Ultra low sulfur fuel may strain logistics network

WITH just 18 months until the Environmental Protection Agency's rule takes effect mandating ultra low sulfur diesel 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 per 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 heavy-duty highway diesel engines, the ultra low sulfur requirement will be phased in between June 2006 (80% of fuel sold) and 2010 (100%).

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

Biodiesel covered

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

“In no case may fuel exceeding 15 ppm be used in diesel engines requiring 15-ppm fuel,” said 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.

EPA officials say they are fully confident that enough 15-ppm diesel will be available to meet US highway 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.

Low refinery capacity

However, the scenario may not be as rosy during the first few months after the highway ultra low sulfur 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 ultra low sulfur fuel in some parts of the United States.

The EPA's Chris McKenna acknowledged at the November 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 highway 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 ultra low sulfur fuels.

In an effort to encourage more refiners to join the program, EPA has taken steps to help smaller plants. Hardship provisions in the ultra low sulfur 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.

Maintaining low sulfur content

Finally — and perhaps most importantly — they will have to put out a fuel with a sulfur content that is well below 15 ppm. Industry experts agree that refineries will have to produce fuel with a sulfur content of only 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. Ultra low sulfur fuel is extremely susceptible to capturing any other sulfur content it encounters during the distribution process.

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 ultra low sulfur shipments. Unfortunately, the testing process was slowed due to limited ultra low sulfur 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.”

Limiting contamination

Steps to limit the effects of contamination from stray sulfur in the pipeline process may include increasing ultra low sulfur 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.

Interfaces are a concern, and pipeline operators will have to pay more attention to managing interface generation. Initial testing indicates that the interfaces for ultra low sulfur 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 ultra low sulfur fuels, though.

“We found in our tests that, between the interface zones, the sulfur level does not appear to increase during pipeline shipment,” says Walter Stasioski, BP Pipelines North America.

Multiple contamination points

Yet another complication comes from the many shipments that 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 an ultra low sulfur 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.

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

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

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

Certain blending activities could result in a 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.

New handling plans

One of the biggest steps will be developing a plan for handling ultra low sulfur fuel to protect it from contamination from other refined 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 ultra low sulfur fuel at a dedicated facility. Cost and space will be the determining factors.

Pipeline 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 one highway diesel fuel.

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 ultra low sulfur fuel. New tanks 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 could end up sitting idle after just five years.

When existing storage tanks are used for ultra low sulfur 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.

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.

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