Benchmarking methodologies

Refining companies and government regulators around the world are relying increasingly on benchmarking methodologies as they establish frameworks designed to control emissions of greenhouse gases (GHG). These methodologies include familiar industry standards as well as customised solutions developed for specific situations and stakeholder groups. Whatever the approach, education is key in developing these frameworks, as is impartiality on the part of the organisations developing the methodologies. Also important is the impact these emission reduction efforts are having regarding the development of strategies for future investments.

Washington state ultimatum

On 28 May 2014, the Department of Ecology in the state of Washington required the state’s five refineries to put in place reasonably available control technology (RACT). The refineries were given two options to address the requirement, increase energy efficiency or reduce GHG emissions. The driving force behind the RACT rules was a court order issued in response to several lawsuits brought by US environmental groups in 2011. This court order required Washington’s regulatory agencies to issue new rules on GHG emissions by May 2014.

While the lawsuits were making their way through the courts, the Western States Petroleum Association (WSPA) and Washington state regulators engaged HSB Solomon Associates LLC (Solomon) to help develop their regulatory framework. Three months before the deadline established by the court order, a federal appeals court vacated the mandate. Nevertheless, the Washington Department of Ecology decided to complete the rule making process it had begun in response to the court order.

To explain this action, the Department of Ecology pointed out that even without a court order it had the authority under state law to set new RACT standards with the intent to limit or reduce GHG emissions for the protection of Washington’s air quality. Although the state’s rules work in tandem with the US Clean Air Act, its standards for air quality and GHGs are stricter than the federal standards. The rules are based on the portions of the US government’s Energy Star® program that specifically address oil refinery operations.

Under Washington’s rules, refineries are required to meet the new standards by 1 October 2025, either by increasing energy efficiency or reducing GHG emissions.

The rules require refineries using the increased energy efficiency method to benchmark their energy efficiency against other, similarly sized US refineries using Solomon’s Energy Intensity Index™ (EII®). EII is a proprietary methodology developed by Solomon and is the foundation of the US Environmental Protection Agency’s (US EPA) Energy Star certification program.

To be in compliance, a Washington refinery must have a certified EII equal to or better than the EII target representing the 50^th percentile of comparable US refineries. EII targets are based on 2006 data and the Energy Star program’s methodology. EII benchmarking data from 2006 are taken from US refineries only and provide information on actual energy consumption among like refineries.

Some Washington refineries could already be in compliance with the new regulatory rules, even before their official adoption as a result of energy efficiency strategies they implemented in the past, strategies implemented not to reduce emissions but to control operating expenses for competitive advantage.

The development of CWB and CWT

At one time, GHG refinery emissions were measured on the basis of refinery throughput alone. However, not all refineries are created equal. Their processing complexities can vary substantially, from the simplest refinery (such as a topping refinery) to the most complex. More complex refineries incorporate many processing units downstream of the crude distillation unit to upgrade the oil they refine into more valuable products. It is therefore not sufficient to judge refinery emission performance on the basis of throughput alone. Although simple refineries might have the lowest emissions per barrel of oil processed, they might consume more energy considering complexity. A normalisation method that takes complexity into account is crucial for determining how well refineries are controlling GHG emissions.

With this in mind, Solomon developed such customised metrics as complexity weighted barrels (CWB™) and complexity weighted tonnes (CWT™), which take refinery configuration into account in gauging the propensity to emit GHGs. Although EII is a good proxy for benchmarking GHG emissions, a refinery’s emission performance also depends on the type of fuel it burns (such as coke versus natural gas) and the amount of byproduct CO₂ it produces (such as from hydrogen generation units), neither of which is addressed in the EII. On the other hand, CWB and CWT can be used either in allocating emission allowances in emission trading schemes (ETS) or as a denominator in calculating refinery emission intensity (actual CO₂ emissions divided by CWB or CWT). Either application creates a level playing field across all refineries for performance comparison.

Determining which customised metric to use depends on the philosophy of the regulating agency for the particular jurisdiction. Is it trying to regulate GHG or energy combustion? Is byproduct CO₂ a significant source of refinery emissions? Are there differences in fuel types burned among refineries? Sometimes EII alone cannot address the full range of issues since it focuses only on the combustion side of the equation.

Applications and lessons

In Canada, the province of Alberta embraced a pioneering Solomon metric called the refinery activity index (RAI™) based on operating expense intensity before adopting CWB across the country as a way of benchmarking the refining industry’s GHG emissions. California implemented the first phase of its GHG control effort using EII before switching to CWB.

In Europe, the EU oil refining industry has employed CWT since the 2013 implementation of Phase III of the EU Emission Trading Scheme, the world’s largest GHG emissions trading scheme. South Korea, for which Solomon developed a customised version of CWB, launched the world’s second largest trading scheme across all industries this year. It aims to reduce emissions by 30% by 2020. This sustained surge of activity no doubt is at least partly attributable to political pressures being exerted in all manner of governmental systems. Solomon has received inquiries about GHG methodologies from around the world, including organisations in Mexico, China, Japan, and Kazakhstan.

Written by Celia He.

Adapted for the web by Emma McAleavey.

The full article can be found in the February issue of Hydrocarbon Engineering.

Read the article online at: https://www.hydrocarbonengineering.com/special-reports/05022015/benchmarking-methodologies-193/