Conflicting energy and environmental policies: The portsmouth oil refinery

Abstract

This case study presents the series of decision-making processes surrounding a current environmental issue—the Portsmouth oil refinery in Virginia. Crude oil must be refined before it can be used as fuel. Additionally, some oil must be desulfurized for use other than as gasoline. In 1977, the nation imported about one million barrels of oil a day. Although the US Department of Energy has emphasized the critical need for greater east coast refinery capability, the east coast is to supply only 25% of its refined oil needs. In the same year, the east coast met its demands for petroleum products from three sources: (a) refinery production, 22.7%, (b) product imports, 28.0%, and (c) products from the Gulf Coast, 49.3%.¹

The energy program after the Arab oil embargo has an objective of encouraging the construction of oil refineries and petrochemical plants in the United States rather than abroad. The tariff is higher on imports of refined oil products than of crude oil, and new refineries are allowed to import a large proportion of their requirements tarifffree.

The US federal government does not directly regulate the locations for oil refineries or methods of desulfurization. The oil import program, however, does influence decisions concerning location of desulfurization facilities and refineries, and air and water pollution standards affect methods of refining, besides making desulfurization necessary.