Recent legislation which took effect on Jan. 1, Senate Bill 546, makes significant changes to the California Oil Recycling Enhancement Act of 1991. The changes update oil recycling efforts in the state, provide a new focus on rerefined oil and the collection of used oil filters – and add substantially to the recycling fees paid by lube manufacturers.

California leads the way in recycling and innovative programs to reduce waste, Margo Reid Brown, director of Californias Department of Resources Recycling and Recovery (CalRecycle), told LubesnGreases. The recent legislative modifications of the act will help our state recover even more used oil and encourage the recycling of used oil filters. It provides incentives for the public and private industry to work together to protect Californias natural resources from the threats of oil contamination.

The act is not financed by income or property taxes, and therefore will not impact Californias Himalayan public debt. As in years past, its funded through a direct charge on lubricant manufacturers, who must report their sales volumes and pay the fee quarterly. From a previous 16 cents per gallon, the charge now is climbing to 26 cents per gallon of lubricating oil sold, transferred or imported into the state for use there. After Jan. 1, 2014, this charge – in effect a dedicated fee on the sale of lubricants – will drop to 24 cents per gallon.

The extra two-cents-per-gallon charge through 2013 is intended to defray the cost of an independent life-cycle analysis of the used oil management process. The analysis is to be completed by then, and a report submitted to the state legislature.

Not including some exempted products, such as lubes exported from the state or products such as two-cycle oils which are not recoverable, an estimated 100 million gallons of lubes are subject to this charge. At that rate, the program will be generating an estimated $26 million per year – $10 million more than before. Thats a lot of money to be extracted from Californias lubricant sales stream.

Tilting to Rerefining

Where will it go? Browns colleague at CalRecycle, Calvin Young, explained, The amended act is a complex amalgamation of many linked components – incentives for producers and individuals and organizations which dispose of used oil properly; new definitions of, for example, used oil haulers and rerefined oil; expanded information and educational programs; defined reporting requirements; testing and analytical requirements for used oil in state-accredited laboratories; certification requirements for collection sites, and enforcement muscle via civil and criminal penalties for act violations.

Eleven percent of the annual levy ($3 million) is allocated to CalRecycle for administrative support of these programs. Another $11 million (42 percent) will fund direct payments to local governments, as well as competitive grants and/or contracts for various projects, outreach programs and educational efforts.

The purpose of the grant programs and contracts are to encourage the responsible collection and recycling of used oil and used oil filters, while also working to promote markets for recycled oil products, Young pointed out. To that end, the new law tilts favorably toward rerefined oil, as reflected in a steeply reduced fee on lubricants made from it. For finished lubricants containing at least 70 percent rerefined base stock, the legislation actually lowered the sales charge to just 12 cents per gallon.

Approximately 4 percent of Californias annual lube consumption is rerefined lubricants, and the state is home to rerefiner Evergreen Oil, based in Irvine. We are the second-largest U.S. lube oil rerefiner, the largest in California by far, and collect 25 million gallons of the [states] 100 million total, Evergreens Thad McNeil told LubesnGreases. The company rerefines the oil in the base stock and other products at its facility in Newark, Calif.

Our annual base oil production capability is approximately 20 million gallons, all a very solid API Group II quality level, McNeil said. Base oil itself is not subject to the fee, but the reduced fee could encourage lube marketers to include more rerefined oil in their products.

Implementing the Act

One stated aim of the new law is to discourage the illegal disposal of used oil and promote recycling. Many studies have shown that improperly disposed used oil can have significant negative environmental impacts, especially on drinking water.

By contrast, recycling oil offers benefits, as the American Petroleum Institute points out. Recycling just two gallons of used oil can generate enough electricity to run the average household for almost 24 hours, the Washington, D.C.-based trade association says.

Its estimated that 85 percent of the oil available for recycling in California is actually collected, leaving about 15 million gallons of oil unaccounted for each year. This includes oil which is burned up in engines, that escapes through leaks, undocumented oil leaving the state and illegal oil management practices.

