U.S. EPA DIESEL FUEL SULFUR REGULATIONS COMPLIANCE KIT NEW 2010 REQUIREMENTS FOR DISPENSER LABELS AND PRODUCT TRANSFER DOCUMENTS FOR THE NEMA AND NONNEMA AREAS A Publication of: New England Fuel Institute Legislative & Regulatory Action Center (LRAC) P.O. Box 9137, Watertown, MA 02471-9137 Prepared by: Mark S. Morgan, Esq., NEFI Regulatory Counsel Updated: September 14, 2010 INTRODUCTION ______________________________________________________ New Challenges The second phase of the U.S. EPA’s ultra low sulfur diesel (ULSD) regulations occurs on June 1, 2010. The EPA diesel fuel desulfurization program was first introduced in 2006. The initial 2006 transition to lower sulfur motor vehicle, non road and locomotive and marine diesel fuel (MVNRLM) posed a significant challenge for heating oil dealers and petroleum marketers (the sulfur content of kerosene is also reduced under the desulfurization regulations). Concerns about supply, cross contamination of high and low sulfur diesel fuels, product segregation issues, new dispenser labels and product transfer document (PTD) language, tank turnover procedures and sulfur content testing were all major hurdles to be cross in order to achieve compliance. However, the second phase of the desulfurization program should be far less challenging. Many of the concerns raised during the first phase of the desulfurization program have been met with tank and fuel management programs that are now routine. Plus, market forces have largely transitioned many areas to 15-ppm product for both highway and non-road fuel diesel fuel well before the deadlines required under the EPA regulations. Also this time around, there is far less concern about supply as the distillate stream moves closer to universal 15-ppm standard (heating oil sulfur content is not affected under the EPA program). The compliance issues during this latest phase of the desulfurization program will be largely confined to sound tank management practices in order to turn tanks over to lower sulfur product and meeting new dispenser label and PTD language requirements. While the phase two transition should be less challenging, the failure to do so is still costly. Failure to meet the EPA’s specific sulfur standards, dispenser label and PTD language requirements can bring civil penalties of $37,500 per day, per violation. The following compliance material is designed to help heating oil dealers and petroleum marketers meet the challenges presented by the ULSD regulations while achieving full compliance with ULSD regulatory requirements. IMPORTANT! The sulfur content of heating oil is not regulated under the EPA desulfurization program. While the sulfur content of heating oil is not regulated, the desulfurization program does regulate product transfer document language and dispenser labels for heating oil product. IMPORTANT! The sulfur content of jet fuel, aviation kerosene, and No. 4 fuel oil is not regulated under the EPA desulfurization program. However, the EPA promulgated regulations to prevent the inappropriate use of these distillates. Use of these products fuels in MVNRLM diesel engines is generally prohibited unless they meet the applicable sulfur standards under the regulations. I. GEOGRAPHIC COMPLIANCE AREAS _______________________________________________________ The second phase of the EPA desulfurization program maintains the two distinct geographic compliance areas established under phase one of the regulations. There are different regulatory requirements in each compliance area. The two compliance areas were established by the EPA due to the small refinery exemption included under the regulations. The exemption allows small refineries – located in the Midwest, South and Western portions of the country to continue production of higher sulfur products for a period of years beyond sulfur reduction deadlines established for large refineries nationwide and in the Eastern area of the country. While the distinction between these two areas is diminishing as the transition to a nationwide 15-ppm diesel fuel standard moves forward, there remain important differences between the two that require unique compliance requirements. The Northeast Mid-Atlantic Compliance Area (NEMA) The following states and counties are located in the NEMA area: all six New England states; New York state (except for the counties of Chautauqua, Cattaraugus, and Allegany); New Jersey; Delaware; North Carolina; Virginia; Maryland; District