KANSAS REFINERY AGREES TO BRING TWO FACILITIES INTO COMPLIANCE
WITH FEDERAL AND STATE ENVIRONMENTAL LAWS

Settlement Nets A Reduction Of More Than 1750 Tons Per Year In Pollution

WASHINGTON, D.C. - The Department of Justice, the Environmental Protection Agency (EPA), and the Kansas Department of Health and Environment (KDHE) announced today that Coffeyville Resources Refining and Marketing, LLC, and Coffeyville Resources Terminal, LLC, have agreed to bring two refining facilities formerly owned by Farmland Industries into compliance with federal and state environmental laws. Today’s settlement will result in a total reduction of more than 1750 tons per year in pollution and ensure cleanup of hazardous waste at the refinery and the terminal. The consent decree, which was filed in the U.S. District Court for the District of Kansas, addresses the Farmland refinery in Coffeyville, Kansas, and the Farmland terminal in Phillipsburg, Kansas.

According to EPA and KDHE, the refinery has been in violation of the federal Clean Air Act and state air pollution control regulations since the 1990's because Farmland failed to install the appropriate emissions controls or best available control technology (BACT) when it increased the refinery’s capacity from 71,000 to 125,000 barrels per day. The two Coffeyville Resources entities were created for the purpose of buying the troubled refinery and terminal, among other assets then owned by Farmland. On March 3, 2004 Farmland’s assets were sold to Coffeyville Resources under the supervision of the federal bankruptcy court.

“This consent decree represents an excellent mechanism for reducing this refinery’s air pollution by requiring Coffeyville to use state of the art emissions controls,” said Tom Sansonetti, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “The combined effort of the federal and state environmental agencies in this case is a laudable example of how the federal/state partnership can effectively address difficult environmental challenges.”

By entering into the consent decree, Coffeyville Resources acknowledges that the refinery will require significant capital improvements in order to comply with state and federal regulations governing the refinery’s air emissions. The consent decree requires Coffeyville Resources to take interim steps to reduce the refinery’s air pollution and install the BACT by the year 2010. EPA estimates that by 2010 the refinery improvements will reduce emissions of nitrogen oxides (NOx) by approximately 553 tons per year, and sulfur dioxide (SO2) emissions by 1200 tons per year.

The consent decree will also require the refinery to reduce its emissions of volatile organic compounds (VOCs), particulate matter, and benzene. EPA estimates that the refinery improvements will cost approximately $22 million. Coffeyville Resources also assumes Farmland’s hazardous waste cleanup responsibilities under the Resource Conservation and Recovery Act (RCRA). The cost of hazardous waste cleanup could reach $15 million.

“This settlement brings the company into compliance by requiring use of state of the art emission controls resulting in significant reductions in the refinery’s air pollution and also ensures hazardous waste cleanup,” said Jim Gulliford, EPA’s Region 7 Administrator. “The local community will gain cleaner air and a safer environment.”

EPA notified Farmland of its intent to pursue formal enforcement action by sending to Farmland a Clean Air Act Notice of Violation in 2002. Soon after, Farmland entered into negotiations with Justice Department, EPA, and KDHE. The negotiations were interrupted when Farmland filed a petition under Chapter 11 of the bankruptcy code. Coffeyville Resources offered to buy Farmland’s facilities, and indicated that it was willing to invest the necessary sums to bring the refinery into compliance with the Clean Air Act and state regulations governing air pollution. Coffeyville Resources also was willing to assume Farmland’s responsibilities under the RCRA for cleaning up releases of hazardous waste at Farmland’s refinery and terminal. Although Farmland is responsible for the Clean Air Act violations and spills of hazardous waste, Coffeyville Resources became legally responsible for the violations and spills by virtue of acquiring the refinery and terminal.

The consent decree will require Coffeyville Resources to meet a schedule for bringing the refinery into compliance, while providing Coffeyville Resources with reasonable assurance that it will not be penalized for Farmland’s violations of the law.

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