ILLINOIS POLLUTION CONTROL BOARD
May 24,
1979
IN THE MATTER OF A PROPOSAL TO
RELAX THE SULFUR CONTENT IN RESIDUAL
)
R75—8
AND DISTILLATE
FUEL OIL IN ILLINOIS,
EXCEPT COOK COUNTY
INTERIM 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 Regulations,
Chapter
2 of the Board’s Rules and
Regulations.
The standards included Rules 204(h)(2)
and
204(c)(2),
sulfur dioxide emission standards for smaller new
and all existing fuel combustion emission sources burning
liquid fuel exclusively.
On May 30,
1975, Petitioners
herein, pursuant to Section 28 of the Environmental Protection
Act
(Act) proposed to amend Rules 204(b)(2) and 204(c)(2)
of
Chapter
2.
The proposal 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
proposal on December
2,
1977.
The study,
IIEQ Document No.
77/30,
is entitled “Economic Impact of Relaxing the Regula-
tion on Sulfur Content
of Fuel Oils.”
Economic impact hear-
ings 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) Liquid fuel Burned Exclusively.
(A)
Except as
provided 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 new fuel combustion source with actual
heat input smaller than,
or equal
to, 250 million
btu per hour,
burning liquid fuel
exclusively:
*A+
(1)
to exceed ~9
1.3 pounds of sulfur
dioxide per million btu of actual heat
input when residual fuel oil
is burned;
and
33—6 13
—2—
fB+
(2)
to exceed ~
0.5 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 smaller than,
or equal
to,
250 million btu per hour,
burning liquid fuel
(1)
to exceed 1.0 pounds of sulfur dioxide per
million btu of actual heat input when resi-
dual fuel oil is burned;
and
(2)
to exceed 0.3 pounds
of sulfur dioxide per
million btu
of actual heat input when dis-
tillate
fuel oil
is burned.”
2.
Amend Rule 204(c)(2) to read as follows:
“(2)
Liquid Fuel Burned Exclusively.
(A)
Except as pro-
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 existing 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,
~B+
(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 existing fuel
combustion source with actual heat input
smaller than,
or equal
to, 250 million btu
per hour, burning liquid fuel exclusively:
(1)
to exceed 1.3 pounds
of sulfur dioxide
per million btu of actual heat input when
residual
fuel oil
is burned;
and,
(2)
to exceed 0.5 pounds of sulfur dioxide
per million btu of actual heat input when
distillate
fuel oil is burned.”
33—614
—3—
Petitioners in this matter,
as
listed on the Petition,
are:
Apco Oil Corporation, Champlin Petroleum Company, Con-
tinental Oil Co.,
CRA, inc., Explorer Pipeline Co.,
FS Ser-
vices,
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
distribution and marketing in Illinois
is increasing to the
extent that it increasingly exceeds
0.3 and 1.0 percent,
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 pipeline 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 com-
ponents are available and the demand for low sulfur fuel
remains minimal.
Before beginning our discussion of the record,
it
should be noted that the rules
in question regulate the
amount of sulfur dioxide emitted, but the discussion in the
record focuses on the sulfur content by weight of distillate
and residual
fuel oil.
Sulfur dioxide emissions from fuel
combustion sources are directly proportionate to the percent
sulfur content of fuel oils by weight as follows:
for
sulfur dioxide emissions
of 0.3 pounds per million BTU’s of
actual heat input from burning distillate fuel oil,
the
sulfur content by weight would be 0.29;
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
percent
(R.17).
Mr. Robert Lindsay of Phillips Petroleum Company testi-
fied 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
.3 percent, from
.7 to well over
1 percent sulfur
(R,36).
Mr. Lindsay concluded that, based upon the global
33—615
—4—
crude oil picture,
the only method by which refiners can pro-
duce products with
low sulfur
is the installation of additional
desulfurization equipment
(R.37).
Mr.
ILL.
Ted
of Williams Pipeline Company
in Tulsa,
Oklahoma,
testifying on behalf of Petitioners, described
generally the mid-continent pipeline operations
of his
company~ssystem, 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 minimum 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
be 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,
but 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 Explorer.
Blending
depends upon an adequate supply of low sulfur number one
fuel
in order to provide sufficient product upon demand.
