Cheers, Jeers for Calif. Used Oil Law


Under California legislation kicking in next month, the state will require that direct truck shipments of used oil to out-of-state facilities meet California testing standards and will pay rerefiners a direct incentive starting in 2013. Opponents have cried foul.

Gov. Arnold Schwarzenegger (R) signed the California Oil Recycling Enhancement Act (Bill SB 546) into law on Oct. 11. Aside from a rerefining incentive of 2 cents per gallon that begins in January 2013, the bill goes into effect on Jan. 1, 2010. It retains a recycling incentive of 4 cents per quart on do-it-yourself motor oil collected by quick lubes.

State Sen. Alan Lowenthal (D-27th) introduced the bill. The acts supporters included Irvine, Calif.-based rerefiner Evergreen Oil and Compton, Calif.-based Demmeno Kerdoon, a used oil, wastewater and antifreeze recycler. The delay in implementing the rerefining incentive was to allow for companies to have the opportunity to develop additional rerefining capacity in California, Gary Colbert, Evergreen Oils president and chief operating officer, told Lube Report.

SB 546 aims to close a loophole in Californias used oil testing program by requiring out-of-state testing to California standards of direct truck shipments of used oil to out-of-state facilities. The key California standards include a flashpoint above 100 degrees F, a PCB concentration of less than 5 parts per million and a concentration of total halogens of 1,000 ppm or less.

The legislations supporters said the change will enable California used oil recycling businesses to compete for the used oil and expand recycling in the state on a level economic playing field.

Prior to SB 546, direct truck shipments of used oil to out-of-state facilities did not have to incur the expense of testing that oil to California standards which are higher – and more expensive – than either other state or federal standards, Evergreens Colbert explained. This is a cost all California recyclers are compelled, by law, to undergo, thereby ensuring that the out-of-state facilities receiving the truck shipments could (and did) always outbid California companies for the resource. The bill levels the economic playing field by requiring that these out-of-state truck shipments test to the same higher California standard required of in-state companies. More then 30 million gallons of California used oil left the state last year alone because of this dynamic.

He noted that prior to the legislation, all in-state truck shipments and out-of-state rail shipments of used oil were already required to be tested to the higher California standard. Out-of-state truck shipments were considered the lone loop hole.

Opposition to the bill included Phoenix-based environmental services firm Thermo Fluids and Plano, Texas-based Safety-Kleen, which operates rerefineries in East Chicago, Indiana, and Breslau, Canada. Safety-Kleen declined to comment for this report.

During the bills legislative discussions, Thermo Fluids Inc. said in a statement, “SB 546 violates the commerce clause of the U.S. Constitution because it discriminates against out-of-state used oil transporters and recyclers and acts as an impermissible flow-control measure.” The firm noted used oil is an extremely valuable commodity that is shipped to neighboring states because California recyclers are not able process all the used oil generated each year.

The California Independent Oil Marketers Association and the Independent Waste Oil Haulers and Transporters Association supported the bill. The National Oil Recyclers Association, however, opposed portions of the bill. It represents the liquid recycling industry in the United States, including the rerefining industry, traditional recyclers who reclaim oil for fuel and other companies involved in various aspects of recycling of used oil and related materials.

In its statement on the California bill earlier this year, NORA called the used oil testing scheme expensive and cumbersome, and said it believes the bill unfairly discriminates against out-of-state used oil recyclers. The burden for testing is imposed on the transporter, transfer facility or in-state recycler, the association stated. Out-of-state facilities are not allowed to conduct the testing – even if the testing were to be conducted by a California-certified laboratory.

The group noted that testing can be expensive, especially for PCBs. Generators are not required to test, out-of-state facilities are not allowed to test and independent used oil transporters are not likely to have the financial resources to pay for the testing, NORA stated. Without any doubt, testing each load of used oil generated in California would overwhelm the capacity of commercial laboratories certified by the State of California. Overall, SB 546 is designed to drastically alter the flow of used oil generated in California to a few in-state facilities – thereby shutting off the flow of used oil to out-of-state facilities and requiring used oil to be transported much greater distances.

NORA Executive Director Scott Parker said that while the association sees the act as a pro-rerefining bill in general, it is concerned about giving special incentives or subsidies to facilities that rerefine used oil into lubricant products or feedstocks.

Our concern was not with the benefits it would provide to rerefining, it was the perception it would tilt the playing field, and we believe the market should decide – not the governments – what happens to used oil, Parker told Lube Report. Thats not the viewpoint of the legislators in California, and theyve done something different.

Now that the bill has been signed into law, he continued, the industry is looking to see what it means and how to adapt to it. Many of our members are doing that right now, he noted.

Elgin, Ill.-based Heritage-Crystal Clean sells used oil collected by its branches as fuel to electric utilities and asphalt plants. The company services close to 40,000 customers through a network of almost 60 branches. In September, it announced plans to explore entry into the used lubricating oil rerefining business. Its management team includes former Safety-Kleen executives and engineers with experience in designing and building rerefineries.

Greg Ray, Heritage-Crystal Cleans chief financial officer and vice president of business management, expressed surprise the major oil companies did not more vehemently oppose the California laws concept of paying incentives to rerefiners.

As nice as that is for recipients of that money, if you take a long term public policy perspective on something like that, Im not really sure that the bulk of the people that sell and handle used oil – the oil majors – are going to be very patient or tolerant of that sort of blatant government incentive, Ray told Lube Report. I dont think its necessary for rerefiners to be successful. If it was, I could better understand the governments role in doing something like that.

Ray said Heritage-Crystal Clean tends to look at such rules and ask if they make good public policy, and whether it would be good for the industry if other states followed suit. Its quite clear it would be counter productive or destructive to the true used oil rerefining industry – which we think is sort of in its infancy and needs some nurturing – if every state made it very difficult for you to ship oil across the border, and every state sought to do what California is doing, he continued. Which is to essentially impose their own state rules on destinations outside the states, and have their own state agencies involved in regulating or governing the practices of facilities outside the state.

Ray pointed out that facilities outside California must operate under federal rules that define used oil and require certain testing. Theyre really not open to just taking whatever they want, he said. Im not sure the state of California needed to adopt their own definition when there was already a federal definition.

The bill establishes a definition of rerefined oil based on the standard established by the American Society for Testing and Materials. Under the legislation, rerefined oil is a lubricant base stock or oil base that has been derived from used oil and was processed using a series of mechanical or chemical methods, or both, including but not limited to vacuum distillation, followed by solvent refining or hydrotreating. It must be capable of meeting the physical and compositional properties, as defined by ASTM, and be processed into a material that has a quality level suitable for use in a finished lubricant.

Evergreens Colbert noted that several companies that do not hydrotreat or solvent treat have attempted to sell a reprocessed good-as-virgin base oil into the California market, representing it as rerefined when it isnt.

And if they do hydrotreat, their product is not capable of meeting the physical and compositional, not the contaminants and toxicological properties as defined in ASTM D6074, he continued. D6074 is ASTMs standard guide for characterizing hydrocarbon lubricant base oils. This is a serious concern for not only Evergreen, who has worked these last 23 years to have our product recognized as a premium alternative to virgin [base oil] but also those blenders who are playing by the rules and meeting the API specifications, producing a quality product the consumers are expecting when they pay for an oil change. Some blenders are utilizing this pseudo rerefined base lube and putting it out into the market in their finished lubricants. That is not good for our industry.

Related Topics

Market Topics