benefits model requires either 

air quality modeling or monitoring data. 

To estimate the human health benefits of emission reductions from refineries for this analysis 

in the absence of modeling data, we used the studies from the PM NAAQS Regulatory Impact 

Analysis (RIA)3

 to generate benefit-per-ton values. These PM2.5 precursor pollutant benefit perton estimates provide the total monetized human health benefits (the sum of premature mortality 

and premature morbidity) of reducing one ton of PM2.5 and PM2.5 precursor emissions from a 

specified source. These benefits estimates have been updated in the final NSPS to utilize the 

mortality valuation estimates obtained in the expert elicitation study, as mentioned in the 

proposal. In addition, we also include VOC benefit-per-ton estimates.4

 EPA has used a similar 

technique in previous RIAs, beginning with the PM NAAQS RIA (U.S. EPA, 2006). EPA has 

requested the SAB to review the presentation of benefits estimates based on the mortality 

 

1

 U.S. EPA, 2008a. Technical Support Document: Calculating Benefit Per-Ton estimates, Ozone NAAQS Docket 

#EPA-HQ-OAR-2007-0225-0284. 2

 U.S. EPA, 2008b. . Regulatory Impact Analysis, 2008 National Ambient Air Quality Standards for Ground-level 

Ozone, Chapter 6. Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/6-ozoneriachapter6.pdf. 3

 U.S. EPA, 2006. Regulatory Impact Analysis, 2006 National Ambient Air Quality Standards for Particulate 

Matter, Chapter 5. Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/Chapter%205--

Benefits.pdf. 4

 In this analysis, the monetized benefits of reducing VOCs only reflect their effects as a PM2.5 precursor pollutant. 

In this analysis, we are not quantifying any ozone-related health benefits. 
7-2 

valuation estimates obtained in the expert elicitation study in the context of an RIA. The 14 

estimates presented below derive from the application of three alternative methods: 

 One estimate is based on the concentration-response (C-R) function developed from 

the study of the American Cancer Society (ACS) cohort reported in Pope et al. 

(2002), which has previously been reported as the primary estimate in recent RIAs 

 One estimate is based on Laden et al.’s (2006) reporting of the extended Six Cities 

cohort study; this study is a more recent PM epidemiological study that was used as 

an alternative in the PM NAAQS RIA. 

 The other 12 estimates are based on the results of EPA’s expert elicitation study on 

the PM-mortality relationship, as first reported by Industrial Economics (2006) and 

interpreted for benefits analysis in EPA's final RIA for the PM NAAQS, published in 

September 2006 (EPA, 2006). For that study, 12 experts (labeled A through L) 

provided independent estimates of the PM-mortality C-R function. EPA practice has 

been to develop independent estimates of PM-mortality estimates corresponding to 

the concentration-response function provided by each of the 12 experts. 

EPA believes that these updated estimates will better characterize the uncertainty 

associated with using the benefit-per-ton approach to derive an estimate of total benefits. Readers 

interested in the complete methodology for creating the benefit-per-ton estimates used in this 

analysis may consult the Technical Support Document accompanying the final Ozone NAAQS 

RIA (EPA, 2008).

To develop the estimate of the benefits of reducing emissions from this rulemaking, we 

calculated the monetized benefits-per-ton of emissions reduction estimates for direct PM2.5 and

each PM2.5 precursor pollutant.5 In the TSD, we describe in detail how we generated the benefitper-ton estimates. In summary, we used a model to convert emissions of direct PM2.5 and PM2.5 

precursors (i.e., SO2, NOx, and VOCs) into changes in PM2.5 air quality. Next, we used the 

benefits model to estimate the changes in human health based on the change in PM2.5 air quality. 

Finally, the monetized health benefits were divided by the emission reductions to create the 

benefit per ton estimates. Even though all fine particles are assumed to have equivalent health 

effects, the benefit-per-ton estimates vary because each ton of precursor reduced has a different 

propensity to become PM2.5. For example, NOx has a lower benefit-per-ton estimate than direct 

PM2.5 because it does not form as much PM2.5, thus the exposure would be lower, and the 

monetized health benefits would be lower. 