of Columbia; Pennsylvania (except for the counties of Erie, Warren, Mc Kean, Potter, Cameron, Elk, Jefferson, Clarion, Forest, Venango, Mercer, Crawford, Lawrence, Beaver, Washington, and Greene); and the eight eastern-most counties of West Virginia (Jefferson, Berkeley, Morgan, Hampshire, Mineral, Hardy, Grant, and Pendleton). The Non-Northeast Mid-Atlantic Compliance Area (NON-NEMA) The NON-NEMA area consists of every area not located in the NEMA. Areas Not covered by the EPA Sulfur Standards California is not covered under the EPA sulfur standard regulations. California transitioned to 15-ppm MVNRLM fuel in 2006. Alaska is exempt from the EPA standards as well. II. DIESEL FUEL AND KEROSENE SULFUR REDUCTION DEADLINES _______________________________________________________ The EPA has set specific deadlines by which the transition to the new MVNRLM diesel fuel and kerosene sulfur standards must occur. Separate deadline are established for refiners, terminal operators, jobbers, retailers and wholesale purchaser consumers (WPC) in both the NEMA and NON-NEMA areas. The following transition deadlines under the regulations represent the date by which all storage tanks must be completely turned over to meet the applicable sulfur standard. 1. NEMA Area: Regulated Party Tank Turnover Date Refiners and Importers June 1, 2010 Terminal Operators and Jobbers Highway Diesel and Kero (15-ppm) Non-Road Diesel and NR Kero (15-ppm) Locomotive/Marine (500-ppm) October 1, 2010 August 1, 2010 August 1, 2010 Retailers and WPC Highway Diesel and Kero (15-ppm) Non-Road Diesel and NR Kero (15-ppm) December 1, 2010 October 1, 2010 IMPORTANT! After December 1, 2010 both MVNR diesel fuel in the NEMA area will be 15-ppm only. LM diesel fuel will be 500-ppm maximum only after this date and the sulfur content of heating oil remains unregulated. 2. NON-NEMA Area: Regulated Party Tank Turnover Date Refiners and Importers June 1, 2010 Terminal Operators and Jobbers Highway Diesel and Kero (15-ppm) Non-Road Diesel and NR Kero (500-ppm) Locomotive/Marine (500-ppm) October 1, 2010 August 1, 2010 August 1, 2010 Retailers and WPC* Highway Diesel and Kero (15-ppm) Non-Road Diesel and NR Kero (500-ppm) December 1, 2010 October 1, 2010 IMPORTANT! After December 1, 2010, all MV diesel fuel in the NON-NEMA area will be 15-ppm only. Also, 500-ppm NR diesel may be used in the NON-NEMA area until October 1, 2014. All LM diesel fuel will be 500-ppm maximum after this date and will be marked with a yellow marker and prohibited for use in any MVNR engine. The sulfur content of heating oil remains unregulated. *WPC means wholesale-purchaser consumer. WPC’s are typically, school systems, fleet operators and construction companies – any entity that stores fuel in bulk and consumes fuels for their own use. III. NEMA AREA PRODUCT TRANSFER DOCUMENT REQUIREMENTS ___________________________________________________ The new PTD sulfur content language is not required until October 1, 2010. However, between June 1, 2010 and October 1, 2010, you may use either the current PTD language or new PTD language and still be compliant according to the EPA. Beginning June 1, 2010 the EPA will no longer require that diesel fuel PTDs indicate whether the fuel is 1D or 2D. In addition, kerosene is also subject to the EPA’s sulfur reduction requirements. Kerosene PTD language is identical to the above language for diesel fuel except that the word “kerosene” must be substituted for the word “diesel fuel” and the designation “ULSK”, must be substituted for “ULSD” wherever these words or abbreviations appear. The PTD sulfur content notice is required for all transfers of kerosene except to retail purchaser-consumers. The sulfur content notice is also required on delivery tickets to purchaser-consumers when the kerosene is delivered to a home or business and used for residential or commercial heating purposes. 