ILLINOIS POLLUTION CONTROL BOARD
March 20, 1980
IN THE MATTER
OF A PROPOSAL TO
RELAX THE SULFUR CONTENT IN RESIDUAL
)
R75—8
AND DISTILLATE FUEL OIL IN ILLINOIS,
)
EXCEPT COOK COUNTY
OPINION AND ORDER OF THE BOARD
(by Mr. Goodman):
On April
14,
1972,
the Illinois Pollution
Control
Board
(Board)
adopted the Emission
Standards
of the Air Pollution
Control Tleguia~ions, Chapter
2 of the Board’s Rules and Regula-
tions.
The standards included Rules 204(b)(2) and 204(c)(2),
sulfur dioxide
emission
standards for smaller new and all
existing
fuel combustion emission sources burning liquid
fuel
exclusively.
On Nay
30,
1975,
Petitioners herein, pursuant to
Sect.ion 28 of the Environmental Protection Act
(Act), proposed
to amend Rules 204(h) (2) and 204(c) (2) of Chapter
2.
The pro-
posal
was accompanied by the requisite number of signatures,
and on June
26,
1975,
the Board authorized
it
for hearing.
Hearings were held on September
30,
1975,
in Edwardsville,
October 26,
1976,
in Springfield, and January
17 and 24,
1977
in Chicago.
On January
6,
1977 the Board ordered Petitioners
to answer certain interrogatories.
The answers were received
on January
19,
1977.
The Board received the economic impact study of this pro-
posal
on December
2,
1977.
The study,
IIEQ
now
Illinois
Institute of Natural Resources
Document No,
77/30,
is entitled
“Economic Impact of Relaxing the Regulation on Sulfur Content
of
Fuel Oils.”
Economic impact hearings were held on March 21
and April
24,
1978
in Chicago and Springfield, respectively.
Petitioners propose to amend Rules
204(b) (2) and 204(c)(2)
in the following manner:
1.
Amend Rule 204(b) (2) to read as follows:
“(2) ~4~id
fuel Burned Exc~!4vel.
(A)
Except as
p~pvidedin subparagraph B of this part, Nno
person shall cause or allow the emission of sulfur
dioxide into the atmosphere
in any one hour period
from any
fuel combustion source with actual
heat input
smaller than,
or equal
to,
250 million btu per hour,
burning liquid
fuel
exclusively:
The
Board acknowledges the assistance of
Ms.
Carolyn
S.
Hesse,
Technical
As~is~ant,in
the
drafting
of
this
Opinion,
and
Ms.
Roberta
Levinson in serving
as
Hearing
Officer.
—2—
+A+
(1)
to exceed ~G
1.3 pounds of sulfur
dioxide per million btu of actual heat
input when residual
fuel oil
is burned;
and
+f~+
(2)
to exceed 9~30.5 pounds of sulfur
dioxide per million btu of actual heat
input when distillate
fuel oil
is burned.
(B)
No person located within Cook County Illinois,
shall cause
or allow the emission of sulfur
dioxide into the atomsphere
in any one hour
period from any new fuel
combustion source with
actual heat input smallerthan,
or equal
to,
250
million
btu
per
hour,
burning
liquid
fuel
ex~vel:
(1)
to
exceed
1,0
pounds
of
sulfur dioxide per
million btu of actual heat input when resi-ET?1 w?207 477 m?518 477 l?S?BT?
dual
fuel
oil
is burned;
and
(2)
to
exceed
0.3
pounds
of
sulfur
dioxide
per
million btu of actual heat input when dis-ET?1 w?207 429 m?511 429 l?S?BT?
tillate
fuel oil
is burned.”
2.
Amend Rule 204(c) (2)
to read as follows:
“(2) ~4~4d
Fuel Burned Exclusively.
