ULSD fuel may strain logistics network

Jan. 1, 2005
WITH JUST 18 months until the Environ-mental Protection Agency's (EPA's) rule takes effect mandating ultra low sulfur diesel (ULSD) for truck engines,

WITH JUST 18 months until the Environ-mental Protection Agency's (EPA's) rule takes effect mandating ultra low sulfur diesel (ULSD) for truck engines, there's still a lot of work to do. Engine technology and diesel formulation may be the least of the challenges facing the trucking industry, though.

Looming over the industry is what could become a logistics nightmare. Refiners, pipeline operators, storage terminal companies, petroleum fleets, even the EPA acknowledge serious problems in the distribution infrastructure that could make it difficult to provide customers with fuel that does not exceed 15 parts per million sulfur content. At the very least, ultra low sulfur diesel will cost up to 60 cents more a gallon, with distribution contributing a hefty chunk of the price increase.

Mandated by the EPA as part of the next round of emission reductions for on-road heavy-duty diesel engines, the ULSD requirement 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.

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

Sulfur content in off-road diesel also will be ratcheted down over several years. Sulfur levels in off-road diesel will have to fall to 500 parts per million in 2007, from the currently allowed 3,000 parts per million. Off-road diesel with 15-ppm sulfur content becomes mandatory in 2010.

It's important to note that, for the purposes of the EPA rule, biodiesel designated as ULSD fuel for vehicle use must meet the 15-ppm sulfur content level. The same goes for kerosene that will be blended with ULSD fuel for winter diesel.

“In no case may fuel exceeding 15 ppm be used in diesel engines requiring 15-ppm fuel,” says Erv Pickell, EPA's air enforcement division. He was among the speakers at the Ultra-Low Sulfur Diesel Implementation Workshop that was held November 15 and 16, 2004, in New Orleans, Louisiana.

Adequate supplies

EPA officials say they are fully confident that enough 15-ppm diesel will be available to meet US on-road demand when the regulations take effect. They predict that 80% of the 114 refineries that are expected to be operational in 2010 will have installed the technology to produce ultra low sulfur diesel. Ninety-eight percent of the distillate coming out of those refineries will meet the 15-ppm spec.

However, the scenario may not be as rosy during the first few months after the highway ULSD rule takes effect. While overall supplies of 15-ppm diesel may be adequate, truck fleets could be hampered by spot shortages or even a lack of ULSD fuel in some parts of the United States.

The EPA's Chris McKenna acknowledged at the government/industry ULSD workshop that just five of the 114 US refineries currently are producing 15-ppm diesel and another seven refineries reportedly have the capability but have not initiated production.

McKenna also acknowledged that at least nine refineries have indicated plans to exit the on-road diesel fuel market. On the other hand, he expects six refineries that aren't currently in the highway diesel market to invest in the technology needed to make ULSD fuels.

Compliance credits

In an effort to encourage more refiners to join the program, EPA has taken steps to help smaller plants. Hardship provisions in the ULSD rule enable smaller refiners to delay 15-ppm compliance until 2010, and they can generate credits for any complying volume of 15-ppm fuel produced prior to 2010. The credits can be traded and sold nationwide.

Regardless of size, refiners producing ultra low sulfur diesel will face the same basic responsibilities and challenges. Among other requirements, they'll have to test every batch of 15-ppm fuel, and the samples must be retained for 30 days. Test records must be kept for five years.

Finally — and perhaps most importantly — they will have to put out a fuel with a sulfur content that is well below 15 ppm. Industry expects agree that refineries will have to produce ULSD fuel with a sulfur content of 6 to 8 ppm.

Why so low? That is the only way to ensure that ultra low sulfur diesel does not exceed 15-ppm sulfur when it reaches the truck fleet or other customer. ULSD fuel is extremely susceptible to capturing any other sulfur content it encounters during the distribution process.

Pipeline challenge

This will be a serious challenge for the pipeline industry, which transports more than 62% of the refined fuels consumed in the United States. Petroleum pipelines transport a wide range of fuels, some with sulfur levels as high as 5,000 ppm.

At least 10 pipeline operators have run tests over the past year to determine how much stray sulfur will be captured and to identify other issues that will hamper ULSD shipments. Unfortunately, the testing process was slowed due to limited ULSD supplies.

“Additional testing is critical to the success of this shift to ultra low sulfur diesel,” says Jim Scandola, Buckeye Pipe Line Company. “We have a short amount of time to develop programs we need to manage downstream contamination of ultra low sulfur diesel.”

