Anacortes oil refineries with Mt Baker in background early morning light
Five Ways US Oil Refineries Can Reduce Emissions Today
With smart policy and technical solutions, Washington State could lead the way.
US oil refineries are increasingly shutting down or converting to cleaner uses as they adapt to future expectations. But refineries are still a major pollution source. Using Washington State as an example, we found that even without fully closing any facilities, refineries could cut emissions 40 percent and reduce the carbon intensity of their products. New programs from the Inflation Reduction Act (IRA) can provide the financial resources to make these changes.
There are five key ways oil refineries can reduce climate pollution, which we’ll explore more below:
- Convert smaller refineries to produce sustainable aviation fuel (SAF)
- Commit to reducing methane leaks
- Electrify or shut down high heat intensive units
- Replace all gray hydrogen with green hydrogen
- Implement Carbon capture and utilisation (CCU) on concentrated waste gas streams at FCC units
Rising EV sales, ambitious climate policies like the IRA, and the US Environmental Protection Agency’s (EPA) new pollution standards for cars and trucks strongly suggest that demand for oil and gas products in the US will decline over the next several decades. While OPEC+ meets to discuss global oil supplies, US gasoline demand may have already peaked.
In the meantime, states need to figure out how to clean up and decarbonize their existing oil refineries today and plan for a reduction or change in industrial outputs by 2030 to reduce greenhouse gas emissions in line with the US’s Nationally Determined Contribution (NDC) under the Paris Climate Agreement. Seven of the fifteen top oil refining states have committed to meeting their portion of the US NDC through their membership in the US Climate Alliance.
A lack of planning for a decarbonized future may leave some oil refineries — and the communities they employ — without a safety net when economic conditions turn against them. Refinery capacity is already down, hitting almost the lowest point in a decade in 2022, so planning for a shifting economic future is important for governments and local communities to consider.
The good news is that there is a technically feasible path refiners can take to help meet 2030 industrial emissions reductions without full refinery shutdowns, and those opportunities are made even more attractive by IRA incentives. RMI’s published report, Oil Refining Emissions Cut Points, describes specific technical changes that can be made at oil refineries to reduce emissions. These steps include electrification projects, targeted unit shutdowns, and fuel-switching interventions.
Washington State is a perfect test case to explore the potential impacts of these refinery emission-reduction solutions. Washington has highly ambitious climate policies — the state plans to reduce its economy-wide emissions 45 percent below 1990 levels by 2030, down to an annual 50 million tons of CO2e — but it’s also the fifth largest oil refining state (See Exhibit 1). Washington can also be an example other states looking to reduce refinery emissions can learn from.
Exhibit 1: Top 15 Oil Refining States with Refining Emissions as proportion of statewide Business-As-Usual Emissions in 2030, as calculated in the state Energy Policy Simulator
Washington’s oil refineries emitted approximately 6 million tons of greenhouse gases in 2021 and emissions are expected to remain fairly constant over time; unless measures are implemented to reduce emissions, oil refineries would account for a larger and larger percent of Washington economywide emissions as other parts of the economy decarbonize. Indeed, data from Washington’s GHG Reporting Program shows that “petroleum systems” (oil refineries) were responsible for the largest portion of industrial sector emissions from fossil fuels (See Exhibit 2).
Exhibit 2: 2020 Large Industrial Facility Emissions in Washington, as reported to Washington’s GHG Reporting Program
The Washington Department of Ecology and the US EPA reports that the five refineries and their respective emissions in 2020 were:
- BP Cherry Point in Blaine (2 million tons CO2e)
- HollyFrontier in Anacortes (1.8 million tons CO2e)
- Marathon in Anacortes (1.2 million tons CO2e)
- Phillips 66 in Ferndale (800,000 tons CO2e)
- U.S. Oil/PAR Pacific in Tacoma (160,000 tons CO2e)
RMI tailored the solutions described in the “Oil Refining Emissions Cut Points” to Washington’s refineries to assess their impact and found that Washington’s oil refineries could implement a series of technical measures to reduce greenhouse gas emissions nearly 40 percent annually by 2030 without any facilities closing. Specifically, not only could direct oil refinery emissions be reduced by 2.36 million tons of CO2e annually by 2030, but the carbon intensity of their products would also be reduced, making them more competitive in carbon-regulated markets.
Example Technical Solutions as applied to Washington’s Oil Refineries
To evaluate targeted measures to meet 2030 emissions targets, RMI modeled each Washington refinery in the University of Calgary’s PRELIM, an open-source refinery model within RMI’s Oil Climate Index Plus Gas (OCI+) suite of climate action tools. Publicly available data on refinery configuration and trade information provided an estimated crude blend for each refinery. As summarized in Exhibit 3 and the bullets below, refiners have numerous emissions-reduction opportunities, from electrification of operations and substitution of green hydrogen to strategic unit shutdowns.