1. EPA Existing Generic PTD Information: The EPA currently requires petroleum marketers to put basic information on product transfer documents, (shipping papers, bills or lading and delivery tickets, etc.) accompanying the transfer of title or custody of diesel fuel or distillate product. These requirements include: the names and addresses of the transferor and transferee; the volume of diesel fuel or distillate which is being transferred; the location of the diesel fuel or distillate at the time of the transfer; the date of the transfer; and for transfers of motor vehicle non-road, locomotive or marine diesel fuel, the sulfur content standard the transferor represents the fuel to meet. 2. Existing and Unchanged EPA Sulfur Content Language for PTDs: 15-ppm Dyed Diesel Fuel “15-ppm sulfur dyed ULSD. Non-road or tax exempt use only” 15-ppm Undyed Diesel Fuel ``15 ppm sulfur (maximum) Undyed Ultra-Low Sulfur Diesel Fuel. For use in all diesel vehicles and engines.'' OR “15-ppm sulfur ULSD” Heating Oil Required on heating oil PTDs, shipping papers, bills of lading and delivery tickets anytime a person transfers custody or title of heating oil (including transfers to residential and wholesale purchaser-consumers): “Dyed Unmarked Heating Oil: Not for use in highway, nonroad, locomotive or marine engines.” 3. New EPA Sulfur Content Language for PTDs: 500-ppm Dyed Locomotive and Marine Diesel Fuel - ``500 ppm sulfur (maximum) Dyed Low Sulfur Locomotive and Marine diesel fuel. Not for use in highway or other nonroad vehicles and engines.'' III. NON NEMA AREA PRODUCT TRANSFER DOCUMENT REQUIREMENTS ___________________________________________________ The new PTD sulfur content language is not required until October 1, 2010. However, between June 1, 2010 and October 1, 2010, you may use either the current PTD language or new PTD language and still be compliant according to the EPA. Beginning June 1, 2010 the EPA will no longer require that diesel fuel PTDs indicate whether the fuel is 1D or 2D. In addition, kerosene is also subject to the EPA’s sulfur reduction requirements. Kerosene PTD language is identical to the above language for diesel fuel except that the word “kerosene” must be substituted for the word “diesel fuel” and the designation “ULSK”, must be substituted for “ULSD” wherever these words or abbreviations appear. The PTD sulfur content notice is required for all transfers of kerosene except to retail purchaser-consumers. The sulfur content notice is also required on delivery tickets to purchaser-consumers when the kerosene is delivered to a home or business and used for residential or commercial heating purposes. 1. EPA Existing Generic PTD Information: The EPA currently requires petroleum marketers to put basic information on product transfer documents,(shipping papers, bills or lading and delivery tickets, etc.) accompanying the transfer of title or custody of diesel fuel or distillate product. These requirements include: the names and addresses of the transferor and transferee; the volume of diesel fuel or distillate which is being transferred; the location of the diesel fuel or distillate at the time of the transfer; the date of the transfer; and for transfers of motor vehicle non-road, locomotive or marine diesel fuel, the Sulfur content standard the transferor represents the fuel to meet. 2. Existing and Unchanged EPA Sulfur Content Language for PTDs: 15-ppm Dyed Diesel Fuel “15-ppm sulfur dyed ULSD. Non-road or tax exempt use only” 15-ppm Undyed Diesel Fuel ``15 ppm sulfur (maximum) Undyed Ultra-Low Sulfur Diesel Fuel. For use in all diesel vehicles and engines.'' OR “15-ppm sulfur ULSD” Heating Oil - Required on heating oil PTDs, shipping papers, bills of lading and delivery tickets anytime a person transfers custody or title of heating oil (including transfers to residential and ‘ “Heating Oil. Not for use in highway vehicles or engines or nonroad, locomotive, or marine engines.’’ 3. New EPA Sulfur Content Language for PTDs: 500-ppm Dyed Diesel Fuel `500 ppm sulfur (maximum) Dyed Low Sulfur Nonroad Diesel Fuel. For use in model year 2010 and older nonroad diesel engines. May be used in locomotive and marine diesel engines. Not for use in highway vehicles and engines or model year 2011 or later nonroad engines other than locomotive or marine diesel engines. Not for use in the Northeast/Mid-Atlantic Area.'' IV. DISPENSER LABELS _______________________________________________________________ Dispenser Label Placement: The NRLM diesel fuel regulations require that the dispenser labels be placed on the vertical surface of each pump housing and on each side that has gallon and price meters. The labels must be on the upper two-thirds of the dispenser in a location where they are clearly visible. The label requirements apply to all storage tanks over 550 gallons. Dispenser Label Compliance Date: October 1, 2010 - All non-road, locomotive/marine and heating oil labels. December 1, 2010 – All 15-ppm ULSD highway diesel and highway kerosene labels. Dispenser Labels: The following labels must be attached to applicable dispensers: 15-ppm ULSD Highway Diesel Fuel Dispenser Label – For Use In NEMA and NON-NEMA AREAS: ULTRA-LOW SULFUR HIGHWAY DIESEL FUEL (15-PPM SULFUR MAXIMUM) Required for use in all highway diesel vehicles and engines. Recommended for use in all diesel vehicles and engines. 