Implications of legislation on used oil disposal – Mike Ward of Mike Ward Associates discusses the current European situation and how things may change

Citation

(2002), "Implications of legislation on used oil disposal – Mike Ward of Mike Ward Associates discusses the current European situation and how things may change", Industrial Lubrication and Tribology, Vol. 54 No. 2. https://doi.org/10.1108/ilt.2002.01854bab.001

Implications of legislation on used oil disposal – Mike Ward of Mike Ward Associates discusses the current European situation and how things may change

Keywords: Legislation, Oils

Under current legislation within the EU the climate under which we operate for the disposal of used lubricating oils, is about to change. The financial implications would suggest that, possibly, over the whole of Europe there will be cost increases for the disposal of used lubricants adding up to some $275 million, equivalent to around $110 per tonne, against the current situation. In addition there are responsibilities expected by the EU on lubricant producers to exercise environmental stewardship, including the possibility of having to take back any used lubricants and certainly be responsible for their disposal.

At this stage under the umbrella of the Waste Oil Directive, the lubricants industry has room to manoeuvre and to bring about changes in the practices undertaken in the disposal of used lubricants before Member States enact legislation that may not be entirely favourable.

1. Aims and objectives

The lubricants industry should seek to deliver enhanced environmental stewardship through strict compliance with the EU Waste Oils Directivendash;Directive 87/101/EEC.

In this objective the lubricants companies will further augment the aims of industry programmes in protecting the environment and companies' reputations.

In addition the industry should be able to overcome some of the pecuniary disadvantages present in much of the present disposal system for used lubricants that are seen to come into force in the near future. This benefit is seen to hold many advantages for all lubricant manufacturers.

2. Major benefits in compliance with the Waste Oil Directive

• •

  Estimated Western European Financial    Savings of $275m per annum

• •

  Enhancement of Environmental    Stewardship

3. Background

EU Waste Oil Directive–Directive 87/101/ EEC

This clearly states in Article 3, that Member States should regenerate (i.e. reuse, material recycling or rerefining) wherever possible. The Directive also states that Member States are allowed to provide indemnities to those processes that may not be profitable, especially in the beginning.

The Directive has a priority in that the prevention of waste takes precedence over any other action. Other actions are prioritised in the following order:- reuse and material recycling, energy recovery, incineration with no energy recovery and finally landfill which should be an action of last resort.

The EC has decided to implement the Directive, and accordingly Germany was taken to the European Court of Justice for their failure to implement Article 3 of the Directive. The court's decision went against Germany. Germany has failed to adequately respond to the decision and a warning letter has been issued and daily fines may now be imposed.

The EC say it is totally unacceptable for Member States to ignore the requirements of Article 3 of the Directive.

The EC has now issued infringement procedures against a further 11 Member States, including the UK.

EU Excise Duty Derogation–Directive 92/81/EEC

This provides an incentive for the use of waste oil as a fuel exempt from excise duty which is currently ±40 per tonne.

Member States have agreed that all excise duty derogations will end on the 31st December 2006.

The imposition of excise duty on waste oil reduces its net value as a fuel, and therefore will lower the cost to rerefiners.

Waste Incineration–Directive 2000/76/EC

This Directive is new and repeals Article 18 of the Waste Oil Directive. This Directive comes into force on the 1st January 2003 for new installations and the 1st January 2005 for existing installations. prohibit the burning of used or waste oils in all facilities apart from cement kilns and incinerators.

Conclusions

From year 2005 waste oil will not be burnt as a fuel unless it is used in cement kilns or incinerators.

From year 2006 excise duty will have to be paid on any waste oil fuel used in these installations.

Although UK cement kilns do not currently burn waste oil, this will change with legislation and they are then likely to charge about $40 per tonne duty paid. At the moment, European cement kilns pay around 50 per cent of the price paid for waste oil by UK power stations, which currently pay around $140 per tonne. Power stations alone, in the UK burn around 200,000 tonnes per annum.

This will result in a major shift in the economics of waste oil, where at the moment it has a value of $180 per tonne shifting to a duty paid cost of $40 per tonne. Without duty therefore there is a negative shift of $220 per tonne. Duty currently is around $40 per tonne.

Throughout EU Directives there is a common theme that the producer pays the levy for disposal of whatever form of products he produces. On this basis there will be an extra burden on the lubricant manufacturers of around $260 per tonne, including excise duty, should there be no other way to dispose of used lubricants other than by burning in cement kilns or incinerators. Furthermore, daily fines imposed by the EU upon the UK government could precipitate recovery via the windfall tax scheme.

