What's ahead in 2003: critical decisions on highway, non-road, light- and heavy-duty diesel

Diesel Fuel News, Dec 23, 2002 by Jack Peckham

Distillate refiners, diesel engine makers, vehicle makers, fuel users and environmental regulators will barely catch their breath as a headlong rush toward near-zero-emissions limits and near-zero-sulfur diesel fuels continues in 2003.

U.S. EPA this year will unveil its new push for a 15-ppm sulfur limit on non-road diesel to match its highway 2006 diesel rules (see Diesel Fuel News 11/25/02, p1), and Europe is likewise heading toward a 10-ppm sulfur limit on both highway and non-road fuels, phasing-in between 2005-2009 (see below).

Unlike the U.S., Europe is actually encouraging tax incentives for cleaner diesel fuels (whether from crude oil or other feedstocks). Only "small" refiners in the U.S. get any deadline breaks for desulfurization, although U.S. Rep. John Dingell (D-Mich.) intends to push a bill offering refiner desulfurization tax credits in 2003.

Major U.S. refiners often express great skepticism about "clean-fuels" tax breaks, since they suspect any "break" likely would be offset by some retaliatory tax elsewhere on the corporation (in part due to federal balanced-budget demands). These refiners also shrink from "corporate welfare" accusations, and attack subsidies for certain "politically favored" fuel producers. So, it's more likely they'd favor liberalized emissions trading and/or sulfur credits trading incentives, even though these may be fairly small compared to tax breaks.

Meantime, refiners, pipelines, terminals, fuel distributors and major end-users have to figure out how to minimize potentially huge ULSD distribution problems, hopefully with more test programs over the coming years.

End-users and distributors also need to give refiners a realistic picture of actual required ULSD demand, since distributors might lack storage space for two grades of highway or two grades of non-road distillate, let alone jet fuel.

The net result of such a market assessment might indicate the disappearance of 500-ppm sulfur diesel much earlier than 2010, except in certain areas or perhaps only as an outlet for "downgraded" 15-ppm sulfur fuel accidentally contaminated by higher-sulfur jet-fuel or marine/locomotive fuel.

Thus, refiner investment and capital planning for 2006 might have to expand far beyond notional highway ULSD demand expectations, if pipelines, terminals and large distributors tell refiners they simply can't handle yet another grade of diesel and kero-jet fuels.

Whether lower-cost refinery desulfurization technology can be commercially proven and installed prior to most refiners' desulfurization investment and construction deadlines for highway/non-road has yet to be shown.

Meantime, better engine/catalyst technology marches on, with new systems matching or surpassing alternatives, according to numerous test programs and studies reported in Diesel Fuel News over this past year.

A promising prototype is U.S. EPA's compact, combined trap for nitrogen oxides ([NO.sub.x]) and particulate matter (PM) unveiled at Society of Automotive Engineers conference this fall (see Diesel Fuel News 11/11/02, p1). If further development of such a system proves durability, cost-efficiency and practicality when used with commercial ULSD fuels, then regulatory objections to diesel should start to disappear, along with the hyperbolic claims from "clean" competitors such as gaseous fuels.

Whether such "clean" technology can evolve and then profitably conquer the last big "virgin" market -- light-duty diesels in North America -- is another big question.

Engine makers can only hope that regulators give them the required fuels to match the required emissions limits, plus enough R&D time to adapt ultra-clean highway diesel technology to non-road applications.

Marrying emissions-compliant [NO.sub.x] and PM devices together, cutting the platinum group metal (PGM) loadings to hit cost targets, and proving 435,000 miles minimum durability remain huge challenges that have only started to be addressed. Schemes to create the proper catalyst temperature windows for [NO.sub.x]/PM reduction also will require super-smart engineering to minimize fuel-economy penalty.

Elsewhere around the world, clean-diesel faces stiff competition from government schemes to mandate compressed natural gas (CNG) or other alternatives to diesel.

This comes in part as a reaction to perceived foot-dragging by refiners to desulfurize fuels, along with widespread ignorance among government regulators that the "alternatives" aren't nearly as "clean" (or reliable) as claimed.

Studies show that ULSD/catalyzed systems can match or beat CNG and alternatives -- even on [NO.sub.x] emissions -- due to highly variable CNG field performance.