UK WASTE OIL SECTOR PRESENTATION TO THE NIHWF 6 NOVEMBER 2003

1. Oil Recycling Association UK WASTE OIL SECTORPRESENTATION TO THE NIHWF6 NOVEMBER 2003 Roger Creswell

2. What we will cover • Waste Oil Industry Overview • Regulatory Framework • Key Issues • Summary of where we are today • Why the HWF plays a role • What England, Wales and Scotland is thinking • Where would our Industry like to go

3. 2003 UK Waste Oil • WASTE LUBRICANTS FROM AUTOMOTIVE/INDUSTRIAL AND INTERNATIONAL TRANSPORT USES • (WASTE OIL DIRECTIVE (WOD) RELEVANT) • COLLECTING 380,000 TPA { ~86% OF COLLECTABLE WOD OIL} • EXCELLENT EUROPEAN COLLECTION RECORD AND GOVERNMENT WISHES TO PROTECT THIS • + FURTHER 100,000 TPA OF WASTE FUELS (WASTE INCINERATION DIRECTIVE {WID}) DEPENDANT) • + IMPORTS FROM EC COUNTRIES

4. LEGAL FRAMEWORK Framework Directive on Waste 75/442/EEC Directives Dangerous Substances and Dangerous Preparations 67/548 & 88/379 European Waste Catalogue Directive 75/439/EEC on the disposal of waste oilsmodified by 87/101/EEC Hazardous Waste Directive Directive 91/692/EEC standardizing and rationalizing reports Directive 92/81/EEC on the harmonization of the structures of excise duties on mineral oils Directive 96/59/EC on the disposal of PCBs and PCTs Directive 2000/76/EC on the incineration of waste Directives 96/91 on IPPC and 99/31 on Landfill

5. Focus of Legislation • Waste Oil Directive - Requires a PRIORITY to Regenerate the Lubricating Oil content of the waste • Waste Incineration Directive - Covers recovery and disposal - Strict Rules and Emissions Control

6. 2003 Industry Practice • (NEARLY) ALL UK WASTE OIL IS PROCESSED TO RECOVERED FUEL OIL (RFO) • TWO HISTORIC KEY MARKETS: • 6 COAL FIRED POWER STATIONS AND ROAD STONE DRYING. • ABOUT 50/50 OVERALL VOLUME AND REGIONALLY DISTORTED USERS PAY POSITIVE PRICES • RFO MUST COMPETE AT A DISCOUNT TO ‘VIRGIN’ DUTY PAID HEAVY FUEL OIL OR GAS OIL • COLLECTORS COSTS ARE LARGELY PEOPLE, TRANSPORT & OVERHEADS. PRICE IS A FUNCTION OF CRUDE • A HIGH VOLUME/LOW MARGIN/ STATIC VOL CORE BUSINESS AND VERY COMPETITIVE

7. Key Issues I • WASTE INCINERATION DIRECTIVE (RFO = A WASTE) • IMPACTS ON POSITIVE VALUE MARKETS • (1) COAL FIRED POWER GENERATION • - PROBABLY WASTE INCINERATION DIRECTIVE COMPLIANT • - CONFLICT WITH RENEWABLES OBLIGATION • (2) ROAD STONE DRIERS • PROBABLY NOT COMPLIANT – WHAT TO DO - BIG NI ISSUE? • (3) NEW MARKETS: • CEMENT INDUSTRY - BUT LOW TO NEGATIVE VALUE • STEEL INDUSTRY – CHEMICAL REDUCING AGENT (EC AGREED BUT REGIONAL) • REGENERATION / RE-REFINING?

8. Key Issues II RE: WASTE OIL DIRECTIVE • GOVERNMENT TO RESPOND TO EC LEGAL PROCEEDINGS & INCENTIVISE REGENERATION? • MAJOR OIL SEES BARRIERS TO RE-REFINING (UNECONOMIC/TECHNICAL CONSTRAINTS) • UK GOV UNLIKELY TO CONFRONT ‘BIG OIL’ NEED A POLICY DECISION - A LONG WAY OFF ?

