Oil giant agrees to $400 million deal with federal government.

In a move that promises cleaner air throughout the Chicago area, BP on Wednesday agreed to spend more than $400 million to settle legal complaints about chronic pollution problems at the oil company's sprawling refinery in northwest Indiana.

Steps that BP committed to take at its Whiting refinery, the nation's sixth-largest, will significantly reduce emissions of lung-damaging soot and other noxious air pollution. The deal also sets a precedent for other oil companies as the industry overhauls refineries nationwide.

Federal regulators had accused BP of violating a 2001 legal agreement over previous pollution problems at the Whiting plant and cited the company for repeatedly exceeding emissions limits on flares that shoot out harmful chemicals during frequent malfunctions.

Changes outlined in the consent decree, filed in U.S. District Court in Hammond, require the oil company to dramatically reduce flaring by capturing most of the pressurized gases, and to operate the flares more efficiently when they are needed.

A new cap on emissions, which federal regulators described as the most stringent to date for a U.S. refinery, is expected to reduce the Whiting plant's flaring by nearly 90 percent. Emissions of hazardous chemicals such as benzene, toluene and hydrogen sulfide will drop by about 4,000 tons annually.

"We are pleased to have reached an agreement that protects jobs, consumers and the environment," said Steve Cornell, president of BP Products North America.

BP's legal battle with federal authorities and environmental groups revolved around a $3.8 billion project to process heavy Canadian crude oil at the refinery, 15 miles southeast of downtown Chicago.

A 2008 permit issued by the Indiana Department of Environmental Management assumed the Whiting refinery's flares would emit virtually no toxic fumes when the expansion project was completed — something federal regulators and activists found difficult to believe given the industry's long history of pollution problems.

Critics said the permit was typical of Indiana's lax approach to BP. The state earlier had allowed the refinery to release more pollution into Lake Michigan, but the company backed off after Tribune stories prompted a storm of protest from politicians and the public.

President Barack Obama's administration ordered Indiana to revamp BP's permit in 2009, reversing theU.S. Environmental Protection Agency's approval of the refinery upgrade and expansion during the last months of PresidentGeorge W. Bush's administration.

Susan Hedman, the EPA's top official in the Midwest, said the new deal "will resolve a number of problems at the Whiting refinery that have negatively impacted the health of people in the surrounding area. It also sets a new standard for refineries throughout the country."

Like other oil giants with operations in the Midwest, BP is overhauling its refineries to process heavy Canadian crude, often referred to as tar sands or oil sands. High oil prices have made it profitable to extract petroleum from forests in northern Alberta, turning Canada into the leading supplier of oil to the U.S. But the thick tar and sand, known as bitumen, is dirtier to process into gasoline and other fuels.

Investigations at other U.S. refineries have revealed that flare pollution is a bigger problem that previously thought. The settlement with BP requires equipment to divert most of the waste gases back into the Whiting refinery for heating and power. The company also must tweak the flares to ensure hazardous chemicals are burned off instead of released into the air.

Other improvements include tougher limits on smog-forming sulfur dioxide and nitrogen oxide emissions from the refinery. The federal complaint noted that northwest Indiana chronically violates limits on the lung- and heart-damaging pollution, largely because of high levels recorded at a monitor near the BP plant.

BP also must take more aggressive action to prevent and repair leaks in refinery pipes, a problem that is expected to worsen as the company increasingly processes oil containing higher levels of corrosive sulfur.

At the behest of environmental groups, BP will install new pollution monitors on the edge of each side of the refinery. The results will be posted online weekly, providing neighbors with more information about pollution that until now they were forced to guess about.

The company also will pay an $8 million fine, most of which will go to the federal government.

"By scrimping on pollution control, BP was effectively handing their neighbors the tab for the real cost of refining dirty tar sands crude, in the form of health costs," said Ann Alexander, a senior attorney in the Chicago office of the Natural Resources Defense Council. "This consent decree hands the tab right back to BP. And it sets a precedent that will make other oil companies think twice before they try the same thing."

Alexander's group petitioned the EPA to order more stringent limits in BP's air permit. Other organizations involved include the Environmental Law and Policy Center, Sierra Club, Environmental Integrity Project, Save The Dunes and the Hoosier Environmental Council.

BP and Indiana regulators had argued that the company already was taking steps to curb air pollution. But even with various improvements during the past decade, the refinery remains one of the largest sources of industrial air pollution in the Chicago area.

The refinery also is one of the region's biggest sources of greenhouse gases that contribute to climate change, emitting 4.7 million tons in 2010, the last year for which figures are available. Under changes outlined in the settlement, those emissions are expected to drop by about 108,000 tons annually.

"We look forward to completion of the modernization project, which will improve the refinery's efficiency and competitiveness while continuing to reduce emissions," said Nick Spencer, the refinery's manager.

Ignacia S. Moreno, an assistant U.S. attorney general, said more than 90 percent of the nation's refineries operate under environmental consent decrees and remain the focus of close monitoring and enforcement under the federal Clean Air Act. In April, the EPA and Justice Department brokered a similar deal withMarathon Petroleum Co. to reduce flaring and air pollution at its six U.S. refineries.

"A lot of these refineries are in disadvantaged areas," said George Czerniak, the EPA's regional chief of air enforcement. "We need to keep an eye on them."

(By Michael Hawthorne, Chicago Tribune, 24/05/2012)