(A)
Except as pro-ET?1 w?375 369 m?510 369 l?S?BT?
vided in subparagraph
B of this part,
Nno person
shall cause or allow the emission of sulfur dioxide
into the atmosphere
in any one hour period
from
any fuel combustion emission source, burning liquid
fuel exclusively:
+A+
(1)
to exceed 1.0 pounds of sulfur dioxide
per million btu of actual heat input
when residual oil
is burned;
and,
+~3
(2)
to exceed
0.3 pounds of sulfur dioxide
per million btu of actual heat input
when distillate
fuel oil
is burned.
(B)
No_person
located
outside
of
Cook
County,
Illinois,
shall
cause or allow the emission
of_sulfur
dioxide from any e~nfu~
combustion
source
with actual heat input
smaller than,
or equal
to,
250
million
htu
per hour,
burning liquid fuel exclusively:
(1)
to exceed 1.3 pounds of sulfur dioxide
p~j~illionhtu of actual heat input when
residual
fuel
oil
is burned;
and,
—3—
(2)
to exceed 0.Spounds
of sulfur dioxide
p~~~1lionbtu of actual
heat.
input
when
distillate
fuel oil
is burned.”
Petitioners
in this matter,
as
listed on the Petition,
are:
Apco Oil Corporation,
Champlin Petroleum Company,
Continental
Oil
Co..,
CRA,
Inc.,
Explorer Pipeline Co.,
ES Services,
Inc.,
Kerr—McGee
Corp.,
Phillips Petroleum Co.,
Skelly Oil Co.,
Sun
Oil Co.,
Texaco,
Inc.,
Union Oil Co.
of California,
and Williams
Pipeline Co.
Petitioners indicate in their Statement of Reasons
Supporting
Proposal
that
they
are
collectively
engaged
in the
refining,
transportation
and
distribution
of
distillate
and
residual
fuel
oils marketed in Illinois.
In their Statement of Reasons,
Petitioners assert that
recent
oil
product
tests
indicate
that
the sulfur content of
distillate
and
residual
fuel oil
transported
for
possible
dis-
tribution
and
marketing
in Illinois
is
increasing
to
the
extent
that
it
increasingly
exceeds
0.3
and
1.0
per
cent,
respectively.
Petitioners
attribute
this
increase
in
sulfur
content
to
reduced
availability
of
low
sulfur
crude
oils
in
refineries
serving
midwestern
states,
including
Illinois.
Petitioner
refiners
contend
that
retention
of
the
current
standards
would
force
them
to
either
install
very
costly
desulfurization
and
related
equipment or discontinue shipment of distillate and residual
fuel oil into Illinois,
In the alternative,
Petitioner pipe-
line companies could increase their present ability to segregate
and/or blend
fuel oil products to supply low sulfur fuel areas,
Such an approach would allegedly require costly installation of
additional
piping and tankage
at
all loading and distribution
points
and
would
be
viable
only
so
long
as
low
sulfur
fuel
oil
components
are
available
and
the
demand
for
low
sulfur
fuel
remains
minimal.
Before
beginning
a
discussion
of
the
record,
it
should
be
noted
that
the
rules
in
question
regulate
the
amount
of
sul-
fur
dioxide
emitted,
but
the
discussion
in
the
record
focuses
on
the
sulfur
content
by
weight
of
distillate
and
residual
fuel
oil.
The Board
notes
that
sulfur
dioxide
emissions
from
fuel
combustion sources are directly proportionate to the per cent
sulfur content of fuel oils by weight as follows:
for sulfur
dioxide emissions of 0.3 pounds per million Btu~sof actual
heat input
from burning distillate
fuel
oil, the sulfur content
by weight would be 0.29 per cent;
for emissions of 1.0 pounds
per million Btu’s from burning residual
fuel
oil, the actual
sulfur content by weight
should be no more than 0,925 per cent
(R. 17),
Mr. Robert Lindsay of Phillips Petroleum Company testified
on behalf of Petitioners about the global crude oil picture,
including domestic and foreign production
(R,28—49),
During
the three years preceeding 1975,
the average
sulfur content of
refinery crude Mr. Lindsay was concerned with increased 0.3 per
cent,
from
0.7 to well over
1 per cent sulfur
(P.36).
