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What's It All About, Alky?, Part 2 - Could a Proposed EPA Rule Spur More Refinery Closures?

Since 2019, more than 1.3 MMb/d of U.S. refinery capacity has been either shut down for economic reasons or converted to renewable diesel production. The decline in the nation’s ability to produce gasoline and diesel hampered the refining sector’s response to the post-COVID demand recovery and exacerbated the big run-up in motor fuel prices that followed Russia’s invasion of Ukraine last February. Now, there may be a new threat to U.S. refining, namely the possibility that a proposed Environmental Protection Agency (EPA) rule on hydrofluoric-acid-based alkylation could, over time, spur an even larger round of refinery closures. In today’s RBN blog, we continue our look at alkylate — a critically important part of the U.S. gasoline pool — the prospective regulation and its possible effects.

As we said in Part 1, alkylate is a blendstock that represents about 15% of the total gasoline pool and offers a triple-threat combo of positive attributes: high octane, low volatility and low sulfur content. There are two primary catalysts that refiners can opt to use in the production of alkylate: hydrofluoric acid, or HF, and sulfuric acid, or H2SO4.  Each is quite popular, with HF and sulfuric acid technologies each representing about half of domestic alkylation capacity — and with those shares varying significantly on a regional basis. While refiners have been safely operating both types of “alky” units for many decades, HF alkylation for some time has been in the crosshairs of various regulators, including the EPA, which recently proposed that refiners using the HF-based process be required to undertake extensive evaluations of potentially safer alternative technologies. While the rule wouldn’t require refineries to replace and shut down HF alky units, refiners employing HF as a catalyst for producing alkylate are concerned the rule’s mandated evaluations may put further pressure on them to do just that. Also, many are worried that the very high cost of shifting from HF alkylation to another alkylate production process may well lead more refineries to shut down, leaving the U.S. with even less refining capacity to meet consumer needs.

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