3.8 PETROLEUM 3.8.1 Description Petroleum, an oily bituminous liquid, is a complex mixture of hydrocarbons with small amounts of other substances that is prepared by various refining processes for use as gasoline, motor oil or other products. The only specific petroleum material to be discussed here is used motor oil. Motor oil is used primarily to lubricate vehicle engines. EPA figures show that roughly 2.6 billion gallons of lubricating oil were sold in 1988. This resulted in the generation of 1.4 billion gallons of used oil, of which only about 0.8 billion gallons were handled through the used oil management system (I). Crankcase oil from privately owned vehicles is generated by individual consumers who change their own oil ("do-it-yourselfers." or DIYs) at the rate of about 200 million gallons per year. Auto shops and industrial generators account for another 370 million gallons (2). Significant concem exists about the amount of waste oil which is illegally dumped or disposed of in landfills or other environmentally unacceptable locations. Crankcase oil drainings have been reported to account for more than 40 percent of the total oil pollution of our nation's harbors and waterways (3). Increasing emphasis is being given to fmding acceptable disposal and recycling outlets for used oil by federal, state and local governments. 3.8.2 Market Structure The two major products generated from reclaiming waste motor oil are fuel oil and lubricating oil. Of the more than 1.2 billion gallons of used oil generated in the country in 1983, almost 50 percent was processed into fuel, while only 5 percent was re-refined into a lubricating oil; over one-third was landfilled or dumped (4). Fuel from waste oil is produced by a distillation/filtration/heating process. EPA estimates that in 1983, half of the oil consumed as fuel was blended with virgin oil before being bumed (5). The primary markets for this product are industrial boilers and asphalt plants. Asphalt plants, while having the capacity to bum more than 400 million gallons of used oil per year, are only buming about 100 to 200 million gallons per year (6). The other major product generated from reclaiming waste motor oil is lubricating oil. According to the Association of Petroleum Re-Refiners, there are currently only five active oil re-refineries in the United States and two in Canada, as listed below: -BresLube in Breslow, Ontario -Consolidated Recycling in Troy, IN -Demenno Kerdoon in Dompton, CA -Evergreen Oil in Imine. CA -Mohawk Lubricants in N. Vancouver, British Columbia 1 -Motor Oil Refining Co. in McCook, IL -Mid-America Distillation in Hot Springs, AK A sixth re-refinery is under construction in East Chicago, IN, which is scheduled to open in mid-1991. Only a small amount of the re-refined oil reaches retail markets as an automotive lubricant (7). Other uses for the product are as cutting oils for industry, fuel oil, dust control and inclusion in asphalt products. Key factors in the economic viability of used oil reclamation are the price of crude oil and federal regulations concerning the handling of used oil. In 1985 the EPA proposed regulations that would classify used oil as a hazardous waste. UNGITRE NC Recyding Market Development Strategic Plan Project Page 3-88 411 /9 1 Recydable Materials Market Assessment Report The EPA's proposal has met considerable opposition. prompting the EPA to back off from its earlier stand. However, the EPA has yet to make a clear decision on whether or not used oil is hazardous (8). Opposing the agency's proposal are the fuel oil processors. who now harbor the majority of the used oil market. As it stands, re-processors have a strong market fortheir fuel oil product, strengthened further with the recent price increase of crude oil. Figure 3.8.1 illustrates the effect of virgin fuel oil price fluctuations on the price of used fuel oil. This graph identifies the critical point which determines whether generators are charged or paid for their used Oil. A hazardous classification will raise the costs of handling and significantly restrict usage of used oil as a fuel. Fuel oil processors claim that by labeling used oil as hazardous, more illegal dumping will occur because of the increased costs of collection and handling. In favor of the hazardous classification are the oil re-refiners. The re-refining industry has suffered several blows over the last 20 years which drastically reduced the re-refining capacity in the country. Re-refining was at its peak in the 1960s. with over 300 million gallons processed per year. In 1965, a S.06 sales tax that had been imposed on virgin oil but not on re-refined oil was revoked. In the 1 9 8 0 ~ the cost to dispose of hazardous by-products generated in the re-refining process increased significantly (9). An additional limitation is the lack of a collection and transportation infrastructure for used oil such as that which exists for crude oil. Financial incentives in other countries have encouraged the re-refining of used oil (10). For example, New Zealand charges a20 percent sales tax on virgin lubricating oil from which re-refined oil is exempt A small financial incentive (about $.lo per gallon) is paid to individuals who retum oil to collection stations. France pays a bonus to re-refiners. 