Since 1973,
the volume of low sulfur number one fuel oil
offered for Williams transportation has declined at the rate
of
19 percent 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),
33—616
—5—
Mr. Dick McDowell, Chief Engineer at Union Oil’s Chicago
refinery,
discussed the typical refining process,
including
desulfurization
(R.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 percent.
In order to further reduce the sulfur content in order to
meet the Illinois
limitations,
several alternatives are
available.
A refinery may 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-lU 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
.5 and
1 percent,
if possible,
rather than the 2
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 (R.132).
The
latter two alternatives will
create problems in product distribution (R.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 (R.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 (R.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 SO2 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 associa-
tions.
Determinations of possible violations
of ambient air
quality standards was made by adding the estimated increases
in
SOT, 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
rehect
all existing sources of
SO., emissions,
and the
modeled increment
is the additional contribution 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 SO2 contribution
caused by the proposed regulation would be approximately 3.4
33—617
—6—
micrograms per cubic meter at Waukegan,
which is 4.3
of the
annual
standards.
The maximum 24—hour incremental contribu-
tion predicted was 18,1 micrograms per cubic meter at the
Maywood monitor,
which
is
5 percent of the 24—hour short—term
SO2 standard.
The maximum 3—hour incremental contribution
predicted was 54.4 micrograms per cubic meter,
also at the
Maywood monitor, which is about 4.2 percent of the correspon-
ding SO2 standard,
The SO2 contribution from the proposed
regulation 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 standard would be increased less
than 2,3 percent
in all cases
(P.235—236).
The author of the economic impact study
(Ex.12) conclu-
ded 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
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 this
cost would be passed on to customers.
The author also conclu-
ded 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
percent of average pre—tax household income.
The author
used the Illinois Bureau of the Budget 1972
Input/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 proposed regula-
tion 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 neces-
sity for the proposed change.
33—618
—7—
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.102), and the No.
2 fuel
oil discussed by Union Oil
is also distillate
(R.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 pic-
ture, 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. Teel indicated that
there are other pipeline companies serving Illinois, but he
did not know how many
(R.88).
The Board has no means
of
assessing whether the problems faced by Williams and Explorer
are indeed representative
of industry as a whole.
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 scant.
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.
The author of the economic impact study specifically
noted at page
16 of the study
(Ex.
12)
that:
“Customarily,
in proposing a regulation,
the petitioner
lays out not only the benefits but also the rationale or
33—619
—8—
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,
the author found that the evidence
appears
to substantiate petitioners’
contention that substan-
tially all middle distillate components would have to be treated.
However, we find that the author’s conclusion in this regard
was based upon speculation and was not substantiated by evidence
obtainable only through petitioners.
The Board attempted to obtain much of the requisite infor-
mation in the Interrogatories it ordered Petitioners to answer.
The answers were insufficient, and the Board has no other means
of obtaining
it.
On May
16,
1979, Petitioners filed a Motion for Substitution
of Counsel,
Reopening of the Record and Identification of Infor-
mation.
The Motion is hereby granted.
The Board will allow
petitioners six months from the date of this Order
to submit
the information which the Board has herein identified as neces-
sary for
it to decide this matter.
In providing the requisite
information, Petitioners should update information in the record
and should complete and update answers
to the interrogatories
addressed to Petitioners by the Board previously.
The Board
orders that another hearing be set in this matter at which
Petitioners may present this information.
Failure to submit
the requisite information within six months will subject this
proposal to dismissal.
ORDER
It is the Order of the Pollution Control Board that:
1)
The Motion for Substitution of Counsel, Reopening
of the Record and Identification of Information,
filed by Petitioners on May
16,
1979,
is hereby
granted.
Petitioners shall
submit the information
identified
in the above Interim Opinion within six
months of the date of this Order.
Failure to sub-
mit the requisite information shall subject the
petition to dismissal.
2)
An additional hearing shall be held in this matter
within six months of the date of this Order.
Dr. Satchell abstained.
33—620
—9—
I, Christan L. Moffett, Clerk of the Illinois Pollution
Control Board,
herepy certify the above Interim Order was
adopted on the ~‘/
day of
______________,
1979 by a vote
Christan L. Moffet
lerk
Illinois Pollution
ontrol Board
33—6 2 1
