Diesel supply woes remain major industry concern

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, Nov. 19 -- Industry continues to voice strong concerns that US environmental regulators are not addressing potential supply problems associated with upcoming diesel fuel standards.

"We are still concerned about the supply impacts of the on-road sulfur rule," Ed Murphy, American Petroleum Institute downstream manager told OGJ Friday. "Supplies could turn out to be inadequate."

But Murphy rejected charges by environmental groups and state air-pollution regulators that industry wants to relax or delay the sulfur reduction rules.

"We are not trying to change the 2006 date. Nor are we trying to change the 15 ppm (sulfur limit) level. We're committed (to the premise) that the trucks that need that fuel (should) have it. But we want (the Environmental Protection Agency) to consider the overall supply picture."

To that end, API and five other industry trade associations are holding a workshop on supply and distribution issues in Houston Nov. 20-21. US Environmental Protection Agency officials will attempt to answer questions but will not be receiving formal comments on potential changes to either the on-road or off-road rules.

Last month, the EPA formally presented a clean diesel review panel report that gave an update on technical advances being made to comply with the on-road, or "highway," rule. API and the National Petrochemical and Refiners Association endorsed the work of the independent panel, whose members determined that technology issues would not prevent regulators from moving forward with the rule. The panel did acknowledge some refiners' concerns over the impact the rule may have on distribution, but the majority of its members concluded those issues were outside the scope of the panel's charter (OGJ, Nov. 11, 2002, p. 7).

Since that meeting, industry officials said they are still worried about diesel standards: both the highway diesel fuel standard, due to begin implementation in mid-2006, and a yet-to-be published non-road standard. EPA, in conjunction with the White House's Office of Management and Budget plans to offer an official proposal on non-road engine and fuels in first quarter 2003; EPA originally had hoped to provide a document to industry before yearend. The White House is said to favor a model that would allow "the potential use of market-based averaging, banking, and trading programs" that might include permission to trade emissions-reduction credits between off-road and highway engines (OGJ Online, May 31, 2002).

Non-road considerations
On non-road diesel, environmental groups are monitoring what they believe to be EPA'0s desire to consider a range of options. EPA's primary option currently would require all non-road diesel to meet a 15 ppm sulfur limit by mid-2008. Industry, meanwhile, wants the agency to consider an alternative two-step process: 500 ppm in mid-2007, followed by 15 ppm by 2010.

In an Oct. 30 notice to small business owners, the agency acknowledged it was mulling the industry option. It also acknowledged efforts with OMB to consider a credit-trading program under a two-step standard. Industry officials say the timing and implementation of the non-road rule will significantly impact how industry can meet challenges associates with highway diesel.

"One of our concerns is that we need to get this off-road rule settled quickly," said Murphy.

Meanwhile, environmentalists and states want a more aggressive timetable than favored by industry, although they say they are willing to work with fellow stakeholders on fuel supply worries.

"Non-road diesel emissions cause massive public health problems. That's why environmental and health groups and state and local officials have urged EPA to set tough non-road diesel fuel and emission standards on a timetable similar to those for highway diesel fuel and engines," said Frank O'Donnell, executive director of the Clean Air Trust. "However, the groups do want to work cooperatively with industry to ensure a strong program."

Highway fuel
On highway fuel standards, there is support by some policymakers within the Department of Energy to dramatically reduce diesel fuel volumes that meet the 15 ppm "ultra low" sulfur standard from 80% to 40% of total production by mid-2006. But that position has not been officially supported by the White House and is vehemently opposed by EPA. Fuel suppliers also are worried that changing volume levels only 3 years before the rule begins would not give truck stops or service stations the lead time needed to install additional storage tanks and pumps that likely would be needed to separate high-sulfur and low-sulfur fuels.

"We've not made that recommendation," said API's Murphy. "Attention should have been paid to that 5 years ago by the agency."

At its Oct. 30 public meeting with EPA on this issue, API offered several recommendations that it maintains the government should take to protect consumers from potential supply problems. One key item would be reconsidering the 20% downgrade limit from ultra-low-sulfur diesel to low-sulfur diesel fuel, which is 500 ppm.

"Because of the tight sulfur limit on ultra-low sulfur diesel fuel, interface volumes will increase. With the increased interface volumes and accidental contamination, the 20% limit may not be sufficiently flexible to allow suppliers, especially at the end of the supply lines, to meet the limit," API said. "Moreover kerosine that is designated as No. 1 ultra-low sulfur diesel and used for winterization blending should not be subject to a downgrading limitation if used to winterize 500 ppm S max diesel."

Another key item of interest to industry is the rule's sulfur credit-trading system. API says EPA should modify the rule to allow an adequate credit market to be formed and "therefore permit the 80/20 ultra-low sulfur diesel to low-sulfur diesel ratio to be achieved and maximize highway diesel production potential. It is important that the credit-trading system encourage the early production of ultra-low diesel to ensure that adequate supplies of both ultra-low sulfur diesel and low-sulfur diesel will be available in mid-2006," API said.

Specifically, API wants EPA to remove the Petroleum Administration for Defense Districts restrictions from the credit-trading system, saying it does very little to ensure widespread distribution of ultra-low sulfur diesel.

"Given the importance of a workable credit-trading system and adequate supply, especially in mid-2006 and shortly thereafter, it is best to err on the side of ensuring that the credit-trading system will work," API said.

Related Articles

BLM approves ROW for Elko gas pipeline expansion project

07/07/2015 The US Bureau of Land Management’s Tuscarora, Nev., field office signed a decision record approving a right-of-way for Paiute Pipeline Co.’s (PPC) ...

Croatian refinery lets contract for upgrading project

07/07/2015 Croatia’s INA Industrija Nafte DD (INA) has let a contract to Findland’s Neste Jacobs Oy to provide project management consultancy (PMC) for a resi...

Obama urged by IPAA president to lift ban on US crude exports

07/07/2015 Commending the administration for its actions allowing some condensate to be exported as a petroleum product, Independent Petroleum Association of ...

AER shuts in 16 Murphy Oil sites in Peace River region for noncompliance

07/07/2015 Alberta Energy Regulator said it has shut in or partially shut in 16 sites operated by Murphy Oil Co. Ltd. in the Peace River region. The sites wer...

WAFWA: Aerial survey finds lesser prairie chicken population grew

07/06/2015 A recent range-wide aerial survey found the lesser prairie chicken population rose 25% from 2014 to 2015, the Western Association of Fish & Wil...

South Africa’s Enref refinery due maintenance

07/06/2015 Engen Petroleum Ltd. will shut down its 125,000-b/d Enref refinery in Durban, South Africa, for planned maintenance beginning on July 9, the compan...

CERI: Energy, operational efficiencies possible in Canadian oil, gas

07/06/2015 Measures can be taken by operators in the expanding resource-intensive Canadian oil and gas sector to improve both energy efficiency and operationa...

Woodside lets contracts for Browse LNG project

07/06/2015 Woodside Petroleum Ltd. has let more contracts for the Browse floating LNG project offshore Western Australia. The contracts, awarded to a Technip-...

Macondo settlement seen ‘positive’ for BP

07/06/2015 BP Exploration & Production Inc.’s recent agreement to settle federal and state claims related to the 2010 Macondo blowout and spill improves t...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts


Driving Growth and Efficiency with Deep Insights into Operational Data

When Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST



On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected