Energy and Climate Change CommitteeWritten evidence submitted by the Environment Agency
Summary
The Environment Agency issues environmental permits to oil refinery operations as required by EU and domestic legislation. The conditions we set within permits are based on an assessment of the Best Available Techniques (BAT) available to the operator. This is informed by an EU-wide assessment of what represents BAT for a particular sector.
Our last periodic review of the overall environmental standards required of oil refineries was carried out at the end of 2007. The permits we issued at that time identified the environmental improvements required between 2007 and 2016. Reductions in the releases of sulphur dioxide were a key issue for oil refineries.
The Environment Agency has worked closely with the UK Petroleum Industry Association and its members to achieve required reductions in sulphur dioxide emissions proportionately and cost effectively.
The Environment Agency works closely with individual refineries to ensure that any site-specific issues they have can be accommodated, whilst achieving the same environmental outcome. Our response focuses on the Committee’s question: what impact (if any) has UK and EU regulation had on the UK refining industry?
Our evidence demonstrates that the implementation of the European Union’s Integrated Pollution Prevention and Control Directive (IPPCD) should not have had a detrimental impact on the viability of the sector.
1.0 Environment Agency’s Role
1.1 The Environment Agency regulates refineries in England under the European Union Integrated Pollution Prevention and Control Directive (IPPCD), which is transposed into law in England by the Environmental Permitting (England and Wales) Regulations 2010 (EPR). We also administer the EU Emissions Trading System and, in England, form part of the Competent Authority with the Health and Safety Executive to deliver the environmental aspects of the Control of Major Accident Hazards regime.
2.0 Environmental Permitting of Oil Refineries in England
2.1 The EPR and predecessor legislation requires operators of industrial installations, including oil refineries, to apply to the Environment Agency for an environmental permit. In deciding whether to grant or refuse a permit, the Environment Agency is required to assess the environmental impacts of the operation and to set any conditions, such as emission limits, necessary to ensure appropriate protection for people and the environment.
2.2 The conditions we set within permits are based on an assessment of the Best Available Techniques (BAT) available to the operator. This is informed by an EU-wide assessment of what represents BAT for a particular sector. For new plants, operators must meet these standards from the start. For existing operations, which includes all of the oil refineries in England, operators agree to an improvement programme which brings their installations up to BAT within a specified timescale, taking into account the costs.
2.3 Our last periodic review of the overall environmental standards required of oil refineries was carried out at the end of 2007. The permits we issued at that time identified the environmental improvements required between 2007 and 2016. Reductions in the releases of sulphur dioxide were a key issue for oil refineries.
2.4 We worked with the UK Petroleum Industry Association (UK PIA), to demonstrate that:
Reductions in sulphur dioxide (SO2) emissions to air should be a priority.
The techniques for reducing SO2 are available. Subsequently, each refinery assessed all available abatement techniques for cost effectiveness and suitability.
The balance of costs and benefits is reasonable. The total industry wide annualised cost for reducing SO2 by 35 kilotonnes is approximately £27 million. Using a range of accepted environmental damage costs for sulphur dioxide, this results in a cost:benefit ratio in excess of 2.5:1.
The affordability of these improvements was assessed against refinery margins. The costs of the identified improvements were about 0.2% of gross margins at that time.
2.5 UK PIA members agreed the overall objective to reduce emissions of sulphur dioxide to air and they are on target to achieve it.
2.6 Since 2007 we have, in some cases, reconsidered the requirements. Some operators have proposed alternative improvements to those originally identified which we have assessed and accepted if the environmental outcome is equivalent. Some have implemented additional improvements where it suits their business. In addition, there has been a gradual move across the sector to more gas firing rather than oil which has operational, financial and environmental benefits.
2.7 The standards required to be met by refineries beyond 2016 will be driven by the Industrial Emissions Directive (IED) which replaces the IPPCD. The European Commission is expected to publish next year its revised conclusions on Best Available Techniques (BAT) for the refineries sector.
3.0 Control of Major Accident Hazards (Comah) Regulations
3.1 The Health and Safety Executive, NRW (Natural Resources Wales since April 2013) SEPA (Scottish Environment Protection Agency) and the Environment Agency are the joint Competent Authority (CA) under the Control of Major Accident Hazards Regulations 1999 (COMAH). We work closely with operators to demonstrate the risk is adequately controlled.
3.2 The Environment Agency’s focus has been on the CA’s Containment Policy (CP). The Environment Agency accepts that the process of upgrading bulk storage tanks at refineries is complex. That is why the policy envisages a 20-year timescale for completion. However, a Regulatory Impact Assessment [http://www.environment-agency.gov.uk/business/topics/oil/145808.aspx] showed that upgrading facilities to containment policy standards did not involve grossly disproportionate cost for the sector (refineries and distribution terminals). COMAH aims to reduce the risks of incidents such as Buncefield where an explosion at oil storage facility led to, reportedly, £1 billion in costs.
3.3 In recent years there have been considerable efforts to improve for COMAH customers the consistency and coordination between Environment Agency and HSE colleagues.
3.4 The Environment Agency is encouraging the UK Petroleum Industries Association (UKPIA) and Tank Storage Association (TSA) to raise concerns and proactively discuss issues arising from implementation of the Containment Policy. The Competent Authority recognises that costs and benefits are site-specific and discuss required requirements at each site with the operator. Where costs are significant, such as at refineries, we have spent several years working with operators to ensure risks, costs and benefits are properly assessed so only essential investment is required. Our senior team has created a mechanism to understand better local constraints and to offer to review cases where these are raised.
4.0 Conclusions
4.1 The Environment Agency has worked closely with the UK Petroleum Industry Association and its members to achieve the required reductions in sulphur dioxide emissions proportionately and cost effectively.
4.2 Our evidence demonstrates that the implementation of the IPPCD should not have had a detrimental impact on the viability of the sector.
4.3 The Environment Agency has also worked closely with individual refineries to take account of any specific business needs whilst ensuring the environmental outcome is equivalent.
June 2013