Illusory Ulsd Phase-In Fear

Diesel Fuel News, Oct 1, 2001 by Jack Peckham

Washington, DC -- One of the U.S.'s biggest pipeline/terminal companies warns that fuel terminal storage capacity in many areas will be "insufficient" to allow for U.S. EPA's phase-in of 80% 15 ppm sulfur diesel (ULSD) alongside 20% of conventional (500 ppm sulfur) fuel.

So, refiners hoping to ship ULSD or else continue sales of 500 ppm sulfur fuel during EPA's 2006-2010 ULSD phase-in might not have available supply outlets, if pipeline and storage companies don't have the capacity to handle two highway diesel fuels. This bottle-neck could "severely restrict the number of terminals" where either ULSD or conventional diesel can be marketed.

Those words of warning came from Williams Energy's government affairs manager Bruce Heine at the Hart World Fuels Conference here.

Terminals face big capital cost hurdles to create extra storage for two diesel fuels, and have "limited blending options for interface" from the inevitable contamination of some ULSD shipments with higher-sulfur fuel, Heine said.

Additional headaches for terminal operators could arise from bio-diesel mandates, as Minnesota almost enacted in its last legislative session, Heine warned. Such a mandate would require "major retrofits" including winter-time heating and blending facilities that would pile additional costs on terminal operators, he said.

Such "boutique fuels" also contribute to the "severe erosion of fuel fungibility, bringing an increasing risk of ratable supply disruptions with each segmentation" of the fuels market, he said.

"We need Congress and EPA to act. Increasing boutique fuels will ultimately outstrip capacity of our distribution infrastructure. This situation is positioned to get worse due to current regulations and because more cities will have incentives to adopt their own special fuels," Heine warned.