Steps to limit the effects of contamination from stray sulfur in the pipeline process may include increasing ULSD batch sizes in anticipation of downgrades. Operators may elect not to transport products with high sulfur content or to stop moving low-sulfur diesel since this will be generated in-transit.

Interface problems

Interfaces are a concern, and pipeline operators will have to pay more attention to managing interface generation. Initial testing indicates that the interfaces for ULSD shipments will be significantly large, and this will increase operating costs for the pipeline companies.

Each diesel shipment, or batch, has an interface at either end that contains a mixture of the diesel and other products being shipped ahead and behind. Turbulent flow helps in minimizing the interface. In addition, pipeline operators have become adept at calculating optimum shipment sequences to control contamination. Current procedures may not be applicable for ULSD fuels, though.

“We found in our tests that, between the interface zones, the sulfur level does not appear to increase in ULSD during pipeline shipment,” says Walter Stasioski, BP Pipelines North America. “However, within the interface, the sulfur will begin to change before, and continue to change after, shifts in specific gravity become detectible.

“To protect the ULSD batch, we'll have to make cuts in the shipment that are more conservative than those based on specific gravity. The sulfur interface will be 50% to 100% larger than the specific gravity interface. The larger interface will result in more downgrade to low sulfur diesel, high sulfur diesel, or transmix.

“Using current field instruments to identify the gravity interface between two distillates with similar gravities is high risk. Current sulfur analysis equipment is slow to react and difficult to keep in calibration.”

Multiple transfers

Yet another complication comes from the fact that many shipments are transferred through multiple pipelines, intermediate tank farms, and other modes of transportation before reaching the consumer. The problem is especially acute on the East Coast and in the Midwest.

Sulfur increase in a ULSD shipment can occur with each handoff. Testing indicates that the best case is a one- to two-ppm increase in sulfur with each transition — from one pipeline to another or to a different mode.

“That's the best we can do right now,” Scandola says. “The more hand-offs we have, the worse it gets. Keeping sulfur away from ULSD shipments is a significant challenge in a complex distribution system.”

Even within a single pipeline system, various factors can contribute to sulfur contamination in ULSD fuel shipments. Contamination can be caused by valves, manifolds, pumps, deadleg piping, drain lines, flush lines, relief lines, meter, provers, filter vessels, and sumps.

“Pipeline operators may need to make significant investments for infrastructure upgrade to prevent ULSD contamination,” Scandola says. “More preventive maintenance will be needed. They should isolate and dedicate lines and equipment wherever possible. Operating procedure modifications may be necessary.”

Additive contamination

Additives in ULSD fuel may pose contamination problems for other products. Colonial Pipeline announced October 15, 2004, that it would not allow ULSD to be shipped with lubricity additives. Most of the other pipelines have now followed suit.

There are indications that the ULSD lubricity additives could contaminate jet fuel shipments. Lubricity additives are needed in ULSD fuel to compensate for the low amount of sulfur, which acts as a natural lubricant in diesel. Poor lubricity means higher wear in truck engine components.

The plan now is to inject lubricity and other additives at the petroleum terminals. Terminals also will handle various blending operations, such as mixing ULSD with biodiesel and making winter diesel blends with kerosene.

Certain blending activities could result in the terminal being classified as a refiner under the EPA rules, and that will bring increased reporting and record keeping requirements. The refiner classification also will go to terminals that are the receiving point for imported fuels. Bulk plants operated by petroleum marketers can be designated as refiners for the same reasons.

For terminal and bulk plant operators, one of the biggest steps will be developing a plan for handling ULSD fuel to protect it from contamination from other refined petroleum products, most of which have significant sulfur content. The overall product range includes jet/kerosene, 500-ppm diesel, high-sulfur diesel for locomotive and marine use, heating oil, and all of the gasoline grades.

The chance of accidental sulfur contamination with 15-ppm diesel (especially in the first year) is so great that terminals are being allowed to downgrade 20% of the 15-ppm product to be sold in a range above 15 ppm but below 500 ppm for highway purposes. The 500-ppm diesel will remain in the marketplace until 2010.

Terminal operators will have to decide whether they want to handle both 15 ppm and 500-ppm diesel in the same facility. Options include setting up segregated areas at a terminal or handling ULSD fuel at a dedicated facility. Cost and space will be the determining factors.

“Most terminals are limited by their infrastructure,” says Ed Jacoby, Premcor Refining Group. “They will find it extremely difficult to accommodate two highway diesel fuels. Management will have to consider overall capacity (tankage, piping, number of arms at the loading rack). Consideration must be given to the potential for contamination of the 15-ppm diesel due to contact with 500-ppm diesel and from products with even higher sulfur content.

