Wednesday, October 05, 2005

Barton legislation could harm plan to clean up diesel

Energy bill may cause problems for ultra-low sulfur diesel
Alex Kaplun, E&E Daily reporter

A provision in the House energy bill that would significantly decrease the number of fuel blends nationwide could hamper the implementation of ultra-low sulfur diesel standards next year, according to industry officials and environmentalists.

The bill, which hits the House floor later this week, includes a provision that would limit the number of diesel fuel blends to one federal diesel fuel and one "alternative" diesel fuel. But such a change would contradict the existing U.S. EPA program for the phase-in of ultra-low sulfur diesel, which calls for the use of at least three different types of diesel fuels over the next five years.

Industry sources and environmentalists say it is unclear at this point exactly what the language would mean for the program, but some said that if the bill becomes law, it could force EPA, refineries and diesel engine manufacturers to significantly alter implementation plans.

"We don't really know what that [language] would mean, but we do know there is a conflict between this bill and what the program is today," said Frank O'Donnell, head of Clean Air Watch. "They might have to go back to the drawing board."

Starting in Oct. 15, 2006, the majority of diesel producers will be required to provide a fuel for onroad engines that meets the 15 parts per million (ppm) sulfur standard. But about 20 percent of refineries will be allowed to produce diesel fuel that stays at the current standard of 500 ppm until May 2010. On top of those two types of diesel fuel, the current nonroad diesel fuels have a sulfur content of up to 3,400 ppm, though lower levels are slated to be phased in over the next five years.

But officials say that under the House bill, such a structure would appear unworkable because the legislation would seemingly allow for only one type of low-sulfur fuel.

"The reality is that under current EPA regulations, we are going to have three or four diesel blends that are in the market for the diesel community," said a former senior EPA official from the Clinton administration. "This legislation seems to call for one fuel used everywhere, and that's just not the situation that exists."

The program for both onroad and nonroad diesel fuels was put in place after years of negotiations between the federal government and the various diesel industry stakeholders. While refiners have feared the new rules could cause supply disruptions, engine manufacturers and some automakers have pushed for the implementation of the 15 ppm standard so their products can meet federal air quality requirements.

Engine Manufacturers Association spokesman Joe Suchecki said it is unclear to the group what the House bill will mean for the ultra-low diesel program, especially since there is no specific date for when the government would limit the number of acceptable fuels. The bill gives the Energy Department 12 months after implementation of the bill to provide a list of a half dozen acceptable fuels, including the two diesels, but does not set a date for when producers must drop down to that level.

"It's really unclear from this bill when this would be implemented," said Suchecki, adding that implementation after 2011 "could cause some difficulty."

Suchecki said the group's members, which includes most major engine producers, are planning this week to discuss whether the language would cause a problem.

An official with the National Petrochemical & Refiners Association said while the group generally supports the House energy bill, it has not fully figured out what the language would mean or if it would lead to supply problems.

Waiver authority most likely would not cause delay, industry says

There has also been some concern among engine manufacturers and environmentalists that language in the bill expanding the administration's power to grant fuel waivers in the event of a fuel shortage could be used to further delay the ultra-low sulfur program.

Diesel fuels producers have warned that the new standard may lead to supply disruptions when it is implemented next year. Already this year, EPA granted producers an additional 45 days to comply with the requirement, saying the extension will help refining terminals and retail outlets make a smoother transition to the cleaner-burning fuel.

"If they delay even the start-up for an extended period of time, that could have major consequences," O'Donnell said. "That could throw into chaos all the plans that have been made."

But industry officials say that -- at least as far as the House bill is concerned -- there are enough safeguards to prevent a major delay. Specifically, industry officials convinced lawmakers to include language that a fuel waiver cannot be issued if it "prevents the normal functioning of the vehicle" -- a provision that would apply to diesel engines built to handle the ultra-low sulfur fuel.
"It's not as open or as unbounded a waiver as before, so I think we're happy with that language," Suchecki said.

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