15-ppm ULSD Non-Highway Diesel Fuel Dispenser Label – For Use in NEMA & NON-NEMA AREAs: ULTRA-LOW SULFUR NON-HIGHWAY DIESEL FUEL (DYED) (15-PPM SULFUR MAXIMUM) Required for Use in all model year 2011 and later nonroad diesel engines. Recommended for use in all other non-highway diesel engines WARNING Federal law prohibits use in highway vehicles or engines OR ULTRA-LOW SULFUR NON-HIGHWAY DIESEL FUEL (15-PPM SULFUR MAXIMUM) Required for Use in all model year 2011 and later nonroad diesel engines. Recommended for use in all other non-highway diesel engines WARNING Federal law prohibits use in highway vehicles or engines OR ULTRA-LOW SULFUR NON-HIGHWAY DIESEL FUEL (15-PPM SULFUR MAXIMUM) Required for use in all model year 2011 and newer non-road diesel engines. Recommended for use in all nonroad, locomotive and marine diesel engines. WARNING Federal law prohibits use in highway vehicles or engines 15-ppm ULSD Highway Kerosene (undyed, taxed )– For Use in NEMA and NON-NEMA Areas: ULTRA -LOW SULFUR KEROSENE (15-ppm Sulfur Maximum) Required for use in all highway diesel vehicles and engines. Recommended for use in all diesel vehicles and engines. 15-ppm ULSD Nonroad Kerosene (undyed, untaxed) – For Use in NEMA and NON-NEMA Areas: (use for tax free sale of clear kerosene from a blocked pump) ULTRA -LOW SULFUR KEROSENE (15-ppm Sulfur Maximum) Required for use in all model year 2011 and later non-road diesel engines. Recommended for use in all other non-highway diesel engines. WARNING Undyed and Untaxed. Federal law prohibits use in highway vehicles or engines. 500-ppm Low Sulfur Nonroad Kerosene – For Use in NON-NEMA Area Only: LOW SULFUR KEROSENE (500-ppm Sulfur Maximum) WARNING Federal Law prohibits use in all model year 2011 and newer nonroad engines. May damage model year 2011 and newer nonroad engines. Undyed and Untaxed. Federal law prohibits use in highway vehicles or engines. OR LOW SULFUR KEROSENE (DYED) (500-ppm Sulfur Maximum) WARNING Federal Law prohibits use in all model year 2011 and newer nonroad engines. May damage model year 2011 and newer nonroad engines. Federal law prohibits use in highway vehicles or engines. 500-ppm Low Sulfur Locomotive /Marine-For Use in NEMA and NON-NEMA AREAS: (This fuel requires a yellow marker in the non-NEMA area) LOW SULFUR LOCOMOTIVE AND MARINE KEROSENE (500-ppm Sulfur Maximum) WARNING Federal law prohibits use in non-road engines or in highway vehicles or engines. Kerosene for Heating – For Use in NEMA and NON-NEMA Areas: KEROSENE HEATING OIL (May Exceed 500-ppm Sulfur Maximum) Federal law prohibits use in highway vehicles or engines, or in non-road, locomotive or marine diesel engines. Its use may damage these diesel engines. Heating Oil – For use in NEMA and NON-NEMA Areas: “HEATING OIL (May Exceed 500-ppm Sulfur) WARNING Federal law prohibits use in highway vehicles or engines, or in non-road, locomotive, or marine diesel engines. Its use may damage these diesel engines.” IMPORTANT! The EPA sulfur content labels do not replace IRS diesel fuel and kerosene tax status labels. Both the EPA and IRS labels are required. Many marketers have received substantial fines from the IRS this year for not having the IRS non-road diesel and kerosene labels on applicable dispensers. IMPORTANT! The EPA sulfur content and IRS tax status labels must also be affixed to the dispensing mechanisms of portable skid tanks. Labels are not required for cargo tank motor vehicles. IMPORTANT! While the sulfur content of heating oil is not regulated under the EPA desulfurization program, heating oil dispensers are required to be labeled. IMPORTANT! The following IRS dispenser labels are still required: “DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE” “UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY PENATY FOR TAXABLE USE” “DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE” Do not remove or cover these labels. IMPORTANT! Labels are not required for delivery trucks or residential heating oil tanks. However, dispenser mechanisms for skid tanks must be labeled (or the skid tank itself if dispenser is too small). The