II. INTRODUCTION TO THE PETROLEUM REFINING INDUSTRY

This section provides background information on the size, geographic distribution, employment, production, sales, and economic condition of the petroleum refining industry. The type of facilities described within the document are also described in terms of their Standard Industrial Classification (SIC) codes. Additionally, this section contains a list of the largest companies in terms of sales.

II.A. Introduction, Background, and Scope of the Notebook

Petroleum refining is one of the leading manufacturing industries in the United States in terms of its share of the total value of shipments of the U.S. economy. In relation to its economic importance, however, the industry is comprised of relatively few companies and facilities. The number of refineries operating in the U.S. can vary significantly depending on the information source. For example, in 1992, the Census Bureau counted 232 facilities and the Department of Energy reported 199 facilities. In addition, EPA's Toxic Release Inventory for 1993 identified 159 refineries. The differences lie in each organization's definition of a refinery. The Census Bureau's definition is based on the type of product that a facility produces and includes a number of very small operations producing a specific petroleum product, such as lubricating oils, from other refined petroleum products. These small facilities often employ fewer than 10 people and account for only one to two of the petroleum refining industry's total value of shipments.' In comparison to the typically much more complex, larger and more numerous crude oil processing refineries, these facilities with their smaller and relatively simple operations do not warrant the same level of attention from an economic and environmental compliance standpoint. Refineries recognized by the Department of Energy tend to be only the larger facilities which process crude oil into refined petroleum products.*

Whenever possible, the facility level data used in this notebook are based on those refineries identified by the Department of Energy's Energy Information Administration. Since the Energy and Information Administration does not collect economic, employment and environmental release information on refineries, other facility level data sources were used. Thus, employment and sales data are based on information collected through the Bureau of Census' Census of Manufacturers for 1992 and environmental release information was obtained from EPA's Toxic Release Inventory.

"Variations in facility counts occur across data sources due to many factors including, reporting and definitional differences. This notebook does not attempt to reconcile these differences, but rather reports the data as they are maintained by each source.

II.B. Characterization of the Petroleum Refining Industry

II.B.1. Product Characterization

Petroleum refining is the physical, thermal and chemical separation of crude oil into its major distillation fractions which are then further processed through a series of separation and conversion steps into finished petroleum products. The primary products of the industry fall into three major categories: fuels (motor gasoline, diesel and distillate fuel oil, liquefied petroleum gas, jet fuel, residual fuel oil, kerosene, and coke); finished nonfuel products (solvents, lubricating oils, greases, petroleum wax, petroleum jelly, asphalt, and coke); and chemical industry feedstocks (naphtha, ethane, propane, butane, ethylene, propylene, butylenes, butadiene, benzene, toluene, and xylene). These petroleum products comprise about 40 percent of the total energy consumed in the U.S.2 (based on BTUs consumed) and are used as primary input to a vast number of products, including: fertilizers, pesticides, paints, waxes, thinners, solvents, cleaning fluids, detergents, refrigerants, anti-freeze, resins, sealants, insulations, latex, rubber compounds, hard plastics, plastic sheeting, plastic foam and synthetic fibers.3 About 90 percent of the petroleum products used in the U.S. are fuels with motor gasoline accounting for about 43 percent of the total (Exhibit 1).

The Standard Industrial Classification (SIC) code established by the Bureau of Census to track the flow of goods and services within the economy is 29 for the Petroleum Refining and Related Industries. The petroleum refining industry is classified as SIC 2911, which includes the production of petroleum products through distillation and fractionation of crude oil, redistillation of unfinished petroleum derivatives, cracking, or other processes. The related industries under SIC 29 are: 2951, Asphalt Paving Mixtures and Blocks; 2952, Asphalt Felts and Coatings; 2992, Lubricating Oils and Greases; and 2999, Petroleum and Coal Products, Not Elsewhere Classified. Certain products that are produced by the petroleum refining industry are also produced by other industries, including: 2865, Cyclic Organic Crudes and Intermediates, and Organic Dyes and Pigments; 2869, Industrial Organic Chemicals; 2819, Industrial Inorganic Chemicals, Not Elsewhere Classified; 2821, Plastic Materials, Synthetic Resins, Nonvulcanizable Elastomers; 2873, Nitrogenous Fertilizers; 4613, Refined Petroleum Pipelines; and 5171, Petroleum Bulk Stations and Terminals."

(Source: Based on Energy Information Administration, The U.S. Petroleum Industry: Past as Prologue 1970-1992,

September 1993.)

Exhibit 1: U.S. Refinery Products and Yields

II.B.2. Industry Size and Geographic Distribution

Generally, the petroleum refining industry can be characterized by a relatively small number of large facilities. The Department of Energy reported 176 operating petroleum refineries in 1994 with a total crude oil distillation capacity of approximately 15 million barrels per day. Most U.S. crude oil distillation capacity is owned by large, integrated companies with multiple high capacity refining facilities. Small refineries with capacities below 50,000 barrels per day, however, do play a significant role in the industry, making up about half of all facilities, but only 14 percent of the total crude distillation capacity."

A relatively small number of people are employed by the petroleum refining industry in relation to its economic importance. The Bureau of the Census estimates that 75,000 people were directly employed by the industry in 1992. However, the industry also indirectly employs a significant number of outside contractors for many refinery operations, both routine and nonroutine. The value of product shipments sold by refining establishments was estimated to be $136 billion in 1992. This accounts for about 4 percent of the value of shipments for the entire U.S. manufacturing sector. Based on the number of people directly employed by refineries, the industry has a high value of shipments per employee of $1.8 million. In comparison, the value of shipments per employee for the steel manufacturing industry was $245,000 for the same year."

The Bureau of Census employment data for 1992 (the most recent facilitybased employment data available) indicated that 60 percent of petroleum refineries had over 100 employees1o (Exhibit 2).

For reasons of efficiency in transporting crude oil feed stocks and finished products, petroleum refineries typically were sited near crude oil sources (onshore petroleum terminals, oil and gas extraction areas) or consumers (heavily industrialized areas). Consequently, the distribution of facilities is more concentrated along the Gulf Coast and near the heavily industrialized areas of both east and west coasts (Exhibits 3 and 4). Based on Department of Energy data for 1994, 78 percent of the U.S. crude oil distillation capacity (which is indicative of the amount of crude oil processed) is located in just ten states11 (Exhibit 3).