Document x1ZgBnnV3Nv3XYkpJK09E4Orm

(conoco) Interoffice Communication To Date Subject Conoco Environmental Council Terry L. Thoen. November 20, 1986 1986 API REPORT Enclosed please find a copy of the cover letter and the three-page environmental portion of API's 1986 Report to the Membership. I thought you would find this interesting reading. If you have interest in the remaining portion of the report, please contact us and we will make a copy. It is 30-pages long. TLT/sm Enclosure cc: Gary Achenbach Brian Atkin Steve Bell Bob Heine Harold Jarman O 1986 Report to the Membership A 9> o<0& PRESIDENT'S MESSAGE Nineteen eighty-six has been a most difficult year for the American petroleum industry. The sudden collapse of world oil prices was cata strophic for domestic oil companies. While consumers enjoyed the benefits of real oil prices lower than they had been for 15 years, oil companies of all sizes were compelled to slash their exploration and production budgets by one-third to one-half compared with 1985. By early 1987. there will be a loss of some 200.000 oil industry jobs and a further 163.000 jobs in supplier industries of all kinds, according to an API survey of its members. The human costs of this year's upheaval cannot be measured. The economic losses suffered by (he states and regions where the oil industry is concentrated have been immense. For the industry, perhaps the most tell ing indicator of the magnitude of the collapse is the active rig count: halfway through 1986. it stood at a level lower than any observed since record keeping began in 1942. with 85 percent of the rigs active in 1981 idle. The American Petroleum Institute has not been spared the cutbacks that have been made by every segment of (he industry. Significant budget cuts for 1986 and 1987 have been accompanied by a reduction in staff and API has had to stretch all of its resources to the full to meet its many responsibilities. The ongoing function of setting technical and operating standards for the petroleum industry could not be neglected. Neither, in a world where government involvement in industry affairs is ubiquitous, could API afford to reduce its presence in the political process on the federal, state and local levels as spokesman for the industry. While continuing these vital tasks. API has worked intensively this year to inform the public of the stale in which the industry currently finds itself and to empha size the serious implications for the nation's future ener gy security. API s reports have served as a primary source of data regarding trends in petroleum supply and demand, refinery operations and inventory and import levels. Because API has traditionally been the most authoritative and respected source of information about conditions in the petroleum industry, its input to the policy debate in academia, the media and ihe political arena is a vital part of the industry's case. For several years, API has been pointing out that the increasingly evident world oil glut is necessarily tempo rary. because the dynamics of the world oil market guarantee that lower prices will cause demand to grow faster than supply. This year's price collapse, by en couraging demand and depressing investment in new supply even more than before, will make the turn around sharper and sooner than it would have been otherwise. Studies by API and others suggest that, under current price conditions, demand for OPEC im ports could grow at a sufficiently fast rate to leave the nation dangerously vulnerable to energy shocks within only three to five years. API issued a major report, titled Tno Energy Futures National Choices Today for the 1990s. that elaborates on this theme. The report marshals facts and figures regarding the industry's current condition and explains why present trends presage a threatening future. It also shows how appropriate government policies designed to encourage rather than to damage investment in do mestic production could significantly reduce the na tion's future level of dependence on insecure and in creasingly costly imported oil. HEALTH & ENVIRONMENT Contradictions abound in the area of health and en vironment. Growing legislative and regulatory initia tives imply that environmental and health conditions are getting worse; the facts demonstrate just the op posite. Regulatory agencies dealing with waste man agement. pollution control and occupational safety is sues tend to overestimate the need for more severe controls, while they underestimate the economic im pact of their actions and the industry's commitment to environmental responsibility. The means of satisfactorily resolving these contradic tions are not at hand. Thus, the impact ofgovernment is likely to grow--unnecessarily in many cases--while the resources for responding to and complying with these actions are shrinking due to the industry's de pressed economic state. These contradictions are a source of frustration, and they make good planning imperative. Recognizing this situation, the Health and Environ ment group in 1986 reorganized the previous three de partments into two and cut the number of committees from 39 to 19. This streamlining has helped the group attain its primary objectives: one department. Health and Environmental Af fairs. responds to government regulatory initiatives; and the other department. Health and Environmental Sciences, provides a scientific basis through research and analysis for industry participation in the public policy process. While successful so far, the group will continue in the coming year to assess the new organization's effective ness in responding to the most crucial health and en vironment issues. These issues are: waste disposal and management; gasoline and vehicle hydrocarbon emis sion control; health effects