ULSD urgency

April 1, 2006
THE NATIONAL Tank Truck Carriers (NTTC) and the Petroleum Marketers Association of America (PMAA), along with several other associations, met with Senate

THE NATIONAL Tank Truck Carriers (NTTC) and the Petroleum Marketers Association of America (PMAA), along with several other associations, met with Senate Energy Committee staff recently in an effort to increase understanding on the looming mandate regarding ultra low sulfur diesel (ULSD) and its impact on the industry.

“While we are not specifically seeking legislative relief, we are making an effort to keep congressional members and staff properly informed about impacts of this major rulemaking on matters that the Environmental Protection Agency (EPA) did not seem to take into account,” says Tom Lynch, NTTC vice-president and general counsel. “Practices like dedicated equipment, if necessary, could foreseeably lead to increased transportation costs and higher prices at the pump.”

Beginning in June of this year, at least 80% of the diesel manufactured by refiners will be ULSD, with the remaining produced as LSD. The retail compliance deadline is October 15, 2006.

A key issue is switchloading gasoline and ULSD, according to NTTC. Carriers had concluded that proper delivery of gasoline to the retail outlet would not be a problem for toploading ULSD. However, the consensus that seems to be evolving among shippers is that ULSD could be loaded into a tank trailer compartment which held gasoline on the previous load only if the compartment is “drained dry.” That would require the trailer's internal valve to be opened and any heel drained into a bucket or other collection system at the loading rack.

However, very few loading racks are willing to allow the practice. Nor will they accept a tank that is simply “empty” (product delivered as completely as possible at the retail outlet.) Thus, by default, they will be asking for dedicated equipment, according to NTTC.

PMAA said that the transition to ultra low sulfur diesel (ULSD) is by far the most challenging transition the petroleum industry has ever faced.

“While until now, much of the focus has been on producing the new product, major challenges remain to be dealt with below the rack by the trucking industry, petroleum marketers, and retailers,” PMAA said.

Because ULSD is prone to pick up contamination as it travels through the distribution system, refiners are planning to produce ULSD at between 8 parts per million (ppm) to 10 ppm. Most terminal operators are expecting that by the time it reaches the rack to be loaded into trucks, it will likely be at 15 ppm.

“This leaves no margin for error in transporting compliant product to retail locations,” PMAA said.

The group also expressed concern that should there be regional supply disruptions such as those that occurred with last summer's hurricanes, EPA will not have as much flexibility to grant diesel sulfur waivers since new diesel engines are required to use ULSD.

PMAA said that possible supply problems could occur with either ULSD or low sulfur diesel (LSD) in certain geographic areas, consumer acceptance of ULSD, and price differentials between the two products driving consumers to one product, creating temporary shortages. Also, the rule's downgrading provisions limit the flexibility of retailers to switch back and forth between fuels based on availability.

PMAA recently issued an updated memo on ULSD. For a copy, marketers should contact their state associations.