ultralow sulfur diesel what you need to know

The Illinois Petroleum Marketers Association/Illinois Association of Convenience Stores (IPMA) addresses common misconceptions about ultra-low sulfur diesel.

Oct. 15 was a significant milestone in the nation’s transition to Ultra-Low Sulfur Diesel (ULSD) 15-ppm sulfur fuel. Prior to Oct. 15, petroleum terminals were permitted to downgrade (to 500-ppm sulfur LSD) as much ULSD as they wanted. Now terminals are restricted and can only downgrade 20% of the ULSD received from refiners. This means enormous volumes of ULSD are now being handed off to petroleum marketers. Because of the increased volumes of ULSD at the rack, more marketers are now focusing increased attention on EPA rules that govern marketers selling ULSD. Based on the phone calls the Petroleum Marketers Association of America (PMAA) is receiving from marketers, IPMA decided to distribute a Q&A to clear up some of the misconceptions marketers have expressed.

Q. Is it true that retailers must sell 15-ppm after Oct. 15, 2006?

No. Retailers may sell either ULSD (15-ppm), low sulfur diesel (500-ppm) or they may sell both products if available until 2010. In 2010, both highway and non-road diesel will be ULSD.

Q. I am a jobber who supplies dealers and commercial customers, and I also operate retail locations. I want the flexibility to buy either ULSD or LSD, depending on price. Can I switch back and forth between products depending on the price?

You can do this, but it is a risk. Once the facility has converted to ULSD and the tanks have turned over three or more times to minimize the potential of contamination of ULSD, introducing low sulfur diesel (500-ppm) into the tank means that the tank will have to be turned again before ULSD can be sold from the tank. This means that possibly three loads of ULSD will have to be downgraded and sold as LSD until the tank has turned over enough times that the label can be changed back to ULSD and the product sold as ULSD.

Q. I plan to supply my retail locations and commercial customers with ULSD. However, I want to label dispensers with low sulfur diesel (500-ppm) labels, since I understand I don’t have to sell ULSD until 2010 and I don’t have to worry about contamination. Is this OK?

No. Beginning Oct. 15, retailers and private/government fuel (wholesale purchaser-consumer) dispensing locations were subject to downgrading limitations. If a facility is receiving 15-ppm but labeling the dispenser as low sulfur diesel (500-ppm), this is considered to be a downgrade. In this case, downgrading is limited to 20% per downgrading period per location. Once the tank is fully converted to ULSD, retailers and private or government fuel facilities must change the label to ULSD.

Q. I am a jobber who supplies dealers and commercial customers. I have heard that 80% of my volume must be ULSD. I also heard that 80% of a retailer’s volume must be ULSD. Do I have to keep records on this?

There is no such requirement at the jobber and retail level. The “80-20″ requirement applies to refiners. Refiners are required to produce a minimum of 80% ULSD annually.

IPMA’s Top 10 Things Petroleum Marketers Need to Know About ULSD Compliance

  1. Marketers are not required to sell 15-ppm on-road diesel fuel until June 1, 2010.
  2. The significance of the October 15 deadline was that after this date the 20% downgrade limitation applies.
  3. There is only one way to downgrade under ULSD regulations. A downgrade only occurs when you change 15-ppm on-road ULSD to 500-ppm on-road diesel. Everything else is a re-designation to off-road fuel.
  4. Retailers and wholesale purchaser-consumers who sell both 15-ppn on-road and 500-ppm on-road at the same location are exempt from the downgrade limitations.
  5. Re-designation can be done without limitation by any party. However, tax issues and market demand will limit how often one can re-designate on-road to off-road diesel.
  6. All shipping papers and bills of lading must have the new product description language for diesel fuels required under the regulations. Receipts to consumers are not required to have the new language descriptors.
  7. Most terminal operators will not reveal the actual sulfur content of the fuel received at the rack. The most they are likely to reveal is that the fuel meets the 15-ppm standard even though it could actually be 8-ppm fuel. Consequently, retailers won’t know their margin of error for sulfur contamination when they load at the rack.
  8. Don’t forget to label dispensers with the appropriate labels. Labels must match sulfur content.
  9. Regulations do not specify frequency of sulfur testing. Retailers are not required to test, but if they don’t, they are not allowed to raise a defense in an EPA enforcement action.
  10. Testing every batch of diesel fuel for sulfur content is not required. Once a month testing or less may be acceptable if one has a strong quality assurance program that protects against downstream contamination while the fuel is in custody.
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