Currently, Holland has effectively legislated against the burning of waste oil as a fuel. This has resulted in much Dutch waste oil being collected and sold into markets such as the UK. Waste Oil collectors in Holland charge around $100 per tonne for the removal of the waste oil, and can sell it at around $70 per tonne FOB Holland for shipment to the UK.

The burning of Waste Oil in power stations is largely banned across Europe. The result of this is that in France the cement kiln operators charge for burning waste oil, and in Germany these operators pay about half the price UK power stations are willing to pay.

On the other hand the rerefining of used oils back to high quality base oils produces a high value end product, which may have a value, depending on market conditions, of around $300 to $400 per tonne. A crude price of $25 per barrel may indicate a mid range solvent refined lubricant base stock price of around $350 per tonne, FOB Western Europe.

The rerefining process requires high quality feedstocks, not currently segregated in waste oils destined for combustion. There needs to be a culture change within the chain of manufacturer to waste oil collector in order that the process of collection ensures a ready supply of quality used oil for rerefining and the minimising of the quantities of waste oil to go to incineration.

This culture change can only come about with the pro-active support of all the players in the chain.

4. Chain of supply and disposal

The chain of supply and disposal may be listed as: -

1. 1.

   The production of base oils and additives

2. 2.

   The manufacture in blend plants of the finished lubricant product

3. 3.

   The supply to end use customers by

   • •

     Lubricant manufacturer

   • •

     Lubricant distributor

4. 4.

   The use of the Lubricant product

5. 5.

   Preparation for collection as used oil

6. 6.

   Used oil collection by authorised collector

7. 7.

   Collected used oil disposal

   • •

     Rerefining back to base oil

   • •

     Laundering using minimum treatment

   • •

     Minimal treatment to Recovered Fuel Oil for cement kilns

   • •

     Cracking process to gas oil fractions for use as fuel

   • •

     Incineration

   • •

     Dump to landfill

It is relatively easy to see from this chain that all parties have a role in the chain to ensure the used oil is regenerated. All parties have an interest in ensuring that through the process the collected used oil, wherever possible, ends up being rerefined back to base oil with high added values. It is also implicit in the chain that along the route the used oil does not pick up penalty charges resulting from burning, incineration or in the ultimate worst case, being dumped to landfill.

In order to ensure this chain of best practice exists there needs to be cooperation from each end of the chain. On the one hand this means the base oil and additive producers, together with the formulators in the blend plants, and on the other hand the used oil rerefiners. These parties will be able to influence the lubricant end user and the collector, to ensure the highest quality used oil is made available with the highest volume practicable.

At each stage in the chain the financial interests of each party must be preserved.

In this way the costs to the lubricant producer will be minimised and all parties will be able to show their commitment to environmental stewardship.

5. Responsibilities within the chain of supply and disposal

The Base Oil Supplier, the Additive Supplier together with the Lubricant Formulator and Blend Plant Operator all have a role to play in advising on the constituents of the finished lubricant that would make it suitable or not for a rerefining process. This advice would be given in conjunction with the rerefiner, who knows the capabilities of the rerefining process.

This advice would be passed to the lubricant end use customer, who then has the responsibility to ensure that used lubricants suitable for rerefining are stored separately from those unsuitable for rerefining. The end user also has the responsibility of ensuring that these used oils are free from other contaminants, and their quality is preserved.

This responsibility on the part of the end user is no different from that taken with virgin, or unused lubricants, in that both the virgin and used lubricants have an intrinsic value that must be preserved.

Advice on the handling and storage of the different grades of used lubricants will come from the cooperation between the lubricants producer and the rerefiner.

At this stage the advice given and the actions taken will separate the different qualities of the used lubricants at the end user premises and it will be known that some used oils may have to go to other processes or for incineration.

The used oil collector becomes a part of the chain in ensuring that any collection preserves the quality and value of the used oil through to the rerefiner. Used oil may be picked up in relatively small volumes, taken to an intermediate terminal, or terminals, where the product will be bulked up for final transportation to the rerefining site.

The used oil collector also needs to be a part of the managed process and needs to be well informed as to his actual role in the process of delivering quality used oils with an intrinsic value to the rerefiner. He will need to know the reasons why different oils are to be kept separate and why no contamination can be tolerated.

