January/February 1999
There’s a whole industry of oil recyclers dedicated to turning the billion-plus gallons of used oil generated in the United States each year from a potential environmental problem into a valuable commodity.
By Robert L. Reid
Robert L. Reid is managing editor of Scrap.
Talk about déjà vu!
There’s a major U.S. industry dedicated to recycling a valuable commodity that otherwise might end up in a landfill or get dumped illegally. Its members, many of which are small mom-and-pop operations, face increasing pressure from environmental regulators who have tried to designate their product as waste, even hazardous waste. Many people believe this heavily fragmented industry is going through a wave of consolidation. It certainly struggled against an especially weak market last year.
Surprisingly, this industry isn’t the scrap processing industry—it’s the used oil recycling business.
And it’s a major bulwark against a potentially vast environmental problem—the ocean of used oil generated each year, in the form of both motor oil from vehicles and hydraulic oil from machinery.
Here’s an overview of the used oil industry, which provides both an important service and an uncanny mirror image of metallic and nonmetallic scrap recyclers.
Awash in Used Oil
Scrap recyclers know all about the need to dispose of used oil. A good-sized shear, for instance, has a tank that holds 3,000 gallons of hydraulic oil. Bill Clay, vice president of operations for Louis Padnos Iron & Metal Co. (Holland, Mich.), says his site generates between 30,000 and 40,000 gallons of used hydraulic oil a year, plus used motor oil from its fleet of nearly 150 trucks and other vehicles. Likewise, just two plants of OmniSource Corp. (Fort Wayne, Ind.) generate about 1,000 gallons of used oil every week from equipment and products such as the oil that drains from turnings, explains Dave Kaminski, plant manager.
Estimates of the total used oil generated by U.S. industry and individual car and truck owners range from about 800 million gallons to well over 1 billion gallons, perhaps even twice that much. Overall, about 3.75 gallons of used industrial lubricants are generated in the United States for every gallon of used crankcase oil, according to the American Petroleum Institute (API) (Washington, D.C.). But again, the numbers aren’t definite. Other sources indicate that 62 percent of all lubricants sold worldwide are for automotive needs, with crankcase oil alone amounting to 50 percent of the market.
One point is clear, though. When it comes to recovering oil from vehicles, the industrial sector does a better job than individual car and truck owners who change their oil (called the do-it-yourself, or DIY, market). While some estimates say more than 90 percent of DIY used motor oil is illegally dumped, about 65 percent of professionally changed motor oil (called the do-it-for-me, or DIFM, market) is being recycled, with the remainder lost by being burned off, leaked, spilled, or left in engines, API says.
The DIFM market includes individual vehicle owners who simply take their car or truck to a commercial oil change facility as well as industrial users, such as scrap processors, who have a service company collect their used motor oil—even though the processors often drain the oil themselves and store it in a holding tank for the collector.
Good numbers for recycling industrial lubricants also aren’t available, though the U.S. EPA has estimated that as much as 90 percent of these oils could be recycled.
From Mom-and-Pops To National Networks
Like the amounts of used oil collected, the exact number of collectors can only be estimated. There are 149 members in the National Oil Recyclers Association (NORA) (Cleveland)—the industry’s major trade group—and probably an equal number of smaller collectors around the country. Individual companies range in size from small operators with just one or two trucks to giants like Safety-Kleen Corp. (Elgin, Ill.), the industry’s leader with about 260 trucks.
Only Safety-Kleen and First Recovery, the Lexington, Ky.-based used oil division of Ashland Inc. (Cincinnati), which manufactures Valvoline oil products, are considered truly national players in the otherwise fragmented used oil business. However, Castrol Reprocessing Services (Louisville, Ky.) and a handful of other NORA members list the entire United States as their service areas, while U.S. Filter Recovery Services (Baltimore) is seen as up-and-coming thanks to its series of recent acquisitions.
Safety-Kleen itself recently merged with hazardous waste management giant Laidlaw Environmental Services Inc. (Columbia, S.C.), which has now adopted the Safety-Kleen name.
For the most part, though, oil recyclers are regional or even strictly local operations. In some cases, there’s a boundary of about a 100- or 150-mile radius around a recycler’s plant beyond which it becomes uneconomical to transport the oil collected, notes Christopher Harris, NORA’s general counsel and an attorney with Harris, Tarlow & Stonecipher (Bozeman, Mont.). Thus, many recyclers will only collect from and sell to sites within that geographic circle.
As far as clients go, scrap processors and other industrial firms form a small but significant part of the overall used oil customer base, representing between 5 and 30 percent of clients for some leading oil recyclers. It’s a part of the market that’s worth expanding, notes Rick Fuller, First Recovery’s marketing analyst, commercial and industrial.
The Collection Stage
Industrial accounts are serviced on a periodic basis based on the amount of used oil generated and the size of the account’s holding tank. For instance, First Recovery might visit one client 30 times a year because it has a 500-gallon tank while another site that generates more oil might get visited only twice a year because it has a 10,000-gallon tank, Fuller notes.