3.8.3 Markets Serving North Carolina In North Carolina, all waste oil currently collected is processed and marketed as a fuel oil or fuel blend. The primary market for fuel oil in North Carolina, as in much of the country, is for industrial fumaces and fuel for large driers used in asphalt plants. Final product specifications vary according to market needs. The product usually sells for 10 to 20 percent below the virgin fuel products with which it competes. Processing for use as a high quality lubricant (requiring re-refining) is less common, and virtually none of the waste oil collected in North Carolina at this time is re-refined. Re-refining of waste motor oil was attempted in North Carolina by the Department of Corrections at a facility in Gamer several years ago. The waste oil was collected from state-owned vehicles and re-refined into a lubricant at the Gamer facility. The program was reported to have failed because of the limited volume of incoming waste oil and technical problems with the process. Some processors are known as fuelblenders. Fuel blenders accept various waste chemicals. usually from industrial sources, such as solvents, sludges, flammable and combustible liquids, paints, petroleum products, hydraulic oil, cutting oil and lubricating oil. The materials are mixed according to the needs of the end user. The materials are bumed for their Btu value and, in some cases. are bumed primarily as a method of disposal. Fuel blenders, while they do handle non-hazardous materials such as waste motor oil, are permitted by the federal government to handle hazardous wastes and are, therefore, distinct from the processors who process only non-hazardous motor oils. Used crankcase motor oil constitutes only a fraction of the waste handled by fuel blenders. Within North Carolina, currently 17 companies are listed as brokers, handlers, processors or end users of waste motor oil in the OWR Recycler Database. These companies are identified in Figure 3.8.2. ' Page 3-89 NC Recyding Market Development Sbategic Plan Project UNCITRE Recydable Materials Market Assessment Report 4/1/91 In addition to the companies located in North Carolina, six processors and one end user are contained in the OWR Recycler Database and located in adjacent or nearby states which also serve North Carolina. End users are the primary driving force of the marketplace because they are the recycling businesses using the secondary materials handled and processed by other recycling businesses. In the case of used oil. many companies may be both processors and end users. Oldover Corporation in Ashland, VA, bums re-processed fuel oil along with other fuels in the production of light-weight aggregate. Enterprise Rendering Company in Oakboro. NC. reportedly accepts waste oil from small quantity generators, processes it and bums it in their rendering operation. The OWR Recycler Database contains seven processors of waste motor oil which are located in North Carolina and seven which are located outside the state. Safety Kleen is listed as a waste oil processor as well as a handler with seven collection locations serving North Carolina generators. Currently, all of the waste oil collected by Safety Kleen is processed out of state. Almostd of the waste oil from NC generators currently goes to Bethlehem Steel in Baltimore to be used as blended fuel stbck. According to Steve Kepley. regional manager, roughly 3 million gallons are collected and processed by Safety Kleen from sources in North Carolina. In the near future, Kepley reports, Safety Kleen plans to re-refine all waste oil collected in North Carolina at the plant under construction in East Chicago, IN. This plant, claimed to be the world's largest re-refinery, should be in operation by mid-1991 and will be capable of processing 75 million gallons of used automotive and industrial oils (as well as 20 million gallons of oily wastewater) per year, From