This process, particularly in the UK, will be foreign to most used oil collectors as they currently only deliver low quality used oils for combustion and there are no incentives to maintain higher quality products .This process of cooperation between all parties also means that the haphazard collection of used oil from user premises by any collector of used oils may not be permitted.

The used oil collector may have the final contract with the incinerator operator and will therefore need to know the contents of the used oil formulation in order that the correct procedures are taken in the interests of both cost and environment.

Used oil collectors are therefore an intrinsic part of the chain and their adherence to quality control and environmental standards is of paramount importance.

Throughout the chain it is seen that, as in the Special Waste Regulations, documentary evidence is required for each movement of the used oil product. It is also seen that some form of rapid laboratory tests may be required within the chain to prove the quality of the used oil has been preserved.

6. Lubricant producer/used oil rerefiner cooperation programme

The cooperation programme will be developed and agreed by both the lubricant producer and the used oil rerefiner to ensure the interests and accrued benefits resulting from the overall programme are of the greatest advantage.

Benefits from the cooperation will be both financial and environmental.

Any programme will be designed to ensure:

1. a.

   Objectives of the EU Waste Oil Regulations are fulfilled

2. b.

   Best practice within these objectives are achieved

3. c.

   Onerous financial penalties for waste oil incineration are minimised

4. d.

   Major financial savings are generated for the lubricant producer and end use customer

5. e.

   The lubricant producer will be able to manage the complete chain of environmental actions

6. f.

   The cooperation will deliver further technical expertise on the handling of used oils

7. g.

   The completion of the circle for the sustainable regeneration of lubricants

7. Financial implications for the lubricant producer and end use customer

The actual pricing regime across Europe is not uniform, just as the implementation of legislation within the Union is not uniform.

However one may assume that as legislation and the various Directives are implemented by Member States, then there may be more uniformity on pricing levels.

If we were to take the Dutch example of a situation that currently exists, that may not be too far away from the ultimate levels of pricing across the EU, then we can use this as a template to give an insight to the future implications.

At present, in Holland, the waste oil collector charges the end use customer $100 per tonne. The waste oil collector is currently able to bulk up the collections of waste oil and sell these at $70 per tonne FOB Holland, for export to other countries where the combustion of this waste is allowed.

It may be reasoned that the waste oil collector is satisfied with his gross receipts of $170 per tonne for the waste oil.

In the future, there will be a reduced market for the combustion of waste oils and this will cease altogether in 2005. The only outlet for combustion will be cement kilns and incineration. In 2006 excise duty on the waste oil as a fuel will apply. It is likely that cement kiln operators and incinerator operators will charge of the order of $40 per tonne to burn this used oil waste.This in turn will reduce the gross revenue of the waste oil collector from $170 per tonne down to $60 per tonne–a shortfall of $110 per tonne against the current situation. It is likely that cement kiln and incinerator operators will require the waste product duty paid, which may add a further $40 per tonne.

This financial burden will fall on the lubricant customer, unless the lubricant producer takes on the charges as a part of the cost of supplying lubricants. In becoming responsible for the charges, and the collection of the used oil for disposal, the lubricant producer will retain management responsibility for the disposal of the used oil. The lubricant producer may wish to take this action to be in a position to manage environmental responsibilities.

If the used oil rerefiners were willing to pay $30 per tonne for the bulk supplies of quality used oils for their rerefining process, the current financial situation is preserved and all parties are satisfied. Duty would not apply. The financial benefits of taking this route to the lubricant producer and its end use customers, is of the order of $110 per tonne, including any excise duty implications that may arise. The amount of used oil likely to be available for collection is of the order of 2.5 million tonnes.

8. Pan European used lubricant collection

Given that the infrastructure for the collection of high quality used lubricants suitable for rerefining, and the bulking up of these supplies can be achieved, the cost of moving bulk product by sea is not prohibitive.

In cooperation with the lubricant producers, perhaps through an agreed code of practice, the rerefiners would arrange, either directly, or through agents, to set up the infrastructure required to ensure the scheme in its entirety worked to all parties' satisfaction.

All parties in this scheme would have to satisfy all the quality operating criteria required and implied by EU Directives and Member States legislation. It is envisaged that the quality levels required by lubricant industry agreed codes of practice would exceed those required by minimal legislation in terms of environmental stewardship.