Durbin’s Petcoke Amendment Will Drive Up Cost of Energy

Today the Senate is voting on an amendment offered by Sen. Durbin to increase the regulation of petroleum coke or “petcoke.” This is another example of the administration and its allies trying to drive up the cost of domestic energy production and domestic energy use.

What is Petcoke?

Like gasoline and diesel, petcoke is produced in oil refineries. Once viewed as a byproduct, petcoke is now an important internationally-trade commodity and is helping to grow many developing economies. Petcoke is not only used as a fuel, but also as a source of carbon for industrial processes.

How is Petcoke Produced?

Petcoke is produced after crude oil undergoes two processes. First, the oil is distilled into various products, separating out the light parts of the oil—the gasoline vapors, liquid petroleum gas (LPG), naphtha, and kerosene from the heavier parts of the oil. The heavier portion of the oil is then processed through a “coker” which subjects the remaining oil to high heat and pressure to exact as much of the lighter gasoline-like parts of the oil as possible. What remains after the coker after the high heat and pressure is a substance called petroleum coke.

What are petcoke’s uses?

Petroleum coke is high in carbon—this makes it chemically similar to coal and both energy dense and useful for many other industrial processes that require carbon.

About 80 percent of petcoke is used as fuel. While petcoke is similar to coal, it generates just 0.2 percent of America’s electricity, while coal generates nearly 40 percent. Instead, petcoke is usually used as a fuel to make cement, lime, brick, glass, steel, and fertilizer as well as many other industrial applications.

Much of the rest of the petcoke is “calcined petroleum coke.” Calcined petcoke is petcoke that is again heated to remove moisture, volatile matter, and impurities and to increase the electrical conductivity. Calcinced petcoke is used to make steel, graphite, and titanium.

Calcined petcoke is essential to the creation of aluminum. Because of its high carbon purity and a lack of contaminants, calcined petcoke provides the only economically viable method to produce primary aluminum. Calcined petcoke also produces titanium dioxide, a safer alternative to the lead used in paint.

Why is petcoke Important?

Demand for U.S. petcoke is rising, with China, Mexico, Japan, Canada, India and Turkey as the largest importers. China, for instance, imported 3.2 million barrels of petroleum coke from the U.S. in this past April alone, their third largest monthly volume of all time.

America became a net exporter of petroleum products in 2011 and the exports of petroleum coke is one of the reasons. As the next chart shows, the U.S. exported 184,167,000 barrels of petcoke in 2012, a nearly 30 percent increase since 2009.

Coal is one of the most affordable and abundant sources of energy for electricity generation. But international coal prices are often higher than U.S. petcoke prices, making U.S. petcoke an attractive option for many countries to use as a fuel.

Growing demand in developing countries, coupled with affordable prices, has enabled U.S. petcoke to emerge as a valuable export for the U.S. and a cost-effective analogue for coal for much of the rest of the world.

Sen. Durbin’s Amendment

Sen. Durbin’s amendment would require the federal EPA to develop new regulations for petcoke. This is unnecessary because petcoke is already regulated by the states and multiple federal laws including the Clean Air Act, the Clean Water Act, and it is regulated under the International Fire Code as well. New regulations from EPA would drive up the cost of producing and using petcoke. It should be noted that EPA has been the agency of choice for President Obama to carry out his plan to make electricity prices “necessarily skyrocket.”

One of the ways that Sen. Durbin’s amendment would increase energy prices is that it could reclassify petcoke as a “hazardous waste,” which could lead to the closing of coker units at refineries. This is because it is possible that the refineries would stop making petcoke altogether instead of dealing with the regulations on hazardous waste.

If all of the coking units at refineries were to close, it would decrease domestic gasoline production by over 1.3 million barrels a day and diesel production would decrease by over 650,000 barrels a day. To put that in perspective, the U.S. produces about 9.6 million barrels of gasoline a day and 4.9 million barrels of distillate (which includes diesel) a day. This reduction would increase the cost of producing gasoline and diesel in the United States and would “offshore” some of our gasoline and diesel production to other countries.

Also, reducing petcoke production in the U.S., as the Durbin amendment would lead to, would reduce the amount of this valuable commodity for other manufacturing purposes, such as aluminum production, steel production, and fertilizer production—further harming U.S. manufacturing.

Conclusion

Petroleum coke is an important product of America’s refineries and is used around the world for manufacturing processes and to make energy. Senator Durbin’s amendment threatens to drive up the costs of making and using petcoke in the United States. This would only harm U.S. manufactures with no environmental gain. After all, EPA does not classify petcoke as a hazardous waste and EPA has not observed carcinogenic, reproductive, or developmental effects from petcoke. In other words, Sen. Durbin’s amendment is all pain and no gain.