OREANDA-NEWS. April 19, 2016. Refiners operating in California expect a tough environmental regulatory permitting process. This has been a bit of a curse at times, causing long delays and restrictions on modifying their plants.

But it has also been a blessing. While the strict rules make the fuels more expensive to make, it also limits the number of suppliers who can supply the fuel to California, giving regional refiners virtually unlimited access to demand in a state where gasoline demand is greater than any other and growing.

Give this backdrop, it was interesting to see what may have been a brief loosening of restrictions in Southern California because of a personnel change open a window of opportunity for the restart of ExxonMobil’s Torrance refinery.

That reopening, which had been slowly moving through the environmental regulatory process before the ouster of the longtime head of South Coast Air Quality Management District, was necessary before ExxonMobil could sell its Torrance plant to East Coast refiner PBF Energy.

Long-time head of South Coast Air Quality Management District, Barry Wallenstein, was voted out in a 7 to 6 vote taken by the regulatory agency’s 13-person board during a closed session on March 4.

The vote to oust Wallenstein occurred after January’s appointment of two board members shifted the balance of power to the Republican camp, a move which was expected to result in “a loosening of requirements” and less rigorous air quality policies, according to sources familiar with the situation.

The timing of the board change will help facilitate the sale of ExxonMobil’s Torrance refinery to PBF, which is contingent on the proven performance of the refinery’s gasoline-making FCC unit, shut February 2015 after an explosion and a fire.

Wallenstein had headed the agency since 1997, and his removal caused dismay among environmental groups, who feared any loosening of regulations would bring back the nasty smog, which plagued the Los Angeles Basin for years.

In early April, following Wallenstein’s departure, agency approval was given to restart the 87,000 b/d FCC unit at ExxonMobil’s 149,500 b/d Torrance, California, refinery.

The restart was a bone of contention among Torrance residents, due in part to ExxonMobil’s failure to notify the community of a hydroflouric acid pipeline leak last September, an action for which it was fined by the state.

While the Torrance restart plan has multiple stringent and rigorous monitoring requirements, it expects refinery emissions levels would exceed permitted levels because it will not use pollution control devices known Electrostatic Precipitators (ESPs) during the restart process.

“This limitation on use is necessary to ensure the safety of the start-up procedure but will minimize excess emissions to the maximum extent feasible,” the agency’s order of abatement said, referring to not using ESPs continuously during the restart.

Personnel change doesn’t mean looser rules

Industry participants caution in assuming an agency change in Southern California means a loosening in the state’s environmental regulations.

“Our mandate is to ensure petroleum refining activities are done as safely as possible,” said Paul Penn, Emergency Management and Refinery Safety Program Manager at the California Environmental Protection agency.

The California Environmental Quality Act, passed in 1970, requires extensive review of project impacts, using 18 environmental factors to determine whether to issue permits.

Despite the personnel change in Southern California’s air quality regulatory body, the state’s strict guidelines are not under threat — and neither is PBF’s deal for ExxonMobil’s Torrance refinery.

The state’s strict CARBOB gasoline and diesel specifications make the fuels more expensive to produce, it also limits the number of suppliers who can sell the fuel to California drivers.

The higher production cost, combined with logistical issues such as lack of pipelines bringing in product from outside the region and the expense of fixing a Jones Act vessel from other US regions, give regional refiners the upper hand in supplying California and surrounding states like Washington and Arizona, who have opted in to using California spec fuels.

And while other refiners have said at various times they want to leave California, it helps explain why PBF’s iconic executive chairman, Tom O’Malley had been on the look out for a California refinery.

“Southern California is a very attractive market and we are excited to become a supplier in the region,” he said, after the PBF deal to buy Torrance was announced in late September 2015.