“In 1993, when the industry originally converted from one to two diesel fuels, it took approximately one year to adjust and make the systems work properly. We had more flexibility with the 500 ppm standard than we do with the shift to 15-ppm diesel. This time, the transition will be more difficult and complex. There is very little room for error.”

ULSD dedication

Terminal operators and petroleum marketers with several storage facilities should give serious consideration to dedicating specific terminals to highway diesel or to just 15 ppm diesel. Terminals also may opt to carry just one highway diesel fuel.

Sprague Energy, Portsmouth, New Hampshire, already has some of the most extensive experience with ULSD fuel, and chose a segregated approach. The company has been distributing ULSD fuel from several East Coast terminals since 2000.

“We set up clear goals from the outset,” says John Didier, Sprague Energy. “We wanted to maintain product integrity throughout the supply chain, meet our contractual obligations with our customers, develop operational efficiencies, and meet the guidelines set by OEM manufacturers.

“Based on our research at the time, we determined that it would be difficult to use common infrastructure — pipelines, barges, piping, storage tanks, and tank trucks. Our decision was to segregate the ULSD fuel from the dock to the loading rack.”

Major investment

The capital investment was substantial. In addition to the cost, the project also took significant time, ranging from a few weeks to months. “We believe the investment in time and money was worth it,” Didier says. “The project was successful. Operations have worked out extremely well, and we have experienced no contaminations.”

He cautions that a terminal choosing to rely on a common infrastructure must anticipate contamination and downgrade of product. Management must factor in the cost of transporting downgraded fuel if storage for that fuel is offsite. Terminals may not be able to meet obligations to customers if too much fuel is contaminated.

Even with a common infrastructure, terminals still will need to upgrade equipment and systems. At the very least, storage tanks will have to be dedicated to ULSD fuel. New tankage may have to be constructed, and that is a serious consideration since the 500-ppm highway diesel will be out of the market in 2010. The extra tanks may end up sitting idle in just five years.

When existing storage tanks are used for ULSD fuel, they must be completely purged of higher sulfur product. They'll have to be drained and flushed with one to two batches of 15-ppm diesel.

Terminal evaluation

Terminal management needs to make a thorough evaluation of the facility. They need to search out piping deadleg valves, pumps, and other areas where small volumes of higher sulfur product may have collected. Piping manifolds at the terminals may have to be reconfigured.

New operating procedures may be needed. Terminals will have to regularly flush out the product handling systems in the future. This includes hoses and piping. Some terminal operators may even have to require that barges be washed every time fuel with different sulfur content is carried.

Finally, terminals need to focus on careful testing of the 15 ppm fuel as it arrives from pipeline, barge, or whatever source. Jacoby points out that when cuts are made from a pipeline shipment, there is no obvious way to determine whether the product is in spec. No accurate on-site testing device is available today, which means it will take longer to get test results.

Increased testing will be a significant cost factor. In addition, it will delay movement of product to the loading rack. All of that must be factored into the terminal operating plan.

There is no question that the challenges of 15-ppm diesel will be overcome as they have in the past. It simply takes coordination throughout the supply chain and good planning.


Logistics 101 for 15-ppm diesel

The shift to 15-ppm diesel that begins in mid-2006 will present major distribution challenges for all of the players in the fuels supply chain. Part One of this special report in Modern Bulk Transporter examines what's ahead for the refiners, pipelines, storage terminals, and bulk plants.

Stay tuned for Part 2

Coming up in the February issue of Modern Bulk Transporter is Part 2 of our special report on how 15-ppm diesel will impact the fuels supply chain. We'll look at distribution and product handling preparations that must be taken by petroleum haulers, truck stops, and trucking companies. Those preparations will be crucial to ensuring a reliable supply of 15-ppm diesel can be guaranteed when the 2007-model-year trucks begin reaching the fleets.

About the Author

Charles Wilson

Charles E. Wilson has spent 20 years covering the tank truck, tank container, and storage terminal industries throughout North, South, and Central America. He has been editor of Bulk Transporter since 1989. Prior to that, Wilson was managing editor of Bulk Transporter and Refrigerated Transporter and associate editor of Trailer/Body Builders. Before joining the three publications in Houston TX, he wrote for various food industry trade publications in other parts of the country. Wilson has a bachelor's degree in journalism from the University of Kansas and served three years in the U.S. Army.