Following years of discourse with the U.S. Congress and Environmental Protection Agency, the used oil recycling industrys largest trade group believes a more favorable stance on rerefining of polychlorinated biphenyl contaminated oil may be within reach.
NORA, the Association of Responsible Recyclers, is closer than ever to attaining relief from the federal Toxic Substances Control Acts inhibiting and overly restrictive regulations on PCBs in rerefining operations, legal counsel Steven Shimberg told the groups annual conference and trade show in November.
Weve made tremendous progress and success is within our grasp, Shimberg, of SJSolutions in Washington, D.C., said.
NORAs goal is to create a level playing field between the various methods of handling used oil – including energy recovery, incineration and rerefining. Existing rules prohibit rerefining any used oil contaminated with PCBs at 50 parts per million or more. Such oil cannot even be diluted to safe levels of less than 2ppm. Finding PCB in a rerefinerys used oil stream now triggers a costly cleanup effort, which can be crippling. It also condemns all the used oil to be landfilled or burned in specially permitted hazardous waste facilities – likewise very costly.
Yes, the anti-dilution rule creates a deterrent to intentional dilution, but the problem from our point of view, is when the rule is applied to unintentional dilution, he continued. You can do everything possible to avoid PCBs, but they can end up [in a rerefinery] anyway. Weve determined that [the rule] doesnt work. All it does is impose additional costs, and its punitive, and it doesnt serve any environmental purpose at that point.
There is an approval process for rerefining PCB-contaminated dilutions of oil, but Shimberg noted that it takes forever to get through and is time consuming, expensive, and unnecessary.
To fight for rerefiners, NORA appealed to Congress and the U.S. Environmental Protection Agency several years ago, urging the bodies to do two things: 1) Create a conditional exception to the anti-dilution rule for rerefining companies that voluntarily comply with NORAs best management practices and 2) streamline and standardize the approval process for rerefining PCB-contaminated used oil.
Resigned that Congress is unready to tackle PCB reform, due to complications such as the upcoming election cycle, NORA is now working directly with the EPA, having established that the agency has the authority under existing regulations to grant relief.
Congress failed to enact TSCA reform legislation this year and is unlikely to get it done anytime soon, Shimberg said. Fortunately, we saw this coming and shifted our focus from Congress to EPA, where we have received a terrific reception.
EPA is notorious for being difficult to work with, and reputedly anti-business. But thats not been our experience on this particular project, Shimberg added. Were working with a group of EPA staffers who understand and agree with our set of problems, agree with our solutions, and sincerely want to help. They understand that recycling used oil can be environmentally positive. They want to encourage it and eliminate barriers to it. We got lucky with the team were working with.
The next stage for NORA is to help EPA develop and submit an application for relief, called a risk-based approval application. In this step, the two will work together to fine-tune NORAs best management practices. NORA already has sent EPA a list of suggested standards for rerefining facilities that can destroy PCBs.
Past risk-based approval processes have taken between eight and 12 years, and were way ahead of that, partly because were coming in with an attitude of lets work together, he said.
If NORA reaches its goal, the industry will have more management options based on as found concentration of PCBs, Shimberg said. Furthermore, rerefiners will avoid the loss of valuable used oil, saving a significant amount of money, time and effort.
Meanwhile, with demand sinking for used oil-derived products such as burner fuel, base oil, asphalt extender oil and others, another hot topic at NORAs November meeting was the cost of used oil. Today, the used oil market is upside down, said consultant Roy Schumacher, who urged players to rethink their purchasing strategies for used oil.
After several presentations detailed the grim realities of the used oil business in the United States, Schumacher, formerly with Thermo Fluids and now head of Schumacher Consulting in Phoenix, Ariz., suggested its time to reset the market. He noted that the landscape of recycling has changed.
The players now include newcomers such as Intergulf, an east Texas rerefinery that makes VGO, and Avista Oil in Georgia. These and other advanced facilities now account for about 50 percent of the countrys used oil recycling capacity, he said.
However, some planned facilities have not come to fruition (NexLube in Florida and FCC Environmental in Maryland), others are on hold (Verolube in both Texas and Canada), and even well-established ones have traded hands (as when Clean Harbors bought Safety-Kleen and then Evergreen Oil, and Vertex snapped up Bango Oil and Heartland Petroleum). A common link for all participants is the tight margins caused by the high cost of buying and collecting used oil, at a time when most petroleum prices have fallen.
I can tell you with absolute confidence that used motor oil prices are too high, Schumacher said. API Group II base oil prices are down 40 percent [since June], with no reversal in sight. Ironically, the costs of collecting used motor oil has gone up 25 to 35 percent. Its ludicrous.
When collecting from quick lubes, Schumacher noted, the dilemma is even starker. In 2010, the average cost of collecting used motor oil from a quick lube was 95 cents per gallon. By 2013, it was $1.45 – a 52 percent increase at the same time that every rerefined product price has gone down.
We like the quick-lube industry, they are our customers. However, how are they able to charge only $19 or $29 per oil change for decades? Because they depend on us, Schumacher said, adding that he believes collectors are subsidizing the quick-lube industry.
My research shows that the average cost of used oil in 2013 and 2014 is $1 a gallon, he continued. Assuming you collect a billion gallons a year in the United States, thats one billion dollars a year going to the generators.
As grim as the situation appears to be, it presents a huge possibility for collectors, Schumacher asserted. Heres the good news: that cost is our opportunity. We choose what that cost is. Imagine if we reset that to zero – its a way out.
Schumacher noted that in almost all other industries, increased production costs are passed along to the consumer. How about that billion dollars gets passed on to the millions of customers at quick-lube changes every year – and we dont have that cost every year? Imagine a world like that.
For a paradigm shift in the used oil market, collectors must take action, Schumacher said. We need to make some big decisions. We need to decide to pay our customers fair market value for used motor oil. No more, and no less.
Players can start by analyzing the market, he explained, and having real conversations with their customers. Its not about making small changes, such as Lets drop the price of used oil by 10 cents – thats not going to get the job done. Instead, collectors need to establish long-term strategies with their customers. Lets get away from one-way conversations such as, How much are you going to give me? How much do I have to pay? Instead, have a conversation. Tell [your customers] the story of where their oil goes. Educate them about rerefining or whatever market youre selling into.
Schumacher concluded by urging used oil collectors and rerefiners to take control of feedstock acquisition costs through a used motor oil pricing index. Lets find an index that we can count on, and [buy] on an index-based system.