 

5

 Emission reductions shown in the tables below are in terms of total PM, but it is estimated that 83.3% of the PM 

emissions are in the PM2.5 fraction. For the purposes of this benefits analysis, all of the PM benefits shown in the 

following tables are the PM2.5 fraction. Therefore, we do not provide any benefits estimates for the reductions of 

PM other than PM2.5 (e.g., PM10) that will take place as a result of this final NSPS. 
7-3 

After generating the benefit-per-ton estimate, we then multiply this estimate by the 

number of tons of each pollutant reduced to derive an overall monetary value of benefits. We 

show a range of benefits estimates per pollutant (and option) rather than a single point estimate 

in order to reflect the range of estimates obtained in the expert elicitation study.6

 Table 7-1 

provides a general summary of the results by pollutant for the selected options, including the 

emissions reductions and monetized benefits-per-ton range. Figure 7-1 provides a visual 

representation of the full range of benefits estimates by pollutant at a discount rate of 3%. Tables 

7-2 and 7-3 summarize the range of benefits of the selected options at discount rates of 3% and 

7%, respectively. Tables 7-4 and 7-5 provide the range of benefits for all options discounted at 

3% and 7% for new and modified/reconstructed units, respectively. All benefits estimates are for 

the fifth year after proposal (2012). More details on the options, emissions, and emission 

reductions can be found in Chapter 4 of this RIA. 

Table 7-1. General Summary of Range of Benefits Estimates for Selected Options in the 

Final NSPSa

Pollutant 

Emissions 

Reductions 

(tons) 

Benefit 

per Ton 

(low, 

3%) 

Benefit 

per Ton 

(high, 

3%) 

Benefit 

per Ton 

(low, 

7%) 

Benefit 

per Ton 

(high, 

7%) 

Total Monetized 

Benefits (millions 

2006$ at 3%) 

Total Monetized 

Benefits (millions 

2006$ at 7%) 

Direct PM2.5 1,054 $68,000 $570,000 $63,000 $520,000 $72 to $600 $66 to $540 

PM2.5 

Precursor 

SO2 16,714 $8,000 $68,000 $7,400 $62,000 $130 to $1,100 $120 to $1,000 

NOx 10,786 $1,300 $11,000 $1,200 $9,600 $14 to $110 $13 to $100 

VOC 230 $210 $1,700 $190 $1,500 $.05 to $.38 $.04 to $.35 

Total $220 to $1,900 $200 to $1,700 

a All estimates are for the analysis year (fifth year after proposal, 2012), and are rounded to two significant figures so 

numbers may not sum across columns. Emission reductions reflect the combination of selected options for both 

new and reconstructed/modified sources. All benefits estimates are shown at both 3% and 7% discount rate. The 

PM2.5 fraction of total PM emissions is estimated at 83.3%, and only the reduction in the PM2.5 fraction is 

monetized in this analysis. All fine particles are assumed to have equivalent health effects, but the benefit per ton 

estimates vary because each ton of precursor reduced has a different propensity to become PM2.5. The monetized 

benefits incorporate the conversion from precursor emissions to ambient fine particles. 

 

6

 In the Expert Elicitation, Expert K represented the lowest estimate, and Expert E represented the highest estimate. 

Therefore, the total range of benefits is presented as the range from Expert K to Expert E. 
7-4 

Pope

Laden

Expert A

Expert B

Expert C

Expert D

Expert E

Expert F

Expert G

Expert H

Expert I

Expert J

Expert K

Expert L

$‐

$200

$400

$600

$800

$1,000

$1,200

Millions of 2006$

Epidemiology or Expert Derived PM2.5 Mortality Function

VOC NOX Direct PM2.5 SO2

Figure 7-1. Monetized Benefits for Selected Options for Final Petroleum Refineries NSPS 

at 3% Discount Rate by PM2.5 Precursor Emitted in 2012a

a

 This graph shows 14 PM benefits estimates, which are treated as independent and equally probable, for each 

precursor pollutant. All fine particles are assumed to have equivalent health effects, but the benefit-per-ton 

estimates vary because each ton of precursor reduced has a different propensity to become PM2.5. The monetized 

benefits incorporate the conversion from precursor emissions to ambient fine particles. 