The state has a network of 4,000 Certified Collection Centers (CCCs) which can accept used oil from the public and are at the heart of its used oil gathering program. Under the new rules, CCCs now are entitled to a state incentive fee of 40 cents per gallon for used lubricating oil collected from the public; they used to garner just 16 cents per gallon. (Oil generated on-site by collectors or industrial lube users, however, still earns only 16 cents per gallon.) Additionally, CCCs must pay at least a 40-cent-per-gallon bounty for used oil when it is brought in by consumers or collected at the curbside – but only if the presenter asks for payment.

CCCs, as well as industrial generators, must meet state certification requirements and be recertified every four years by CalRecycle. The Department of Toxic Substances Control can also initiate an inspection of a CCC at any time, for any reason.

Only California, Massachusetts and Rhode Island, but not the federal Environmental Protection Agency, treat used engine oil as a hazardous waste. In California this means special handling requirements including a detailed paper trail. Oil moves point to point in the recycling system under a hazardous waste manifest, so that each shipment – in fact, each drop of used oil – can be traced back to the generator. The used oil also is subject to testing requirements, and if measured levels of certain components, including halogens and PCBs, are found, it triggers other restrictive outcomes.

The Life-cycle Puzzle

Life-cycle analysis, as the U.S. EPA defines it, is a technique to assess the environmental aspects and potential aspects associated with a product, process or service by compiling an inventory of relevant energy and material inputs, evaluating these inputs and interpreting the results to help make an informed decision.

Although several LCA studies have been done on aspects of used oil management, none has adequately addressed all the technical and economic issues necessary to properly support policy development. Since used oil has to be managed everywhere, Californias upcoming study will be closely watched by other states and countries.

CalRecycle will execute the study via three contractors: 1) a facilitator to manage stakeholder input and assist in developing the studys scope of work; 2) a technically competent organization to implement the comprehensive life-cycle analysis and economic assessment; and 3) a peer-review process to ensure study validity. Its proposed that the University of California system be the recipient of these contracts, most likely Davis as the facilitator, Berkeley for the technical study, and Santa Barbara for the peer-review portion.

APIs Used Oil Task Force, which includes representatives of major oil producers, rerefiners, chemical additive companies and independent lubricant manufacturers, has provided CalRecycle with detailed, substantive comments on the proposed LCA development and execution.

API is very supportive of the intent of the LCA, its an important study, APIs Dennis Bachelder pointed out. In this respect we strongly support a slower, more deliberate and inclusive developmental process, so that a full range of independent expertise can be brought to bear. API member companies and other institutions have considerable technical expertise in relevant areas which can be useful as this project moves forward.

Bachelder emphasized that a comprehensive, transparent and flexible model that builds on life-cycle assessment and economic modeling techniques is needed, so the state and other stakeholders will have the tools to incorporate changes in technical options, policy development and economic conditions.

This kind of comprehensive life cycle analysis can assess and reflect the integrated and multiplicity of component elements of the used oil market, he stated. Put directly, API wants to ensure that the study can respond to the dynamics of a changing world.

API stressed the need to avoid bias in the study, urging that all options be robustly assessed to develop the optimum solution. For example, Californias documented interest in rerefined oil might create a bias that shows up in the study or the peer review component. To minimize that possibility, Bachelder suggested that all study formulas, logarithms, algorithms and methods be made public throughout the study execution, so that stakeholders and CalRecycle can develop scenarios using the same agreed model.

A meeting on January 20 and 21 in Sacramento will consider these and other issues.

Next Up: A Wider Perspective

Californias used oil program is a major, detailed governmental oversight program. Most other state governments largely ignore used oil, leaving federal rules to take precedence.

Its often pointed out that if California were a separate country, it would have the eighth largest economy in the world. Its used oil program certainly has the legal frame-work, funding resources, implementation incentives and regulatory elements which mimic those of an independent nation.

In addition to providing a boost to day-to-day used oil programs, the upcoming LCA – if carefully designed and executed, to use the cautionary words of APIs Bachelder – has the potential to be used by many policy makers, in California and beyond.