By Laura Sanicola
(Reuters) - California regulators allege that U.S. refiner Phillips 66 (NYSE:PSX) improperly began processing renewable diesel in a unit at its Rodeo, California refinery, the company confirmed to Reuters.
Phillips 66 started to process small volumes of soybean oil at the Rodeo refinery in the first quarter of 2021, the company said last year, part of a plan to become the largest producer of renewable fuels from animal fats and soybean oil in the United States.
The Bay Area Air Quality Management District (BAAQMD) issued a notice of violation in early June, saying the refiner began making renewable diesel without modifying the existing air permit that allows the same type of processing with petroleum feedstocks.
"Phillips 66 disagrees with the allegation but is working with the district to resolve the notice of violation," the company said in a statement, adding that it submitted an air permit modification request to the district.
BAAQMD, which regulates stationary sources of air pollution, has been investigating whether the company modified its petroleum refinery without getting required additional permits following prompts by environmental groups last year.
Environmental groups including the Natural Resources Defense Council alleged the company had not obtained the proper permits, which Phillips 66 disputed. But regulators told Phillips 66 in June they had indeed failed to apply for a permit for the use of alternative fuels in one of the refinery units, according to an email from the regulators seen by Reuters.
The refiner needs to provide additional information to determine whether the company needed a permit for changes to the unit, regulators said, adding that they will issue enforcement action once the investigation is concluded.
Contra Costa County approved plans for Phillips 66 and Marathon Petroleum (NYSE:MPC) to convert their Bay Area refineries to produce renewable fuels in early May.