It is important to note that the monetized benefit-per-ton estimates used here reflect 

specific geographic patterns of emissions reductions and specific air quality and benefits 

modeling assumptions. Use of these $/ton values to estimate benefits associated with different 

emission control programs (e.g., for reducing emissions from large stationary sources like EGUs) 

may lead to higher or lower benefit estimates than if benefits were calculated based on direct air 

quality modeling. Great care should be taken in applying these estimates to emission reductions 

occurring in any specific location, as these are all based on national or broad regional emission 

reduction programs and therefore represent average benefits-per-ton over the entire United 

States. The benefits-per-ton for emission reductions in specific locations may be very different 

than the national average. 
7-5 

Table 7-2. Summary of Monetized Benefits for Selected Options at 3% Discount Rate in 

2012 (millions of 2006$) 

Process Unit (new) 

Selected 

Optiona Pollutantb

Emissions 

Reduction 

(tons) 

Total Benefit 

(millions)c

FCCU 2 PM 235 $13 − $110 

2 SO2 1,993 $16 − $140 

2 NOx 859 $1.1 − $9.1 

Small SRP 2 SO2 42 $.34 − $2.9 

Fuel gas combustion 2 SO2 524 $4.2 − $36 

Flaring gas minimization 3 SO2 24 $.20 − $1.7 

3 NOx 9 $.01 − $.09 

3 VOC 277 $.06 − $.46 

Delayed cokers 2 SO2 174 $1.4 − $12 

2 VOC 10 $.00 − $.02 

Process heater 2 NOx 5,237 $6.9 − $56 

Sulfur pits 2 SO2 30 $.24 − $2.0 

Total $43 − $370 

Process Unit 

(modified/reconstructed) 

 

FCCU 1 PM 0 $.00 − $.00 

2 SO2 2,350 $19 − $160 

2 NOx 1,784 $2.3 − $19 

Fluid coker 2 PM 1,030 $47 − $400 

2 SO2 5,893 $59 − $490 

Fluid coker 3 NOx 657 $.86 − $7.0 

SRP 2 SO2 381 $3.1 − $26 

Fuel gas combustion 2 SO2 4,717 $38 − $320 

Process heaters 2 NOx 2,244 $3.0 − $24 

Flaring gas minimization 3 SO2 97 $.78 − $6.6 

3 NOx 35 $.05 − $.37 

3 VOC 1,108 $.23 − $1.8 

Delayed cokers 2 SO2 261 $2.1 − $18 

2 VOC 15 $.00 − $.02 

Sulfur pits 2 SO2 269 $2.2 − $18 

Total $180 − $1,500 

a

 Refer to Chapter 4 of this RIA for more details on options. 

b

 The PM2.5 fraction is estimated at 83.3% of the total PM emissions, and only reductions in the PM2.5 fraction is 

monetized in this analysis. All fine particles are assumed to have equivalent health effects, but the benefit-per-ton 

estimates vary because each ton of precursor reduced has a different propensity to become PM2.5. The monetized 

benefits incorporate the conversion from precursor emissions to ambient fine particles. 

c

 All estimates rounded to two significant figures and may not sum across columns. 
7-6 

Table 7-3. Summary of Monetized Benefits for Selected Options at 7% Discount Rate in 

2012 (millions of 2006$) 

Process Unit (new) 

Selected 

Optiona Pollutantb

Emissions 

Reduction 

(tons) 