Mr.
—4
*
Lindsay concluded that,
based upon the global crude oil picture,
the
only
method
by
which refiners can produce products with low
sulfur
is
the installation
of
additional
desulfurization
equip—
ment
(R.37).
Mr.
H.
L.
Ted
of Williams Pipeline Company in Tulsa,
Oklahoma,
testifying
on behalf of Petitioners, described
generally the mid—continent pipeline operations of his company’s
system,
which is
a fungible product system,
and of Explorer
Pipeline Company, which is a segregated product network
(R,65),
In
1974, Williams
shipped 1,8 million barrels
of number two oil
to Williams—owned terminals
and 2 million barrels to shipper-
owned terminals,
Mr.
Teel submitted data indicating that for
five midwest Williams-owned terminals
for the period of March,
1974, through February,
1975, portions of the number two burner
oil handled exceeded the limits
(R,70),
The two solutions available to product pipeline companies
to assure availability of fuel
oil complying with the Illinois
standards
are segregation of low and high sulfur
fuel oils or
blending
of
high
sulfur
oils
with products low enough in sulfur
content that the blended product conforms
with
the Illinois
limitations
(R.71).
Segregation depends upon a sufficient
supply of
low
sulfur
oils
by
shippers
to
meet
the
demands.
Williams estimates that,
in order to assure oil complying with
Illinois
limits
by means of segregation,
it must spend
a mini-
mum of $8 million over a period of two years to construct
necessary additional facilities,
including additional tankage
and loading facilities at Williams—owned terminals and at least
one additional pipeline segment.
This amount does not include
the additional tankage that may he required at shipper—owned
terminals
(R.73).
In addition,
Williams would require up to an
additional two weeks advance notice prior to actual pumping
(R.73).
For the segregated product pipeline systems such as
Explorer Pipeline,
additional pipeline segments would not be
necessary,
hut additional
tankage and loading
facilities would
be,
Explorer estimates that it would have to expend a minimum
of $2.2 million
for added tankage alone to segregate two grades
of number two burner oil at two of its terminals
(R,75).
Blending is not a viable alternative for segregated product
pipeline operations
such as
~piorer.
Blending depends upon an
adequate supply of low sulfur number one fuel in order to pro-
vide sufficient product upon demand.
Since 1973, the volume of
low sulfur number one
fuel oil offered
for Williams transporta-
tion has declined at the rate of 19 per cent annually (R,76).
However, even
if the requisite blending stocks are available
at
originating
locations, problems remain
(See R.75—78),
Also,
reliance upon blending would require that each pipeline install
additional testing at each delivery terminal in order to achieve
the proper mix
(R.78).
—5—
Mr. Dick McDowell, Chief Engineer at Union Oil’s Chicago
refinery, discussed the typical refining process, including
desulfurization
(11.125).
He introduced a chart of a “typical”
refinery flow distribution with 2
crude.
In the example used,
the final product has a sulfur content of 0.53 per cent.
In
order to further reduce the sulfur content in order to meet the
Illinois limitations, several alternatives are available.
A
refinery nay add an additional desulfurizer, which would
allegedly take approximately 3 years to design and build and,
for a unit processing 10,000 barrels a day, would cost $8—b
million.
In addition, some refineries may require installation
of adsorption facilities
and
a sulfur unit (R.130).
Other
alternatives include obtaining crude with a sulfur content of
between 0.5 and 1
per
cent, if possible, rather than the 2 per
cent used in the example, blending products with a lower sulfur
content with the
number
2 fuel oil or removing one of the high
sulfur components, or reducing the crude throughput
(11.132).
The latter
two
alternatives will create problems in product
distribution
(11.131).
On behalf of Union Electric Company, Mr. Jerrell Smith
testified that the company’s Venice power plant, which has six
oil—fired boilers, has had difficulty meeting the Illinois
limitations
(11.187).
Mr.
Smith stated that the company could
comply with the limitations if it were willing to expend the
money to obtain the lower sulfur oil, but that local refineries
have been unable to provide it (11.193—195).