9. Key Issues III • DUTY DEROGATION ON WASTE OIL FUEL (APPROX 4ppl) ON WASTE DERIVED FUEL OIL, ALLOWED UNTIL END OF 2006 • REMEMBER: TO SELL AS FUEL (RFO) IT MUST BE CHEAPER THAN NEW HFO THAT IS DUTY PAID • ADDING DUTY WOULD BE 50% of CURRENT RFO COST – THIS WOULD PUSH BACK DUTY AND COSTS TO WASTE PRODUCER?? LOGIC - FITS POLLUTER PAYS PRINCIPLE • BUT, GOVERNMENT CONCERNED THIS ENCOURAGES ILLEGAL DUMPING AND REDUCE THE COLLECTION RATE

10. Summary so far: • AN ABSENCE OF CLEAR POLICY ON HOW THE WOD AND WOD WILL IMPACT ON BUSINESSES • FUEL OIL MARKETS WILL BE WID AND DUTY CONSTRAINED BY 2005/6 • COSTS MOVING BACK TO WASTE GENERATORS AND CONCERN IS OVER ILLEGAL DUMPING • UK OIL COLLECTORS FACE GREAT UNCERTAINTY • LITTLE INVESTMENT PLANNEDBY BUSINESS

11. For Governments, the bigger picture of uncertainties • WASTE OIL/OILY WATER IS THE LARGEST ELEMENT OF HAZARDOUS WASTE MOVEMENTS > 20% • DEFRA HAZARDOUS WASTE FORUM FORMED & ORA IS A MEMBER • IMPACT OF WID/WOD/PPC/LANDFILL DIRECTIVES HAS MADE WASTE OIL THE PRIORITY WASTE STREAM • FORMATION OF REGIONAL HWF’s

12. What Is UK Government Doing? RE: WASTE INCINERATION DIRECTIVE - INTERPRETING • ‘VERY LITTLE COMPROMISE’ ALLOWED • THERMAL PROCESSING TO FUEL - THE OUTPUT IS STILL A WASTE AND UNDER WID i.e. not a product • WHERE INCINERATION TAKES PLACE CO-INCINERATION IS RECOVERY and PREFERRED(R)TO DISPOSAL (D) E.G. HIGH TEMP INCINERATION USES • SMALL BURNERS. EXEMPTION. SCOTLAND Vs ENGLAND MISMATCH – BREAKS A MAJOR HWF RECOMMENDATION • UNDERSTANDS THE EC CASE FOR REGENERATION ACCEPTING THAT POLITICS IS AN ISSUE

13. What Is Government Doing? RE: WASTE OIL DIRECTIVE • A LOT OF THINKING!! • PREPARING ITS RESPONSE to THE EC PROCEEDINGS & UNDERTAKING STUDIES TO SHOW COMMITMENT • UNDERSTANDS THE EC CASE FOR REGENERATION ACCEPTING THAT ECONOMICS AND SCIENCE CAN BE UNSOUND • OUTCOME?: WANTS TO FIND A COMPROMISE THAT FITS ITS HAZARDOUS WASTE PROGRAMME WITHOUT USING TOO MUCH GOVERNMENT MONEY IN PRIVATE INDUSTRY

14. What Is Government Doing? ANALYSTS SUGGEST • NO DIRECT CAPITAL GRANTS FOR REGENERATION (NOT SEEN AS COST EFFECTIVE) • FORCING THE USE OF RE- REFINED OIL INTO MARKETS WILL NOT BE SUCCESSFUL • THE ENDING OF DUTY DEROGATION ON RECOVERED FUELS • TRYING TO FIND A SOLUTION THAT BRINGS ‘BIG OIL’ INTO THE PICTURE – PRODUCER RESPONSIBILITY? • COLLECTORS WOULD BE ABLE TO INVEST IN PARTNERSHIPS AS VERY DOUBTFUL IF OIL COMPANIES WOULD WANT TO MANAGE WASTE OPERATIONS • THIS WOULD FAVOUR ‘GOOD RE-REFINING’ BUT VERY LIMITED IN SCOPE (ONE 100,000 t plant?) UNLIKELY OPTION FOR NI

15. What Output the Waste Oil Industry Would Like to see • CLEAR GUIDANCE ON THE WASTE INCINERATION DIRECTIVE • RECOGNITION THAT MUCH WASTE OIL WILL NEED TO BE COMBUSTED • PREVENTION OF THE SMALL BURNER EXEMPTION • GOVERNMENT POLICY MADE CLEAR ON THE WASTE OIL DIRECTIVE • BUILD PARTNERSHIPS WITH REGULATORS /OIL SUPPLIERS • STIMULATING INVESTMENT IN TECHNOLOGY, PROMOTING RECOVERY • OVER DISPOSAL • A RETURN TO SECURE PROFITS

16. Importance of Timing • DECEMBER 2005 IS A BRICK WALL (IMPACT OF WID) • SECTOR PPC DUE MID 2005 –INVESTMENT BUT RISKY • STRESSES THE IMPORTANCE OF THE HWF’s

17. Presented by: • Roger Creswell Oil Recycling Association OilRecyclingAsso@aol.com Tel +44 (0) 1279 814035