Total Benefit 

(millions)c

FCCU 2 PM 235 $12 − $100 

2 SO2 1,993 $15 − $120 

2 NOx 859 $1.0 − $8.2 

Small SRP 2 SO2 42 $.31 − $2.6 

Fuel gas combustion 2 SO2 524 $3.9 − $32 

Flaring gas minimization 3 SO2 16 $.12 − $1.0 

3 NOx 1 $.00 − $.01 

3 VOC 41 $.01 − $.06 

Delayed cokers 2 SO2 174 $1.3 − $11 

2 VOC 10 $.00 − $.02 

Process heater 2 NOx 5,237 $6.3 − $50 

Sulfur pits 2 SO2 30 $.22 − $1.8 

Total $40 − $320 

Process Unit 

(modified/reconstructed) 

 

FCCU 1 PM 0 $.00 − $.00 

2 SO2 2,350 $17 − $140 

2 NOx 1,784 $2.2 − $17 

Fluid coker 2 PM 1,030 $43 − $360 

2 SO2 5,893 $54 − $440 

Fluid coker 3 NOx 657 $.79 − $6.3 

SRP 2 SO2 381 $2.8 − $23 

Fuel gas combustion 2 SO2 4,717 $35 − $290 

Process heaters 2 NOx 2,244 $2.7 − $21 

Flaring gas minimization 3 SO2 64 $.47 − $3.9 

3 NOx 4 $.01 − $.04 

3 VOC 165 $.03 − $.3 

Delayed cokers 2 SO2 261 $1.9 − $16 

2 VOC 15 $.00 − $.02 

Sulfur pits 2 SO2 269 $2.0 − $17 

Total $160 − $1,300 

a

 Refer to Chapter 4 of this RIA for more details on options. 

b

 The PM2.5 fraction is estimated at 83.3% of the total PM emissions, and only reductions in the PM2.5 fraction is 

monetized in this analysis. All fine particles are assumed to have equivalent health effects, but the benefit-per-ton 

estimates vary because each ton of precursor reduced has a different propensity to become PM2.5. The monetized 

benefits incorporate the conversion from precursor emissions to ambient fine particles. 

c

 All estimates rounded to two significant figures and may not sum across columns. 
7-7

Table 7-4. Estimated Range of Monetized Benefits in 2012 for All Options of New Process Units (thousan

Process Unit PollutantB Option 

Total Benefits 

Low 3% 

($1,000/yr) 

Total Benefits 

High 3% 

($1,000/yr) 

Total 

Lo

($1,0

FCCU PM 1 Baseline (1.0 lb/klb coke burn (M5B or 5F)) $— $— $

2 0.5 lb/klb coke burn (M5B or 5F)C $13,000 $110,000 $12

3 0.5 lb/klb coke burn (M5) $17,000 $140,000 $16

FCCU SO2 1 Baseline $— $— $

2 25 ppmvC $16,000 $140,000 $15

FCCU NOX 1 150 ppmv $480 $3,900 

2 80 ppmvC $1,100 $9,100 $

3 20 ppmv $1,800 $15,000 $

Small SRP SO2 1 Baseline $— $— $

2 Less than 20 ltpd @ 99%C $340 $2,900 

3 All at 250 ppmv $420 $3,500 

Fuel gas combustion 

SO2 1 Baseline $— $— $

2 long term limit of 60 ppmv H2SC $4,200 $36,000 $3

3 TRS limits of 160/60 ppm $7,400 $63,000 $6

Process heaters NOX 1 80 ppmv >20 MMBtu/hr $6,400 $51,000 $5

2 40 ppmv >40 MMBt/hrC $6,900 $56,000 $6

3 20 ppmv, 40 MMBtu/hr $7,700 $62,000 $7

Flare gas minimization 

SO2/VOC 1 Baseline (no standard) $— $— $

2 RCA >500 lb/day SO2 $120 $1,000 3 Option 2 + Flare minimization planC $140 $1,200 

4 Option 2 + No routine flaring $140 $1,200 

Delayed cokers SO2/VOC 1 Depressure to control to 15 psig $— $— $

2 Depressure to control to 5 psigC $1,400 $12,000 $

3 Depressure to control to 2 psig $1,800 $15,000 $
7-8

Table 7-4. Estimated Range of Monetized Benefits in 2012 for All Options of New Process Units (thousan