Exhibit 3: Washington Refinery Emission Reductions Achievable by 2030, MMTCO2e/yr
- Convert smaller facilities to biorefineries (160,000 tons CO2e/year). Smaller-capacity refineries — like the US Oil/PAR Pacific in Tacoma — are typically good fits for conversion to biorefining facilities due to tighter economics for traditional refining and the ability to reuse existing infrastructure (e.g., tankage, towers, pipelines, etc.). Given that hydroprocessed ester and fatty acid (HEFA) feedstocks most common for biorefineries are limited in supply, smaller-scale capacity refineries can best match their existing capacity and minimize the capital expenditures required for conversion. Without such conversions, smaller refineries are more likely to close permanently if large new investments are needed to keep them in operation. A converted facility at U.S. Oil/PAR Pacific in Tacoma could produce at least 1,000 barrels per day of Sustainable Aviation Fuel (SAF) but up to 3,000 barrels per day with prioritized design, feedstocks, and operating conditions.
- Cut fugitive and flaring emissions by >75 percent (90,000 tons CO2e/year). All sites could commit to reducing methane leaks, high global warming potential (GWP) refrigerant leaks, and routine flaring in line with methane leak reductions required by the International Energy Agency’s Net Zero Emissions pathway. This includes enhanced leak detection and repair (LDAR) to reduce methane leaks as well as replacement of refrigerants with lower GWP alternatives where appropriate. Safe, stable operations correspond to limited flaring, and sites would then approach maintenance and operations tasks with a further emphasis on flaring minimization. Increased monitoring and upgrades to flare gas systems can help quickly identify and stop most fugitive sources to the flare. Operators would need to regularly update procedures to minimize flaring during periods of unstable operation.
- Shut down naphtha treatment units (400,000 tons CO2e/year). Naphtha is a light, partially processed liquid product in refineries that can be converted into gasoline or chemical feedstocks. Naphtha-to-gasoline units (isomerization, catalytic reforming units, and naphtha hydrotreaters) account for a significant portion of Washington refineries’ process heat requirements. As transportation electrifies and gasoline demand is reduced, refineries could shut down their naphtha treatment units and sell the resulting high sulfur naphtha. Selling the naphtha to other industrial consumers preserves some value of the product stream while the rest of the refinery keeps running and can reduce emissions outside of Washington by displacing higher emission feedstocks like coal. Longer term, electrified petrochemical plants could be built in-state to process the naphtha into chemicals.
- Electrify or shut down coker units (280,000 tons CO2e/year). Another sizable portion of heat demand comes from residue upgrading units known as cokers. These units upgrade heavy oil fractions into gasoline and diesel range material — products the most at risk for demand reduction due to transport electrification. Coker units heat heavy residue oil to 800–1,000°F and would require about 150 megawatts (MW) to electrify. Though coker electrification technology is nascent, Washington would be a preferred place to pilot a commercial facility for further scaling. Indirect electrification can also be achieved through the production of hydrogen using electrolysis, or green hydrogen. Washington’s highly renewable grid supports significant emissions reductions with electrification of process equipment.
- Convert fluid catalytic cracker (FCC) flue waste gas to methanol (310,000 tons CO2e/year). Process emissions account for a lower percentage of refinery emissions than combustion, but those emissions are heavily concentrated at a few specific units. FCC units produce a highly concentrated stream of CO2 flue gas during operation. This stream is a good target for carbon capture and utilization (CCU) capabilities with the potential to utilize the captured carbon-containing gases for a waste gas-to-alcohol (i.e., methanol or ethanol) facility — and is likely eligible for the 45Q tax credit updated in the IRA. If methanol is the selected product, RMI estimates this could add at least 20,000 tons per year of methanol production capacity and facilities can repurpose existing gasoline storage and transport infrastructure for methanol handling with relative ease. Waste gas conversion to methanol or ethanol can also provide a low-carbon “bridge” feedstock for future alcohol-to-SAF facilities until green hydrogen production scales sufficiently.
- Replace fired boilers with electric boilers (300,000 tons CO2e/year). In addition to direct-fired heat demand for process units, refineries require significant quantities of steam for various purposes. Heat integration and supplemental boilers typically supply this necessary steam. Refiners could replace supplemental fired boilers with electric boilers to meet steam demand. Piloting industrial-scale electric boilers at Washington refineries can also support industrial decarbonization trends for other sectors.