testing ofindustry products, streams and chemicals; benzene and solvents; and out er continental shelf operations. Health and Environmental Affairs The Health and Environmental Affairs Department prepared more than 80 submissions to regulatory agen cies over the past year--some 42 percent of all API's submissions to the government. The department's man date is to respond effectively and in a timely manner to legislative and regulatory proposals that could have substantial economic or operational effects on the in dustry. The department's responses in 1986 have covered regulatory initiatives under the Clean Air Act. Clean Water Act. Resource Conservation and Recovery Act (RCRA). Comprehensive Environmental Response. Compensation and Liability Act (CERCLA). Toxic Substances Control Act (TSCA) and Occupational Safety and Health Act. The department also assisted in responding to congressional activities on several of these laws. The accomplishments of the department this year include the following: Commented that the Environmental Protection Agency (EPA) proposal under RCRA to list used motor oil as a hazardous waste is not supported by existing data and would discourage recycling practices. EPA is re-examining its initial proposal. Submitted to EPA extensive data on refinery proc esses and products as part of the record for deciding RCRA requirements for burning and blending. EPA granted an exemption for refinery products. Filed extensive comments and held numerous dis cussions with EPA before the agency published its pro posal to ban land disposal. The published proposal incorporated a "risk assessment" approach that could be effective. However, objections by some members of Congress have caused the agency to consider making the proposal extremely restrictive. This could place land farming in jeopardy and significantly increase the industry's disposal costs. An aggressive program has been initiated to prevent this from happening. Regarding natural resource damage assessments under CERCLA, made suggestions on the definition of "damage" and alternative approaches for different spill volumes. The comments were reflected in the Interior Department's proposals. Under TSCA, submitted data to the Interagency Testing Committee on three fuel classes--unleaded gas oline, middle distillate fuels and heavy residual fuels-- being considered for possible test rule designation. The committee has indefinitely deferred consideration of these Aids. MOD 000015979  Filed comments in response to EPA's Phase II test rule for the C9 aromatic hydrocarbon fraction. The comments dealt with the industry's problems with EPA's tier testing approach, reporting requirements and lest guidelines for certain studies. API has made steady progress in bringing about positive changes in this $3-5 million test program. Submitted an information profile on clarified slurry oil tCSO) in response to EPA's request for information. Several API member companies have filed "substantial risk" notices with FPA refilling in EPA considering the need to initiate regulatory action on CSO. This regulatory activity holds the possibility of setting a precedent for future T5CA regulation of petroleum products, and therefore will be followed carefully by API in the coming year. Discussed with EPA the duplicative nature of a proposed Comprehensive Assessment Information Rule (CAIR) and the resulting unnecessary burden on industry. EPA has delayed the regulatory timetable and apparently intends to limit future plans for generic chemical reporting. In testimony before the Occupational Safety and Health Administration (OSHA), indicated that OSHA overestimated health risks in proposing a rule to lower the level of permissible occupational exposure to benzene. OSHA has recognized that industry programs provide a protective work environment, but still Hods significant residual risk. Work is continuing on this issue. Have continued to provide data to EPA that sup* port the use of the vehicle onboard refueling canister to control automobile emissions. EPA staff appears to agree that the onboard system is feasible and cost* effective compared with other options. API work has also led several states to defer requirements for "Stage H" systems. API commented on EPA's technical documents covering health and welfare effects of ozone. These documents will be used to support EPA's planned revi sion of the standard. API's comments pointed out weaknesses in the scientific data and conclusions that suggest health effects at levels lower than the existing standard. Future Efforts In the future, operating with reduced resources, the department will concentrate on several issues that could have a substantial economic impact on the indus try. These issues include continued implementation of RCRA and TSCA. regulation of motor gasoline and benzene in air and water, possible lowering of the ozone standard, post-1987 non-attainment policies, state air toxic programs and new initiatives flowing from the ^authorization of CERCLA. Under the 1984 RCRA amendments, many current industry practices--such as land disposal of waste-- will be automatically banned unless EPA acts affirma tively. This situation, which could impose billions of dollars in additional costs on industry, places a substan tial burden on API to work to prevent automatic bans. While TSCA has so far dealt primarily with informa tion gathering and chemical testing, regulatory actions will likely increase. Components of petroleum products may be the subject ofthese rules, which can range from labeling to reformulation of products. Further regulation of motor gasoline and refueling is likely-intended either to control benzene or to further control hydrocarbons and help attain the ozone air quality standard. A reduction in the