Between pickups, used oil generators must be careful not to contaminate their oil, Fuller adds. Some companies forget to put the cap back on their tank, for instance, allowing rain to dilute the oil. Or a poorly maintained oil/water separator could fail, leaving too much water in the oil.
Such carelessness can mean the difference between getting your used oil taken away for free or having to pay to have it removed. That’s because uncontaminated used oil is much more valuable to the collector than “oily water,” a term that refers to any oil with 5 percent or more water content. During boom times in the oil business, collectors will even pay generators for their clean used oil. But today the price of oil is so low—down from $30 to $40 a barrel in the late 1970s to roughly $12 to $14, notes Reed Engdahl, API’s used oil coordinator—that more and more collectors have to charge their customers.
They’ll also charge if the used oil gets mixed with gasoline, antifreeze, or solvents. So, make sure that oil from turnings or crushed cars is kept separate from motor oil taken straight from a vehicle or hydraulic oil right out of a machine. And if your used oil gets contaminated with something worse, the collector might reject it as a hazardous waste. Some collectors, in fact, will conduct on-site tests before accepting a load of used oil, but just as often they “depend on the honesty and reliability of the person generating the oil,” notes Harris.
After the used oil is pumped into the collector’s truck, the material is shipped to an oil processor. That processor may be a different company, if the collector is simply a transporter, or it may be the collector’s own facility. There, the used oil will be cleaned of any dirt or contaminants and prepared for its next use, which could involve blending the material with something like diesel or another grade of oil if it’s going to be burned as a fuel or sending it through a more elaborate re-refining process if it’s intended to be a new lubricant product.
New Lives for Old Oil
So what happens to the used oil that’s collected?
More than 90 percent of recovered oil is burned as fuel in boilers for steel mills, utilities, asphalt plants, and other industrial operations, or else burned in space heaters by used oil collectors themselves, industry experts note. A much smaller portion—perhaps 2 to 5 percent—is re-refined into new oil products such as industrial lubricants, crankcase oil, and marine fuel. Some is also cleaned and returned for reuse in the same machines from which it was collected, either on-site or at the collector’s facility.
While some people might not consider burning to be recycling or even reuse, the used oil industry believes it is and the EPA seems satisfied as well. Now that unleaded gasoline has eliminated the possibility of lead-contaminated used oil, the EPA seems to accept clean used oil as the equivalent of virgin oil, Harris notes. After all, if used oil couldn’t be burned, it would lose its primary market. “Where would all the used oil go?” Harris asks. The answer is clear: It would “disappear” down drains and through other illegal disposal means.
Ironically, however, the used oil industry’s two leading firms–Safety-Kleen and First Recovery–have chosen to re-refine most of the oil they collect. And that’s despite today’s low oil prices that make profit margins on re-refining low, if not nonexistent.
Other key re-refiners include Evergreen Holdings Inc. (Newport Beach, Calif.), Mohawk Lubricants Ltd. (North Vancouver, British Columbia), and Hub Oil Co. Ltd. (Calgary, Alberta), with another re-refiner, Ortek Inc., scheduled to begin operation in McCook, Ill., soon.
For Safety-Kleen, about 70 percent of the roughly 100 million gallons it collects goes through a re-refining process at its facilities in East Chicago, Ind., and Breslau, Ontario, with the rest turned into fuel or oil byproducts, says Julio D’Alessandro, product manager, oil services.
With First Recovery, about 80 percent of the used oil it collects gets sent to a Louisiana-based re-refinery operated by Texaco Inc. (White Plains, N.Y.), which produces a product sold as a maritime fuel. Although extensive use of river barges and economies of scale help First Recovery transport its product all the way to Louisiana, the company is also looking more closely at the industrial fuel burning option to help “minimize the peaks and valleys of the market,” Fuller says.
Re-refining used to be a larger industry back in the 1950s and 1960s, Harris notes, but it has shrunk tremendously since then due to the increasing sophistication of lubricant products. Today’s oil isn’t simply oil, he explains. It also includes chemical additives that must be removed, then added back in during the complicated and expensive re-refining process.
There’s also a small part of the industry that thinks the best use for your used oil—at least hydraulic oil and other industrial lubricants—is to clean it up and put it right back into the machinery from which it came. That’s the service offered by Chem-Ecol Ltd. (Cobourg, Ontario) and about a half-dozen other firms. Reclaiming about 4 million gallons of lubricants a year throughout the eastern United States, Chem-Ecol either collects the fluids and trucks them to its Cobourg facility for treatment or hooks up two hoses to a baler, for instance, and simply runs the hydraulic fluid through its process while the machine is operating.
A Well-Lubricated Future?
Like the scrap industry, a number of multigenerational mom-and-pop used oil recyclers are considering whether to leave the industry these days, either by closing their business or selling it to a larger firm. Industry consolidation is a hot topic, especially after the merger of Safety-Kleen and Laidlaw.
To survive in the future, used oil recyclers are branching out to offer more comprehensive, “one-stop shop” services, which means also collecting customers’ oily water, antifreeze, even used oil filters (see “Finding Value in Filters” on page 86). In fact, many collectors’ trucks are now equipped with multiple compartments to separate different liquids or products.