- Replace all gray hydrogen with green hydrogen (820,000 tons CO2e/year). Hydrogen is used at refineries to remove sulfur and to crack some heavy refinery streams into finished refined products. Refineries could meet their current hydrogen requirements with lower footprint hydrogen sources for hydrotreating and hydrocracking. This would displace gray hydrogen producing steam methane reforming (SMR) units internal and external to the facility. Green hydrogen production at Cherry Point alone could result in 460,000 tons CO2e/year of emissions reduction. Green hydrogen for refinery use would be eligible for the section 45V tax credit introduced in the IRA.
- Longer term, refineries could change their product mix to focus on chemicals and plastics and/or turn to alternative uses of refinery sites as transportation fuel demand continues to drop post-2030. Alternative uses of oil refinery sites could include usage as storage depots and distribution racks, green hydrogen production facilities, and energy storage using gas compression or thermal batteries. In the case of a refinery shutdown, on-site green hydrogen production could still continue — which means electrolyzers for producing green hydrogen would retain their asset value better than traditional refinery investments.
Cutting refining emissions using the options described above will require extensive planning and careful implementation. As noted earlier, states will need to take action to ensure carbon reductions from refineries occur within this decade in order to meet 2030 targets. Here we explore policy levers Washington could pull to initiate the transition to lower-carbon oil refining; other states could look to similar policy levers.
- Establish a task force for refinery transition to reduce emissions. With 2030 in mind, Washington could set up a task force for refinery transition comprised of government officials, refinery management, union representatives, members of the local refinery community, and independent experts. Transition could mean facility emissions reductions using the options described above or, in some cases, facility retirement. Each unit within a refinery typically undergoes a major shutdown for maintenance or overhaul on a 4- to 5-year cycle. Plans for a refinery shutdown and overhaul begin a couple years before the shutdown occurs, which means the sooner a state task force can be set up the more likely reductions can be achieved by 2030. If upgrading refinery units is determined to be not economical, lessons can be taken from Philadelphia and Contra Costa County, California in identifying and planning for eventual retirement to optimize transition opportunities for the refinery owner, employees, and the community. A refinery transition task force would dovetail logically with the study authorized in Washington’s 2023-2025 budget to analyze the economic impact of oil refining in Washington State.
- Update existing rules. As a result of a 2011 court case, Washington has an existing regulation to reduce emissions from refineries 10 percent by 2025. Due to technological improvements, Washington’s Department of Ecology has sufficient reason to update the regulation in accordance with the court’s decision and the 2030 economy-wide target. The Reasonably Available Control Technologies (RACT) described in this article and in RMI’s “Oil Refinery Emissions Cut Points” report mean that Washington’s Oil Refinery GHG standards could be significantly strengthened with a 2030 target aligned with Washington’s economy-wide target, perhaps 40 to 50 percent below 2020 levels. To make the reductions more likely to be accepted by the oil industry without leading to facility shutdowns, the state could provide grants to refineries targeting deployment of new low-carbon technologies or support applications for federal IRA funds for similar purposes.
- Leverage IRA opportunities. The Inflation Reduction Act includes generous incentives for reducing refinery emissions and producing cleaner products: the section 45V tax credit for producing green hydrogen, and the tax credits for sustainable aviation fuel in section 40B and section 45Z, extended and expanded 45Q tax credits for CCUS, potentially the advanced energy project 48C tax credit, grants from the advanced industrial facilities program, and financing through the Department of Energy’s Loan Programs Office. These IRA incentives would make emission reduction actions at refineries more attractive and affordable. The refinery and the local community could also take advantage of the Energy Infrastructure Reinvestment Program in the IRA. The Energy Infrastructure Reinvestment Program is a loan program to ease the clean energy transition for communities historically tied to fossil fuels and related energy infrastructure.
Fully shutting down facilities is another option to reduce emissions from the refining sector. However, even with intensive electrification of the transportation sector, there will still be significant in-state demand for petroleum products post-2030 (see Exhibit 4), suggesting that a near-term full shutdown of Washington’s five refineries would not be economically prudent.
Exhibit 4: Projected Washington State fuel consumption under current policy modeled in the Energy Policy Simulator.
Closure of refineries could occur for economic reasons unrelated to the need to reduce industrial sector emissions. As electrification of transportation accelerates, the consumption of petroleum fuel in Washington and elsewhere will continue to decline and Washington’s refineries will become more dependent on exports to remain profitable. Even now, Washington produces little to no crude oil and exports nearly half of its refined petroleum products out of state.
Washington is leading the nation in efforts to reduce emissions and build the clean energy economy, and it also has the opportunity to lead the nation in reducing emissions from oil refining. Washington’s refining sector could very plausibly reduce its emissions 2.36 million tons of CO2e annually by 2030. If Washington can successfully implement a plan for reducing refinery emissions in accordance with its ambitious climate targets, then other US states — particularly those with strong climate commitments — can learn from their example.