(continued) 

Process Unit PollutantB Option 

Total Benefits 

Low 3% 

($1,000/yr) 

Total Benefits 

High 3% 

($1,000/yr) 

Total 

Lo

($1,0

Sulfur pits SO2 1 Do not include sulfur pits $— $— $

2 Include primary sulfur pitsC $240 $2,000 

3 Include primary pits and secondary tanks $250 $2,100 

a All estimates rounded to two significant figures. b The PM2.5 fraction is estimated at 83.3% of the total PM emissions, and only the reduction in the PM2.5 fraction is monetized in this an

are assumed to have equivalent health effects, but the benefit per ton estimates vary because each ton of precursor reduced has a diffe

PM2.5. The monetized benefits incorporate the conversion from precursor emissions to ambient fine particles. 

c This is the selected option. 
7-9

Table 7-5. Estimated Range of Monetized Benefits in 2012 for All Options of Modified/Reconstructed Pr

(thousands of 2006$)a

Process Unit Pollutantb Option 

Total Benefits 

Low 3% 

($1,000/yr) 

Total Benefits 

High 3% 

($1,000/yr) 

Total 

Lo

($1,0

FCCU PM 1 Baseline (1.0 lb/klb coke burn (M5B or 5F))c $— $— $

2 0.5 lb/klb coke burn (M5B or 5F) $39,000 $330,000 $33 0.5 lb/klb coke burn (M5) $46,000 $380,000 $4

FCCU SO2 1 Baseline $— $— $

2 25 ppmvc $19,000 $160,000 $1

FCCU NOx 1 150 ppmv $1,100 $9,100 $

2 80 ppmvc $2,300 $19,000 $

3 20 ppmv $4,300 $34,000 $

Fluid coker PM/SO2 1 Baseline $— $— $

2 1.0 lb/klb coke burn (M5B or 5F)/25 ppmvc $110,000 $890,000 $9

Fluid coker NOx 1 Baseline $— $— $

2 80 ppmvc $540 $4,300 

3 20 ppmv $980 $7,900 

Small SRP SO2 1 Baseline $— $— $

2 Less than 20 ltpd @ 99%c $3,100 $26,000 $

3 All at 250 ppmv $3,700 $32,000 $

Fuel gas combustion 

SO2 1 Baseline $— $— $

2 long term limit of 60 ppmv H2Sc $38,000 $320,000 $3

3 TRS limits of 160/60 ppm $73,000 $620,000 $6

Process heaters NOx 1 80 ppmv >20 MMBtu/hr $2,700 $22,000 $

2 40 ppmv >40 MMBt/hrc $3,000 $24,000 $

3 20 ppmv, 40 MMBtu/hr $3,300 $27,000 $

Flare gas minimization 

SO2/VOC 1 Baseline (no standard) $— $— $

2 RCA >500 lb/day SO2 $470 $4,000 

3 Option 2 + Flare minimizationc $550 $4,700 

4 Option 2 + No routine flaring $580 $4,900 
7-10

Table 7-5. Estimated Range of Monetized Benefits in 2012 for All Options of Modified/Reconstructed Pr

(thousands of 2006$)a (continued) 

Process Unit Pollutantb Option 

Total Benefits 

Low 3% 

($1,000/yr) 

Total Benefits 

High 3% 

($1,000/yr) 

Total 

Lo

($1,0

Delayed cokers SO2/VOC 1 Depressure to control to 15 psig $— $— $

2 Depressure to control to 5 psigc $2,100 $18,000 $

3 Depressure to control to 2 psig $2,700 $23,000 $

Sulfur pits SO2 1 Do not include sulfur pits $— $— $

2 Include primary sulfur pitsc $2,200 $18,000 $

3 Include primary pits and secondary tanks $2,200 $19,000 $

a All estimates rounded to two significant figures. b The PM2.5 fraction is estimated at 83.3% of the total PM emissions, and only the reduction in the PM2.5 fraction is monetized in this an

are assumed to have equivalent health effects, but the benefit per ton estimates vary because each ton of precursor reduced has a diffe

