Sunoco 2004 Annual Report Download - page 35

rently being analyzed but is not expected to have a significant impact on Sunoco’s capital
expenditures. The ultimate impact of the rules may be affected by such factors as technol-
ogy selection, the effectiveness of the systems pertaining to banking and trading credits,
timing uncertainties created by permitting requirements and construction schedules and
any effect on prices created by changes in the level of gasoline and diesel fuel production.
In July 1997, the EPA promulgated new, more stringent National Ambient Air Quality
Standards (“NAAQS”) for ozone and fine particles, which is resulting in identification of
non-attainment areas throughout the country, including Texas, Pennsylvania, Ohio and
West Virginia, where Sunoco operates facilities. The EPA issued final ozone non-
attainment area designations in April 2004, which became effective June 15, 2004. Fine
particle non-attainment areas are not expected to be designated until early 2005. These
standards will result in further controls of both nitrogen oxide and volatile organic com-
pound emissions. The EPA has designated certain areas, including Philadelphia and Hous-
ton, as “moderate” non-attainment areas, which would require them to meet the ozone
requirements by 2010, which is before existing federally mandated control programs would
take effect. However, EPA’s designation of non-attainment areas and the EPA’s rule on
state implementation are currently being challenged by the state of Ohio, trade associa-
tions and health and environmental groups. In September 2004, the EPA granted
reconsideration of certain issues relating to the 8-hour ozone NAAQS standard and, in Feb-
ruary 2005, issued a proposed rule requesting comments on two issues raised in connection
with the implementation of the 8-hour standard and revocation of the 1-hour standard.
Regulatory programs, when established to implement the EPA’s standards, could have an
impact on Sunoco and its operations. However, the potential financial impact cannot be
reasonably estimated until the EPA completes the non-attainment area designation process
and promulgates regulatory programs to attain the standards, and the states, as necessary,
develop and implement revised State Implementation Plans to respond to the new regu-
lations.
Since the late 1990s, the EPA has undertaken significant enforcement initiatives under
authority of the Clean Air Act, targeting industries with large manufacturing facilities that
are significant sources of emissions, including the refining industry. The EPA has asserted
that many of these facilities have modified or expanded their operations over time without
complying with New Source Review regulations that require permits and new emission
controls in connection with any significant facility modifications or expansions that could
increase emissions above certain thresholds, and have violated various other provisions of
the Clean Air Act, including New Source Review and Prevention of Significant Deterio-
ration (“NSR/PSD”) Programs, Benzene Waste Operations National Emissions Standards
for Hazardous Air Pollutants (“NESHAP”), Leak Detection and Repair (“LDAR”) and flar-
ing requirements. As part of this enforcement initiative, the EPA has entered into Consent
Agreements with several refiners that require them to pay civil fines and penalties and
make significant capital expenditures to install emissions-control equipment at selected
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. Sunoco has
completed its responses to the EPA. In 2003, Sunoco received an additional information
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
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