tank or dispenser owner is the only person responsible for labeling. V. RECORDKEEPING REQUIREMENTS _______________________________________________________ Record Keeping Requirements: The EPA regulations require the following records to be maintained for five years: Product transfer documents (bills of lading, shipping papers, delivery tickets, etc. invoices); Sample and test results conducted under a quality assurance program; Sample and test methods documentation; The actions the party has taken, if any, to stop the sale or distribution of any NRLM diesel fuel found not to be in compliance with the sulfur standards. Importance of Keeping Records: It is extremely important that petroleum marketers keep the required records described above. These records are needed to claim a defense against liability for off-specification fuel. Remember that under the NRLM regulations, all parties along the distribution chain are presumed liable for diesel fuel that does not meet the correct sulfur standard. Your records are the only way to prove that you did not cause the violation. VI. QUALITY ASSURANCE _______________________________________________________ Downstream Quality Assurance: Under the EPA regulations, parties in the distribution chain downstream of the refiner or importer are not required to test diesel fuel for sulfur content. However, in order to establish a defense to any violation, downstream parties must conduct a quality assurance program, including sampling and testing. Distributor Quality Assurance Program: Petroleum marketers who distribute 500-ppm product should take the following steps to ensure that sulfur content levels are not exceeded during transportation and storage to the end user: Allow time for multiple storage tank turnovers; Develop fuel sequencing strategies that minimize commingling of fuels; Conduct a random sampling and testing program for product and maintain test results and sampling methods records for at least five years; Inspect PTDs carefully and reject improper fuel; Keep PTDs, shipping papers and bills of lading, delivery tickets, etc for a minimum of five years; If possible, dedicate separate cargo tank vehicles and storage tanks for on-road and offroad distillates; If product segregation is not possible, make certain that residues from high sulfur fuel in trucks and storage tanks (including piping and hoses) are drained or flushed prior to filling with 500-ppm product diesel fuel. Take into consideration the following facts when flushing cargo tank vehicles: o o o Flat-bottomed cargo tank vehicles tanks are more susceptible to sulfur contamination. Draining at terminal rack prior to loading reduces sulfur contamination. Angled bottom tanks generally do not add enough sulfur contamination to throw product off-spec. Flushing compartment with 15-ppm product prior to loading effectively removes any sulfur contamination in both flat bottom and angle bottom cargo tank trucks. Use terminal drain tanks (when available) to purge residue prior to taking on 500-ppm product after transporting heating oil and other high sulfur fuels; Change all fuel filters frequently to prevent sulfur residue contamination; Train driver in NRLM diesel fuel product handling with emphasis on PTD recognition and proper delivery techniques, including identification of 500-ppm diesel fuel in storage tanks; and Develop written fuel handling techniques for bulk plants and cargo tank vehicles. VII. TESTING _______________________________________________________ Testing for Sulfur Content: Under the diesel fuel regulations testing is not required for any party downstream of the refinery gate. However, petroleum marketers who distribute MVNRLM must conduct sampling and testing in order to raise a defense against a violation of the sulfur limits. If you don’t test, you can’t contest the violation. Testing Frequency: First, remember that sulfur testing is not required for any party downstream of the refiner or importer. However, to raise a defense against liability for fuel exceeding established sulfur limits, periodic testing and sampling must occur above the retail level. The regulations do not provide how often sampling and testing must occur, though it is certain that testing every batch of NRLM diesel fuel is not required. Periodic random testing, perhaps once per month may be sufficient. To raise a defense against liability, sampling and testing of the specific batch of diesel fuel found to