The potential or unintended consequences of the proposed amendments to the listed activities – petroleum sector. Anton Moldan, Environmental Adviser South African Petroleum Industry Association (SAPIA) 8 May 2013

Presentation outline 1.Background 2.Air Quality Act provisions that need to be met 3.Outstanding issues of concern: a)Disconnect between ambient & point source standards b)Existing facilities meeting new facility standards c)“Bubble” approach d) Implementation timeframes e) Unsustainable emission standards f) Clarification 3.Concluding remarks 2

Background SAPIA supports measures for ambient air quality improvements that are meaningful, reasonable & achievable.. The AQA allows for the management of Air Quality by means of a number of tools listed in the National Framework. MES should not be used as the sole tool – need holistic approach. SAPIA has been intimately involved since 2007 – maintained a consistent position, adapted to changing regulatory positions. 3

AQA provisions that need to be met – holistic approach. S 9: Setting of Ambient Air Quality Standards. S 15: Development of Air Quality Management Plans. S 18: Declaration of Priority Areas Regulations for implementing & enforcing priority area air quality management plans, including stricter standards. S 21: Setting of Minimum Emission Standards S 24: Declaration of Controlled Emitters S 26: Declaration of Controlled Fuels. 4

Outstanding issues of concern 1.Disconnect between ambient & point source standards. 2.Existing facilities to meet new facility standards. 3.Dropping of the “Bubble” approach for managing point source emissions. 4.Timeframes for implementation. 5.Certain unsustainable standards. 6.Residual errors & areas needing clarification. 5

1. Disconnect between ambient & point source standards. Objective of AQA is to improve and/or maintain air quality within an airshed so as to avoid adverse impact on human health & the environment. There is no connection between the point source MES and the ambient air quality in the proposed amendments. Need to justify significant expenditure by knowing that the air quality in the airshed will benefit. 6

1. Potential consequence. Major investments made in refinery emission controls which do not result in the objective of improved air quality in the airshed. Proposal:  Site specific parameters be taken into account: Location of plant, Other emission sources in area, Technical characteristics of plant, Local environmental conditions, and Proximity to surrounding community. As is done in other countries. 7

2. Existing facilities to meet new facility standards. SAPIA supports the principle that new refineries should be designed to comply with new plant standards. SAPIA cannot support expectation that existing plant can be retrofitted to meet new refinery standards. Not technically feasible, in many cases. 8

Existing refineries will not be able to comply with the MES set for new refineries as it is either not technically feasible or economically sustainable. Proposal:  Existing plants must meet proposed existing plant standards until the end of the plant life.  The expectation that ageing plants should be upgraded to meet standards expected of new plants, be dropped. 2. Potential consequences 9

3.“Bubble” approach to managing emissions Bubble approach combines a number/all of emission sources within a plant and sets standard for overall bubble. Promulgated version adopts this approach ie Allowable SO 2 calculated as sum of emissions from combustion, S recovery units, flares, catalytic cracking units. The DEA decided to abandon the Bubble approach. 10

3. Potential consequences Managing emissions from individual point sources within refinery removes flexibility and constrains operations. Refineries are dynamic, highly integrated processes & need to be managed as a whole. Could lead to constrained operations & more frequent shutdowns leading to increased emissions. Proposal:  Re-instate bubble approach. 11

4. Timeframe for implementation of MES Refineries need at least 5 years to cost, get shareholder approval, design and implement major process changes eg introduction of clean fuels. Initial requirement for existing standards to be met by 2015 and new standards to be met by BUT amendment process still not finalised, resulting in regulatory uncertainty and inability to take decisions on way forward for plant upgrades in absence of concrete targets. 12

4. Potential consequences As the refineries have not had the required regulatory certainty to date and hence have not been able to finalise the process for making the required process changes, at this stage it would not be possible to meet the 2015 implementation date to meet the “existing refinery” standards. Proposal:  SAPIA welcomes the extension of the implementation date to meet existing refinery standards to 5 years following promulgation of the amendments and emphasises the importance of retaining this timeline. 13

5. Amendment of unsustainable emission standards It has been proposed earlier that the “bubble” approach be adopted. If this proposal is not adopted and individual point sources within the refinery are to be individually managed through individual stack standards, then SAPIA proposes that the existing standards be reviewed to ensure that whatever level is set will achieve a particular desired objective. Open and transparent discussions need to be held. 14

6. Correcting errors & providing clarification Certain errors are still present in the proposed amendments which need to be addressed. Certain provisions of the legislation require clarification as the current layout/wording in some parts is unclear and makes for difficult implementation eg the storage and handling of petroleum products (Sub-category 2.4) 15

Concluding remarks Certain provisions in the legislation relating to oil refining operations will be extremely difficult, if not impossible, to comply with. New legislation, impacting on refinery operations, needs to be co-ordinated to ensure sustainability of the sector eg CF2 & MES. Proposal:  An inter-departmental Petroleum Industry Regulatory Co- ordination Group be established to review and co-ordinate the introduction of new, cross-cutting legislation so as to ensure that the best interests of RSA are being served. 16

Thank you for your attention 17