PM2.5. The monetized benefits incorporate the conversion from precursor emissions to ambient fine particles. 

c This is the selected option. 
7-11 

7.2 Characterization of Uncertainty in the Benefits Estimates 

In any complex analysis, there are likely to be many sources of uncertainty. Many inputs 

are used to derive the final estimate of economic benefits, including emission inventories, air 

quality models (with their associated parameters and inputs), epidemiological estimates of 

concentration-response (C-R) functions, estimates of values, population estimates, income 

estimates, and estimates of the future state of the world (i.e., regulations, technology, and human 

behavior). For some parameters or inputs it may be possible to provide a statistical representation 

of the underlying uncertainty distribution. For other parameters or inputs, the necessary 

information is not available. 

The annual benefit estimates presented in this analysis are also inherently variable due to 

the processes that govern pollutant emissions and ambient air quality in a given year. Factors 

such as hours of equipment use and weather are constantly variable, regardless of our ability to 

measure them accurately. As discussed in the PM2.5 NAAQS RIA (Table 5.5), there are a variety 

of uncertainties associated with these PM benefits. Therefore, the estimates of annual benefits 

should be viewed as representative of the magnitude of benefits expected, rather than the actual 

benefits that would occur every year. 

Above we present the estimates of the total benefits, based on our interpretation of the 

best available scientific literature and methods and supported by the SAB-HES and the NAS 

(NRC, 2002). The benefits estimates are subject to a number of assumptions and uncertainties. 

For example, for key assumptions underlying the estimates for premature mortality, which 

typically account for at least 90% of the total benefits, we were able to quantify include the 

following: 

1. Inhalation of fine particles is causally associated with premature death at 

concentrations near those experienced by most Americans on a daily basis. Although 

biological mechanisms for this effect have not been established definitively yet, the 

weight of the available epidemiological evidence supports an assumption of causality. 

2. All fine particles, regardless of their chemical composition, are equally potent in 

causing premature mortality. This is an important assumption, because PM produced 

via transported precursors emitted from EGUs may differ significantly from direct 

PM released from diesel engines and other industrial sources, but no clear scientific 

grounds exist for supporting differential effects estimates by particle type. 

3. The impact function for fine particles is approximately linear within the range of 

ambient concentrations under consideration. Thus, the estimates include health 

benefits from reducing fine particles in areas with varied concentrations of PM, 
7-12 

including both regions that are in attainment with fine particle standard and those that 

do not meet the standard. 

4. The forecasts for future emissions and associated air quality modeling are valid. 

Although recognizing the difficulties, assumptions, and inherent uncertainties in the 

overall enterprise, these analyses are based on peer-reviewed scientific literature and 

up-to-date assessment tools, and we believe the results are highly useful in assessing 

this rule. 

5. Benefits estimated here reflect the application of a national dollar benefit-per-ton 

estimate of the benefits of reducing directly emitted fine particulates from point 

sources. Because they are based on national-level analysis, the benefit-per-ton 

estimates used here do not reflect local variability in meteorology, exposure, baseline 

health incidence rates, or other local factors that might lead to an over-estimate or 

under-estimate of the actual benefits of controlling directly emitted fine particulates. 

This RIA does not include the type of detailed uncertainty assessment found in the PM 

NAAQS RIA because we lack the necessary air quality input and monitoring data to run the 

benefits model. Moreover, it was not possible to develop benefit-per-ton metrics and associated 

estimates of uncertainty using the benefits estimates from the PM RIA because of the significant 

differences between the sources affected in that rule and those regulated here. However, the 

results of the Monte Carlo analyses of the health and welfare benefits presented in Chapter 5 of 

the PM RIA can provide some evidence of the uncertainty surrounding the benefits results 

presented in this analysis. 

