Complex situation

TERMINALS, bulk plants, pipelines, carriers, and retail outlets face a complex situation as ultra low sulfur diesel (ULSD) enters the marketplace, according to information presented at the 2006 Atlantic Region Energy Expo in Atlantic City in May.

Holly Tuminello of the Petroleum Marketers Association of America said the transition from low sulfur diesel to ULSD “is by far the most challenging issue our industry has faced.”

She was joined in the ULSD discussion by Buster Brown of Colonial Pipeline and David Doane of the Independent Liquid Terminals Association.

The Environmental Protection Agency (EPA) requirements mandating the use of ULSD began in June 2006. The requirements will be phased in between June 2006 (80% of fuel sold) and 2010 (100%). Off-road equipment has five years until it must comply with the ULSD requirement.

EPA's 80/20 rule for on-road diesel fuel will allow 20% of the diesel produced in 2006 to have a sulfur content of 500 parts per million, while 80% must meet the new 15 ppm level. The 500-ppm fuel will remain available in diminishing quantities until 2010.

Tuminello noted that just 2.7 gallons of jet fuel, four gallons of heating oil, or 16 gallons of low sulfur diesel could contaminate 5,000 gallons of ULSD. It would push sulfur content in ULSD beyond the 15-ppm maximum.

Brown said that pipelines were not designed to handle products such as ULSD that have to be segregated because of the problems. Colonial Pipeline will not be handling ULSD in its network's northeastern sector.

“We found some significant issues with contamination in that sector,” he said, noting that the region has complex distribution systems that allow more potential for sulfur contamination.

In the areas where the company will be handling ULSD, it will test the product on every delivery, at least in the beginning. Colonial will not handle ULSD with lubricity additives because the product could impact jet fuel, Brown said.

Doane said that liquid bulk terminals have been preparing for the ULSD by resolving contamination issues at terminal points, developing testing procedures, and learning EPA record-keeping requirements.

At the same time, he said the EPA rule may be fatally flawed and may cause significant fuel price hikes and supply bottlenecks. (EPA estimated a five-cents-per-gallon increase in the price to manufacture ULSD, but did not project a price at the pump.)

If distribution of ULSD fails to satisfy market demands, industry is likely to receive the blame. Doane pointed out that EPA failed to consider downstream distribution in its rulemaking and instead focused on refining. In the event the distribution system bogs down, industry officials will have to contact their congressional representatives in an effort to brief them on the distribution issues associated with the rule, Doane added.

Another problem lies in sulfur testing procedures that may not be reliable or efficient. “Testing is critical for reducing liability,” he added.

Brown said the greatest risk for ULSD contamination will occur at the point from the pipeline to the tank farms and out again into the pipelines.

In addition to contamination by stray sulfur, there is the problem of disposing transmix and other off-spec products. The fuel can be downgraded to low sulfur diesel (500 ppm) at retail locations, but bulk plants can only downgrade to 20% of their capacity. If the product is downgraded, transfer documents must include the information. Documents and testing data must be retained for five years.

Doane urged carriers to work with the terminals they serve in order to avoid more problems. However, he pointed out that carriers choosing to dedicate tank trailers for ULSD will ease the situation.

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