Used oil: An often overlooked resource

JANUARY 2010 by Mike Breslin

Long before it became widespread practice to recycle paper, plastics and other waste stream commodities, used oil was recycled to recover its innate heating value. Even though it’s dirty and exhausted of lubricity, a gallon of used oil contains 140,000 BTUs of energy, approximately the same heating value of a new gallon of oil.

Used oil is a broad category that includes mixes of crankcase oils, transmission and hydraulic fluids, and industrial oils of many grades and qualities. EPA defines used oil as any oil refined from crude or synthetic that has been used and thereby contaminated by physical or chemical impurities. It’s not publicly traded as a commodity. Most transactions are private and most people involved in the business are reluctant to talk about price or the volume distributed. Therefore, there is scant and conflicting data on this sector.

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An EPA Material Characterization Paper published in December 2008 estimated the quantity of used oil generated annually at 1.35 billion gallons with 784.4 million gallons used as fuel, 160.7 million gallons re-refined and 200 million gallons going to landfills or illegally dumped. A long-time executive in the used oil business estimated that over 50 percent goes to industrial burning for energy, about 20 percent to re-refining into base lubricants and 15 to 18 percent to on-site heating.

Nobody knows how much is illegally dumped, but the consensus is that illegal disposal has decreased substantially over the past few decades. “Used oil is a big business today and grows with each hike in the price of a barrel of crude. Anyone foolish enough to dump it on the ground or down a storm sewer is not only subject to criminal penalties, but is also wasting a valuable commodity,” said Rob Stevens, president and CEO of EnergyLogic, a Nashville-based manufacturer of used oil furnaces and boilers.

A 2005 Department of Energy study estimated that 80 percent of oil from do-it-yourself oil changes winds up being illegally disposed. But this is thought to be improving for several reasons. The bulk buying power of quickie-lube shops and the resulting competitive pricing from auto dealerships have reduced the number of home oil changes. A growing number of state and local governments have instituted regulations banning used oil and oil filters from landfills and have imposed fines for illegal disposal. And, there has been increased funding to raise public awareness regarding recycling options and to establish more collection facilities to make it convenient.

Used oil has also become substantively cleaner. “What has occurred over the past ten years is the entire used oil waste stream generated by salvage yards, repair shops, dealerships and quick-change shops have cleaned up considerably due to regulations. Also, engines run much cleaner now as a result of technology improvements and due to better waste stream management,” said Stevens.

Waste oil is not considered a hazardous material during transport, but there remain serious liabilities to the generator and the transporter. “Transporting it has many environmental risks and potential consequences. The business that generates the used oil is responsible and liable for that used oil until it is properly disposed, which could literally be for years if the oil is held in a storage facility. I know I needn’t tell you about the potential environmental damage that can occur if the oil is spilled in transit. Not to mention the financial damage that has put more than one business out of business,” warned Kevin Ferrick of the engine oil licensing and certification system at the American Petroleum Institute.

In view of the liability issue, the inherent energy value in used oil, and the recent high prices for fuel oil, many in the recycling business and businesses across the spectrum of industries are taking a second look at on-site burning for heat, or hauling it short distances for burning to limit liability. As the recycling industry knows, the expense of long distance trucking is often the death of recycled commodities. That is why used oil consolidation and processing is largely regional.

LKQ Corporation, one the largest providers of wholesale recycled and new parts in North America, processed 441,000 vehicles for parts and scrap in 2008. “All of those would have had the fluids, including motor oil, removed,” said Sarah Lewensohn, LKQ’s director of investor relations. Since the average vehicle yields approximately one gallon of combustible fluids, that equates to nearly half a million gallons of combustibles collected.

The United States Energy Information Administration reported the national average price for diesel fuel in December at $2.78 per gallon, $0.16 per gallon higher than last year. A December quote from New Jersey fuel oil dealer was $2.99 per gallon. “At least 15 locations are using oil- burning high efficiency heaters for their plants. In some cases, it is limited by state law. In others, it is limited by climate,” said Lewensohn.

Large generators like LKQ cannot consume all they generate. The excess is sold to consolidators, haulers and processors, some positioning themselves as “environmental service providers.” These companies provide a range of services including on-site sampling, lab analysis, and transportation and recycling services ranging from used oil marketing to processing that involves dewatering, filtering and demineralising for use in industrial burners. As best could be determined at press time, used oil from a generator to a dealer sells used oil at approximately $.25 per gallon.

Getting fluids out of vehicles used for scrap has also become faster and more efficient. In the past scrap yards extracted fluids manually, often assisted by homemade Rube Goldberg contraptions of lifts, funnels, hoses and tanks. Currently there are several manufacturers of self-contained fluid removal systems. One such is Enviro-Rack, made by Iron Ax, that meets EPA and state level regulations for fluid removal. By using air operation it avoids the sparking dangers posed by electric motors or gasoline engines and sucks a vehicle dry in less than five minutes. The system has a catch pan underneath to prevent ground contamination.

Although the majority of used oil is burned in asphalt plants, steel mills, cement plants and industrial and utility boilers, the Department of Energy estimates that approximately 14 percent is consumed by space heaters.

According to Rob Stevens at EnergyLogic, “Our emissions are approximately the equivalent of those associated with diesel powered earth moving and yard equipment,” Stevens claimed. That is emissions coming out of his furnaces without additional pollution control equipment, which is usually cost prohibitive for small installs.

With that in mind, it’s worth examining the economics of space heating with used oil in context with pollution ramifications. According to EnergyLogic, their entry level furnace costs roughly $6,000 including installation, tank and filtering between tank and furnace. Such a unit can heat up to 3,000 square feet. In northern climes with fuel oil costing approximately three dollars per gallon, the investment can typically be recovered in less than two seasons. Life expectancy depends on hours of usage, but Stevens stated that ten years or more is average. “Our pollution control is based upon combustion efficiency and cleanliness. We take the raw fuel and combust it at an extremely high temperature, which results in flue stack emissions similar to a standard oil furnace burning #2 fuel oil or diesel fuel, and a very fine, non-hazardous fly ash,” Stevens said.

Compare burning used oil and its emissions with those associated with heating oil refined from crude, or with used oil that is re-refined into base lubricants. Think of the emissions created in drilling and transportation to the refinery, heavy emissions from refining and the multi-step transport emissions to deliver fuel oil to a business or home (trucks and locomotives burning diesel). In addition, burning used oil on-site ensures destruction of a potentially hazardous material and eliminates the trucking emissions if it had to be hauled away.

While burning used oil for heating may seem onerous to many environmentalists, it apparently has less universal emissions and conversationalist benefits than newly refined or re-refined lacks. Scrap yards, repair shops, oil change centers, fleet maintenance facilities, heavy equipment dealers, automotive and equipment dealers, or businesses located near used oil sources should consider on-site burning, particularly recycling facilities, as part of their overall effort to clean up the planet and lower heating bills.