the waste oil feedstock, the products will be high-grade base lubricating oil, distillate fuel, asphaltic boaom cut and reprocessed fuel. According to Kepley, re-refined oil from an existing Safety Kleen re-refinery is now being distributed by Wal-Mart stores as "America's Choice" brand. Kepley says that this product meets MI specifications for motor oil and sells for approximately $.80 per quart. Noble Oil Services processes waste oil into fuel at its Sanford facility. According to Ed Howell of Noble, the Sanford facility is capable of producing 80-90,OOO gallons per day of specification fuel oil. It receives waste oil from as far west as Winston-Salem and as far east as Wilmington from military bases, service stations and other handlers. Their service area may vary according to buyer needs. Holston Energy (in Waynesville) is one of the largest waste oil processors located in North Carolina. Holston works with several counties (in Region D and in westem North Carolina as far east as Catawba County) in their waste oil collection programs. Holston also collects waste oil with its own trucks from service stations throughout the Piedmont. All of the waste oil is processed at the Waynesville facility into specification fuel. Holston collects waste oil from neighboring states, but the majority comes from North Carolina (an estimated 4 million gallons per year). Heritage Environmental Services accepts various oils from industrial generators and processes them into fuel at its Charlotte facility. Lynn Phillips of Heritage estimates that only 5 percent of the total volume processed is crankcase oil. Statewide Service and Supply, located in Spartanburg. SC, receives roughly half of its incoming waste oil from North Carolina (nearly 1 million gallons per year). Statewide is a re-processor who markets its fuel product strictly in South Carolina. Figures 3.8.3 and 3.8.4 display the locations of waste oil end users, processors, handlers and brokers in the United States and North Carolina. There appears to be adequate waste oil processing capacity throughout most of the state. with the possible exception of the Coastal Plain region. The closest processor to the coast, according to the OWR Recycler Database, is Noble Oil in Sanford. The acceptable radius from generators to processors is variable, but is probably not greater than 100 miles in most of North Carolina. Refinery grade fuels are readily available and relatively cheap to industrial customers near the Coast. This location (Le.. transportation) factor reduces the competitive price advantage experienced by re-processors in the rest of the state. Used motor oil is rarely brokered. In fact, no brokers of used motor oil are contained in the OWR Recycler Database within North Carolina. Altemate Energy Resources. Inc. (Augusta. GA), and Necessary Oil Company (Bristoi, VA) are listed as out-of-state brokers serving NC generators. Both of these companies are also listed as handlers UNGITRE NC Recyding Market Development Strategic Plan Project Page 3-90 411191 Recvdable Materials Market Assessment Rewrt and processors. Altemate Energy Resources is reported to be a fuels blender (i.e., collects vanous t y p s of petroleum products and other combustible chemicals, blends them and markets the mixture as an altemative fuel product), whose service area is the southeastem United States. Necessary Oil Company reportedly brokers, handles and processes waste motor oil from northwestem North Carolina around Boone. Eastem Petroleum Corporation operates out of Georgia and furnishes several tank cars for holding waste motor oil. Three of these tank cars are located in North Carolina and are used for temporary storage of waste oil delivered by independent collectors. The re-process it into a fuel product Another portion of the material is sent to re-refineries which convert it back into a lubricating oil product. The company estimates that 200,000 gallons per month are collected from NC independent haulers. Markets are located throughout the Southeast Companies that recycle waste motor oil may be both handlers and processors. Some may be end users as well. In North Carolina, this is the case for several companies. Due to the nature of the material, the varied practices of waste oil generators and the general perception of waste oil as a "hazardous" material, many waste oil processors are concemed with the potential liabilities inherent in their industry. Therefore, some processors provide collection as part of their operation. This opuon facilitates maximum control over the quality of the waste oil they collect and