An air quality impact study was prepared on behalf of
petitioners by Environmental Technology Assessment, Inc.
(ETA)
(Exhibit 11).
The Climatological Dispersion Model (CDM), which
is a part of the UNAMAP system of the U.
S.
EPA, was used to
model the change in SO.~air quality in the Chicago and St.
Louis MMA’s as a result of the proposed regulation.
The area
source emissions data for fuel oil sources were developed by
ETA using surrogate variables for fuel oil useage and results
of a survey of two trade associations.
Determinations of
possible violations of ambient air quality standards was made
by adding the estimated increases in SO2 from these sources, as
a result of changing the regulation, to the measured existing
air concentrations of
SO.) at monitoring stations in the MMA’s.
The monitored data refle8t all existing sources of SO, emis-
sions, and the modeled increment is the additional cofftribution
from small fuel oil sources which would result from putting the
proposed regulation into effect.
According to ETA the results
of the analysis are “worst case” estimates of air quality
impacts, based on use of a state of the art dispersion model
and a
number
of conservative assumptions in modeling work.
The modeling analysis of the Chicago and East St. Louis
areas
determined
that
the
maximum
annual
SO
contribution
caused
by
the
proposed
regulation
would
be
I~proximately
3.4
micrograms
per
cubic meter at Waukegan, which is 4.3 per cent
—6-
of the annual standards
•
The maximum 24—hour incremental
contribution predicted was 18.1 micrograms
per
cubic meter
at the Maywood monitor, which is 5 per cent of the 24—hour,
short—term
SO
standard.
The maximum 3—hour incremental
contribution $redictect was
54.4
micrograms
per
cubic
meter,
also at the Maywood monitor, which is about 4.2 per cent of
the corresponding SO
standard.
The 502 contribution from
the proposed reguladon would not cause any monitors which
are currently below the ambient air quality standards to
exceed the long— or short—term standards.
Finally, SO,
levels already exceeding the short—and long—term stand*rd
would be increased less than 2.3 per cent in all cases
(R.235—236).
The author of the economic impact study specifically
noted at page 16 of the study
(Ex.
12) that:
“customarily, in proposing a regulation, the peti-
tioner lays out not only the benefits but also
the rationale or evidence on which these benefits
are based.
In this case,
the petitioners were
unwilling to provide the supporting evidence
necessary to determine the validity of their claims.”
The author assumed that existing Illinois—supplying refiners
were at or near desulfurization and fuel oil blending
capacity.
However, the author noted that this fact was
indeterminant
(Ex.
12, p.17).
Furthermore, although the
author found that the evidence appears to substantiate
Petitioners’ contention that substantially all middle
distillate components would have to be treated, the Board finds
that the author’s conclusion in this regard was based upon
speculation and was not substantiated by adequate evidence,
even though that evidence is obtainable only through
Petitioners.
The Board attempted to obtain much of the requisite
information in the interrogatories it ordered Petitioners to
answer.
The answers were insufficient, and the Board has no
other means of obtaining it.
The author of the economic
impact
study
(Ex
•
12)
concluded
that continuation of the current regulation would
result in an increase of 5 to 10 cents
per
gallon
of
fuel
oil, which would be 15 to 30 per cent above current prices.
This price increase would
amount
to a total increase of $150
to $300 million to Illinois fuel oil users.
This cost was
based upon the cost of additional desulfurization equipment
that he assumed would need to be installed and the author’s
determination that all of this cost would be passed on to
customers.
The author also concluded that the residential
heating oil portion of the costs would amount to $75 to $150
per year per household, or 0.7 to 1.4 per cent of average
pre—tax household income.
The author used the Illinois
—7—
Bureau of the Budget’s 1972 Inpü/Output Model to estimate
the increased costs of goods and services resulting from
application of the current regulation.
The model results
showed that the fuel oil cost increase would cause inflation
of up to $110 million in the total 1972 Illinois consumption
expenditure of $45 billion.