federal ozone stan dard--which is under review--could increase industry control costs by billions of dollars. Both state and feder al agencies are expected to continue the pressure to reduce benzene emissions from mobile and stationary sources. On the state level, California and other states are implementing air toxic programs designed to control benzene and other substances. California's recent ac tion indicates that it may require reduction or removal of benzene from motor fuel, and other states could follow suit. In some states, benzene regulations have set up extremely stringent standards for cleanup of contaminated groundwater and soil. CERCLA reauthorization includes several pro grams--cleanup standards, community "right-toknow," settlement agreements and judicial provi sions--that could also lead to many significant reg ulatory initiatives over the next few years. Health and Environmental Sciences API has maintained an exceptional reputation for high quality research throughout the scientific commu nity. During the past year, the Health and Environmen tal Sciences Department has continued to provide high quality research on the specific issues facing the petro leum industry. Tliis research is essential to respond effectively to the growing regulatory initiatives by fed eral and state agencies and to the concerns of Congress and special interest groups. Complex health and environment issues require a carefully integrated research program. To carry out this program, the department comprises three groups: En vironmental Science and Technology; Toxicology; and Human Health. These groups provide other API de partments and member companies with the information they need to develop solidly based health and environ mental policies and practices. The strongest measure of credibility in the scientific community is published, peer-reviewed research, and API was well represented during the past year with more than 35 publications. Perhaps the best example of APIs reputation in regulatory circles is the peer review work performed this year at EPA's request on the agen cy's Complex Effluent Testing Program and Offshore and Coastal Dispersion Model. While the current economic state of the industry requires austerity, regulatory agencies are requesting growing amounts of complex information to make reg ulatory decisions. Thus, the department is cutting back on areas of declining importance and emphasizing ac tivities that respond directly to regulatory concerns. Through cutbacks, the department has reduced the research budget by over SI million this year, including a $600,000 savings from cancellation of shale oil toxicolo gy research. Over the past year, the department's major activities included the following: Provided EPA with extensive data showing that ve hicle "onboard" canisters are a more cost-effective means of controlling refueling and evaporative emis sions than are "Stage II" service station controls. Developed quantitative exposure and risk assess ments because of growing reliance by EPA and OSHA on human health risk data. For example, API respond ed to EPA concerns about human health risk from gasoline vapors by conducting a state-of-the-art epide miology study of downstream gasoline workers. Provided data and technical support for API testi mony on OSHA occupational benzene standard. Helped the Health and Environmental Affairs De partment design and implement an EPA-required tox icity testing programfor C* petroleum fractions. Other highlights of research on the major issues now being emphasized include: Gasoline. Studies are evaluating the' mechanisms of toxicity of gasoline vapors on the male rat kidney to determine whether the rat is an appropriate model for human risk assessment. Studies on vehicle hydrocar bon emissions have provided data that convinced EPA to modify its nationwide emissions mode! and vehicle test procedures. Benzene. Research is underway to determine the con tribution of indoor non-industrial exposure to overall population exposure. Outer continental shelf. Five major studies have sup ported API's position that current disposal practices cause no adverse effects on air and water. Waste management. Study of and comments on EPA's hazardous waste characterization process under RCRA helped lead to favorable revisions of EPA's proposal. Studies are underway to evaluate alternatives for treat ing refinery wastes in view of anticipated EPA regula tion of land disposal. Groundwater. Research has focused on underground tank leaks. The industry has already applied the results in cleaning up leaks and in negotiating with state and local governments. For example, an engineering cost model showed that a stringent Florida proposal for cleanup of benzene was neither attainable nor costeffective with conventional technologies. Air quality. Research has demonstrated that sensitive sub-populations do not suffer ill effects at the current ozone air quality standard. These data can help prevent a lowering of the standard. TSCA. A large number of animal studies on the acute and chronic toxicology of refinery streams have shown that most streams have low toxic potential. These re sults will be invaluable in responding to growing reg ulatory initiatives for product labeling and hazard com munication under TSCA. Future Efforts In the coming year, the department--under a reduced budget--will continue to produce high quality re search. Efforts will include: emphasis on underground leak detection and cleanup, evaluation ofhuman health and environmental impacts of hydrocarbons in groundwater, and quan titative risk assessment; helping member companies manage industry *d government-mandated research; and performing in-depth studies on critical rtgvmor> issues, such as proposals to lower gasoline Mcd onr