7.3 Updating the Benefits Data Underlying the Benefit-per-Ton Estimates 

As described above, the estimates provided in Tables 7-1 through 7-5 are derived through 

a benefits transfer technique that adapts monetized benefits from reductions in PM2.5 precursor 

pollutants that were estimated for the Ozone RIA utilizing nationally distributed emissions 

reductions. EPA is currently in the process of generating localized benefit-per-ton estimates to 

better account for the spatial heterogeneity of benefits. EPA believes that these localized 

estimates may better represent the actual benefits than estimates that use national averages. 

7.4 Comparison of Benefits and Costs 

EPA estimates the range of annualized benefits of this rulemaking to be a combined $220 

million to $1.9 billion ($2006) for new and reconstructed/modified sources at a 3% discount rate 

and annualized costs calculated at a 7% interest rate as mentioned in Chapter 4 of this RIA for 

these sources to be $31 million ($2006) in the fifth year after proposal (2012). Thus, net benefits 

are $190 million to $1.8 billion in the fifth year after proposal at a 3% discount rate for the 

benefits. Figure 7-2 shows the full range of net benefits estimates (i.e., annual benefits in 2012 

minus annualized costs) utilizing the 14 different PM2.5 mortality functions at the 3% discount 
7-13 

rate. EPA believes that the benefits are likely to exceed the costs by a substantial margin under 

this rulemaking even when taking into account uncertainties in the cost and benefit estimates. 

‐$2,000

‐$1,500

‐$1,000

‐$500

$0

$500

$1,000

$1,500

$2,000

Various Combinations of Costs and Benefits Estimates

Millions (2006$)

Figure 7-2. Range of Estimated Net Benefits for Selected Options for Final Petroleum 

Refineries NSPSa

a

 Net Benefits are quantified in terms of PM2.5 benefits at a 3% discount rate for the fifth year after proposal. This 

graph shows 14 benefits estimates combined with the cost estimate. All combinations are treated as independent 

and equally probable. All fine particles are assumed to have equivalent health effects, but the benefit-per-ton 

estimates vary because each ton of precursor reduced has a different propensity to become PM2.5. The monetized 

benefits incorporate the conversion from precursor emissions to ambient fine particles. 

7.5 References 

Ayyb, 2002 

Guo et al., 1999.

Ibald-Mulli et al., 2001. 

Industrial Economics, Inc., 2006. Expanded Expert Judgment Assessment of the ConcentrationResponse Relationship Between PM2.5 Exposure and Mortality. Prepared for the U.S. 

EPA, Office of Air Quality Planning and Standards, September. 

National Research Council (NRC). 2002. Estimating the Public Health Benefits of Proposed Air 

Pollution Regulations. Washington, DC: The National Academies Press. 

Laden, F., J. Schwartz, F.E. Speizer, and D.W. Dockery. 2006. Reduction in Fine Particulate Air 

Pollution and Mortality. American Journal of Respiratory and Critical Care Medicine. 

173: 667-672. 

Benefits are 

greater than costs 
7-14 

Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D. Krewski, K. Ito, and G.D. Thurston. 

2002. “Lung Cancer, Cardiopulmonary Mortality, and Long-term Exposure to Fine 

Particulate Air Pollution.” Journal of the American Medical Association 287:1132-1141. 

U.S. Environmental Protection Agency. 2006. Regulatory Impact Analysis, 2006 National 

Ambient Air Quality Standards for Particulate Matter, Chapter 5. Available at 

<http://www.epa.gov/ttn/ecas/regdata/RIAs/Chapter%205--Benefits.pdf>. 
C-1 

APPENDIX C 

OVERVIEW OF ECONOMIC MODEL EQUATIONS 

We illustrate our approach for addressing conceptual questions of market-level impacts 

using a numerical simulation model. Our method involves specifying a set of nonlinear supply 

and demand relationships for the affected markets, simplifying the equations by transforming 

them into a set of linear equations, and then solving the equilibrium system of equations (see 

Fullerton and Metcalfe [2002] for an example). 

