The request was made during the FTCs regulatory review of the Test Procedures and Labeling Standards for Recycled Oil, as part of its systematic review of all current commission regulations and guides.

Rerefined oils have been meeting industry specifications for decades. When API 1509 established the definitions for base stock Groups I through V, base oil interchange programs were conducted for both virgin and rerefined stocks. One of the first approvals was issued in 1992 to rerefiner Safety-Kleens base stocks to support use in blending ILSAC GF-1 engine oils, the then-current passenger car engine oil specification. It was used to produce one of the early motor oils marketed as environmentally friendly.

In addition to bench tests, all base oil interchange programs included two engine tests: the Sequence IIIE to measure oil thickening resulting from oxidation, piston deposits and camshaft wear; and the Sequence VE for low-temperature sludge, wear and varnish control. Even in the early 1990s, engine oils based on rerefined oils passed both tests without issue.

Back in 1992, all rerefined base stocks were API Group I, as were the vast majority of base stocks in general. Some Group II oils were being produced by PetroCanada; Chevrons Richmond, California, plant; and Sunocos Yabucoa refinery in Puerto Rico, which was closed in 2001. API Group III oils were a niche product not associated with any of todays familiar base stock brands. Over time, rerefined oils moved from API Group I to Group II. The changeover picked up speed with the advent of ILSAC GF-4 oils in 2004, which were predominantly based on Group II.

Today, North American rerefiners can produce 16,550 barrels per day, or 6 percent of the regions total base oil capacity, according to LubesnGreases research. Ninety-seven percent of the continents rerefined oils are API Group II quality; Heritage-Crystal Clean produces 150 b/d of Group I oils at its facility in Indianapolis, and Avista Oil says it makes 400 b/d of Group III in Peachtree City, Georgia.

Though it inched up steadily during the early 2000s, rerefined oils share of North American base stock capacity has been flat for the past four years. The amount of used lubricants that the continent generates would allow it to produce significantly more rerefined base stocks, but this may not happen without regulation mandating used oil collection.

Rerefinery Economics

Government regulations mandating the proper handling and disposal of used motor oil have helped increase feedstock availability, along with laws that require outlets selling fresh oil to take back used oil from do-it-yourself consumers. But industry players do not expect state or federal government to require that used oil be rerefined, at least in the United States-nor would such regulations compel consumers to buy rerefined lubes.

Further, not all used oil is fit to be rerefined into engine oil. Rerefiners must carefully manage the quality and contamination of used oil. Oil that cant be rerefined into suitable lubricant base stocks may go into other uses such as asphalt production. Spent oil can also be burned as fuel, so collectors and rerefiners must consider market forces to ensure they can run a profitable and efficient business.

The rerefined base oil market is driven by the economics of the business, i.e. the spread between base oil price and used oil cost, commented Juan Fritschy, CEO of Avista Oil. It is not driven by regulations, and I do not see regulations compelling its use, at least in the immediate future. Some use is driven by federal or government agencies, but it is a relatively small part of the market.

Although many investment opportunities are explored in the rerefining space, on average only 30 percent of those investments get built, he continued. Without an effective collection system, a rerefinery cannot succeed in the long term. Success means that the investment pays a return to the investors, proportional to the risk taken.

The price of crude can impact rerefinery economics, but its the efficiency of collecting used oil that can make or break a rerefiner. To be successful in this business, you need to be able to control the quantity and quality of the used oil needed at the rerefinery, Fritschy explained. Anyone can build a rerefinery, but to be successful, a strong collection process must be guaranteed.

Used oil generators that segregate oil suitable for rerefining can expect that collectors will pay for higher quality used oil. When the price of crude rises, so does the value of this oil. Successful rerefiners can balance these factors to generate the highest margins.

Green Oil: Do Consumers Buy It?

Rerefiners use the idea of a closed-loop system to market their oils and explain how rerefining is a sustainable and efficient way to both deal with used oil and conserve natural resources. In this process, used oil is collected, rerefined, blended into a lubricant and then used as part of a routine oil change.

For example, Safety-Kleen, the largest rerefiner in North America, collects more than 200 million gallons of used oil per year, according to its website. The collected oil is rerefined using vacuum distillation and hydroprocessing to remove impurities and additives. The rerefined base stock is then used to blend EcoPower or Performance Plus-branded lubricants for passenger car and heavy-duty applications, industrial lubes and greases, or sold to other blenders.

In total, the company says it returns more than 140 million gallons of rerefined oil to the marketplace, completing the closed-loop process. Safety-Kleen attributes more than one million metric tons of greenhouse gas prevention to this process, along with its recycled parts washer solvents program.

Its not just the rerefiners themselves who take advantage of the green marketing scheme. Fleets or businesses that want to demonstrate they are supporting sustainable options may highlight their use of lubricants that are at least partly produced from recycled oil.

The value proposition should make sense to most consumers, as it is widely known-at least to industry insiders-that a finished lubricant developed from a properly rerefined base stock is at least equal to those made from virgin base stock.

Rodney Walker, formerly of Safety-Kleen, has spent many years working with rerefined base stocks. Additive companies have had few issues completing engine test programs for rerefined base stock, he confirmed. I have seen field data in both gasoline and heavy-duty diesel engines that would further validate the performance of these stocks.

I have seen Class 8 engines operate for a million miles on a properly formulated lubricant with 100 percent rerefined base stocks, he continued. Some virgin base stock marketers will still try to say virgin is better, but we see that less than in the past.

But perceptions about rerefined base stocks vary widely. Marketing rerefined oils can be challenging, because end users may still perceive rerefined base stock as lower quality than virgin oil.

Valvoline put in a particularly hard marketing push for its NextGen rerefined passenger car engine oil as being both high quality and environmentally beneficial. When the company began its marketing campaign in 2011, Walker said he thought the market for sustainable lubricants would begin to grow. Valvoline did all the right things in providing consumers with an alternative choice at no extra cost and spending the time and effort to market and explain the concept. Unfortunately, consumers did not warm to the concept, even if they did not have to pay extra for this feature.

What has become clear is that products do not need to be manufactured and marketed as sustainable. The key is making a product that meets specifications, whether it is engine oil, hydraulic oil, automatic transmission fluid, metalworking fluid or anything else. If the product is the right quality and leads to the lowest formulation cost, marketers will be interested and consumers should have confidence that it will provide the correct performance.

Rerefiners will have to rise to the challenge as more original equipment manufacturers and consumers require products based on API Group III base oil. Rerefiners have the technology to produce Group III today, and eventually economics should make rerefined Group III more available, said Walker. The pool of used oil to work with will also improve over time as more of the used oil will be higher quality to start. But it will not be without hurdles, especially for higher-tier applications.

I believe that API will continue to expand [base oil interchange and viscosity grade read-across] rules, which will enable the use of not just rerefined base stocks but all Group III base stocks, as they become a more mainstream need for todays modern lubricant, Walker concluded.