At least one industry leader also sees collectors forming alliances with oil companies to work more closely on “product stewardship,” says D’Alessandro, who notes that Safety-Kleen is in the early stages of just such negotiations.
Finally, used oil recyclers seem to be fighting a never-ending battle against those who would label their commodity as waste. In the late 1980s and early 1990s, the question was whether the EPA would list used oil as a hazardous waste under RCRA—a decision that would have killed used oil recycling, Harris says. But ultimately, he adds, “we won a huge battle that saved the industry.”
But the battle didn’t end there. The “central issue of the next decade” involves the EPA’s management standards for used oil under the Clean Air Act, Harris says. Specifically, will the agency consider used oil on par with virgin oil—as it did under RCRA—when it comes to fuel burning emissions? Or will the agency classify used oil as a “waste-derived fuel,” which Harris says would put it at a serious competitive disadvantage?
The answer lies somewhere down the road.
NORA: Where Every Drop Counts
The National Oil Recyclers Association (NORA) was formed in 1984 as the trade association for the oil recycling and re-refining industry. Its mission is “to promote the proper recycling of used oil, wastewater, oil filters, used antifreeze, and related petroleum streams in an environmentally responsible manner.” NORA’s motto sets a high standard: Every drop counts.
All NORA members register with the EPA, and NORA has adopted a code of ethical business practices that stresses the need to cooperate with and assist regulatory agencies and avoid mixing used oil with hazardous wastes.
NORA, which represents its 149 members before Congress, state legislatures, regulatory agencies, and courts, also sponsors studies, an annual conference, and participates in the Used Oil Recycling Coalition, which brings it together with groups such as the American Petroleum Institute (Washington, D.C.) and major oil companies.
NORA can be reached at 12429 Cedar Road, Suite 26, Cleveland, OH 44106-3172; 216/791-7316 (fax, 216/791-6047); e-mail: noraoil@aol.com; or visit www.noraoil.com. —R.L.R.
Finding Value in Filters
In addition to recovering used oil, Americans must deal with approximately 400 million used oil filters annually, according to the Filter Manufacturers Council (FMC). These filters—which remove solid contaminants from motor oil before the oil lubricates engine parts—represent substantial amounts of recoverable steel and oil. One ton of used filters, for instance, can be turned into 1,700 pounds of rebar, notes Brent Hazelett, FMC’s executive director. Likewise, recyclers in Texas annually recover roughly 3 million gallons of oil from used filters, adds John Barber III, president of ProCycle Oil & Metals Inc. (Springtown, Texas).
At the federal level, ReMA was instrumental in persuading the EPA to issue an interpretive memo that said used automotive oil filters, properly drained and crushed for recycling, meet its definition of “processed scrap metal” and thus are exempt from RCRA regulation.
A growing number of states are also banning filters from landfills. Five states—California, Florida, Minnesota, Rhode Island, and Texas—require that filters either be recycled or treated as hazardous waste, according to U.S. Oil Co. Inc. (Combined Locks, Wis.). Similar measures are also under consideration in Iowa, Massachusetts, and other states. Ultimately, Hazelett predicts, most states will ban used filters from landfills within the next 10 years.
Such bans can be crucial to jump-starting recycling efforts. In Texas, for instance—where filters are banned—four or five recyclers vie for used filters, even drawing filters from companies outside Texas that are concerned about future landfill bans in their own states, notes Barber.
ProCycle, which began as a used oil recycler, branched into filters as a value-added service to its customers, Barber explains. The company spent millions of dollars to patent an eight-step process to recycle the entire filter—steel, oil, and paper medium—so that virtually nothing ends up in a landfill. The recovered steel goes to a local scrap processor or minimill, the oil enters the normal used oil recycling stream, and the thermal portion of the process produces a clean ash used in concrete products. Filters now represent about 40 percent of ProCycle’s business, Barber says, and he estimates that 90 percent of major used oil recyclers are also recycling filters today.
Farther west, steelmaker Tamco (Rancho Cucamonga, Calif.) has been using drained oil filters as scrap in its electric-arc furnace since 1991. The company reportedly uses about 1 million filters a month to make rebar, with most filters supplied by California scrap processors.
Overall, the recycling rate for used filters has grown from practically zero as the 1990s began to almost 30 percent today. FMC is currently working with the American Petroleum Institute (Washington, D.C.) and the Steel Recycling Institute (Pittsburgh), as well as the National Oil Recyclers Association (Cleveland), on projects to promote used oil filter recycling.
For more information, contact FMC at 10 Laboratory Drive, Research Triangle Park, NC 27709-3966; 800/993-4583 (fax, 919/549-4824); e-mail: fmcinfo@ mema.org; or visit www.filtercouncil.org. For a copy of the EPA’s interpretive memo, call Tracy Mattson at ISRI, 202/662-8533. —R.L.R.•
There’s a whole industry of oil recyclers dedicated to turning the billion-plus gallons of used oil generated in the United States each year from a potential environmental problem into a valuable commodity.