New security rules prove expensive
Aug 1, 2004 12:00 PM
MAJOR oil companies are expecting to spend two percent of their budget in compliance with new federal security requirements, said Dan Gilligan, Petroleum Marketers Association of America president. He added that smaller companies also will be affected and should begin developing their own security plans.
“It's going to be a huge burden for us,” Gilligan said.
The security rules, along with other requirements, particularly environmental mandates, continue to impact the price of fuel, a fact which is not communicated to the public.
“We do not have an energy policy in this country,” he said. “We have an environmental policy on energy, which basically tells us what we can't do, not what we can do.”
He called for more industry effort to educate consumers and politicians about the costs involved in maintaining clean air and water.
Because of new spill prevention rules aimed at bulk plants, he predicted that many will be shut down because of the investment required for compliance.
“We estimate that there are 6,500 petroleum bulk plants in the United States,” Gilligan told Modern Bulk Transporter after the meeting. “We were estimating more than half would close if they had to meet the July 2002 spill rule changes. Now that EPA has clarified some of the areas of concern, we have reduced our estimate to one third will likely close. If we can get further clarification on loading rack containment requirements, we believe less than a 1,000 will close.” As a result, more trucks will be added to the highways in order to meet market demands.
“Storage is disappearing in America at lightning speed,” he said.
The spill prevention rule requires loading racks to have containment equal to the capacity of the largest tank trailer. “It's an incredible cost to most bulk plants,” he said, adding that a typical spill entails about 50 gallons.
Turning to another aspect of the industry, Gilligan said that more and more major oil companies are selling their retail businesses to independent jobbers.
At the same time, for a jobber to receive a contract with a major oil company, it must demonstrate it can handle five million gallons a year. With that prospect in force, he anticipated that the number of jobbers will fall in the next few years from a current 8,000 to as few as 5,000.
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