What's likely, unlikely to happen from U.S. EPA's non-road diesel rule

Diesel Fuel News, April 23, 2003 by Jack Peckham

Washington, DC -- U.S. EPA touts several "flexible" provisions in its long-awaited, newly unveiled non-road diesel fuel/emissions rule.

But it's likely that many will have a hard time taking advantage of some of the "flexibilities," as (for example) market forces and distribution logistics seem likely to force broad distillate desulfurization years in advance of legal deadlines. Here's what EPA proposes, in "two steps:" for delivering big public health benefits but also for including flexibility such as the "two-step" fuel desulfurization scheme phasing-in between 2007-2014.

Refiner Class     500-ppm Sulfur Deadline  15-ppm *

'Small' Refiners         6/1/2010          6/12014
'Non-Small'              6/1/2007          6/1/2010

* No 15-ppm sulfur deadline yet for locomotive/marine, but potential
application around 2011-2012

EPA Administrator Christie Whitman praised the proposed rule not only for delivering big public health benefits but also for including flexibility such as the "two-step" fuel desulfurization scheme phasing-in between 2007-2014.

What's unlikely: A "one-step" mandate to desulfurize non-road diesel in 2008, first proposed in an EPA small-business memo (see Diesel Fuel News 11/25/02, p1). That now looks dead, relegated to a "request for comment" in some 2,000 pages of mind-numbing documentation EPA just released (including preamble, regulatory language and "regulatory impact analysis" sections).

Instead, EPA now proposes that "small" refiners of up to 155,000 barrels/day and up to 1,500 employees could continue producing today's high-sulfur non-road diesel (typically over 3,000-ppm sulfur) until June 1, 2010, when this group must slash non-road sulfur to 500-ppm maximum. (California refiners already produce such low-sulfur fuel for both non-road and highway, under separate rules).

By June 1, 2014, all these "small refiners" must desulfurize non-road diesel to a 15-ppm sulfur maximum (ultra-low sulfur diesel, ULSD), under EPA's proposed rule.

What's likely: In reality, refiners (including "small" refiners) in markets where pipelines and terminals will only accept one grade of diesel fuel will have to switch to a 15-ppm sulfur fuel starting when EPA's highway diesel rules take effect in 2006. Hence the "conversion" of most non-road (and highway) diesel fuel to ULSD likely will occur long before 2014 -- and most locomotive/marine fuels seem likely to be desulfurized in this process, too, EPA now concedes.

What's unlikely: While EPA proposes to allow refiners "voluntarily" to dye-and-segregate 500-ppm non-road diesel from 500-ppm highway diesel at refinery gate during the 2006-2010 ULSD phase-in period, this would only create more shipping/storage segregation problems for yet another grade of distillate.

More likely: Refiners will (as EPA proposes) instead declare a "baseline" non-road production average and then ship both highway and non-road 500-ppm diesel in a fungible batch, only splitting these later at distribution terminals. During this ULSD phase-in period, some high-sulfur (roughly 3,000-ppm) diesel still will be commingled with this new 500-ppm non-road fuel under "small" refiner derogations (until 2010) and some high-sulfur crdits trading schemes. But heating oil will be dyed yellow at refinery gate, between 2006-2010.

Post-2007 "clean" engines that are EPA-certified only if running on lower-sulfur fuels cannot use high-sulfur fuels merely because "small" refiners supply them, EPA's rule points out. Actually, EPA says it wants to encourage end-users to switch to low-sulfur fuels in any case, for both pre- and post-2007 engines. Given the very strict limitations on high-sulfur fuel distribution, EPA seems likely to get its wish.

Meantime, for all but the "small" refiners, the first mandated 500-ppm step-limit for non-road starts at the refinery gate on June 1, 2007. These "non-small" refiners later must convert non-road diesel to 15-ppm ultra-low sulfur diesel (ULSD) by June 1, 2010.

Only locomotive and marine diesel are legally exempt from the 15-ppm ULSD limit, at least until EPA decides to move forward with the next phase of locomotive/marine desulfurization and emissions limits.

"We are seeking comment on and seriously considering applying the 15-ppm cap to locomotive and marine diesel fuel," EPA says -- if not in 2010, then perhaps around 2011-2012. That short delay would ensure that refiners overcome any initial problems with their non-road ULSD conversion in 2010.

EPA promises to propose new locomotive/marine diesel emissions rules by Spring 2004, then finalize these rules by 2007, to take effect between 2010-2012.

Until then, locomotive/marine legally will be 500-ppm sulfur starting in 2007 (larger refiners) or 2010 (small refiners). Engines certified to run on cleaner fuels would have to use such fuels, no matter if "small" refiners supply them.

For now, EPA isn't mandating desulfurization of heating oil and jet fuel, even though these fuels can be nearly identical to high-way/non-road diesel fuel today. But for practical purposes, desulfurization of these grades may become widespread because of pipeline/terminal shipping-storage limitations on multiple distillates, and multiple blending/multiple end-use applications of these grades. Perhaps only Colonial and Plantation Pipelines shipping heating oil from Gulf Coast to Northeast states will be able to justify continuing segregated shipping of high-sulfur heating oil, EPA suggests.