subsequently provides additional quality control over the final product resulting from re-processing or re-refining. The distribution of waste motor oil handlers, as contained in the OWR Recycler Database, is fairly even throughout North Cmlina, with the exception of the Mountain region, where there is only me handler listed. The Figure 3.8.5 depicts the number of 1; tndlers within each region of the state: oil is ultimately shipped to processors out of state by rail. The majority of the material is sold to companies that 9 Figure 3.8.5 Waste Motor Oil Businesses Serving North Carolina Resion Number Mountains 1 Piedmont 4 Coastal Plain 2 Saurce: OWR Recycler Database Waste oil handlers that s e w Nonh Carolina from other states include M&M Chemical Company (Attalla, AL); Altemate Energy Resources, Inc. (Augusta, GA); Safety Kleen Corporation (Elgin. L); Southeastem Chemical Company (Sumter, SC); Necessary Oil Company (Bristol, VA); and Oldover Corporation (Ashland, VA). These companies are also listed as processors. Oldover Corporation.is listed as an end user as well. All of these companies accept waste oil on a regional basis. Safety Kleen has four collection centers located in North Carolina and reports that it serves the entire state. Its centers are located in High Point Charlotte, Gamer and St Paul. It also has a collection center in the following out-of-state locations: Chesapeake, VA (serving Eastem North Carolina. around Elizabeth City and Cape Hatteras): Greenville. SC (serving the Asheville area): and Bristol. TN (serving the Boone area). Safety Kleen has its own fleet of collection trucks. and it picks up waste oil from automotive dealerships, service stations, garages and some industrial generators. Safety Kleen claims to collect approximately 3 million gallons a year from sources in North Carolina. 3.8.4 Conclusion There are many advantages to recovering used motor oil. Demand for oil as a fuel is strong, since prices are generally 10 to 20 percent lower than comparable virgin fuel. Re-refining used oil only takes one-third the enera required to refine motor oil from crude oil (1 1). \I Page 3-91 NC Recyding Market Development Strategic Plan Project UNCITRE Recydable Materials Market Assessment Report 4/1/91 There are alsomany obstacles to increased oil recycling which impact marketability and/orsupply in North Carolina as well as throughout the country. An obstacle to the acceptance of re-refined lubricating oil in the marketplace is the common perception that the quality and performance of the materials are lower than comparable virgin products. ' h s perception, coupled with the relatively insignificant price difference between re-refined and refined crude products, results in a bleak future for sales of the re-refined product until either the economics or the perception changes. Procurement requirements for recycled oil products in state government could stimulate the market and provide endorsement for these products. Additionally, if used oil becomes classified as a hazardous waste, the higher the disposal costs for oil will result in more favorable economics for re-refining although the used oil fuel industry may be hit with more regulations. Limited re-refining capacity in the country (there are currently only five) results in prohibitive transportation costs for waste oil handlers seeking to market used oil for re-refining.. In response to the concem over improper disposal of waste oil. provisions for management of used motor oil in North Carolina were incorporated into SB 11 1. These provisions, now in effect, include a ban prohibiting landfill disposal of used oil. The practice of accepting waste oil at public landfills had, in fact, ken abandoned by most local govemments long before SB 1 1 1. While not required in SB 1 1 1. many local governments have also assumed responsibility for the proper disposal of used oil by providing used oil collection repositories for public use. The private sector has responded to the provisions as well by providing waste oil collection and handling services throughout the state. Given economic incentives, further participation by the private sector in the waste oil recycling husiness could develop. . UNCITRE NC Recyding Market Development Strategic Plan Project Page 3-92 411191 Recydable Materials Market Assessment Report la 0 v) c 9 9 c c -m o 9 9 7 0 0 CD f-0 m 0 m Posted Price of Virgin Fuel Dll 0 0 ? ? 0 0 -Z < 7 0 Q -2 < 7 Q Q -2 < 7 rc (0 -2 < 1 U a v) c 0 I f Page 3-93 NC Recyding Market Development Strategic Plan Project UNCITRE Recydable Materials Market Assessment Report 411 191