C.1 Discussion and Specification of Model Equations 

First, we consider the formal definition of the elasticity of supply with respect to changes 

in own price: 

dp / p

dQs / Qs εs = (C.1) 

Next, we can use “hat” notation to transform Eq. (C.1) to proportional changes and rearrange 

terms: 

Q ˆp ˆ

s s = ε (C.1a) 

where 

Qs

ˆ = percentage change in the quantity of market supply, 

γs = market elasticity of supply, and 

ˆ

p = percentage change in market price. 

As Fullerton and Metcalfe (2002) note, we have taken the elasticity definition and turned it into a 

linear behavioral equation for our market. 

To introduce the direct impact of the regulatory program, we assume the per-unit cost 

associated with the regulatory program (c)1

 leads to a proportional shift in the marginal cost of 

production. Under the assumption of perfect competition (price equals marginal cost), we can 

approximate this shift at the initial equilibrium point as follows: 

 

1

The per-unit costs (c) are computed by dividing the total annualized costs reported in by the baseline consumption. 

The annual cost savings are included in the supply shift in the primary analysis. 
C-2 

o po

c

MC

c Mˆ C = = . (C.1b) 

The with-regulation supply equation can now be written as 

MC ) ˆ Q (pˆ ˆ s = εs − . (C.1c) 

Next, we can specify a demand equation as follows: 

Q p d d ˆ ˆ = η (C.2) 

where 

Qd

ˆ = percentage change in the quantity of market demand, 

ηd = market elasticity of demand, and 

ˆ

p = percentage change in market price. 

Finally, we specify the market equilibrium conditions in the affected markets. In response 

to the exogenous increase in production costs, producer and consumer behaviors are represented 

in Eq. (C.1a) and Eq. (C.2), and the new equilibrium satisfies the condition that the change in 

supply equals the change in demand: 

s Qd Qˆ ˆ = . (C.3) 

We now have three linear equations in three unknowns ( ˆ

p , Qd

ˆ , and Qsˆ ), and we can 

solve for the proportional price change in terms of the elasticity parameters (εs and ηd) and the 

proportional change in marginal cost: 

( )

( ) 64748 A.1.c Qs ˆ

εs ˆp − Mˆ C

=

( )

( ) 678

A.2 ˆ

ˆ

Qd

d η p (C.4)

 = 

εs pˆ – εsMˆC = ηd ( ˆ

p ) 

εs pˆ – ηd ( ˆ

p ) = εsMˆC

ˆ

p ( s ε – ηd) = εsMˆC

ˆ

p = 

εs

(εs – ηd)

× MˆC
C-3 

ˆ

p Mˆ C

s d

s ×

ε −η

ε = . (C.5) 

Given this solution, we can solve for the proportional change in market quantity using Eq. (C.2). 

C.2 Consumer and Producer Welfare Calculations 

The change in consumer surplus in the affected markets can be estimated using the 

following linear approximation method: 

)CS = – [Q1 × )p] + [0.5 × )Q × )p]. (C.6) 

As shown, higher market prices and reduced consumption lead to welfare losses for consumers. 

A geometric representation of this calculation is illustrated in Figure C-1. 

For affected supply, the change in producer surplus can be estimated with the following 

equation: 

)PS = [Q1 × )p] – [Q1 × c] – [0.5 × )Q × ()p – c)]. (C.7) 

Increased regulatory costs and output declines have a negative effect on producer surplus, 

because the net price change ()p – c) is negative. However, these losses are mitigated, to some 

degree, as a result of higher market prices. A geometric representation of this calculation is 

illustrated in Figure C-1. 
C-4 

Q1 Q0

P1

P0

h

c

a

$

Output

e

d

S1 : With Regulation

S0 : Without Regulation Price

Increase

g Unit Cost Increase

f

b

) consumer surplus = –[fghd + dhc] 

) producer surplus = [fghd – aehb] – bdc 

) total surplus = –[aehb + dhc + bdc] 

Figure C-1. Welfare Calculations 
United States 

Environmental Protection 

Agency 

Office of Air Quality Planning and 

Standards 

Health and Environmental Impacts 

Division 

Research Triangle Park, NC 

Publication No. EPA 

452/R-08-002

April 2008