The author noted that no environmental benefits would
result from the proposed regulation.
Environmental costs
investigated were health, ecological and material costs.
The author concluded that changes in some health effects
indices caused by enacting the proposed regulation,
including increases in mortality rates
and
decrease in
pulmonary functions, were highly unlikely and that changes
in several other indices, including general morbidity rates,
were impossible to predict.
The author predicted no
economic loss to agriculture, but did estimate that total
material damage costs in Illinois resulting from the
propoEed regulation would range from $1 to $20 million with
a best estimate of roughly $4 million.
Having reviewed the testimony and exhibits, the Board
finds that it does not have enough information at the
present time to allow it to make a decision in this matter.
Although the record contains much conclusory information, it
contains little of the data necessary to give the Board a
representative picture of the industry and to convince the
Board of the necessity for the proposed change.
First of all, aside from the discussion of available
crude oil from which
residual
oil
is
refined,
the
record
contains no information on residual oil.
Williams and
Explorer ship only distillate
(R.b02), and the No.
2 fuel
oil discussed by Union Oil is also distillate
(11.133).
The
record contains little information on the quantities or
sulfur contents of residual oils consumed in Illinois, where
they are refined, what desulfurization capability those
refineries have, or methods of transport.
As to the world
crude oil picture, the record contains no data on the
quantity and sulfur content of fuel oil consumed annually
in Illinois itself over the last several years and the
effect worldwide changes will have on the sulfur contents
of crudes used in Illinois.
As to the product pipeline companies and the problems
they face in supplying oil which complies with Illinois
standards,
testimony presented concerned only the Williams
and Explorer Pipeline Companies.
Mr.
Ted
indicated that
there are other pipeline companies serving Illinois, but he
did not know how many
(11.88).
The Board has no means of
assessing whether the problems faced by Williams and
Explorer
are
indeed representative of industry as a whole.
—8—
The record lacks an inventory of product pipelines
transporting distillate oil to Illinois purchasers,
capacities of the pipelines, storage capacities at receiving
terminals, capability of segregating
low
sulfur fuels during
transport and storage, capability of blending oils to obtain
compliance, and the cost of such blending and/or
segregation
Information in the record on refineries serving Illinois
is equally scanty.
The record lacks an inventory of
refineries producing oil for Illinois, the quantity and
sulfur content of oil received and produced by each
refinery, present desulfurization capacities of the
refineries and how much of that capacity is being used, the
flexibility in the refining process itself to allow for
blending of products, and the cost for each refinery of
additional equipment, if necessary, in order to produce oil
complying with the current standards.
The record contains no evidence on the sulfur standard
applicable in other states which Petitioners supply and no
explanation of why the sulfur standard is proposed to remain
unchanged for cook county.
Finally, the record is devoid of
information or testimony, other than that presented by Union
Electric, on behalf of sources to whom the regulatory
proposal would apply and their current or prospective
inability to meet the limitations.
On
May
24, 1979,
the Board issued an Interim Order
requiring that Petitioners update the record, and complete
the Answers to Interrogatories
filed on January 19, 1977,
according to certain stated points of deficiency.
The Order
declared that the record was inadequate to provide a
representative picture of the oil industry.
Such picture is
essential to support a change in the present regulations.
The Board’s May 24,
1979 Interim Order provided Petitioners
with fully six months to gather the information sought by
it.
Hearing was held on January 11,
1980, at which
Petitioners presented information.
The information given
did not sufficiently update or complete the gap which, as
pointed out in the Interim Order, prevents the Board from
responsibly considering the merits of Petitioners’
proposal.
The Board again finds that it does not have enough
information upon which to base a regulatory change.
The most glaring inadequacy of the record stems from
the absence of Illinois—specific supply, demand,
distribution, cost, sulfur content, and sulfur content
control methodologies data.
The most recent information
available submitted by Petitioners,
the National Petroleum
council’s November 2, 1979 Interim Report on refinery
flexibility (Ex.19), is based on surveys of all refineries
in the United States.