be out of compliance is not required. It is sufficient that a periodic sampling and testing program is in place. Applicable Tests: Currently, there are no reliable field tests to determine sulfur content in diesel fuel. Sulfur testing must be conducted by an off-site laboratory. EPA recommends the following test methods as the most cost effective ($75-$100 per test) and accurate choice for below the terminal rack testing: ASTM D5453: Total Sulfur in Light Hydrocarbons, Motor Fuels and Oils by Ultraviolet Fluorescence. (see www.astm.org). ASTM D7039: Sulfur in Gasoline, Diesel Fuel by Wavelength Dispersive X-ray Fluorescence. (see www.astm.org). Sampling Protocol: EPA recommends using ASTM D-4057 Standard Practice for Manual Sampling of Petroleum and Petroleum Products as the basis for a sampling protocol for below the terminal rack testing. (see www.astm.org). Testing Laboratories: The EPA is currently compiling a list of certified testing laboratories. Check with your fuel supplier to find a testing laboratory near you. IMPORTANT! The EPA uses its own sulfur test method for enforcement purposes. When determining compliance with sulfur limits, only the EPA test results are considered. IMPORTANT! Save all sampling and test results and methodology for at least five years! VIII. LIABILITY _______________________________________________________ Joint and Several Liability: The EPA has adopted a joint and several liability approach for violations of allowable sulfur limits. In other words, anytime distillate product exceeds allowable sulfur limits, every party along the distribution chain that has had custody or title to the fuel is presumed to have caused the violation. It is up to each party to prove they did not cause the violation. Defenses to Liability: In order for a party along the distribution chain to prove they did not cause the violation, the following must be shown: The violation was not caused by the party or the party’s employee; PTDs in the party’s possession account for all non-compliant fuel and/or additives and shows that the fuel was in compliance while under the party’s custody; The party has in place a quality assurance program that includes periodic sampling and testing; and Upon learning of the non-compliant fuel, the party immediately removed it from commerce and took steps to prevent future violations. IX. DIESEL ADDITIVES, KEROSENE, BIO-DIESEL AND USED OIL BLENDING _______________________________________________________ Additive Blending: Some distributors blend additives into diesel fuel to improve performance, including bio-diesel kerosene in cold weather conditions and used oil. Some of these additives may increase the sulfur content of the diesel fuel to which it is added. Bio-diesel - Bio-diesel has virtually no sulfur content. Bio-diesel temperature should be kept at a minimum of 10 degrees F above its cloud point when splash blending. Keep all product transfer documents for bio-diesel with the PTDs of the blended diesel fuel. For more information on bio-diesel, go to http://www.biodiesel.org. Kerosene - Kerosene blended into diesel fuel must meet the applicable sulfur content standard of the fuel into which it is blended. Used Oil - Used oil blended into diesel fuel is generally not allowed. Diesel Fuel Additives in General - Diesel fuel additives blended into diesel fuel must meet the applicable sulfur standard of the fuel into which it is blended. X. INFORMATION RESORCES _______________________________________________________ 1. Information Resources - For additional information please see the following General Compliance Information Mark S. Morgan, Regulatory Counsel New England Fuel Institute 4200 Wisconsin Avenue, Suite 106 Washington, D.C. 20016 (202) 364-6767 mark@nefi.com Purchase Labels Dave Rocco The New England Fuel Institute P.O. Box 9137 Watertown, MA 02471 (617) 924-1000 dave@nefi.com or nefi@nefi.com U.S. EPA Diesel Fuel Web Site http://www.epa.gov/otaq/regs/fuels/diesel/diesel.htm U.S. EPA ULSD Question and Answer Document http://www.epa.gov/cleandiesel/420b05010.pdf Regulatory Language -U.S. EPA Regulations http://www.access.gpo.gov/nara/cfr/cfr-table-search.html#page1 Sulfur Sampling and Testing Methods ASTM International 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA, 19428-2959 (610) 832-9585 http://www.astm.org Biodiesel Blending National Biodiesel Board 3337a Emerald Lane Jefferson City, MO 65110 (800) 841-5849 http://www.biodiesel.org