October 18-25, 2004

New rules set sulfur limits for off-road diesel fuel

Draft regulations to significantly reduce sulfur levels in diesel fuel used for rail, marine and off-road purposes (e.g. construction, agricultural and industrial equipment) have been published in the October 2, 2004 edition of the Canada Gazette, Part I, for a 60-day public comment period. The regulations, under the Canadian Environmental Protection Act, are expected to become final in early 2005 and come into affect in 2007.

The new regulations will mark the first time limits have been set for sulfur in diesel fuel used in off-road applications. Canada's Sulfur in Diesel Fuel regulations, passed in June 2002, set limits for the level of sulfur in diesel fuel used in on-road vehicles to 500 parts per million (ppm, equivalent to milligrams per kilogram (mg/kg)). This will be reduced to 15 ppm starting in 2006.

The amendments to the Sulfur in Diesel Fuel regulations will match U.S. requirements, specifically by requiring sulfur in diesel levels to be reduced from the current unregulated level to 500 ppm starting June 1, 2007, and to 15 ppm by 2012. This amounts to a reduction of about 99% in eight years. (Regular grade diesel fuel not currently subject to regulatory limits has a maximum sulfur content of 5,000 ppm under voluntary commercial standards set by the Canadian General Standards Board.)

The 500 ppm limit will initially apply to the production or import of diesel fuel for off-road, rail and marine uses, extending to the sale of such fuels as of October 1, 2007. The 15 ppm limit will apply to the production or import of off-road diesel fuel as of June 1, 2010 and will be extended to the sale of such fuel, effective September 1, 2010. As of June 1, 2012, the 15 ppm limit will apply to the production and import for use or sale of off-road, rail and marine diesel fuel. Diesel fuel sold for use in locomotives or marine vessels will remain subject to the 500 ppm sales limit.

Since 2001, regulations have been implemented to cut down engine emissions of pollutants such as particulate matter, nitrogen oxides and volatile organic compounds from on- and off-road vehicles as well as small and large engines and the fuels that power them. New-generation, low-emission engines for off-road construction, mining, farming and forestry equipment, which will be coming onto the market in model year 2006, will need the low-sulfur diesel fuel.

In addition to better engine/equipment-fuel compatibility, the new regulations are expected to help lower the cost of maintaining diesel engines due to less corrosion wear and reduced engine deposits. Estimates from the U.S. Environmental Protection Agency indicate that the maintenance savings could be equal to 40% of the projected increased unit cost of producing the diesel fuel.

Substantial health benefits have also been calculated, in terms of avoided and/or reduced mortality, hospital admissions, emergency room visits, new cases of chronic bronchitis, incidence of asthma and other respiratory illness, and restricted activity days.

The cost to the Canadian petroleum refining industry of reducing sulfur in off-road diesel fuel from current levels to 500 ppm is projected at $184 million in capital costs and$104 million per year in operating costs (based on 2002 dollars and a total of 3.5 billion litres requiring desulfurization. The estimated cost of reducing off-road diesel fuel from 500 ppm to 15 ppm is between $263 and $483 million in capital costs and $18 to $33 million per year in operating costs.

Canada's comprehensive ten-year Federal Agenda for Cleaner Vehicles, Engines and Fuels sets out a plan of actions to reduce emissions from these sources. Through this plan, Environment Canada has implemented regulations to improve the quality of almost all types of fuels. For example, regulations to reduce the average level of sulfur in Canadian gasoline came into effect in 2002. These regulations will achieve a 90% reduction in sulfur levels, starting in 2005.

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