Sunoco 2003 Annual Report Download - page 34

facilities. For some of these refineries, the cost of the required emissions control equipment
is significant, depending on the size, age and configuration of the refinery. Sunoco received
information requests in 2000, 2001 and 2002 in connection with the enforcement ini-
tiative pertaining to its Marcus Hook, Philadelphia, Toledo and Tulsa refineries, the
Puerto Rico refinery divested in 2001 and its phenol facility in Philadelphia, PA. Sunoco
has completed its responses to the EPA. In 2003, Sunoco received an additional in-
formation request at its phenol plant in Philadelphia.
Sunoco has received Notices of Violation and Findings of Violation from the EPA relating
to its Marcus Hook, Philadelphia and Toledo refineries. The Notices and Findings of
Violation allege failure to comply with certain requirements relating to benzene waste-
water emissions at the Company’s Marcus Hook, Toledo and Philadelphia refineries and
failure to comply with certain requirements relating to leak detection and repair at the
Toledo refinery. In addition, the EPA has alleged that: at the Company’s Philadelphia
refinery, certain modifications were made to one of the fluid catalytic cracking units in
1992 and 1998 without obtaining requisite permits; at the Company’s Marcus Hook refin-
ery, certain modifications were made to the fluid catalytic cracking unit in 1990 and 1996
without obtaining requisite permits; and at the Company’s Toledo refinery, certain phys-
ical and operational changes were made to the fluid catalytic cracking unit in 1985 with-
out obtaining requisite permits. The EPA has also alleged that at the Company’s Toledo
refinery, certain physical and operational changes were made to the sulfur plant in 1995,
1998 and 1999 without obtaining requisite permits; certain physical and operational
changes were made to a flare system without obtaining requisite permits; and that the flare
system was not being operated in compliance with the Clean Air Act. Sunoco has met
with representatives of the EPA on these Notices and Findings of Violation and is currently
evaluating its position. Although Sunoco does not believe that it has violated any Clean
Air Act requirements, as part of this initiative, Sunoco could be required to make sig-
nificant capital expenditures, incur higher operating costs, operate these refineries at re-
duced levels and pay significant penalties. There are no liabilities accrued at December 31,
2003 in connection with this initiative. With respect to the Company’s recently acquired
Eagle Point refinery, El Paso Corporation, its prior owner, has entered into a consent de-
cree with the EPA and the NewJersey Department of Environmental Protection as part of
EPA’s enforcement initiative. Sunoco does not anticipate substantial capital expenditures
on its part as a result of El Paso’s consent decree.
Energy policy legislation continues to be debated in the U.S. Congress. The Bush Admin-
istration and the U.S. Senate and House have been unable to reach agreement on final
legislation. Both chambers passed energy bills in 2003 and a House-Senate Conference
Committee produced a conference report. The U.S. House approved the Conference
Committee report but the U.S. Senate failed to bring the matter to a vote. The U.S. Sen-
ate leadership has introduced new, pared-down legislation for consideration in 2004. The
new legislation, like the conference report, would repeal the oxygenate mandate in the
Clean Air Act, set certain requirements for ethanol or renewable fuels usage and phase out
the use of MTBE. However, there is no agreement with the U.S. House leadership and no
certainty of any action in either chamber. Sunoco uses MTBE and ethanol as oxygenates in
different geographic areas of its refining and marketing system. While federal action is
uncertain, California, NewYork and Connecticut began enforcing state-imposed MTBE
bans on January 1, 2004. Sunoco does not market in California but is complying with the
bans in New York and Connecticut. These bans have resulted in unique gasoline blends,
which could have a significant impact on market conditions depending on the details of
future regulations, the impact on gasoline supplies, the cost and availability of ethanol and
other alternate oxygenates if the minimum oxygenate requirements remain in effect, and
the ability of Sunoco and the industry in general to recover their costs in the marketplace.
A number of additional states are considering bans on MTBE although no immediate action
is anticipated.
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