The only relevant geographical
breakdowns are by
PAD
areas; PAD—Il includes 14 midwestern
—9—
states besides Illinois.
Answers to Interrogatories 7—10,
22,
24, 26 and 27 were similarly defective in not being
representative of Illinois’
industry.
Answers to
Interrogatories 21, 23 and 25 were incomplete; Answers to
Interrogatories
5,
6,
11 and 17 were nonresponsive.
Petitioners assert that supplying data on the quantity
and sulfur content of crude oil from which Illinois-consumed
oils are produced would violate antitrust laws.
Petitioners
supplied the Board only with United States Department of
Energy data on the capacity of refineries nationwide and the
amount of imported crude oil shown in United States customs
records, neither of which specifies what portion of crude is
utilized in producing Illinois—consumed oils, or what the
sulfur contents of such crudes are.
Without this information,
the Board
can
evaluate neither the technological feasibility
of reducing sulfur content of those crudes nor the economic
reasonableness of requiring degrees of sulfur content
reduction of those crudes.
There must be in the record evidence sufficient to
prove that the Board can reasonably find that not reducing
the present regulatory limitations regarding sulfur contents
of residual and distillate fuel oils presents technological
and economic problems.
The evidence in the record is not
sufficient for either of these purposes.
One
minor
illustration is that hydrotreating is a technology which can
reduce sulfur content, but no costs were given regarding the
installation or use of such technology
(R.43,
50).
Perhaps
most illustrative of industry economics is the following
statement of Texaco, Inc.’s Manager of Planning for U.
S.
products:
“
...
from the economic standpoint
you
run
as
much high sulfur crude as
you
can within the specification
limits that
you
have to meet, which in this case is 0.5”
(R.63).
The reason Petitioners gave for not seeking a relaxation
of limitations regarding
new
cook county sources
burning liquid fuel exclusively, and seeking it for
existing, non—cook county sources, is inadequate.
Petitioners stated that Cook county presently has high fuel
combustion rates due to high population density (R.35).
However, the fact is that all townships of Cook county are
presently attainment areas for the secondary sulfur dioxide
air quality standard.
Finally, there was little evidence of either
technological feasibility or economic reasonableness from
the combustion sources themselves, which would face any
sanctions imposed for violating this proposed regulation.
These include citizens
who
heat their homes with oil.
The
problem is that Petitioners are less directly affected by
the content of their proposal than these citizens.
—10—
Petitioners have
a stake
in the regulation
to the extent
that homeowners theoretically will not be supplied
low—sulfur content oil by retailers if the less costly high
sulfur
fuel oil
is marketable.
But this
stake
is one of
economic gain rather than loss
since less desulfurization of
the crudes would be necessary.
There
is evidence
in the record that Petitioners can,
and are, meeting
the
present sulfur content limitations
(R.33—36,
42—43,
48,
56—56,
59,
77—78);
there is little or
no evidence that meeting these
limitations
imposes
prohibitive burdens, whether financial or otherwise.
Lastly,
a
lot of supply problems are market—inherent,
e.g.,
the Middle East situation (R.55)
and the increasing demand
for jet fuel
(P.92).
The Board hereby dismisses the
petition in P75—8.
It is
noted that,
should Petitioners desire to provide the
necessary information, the Board would entertain
a new
petition.
The
Agency has alleged that
this
proposed
regulation
would conflict with the Clean Air Act as
amended in 1977.
Caterpillar Tractor testified that the proposal would allow
part of the PSD increment to he consumed,
The Board
finds,
however, that
it need not address these issues~
ORDER
It
is the Order of the Illinois Pollution Control Board
that Petition P75—8 be dismissed.
Mr. Werner dissents.
I,
Christan
L~Moffett, Clerk
of
the Illinois Pollution
Control
Board, her~bycertify
that ~the above Order was
adopted on the
_____
cay of
,
1980 by a vote
of
3-I
Christan L.
Mof’~~t,Clerk
Illinois Pollution Control Board
