February 26, 2007

Trucking industry asks feds to allow temporary use of higher-sulfur diesel

The Ontario Trucking Association (OTA) has asked the federal government to temporarily allow on-road trucks to use the higher-sulfur-content diesel fuel still permitted for off-road vehicles and equipment. The OTA wrote to federal Environment Minister John Baird to request the temporary exemption in the wake of diesel fuel rationing, pump and station closures and double digit price increases brought on by supply problems at Imperial Oil.

"It is OTA's understanding that the current supply crisis in Ontario could be resolved if, on a temporary basis, oil companies were allowed to resume producing and selling diesel fuel with 500 ppm sulfur content to the trucking industry," said OTA president David Bradley.

Imperial Oil has attributed the shortages in supplies of distillates (i.e. diesel and home heating oil) and gasoline to a combination of factors, including recent industry refinery operating incidents, restrictions in marine access due to cold weather and a prolonged strike at CN Rail.

Added to these circumstances were unanticipated operating problems at Imperial's Ontario facilities, including a fire at the Nanticoke refinery earlier this month. The company reports that damage from the fire is currently under repair and Nanticoke is expected to resume production by the end of February, at reduced operating rates. Imperial has notified Ontario and federal government officials and is keeping them informed of the situation.

In the meantime, the company has had to ration the supply of distillate fuel and gasoline to its customers in Ontario. As a result, some of Imperial's Esso retail sites have "run dry" at locations throughout Ontario. Delays in replenishing supplies may be short-lived and rotating, but some locations will be out of product for longer periods, said the company. Imperial added that while diesel supply to commercial customers will also be limited, fuel for home heat customers is adequate to meet demand.

Truck diesel fuel with 500 parts per million (ppm) sulfur content was the industry standard up until October 2006 when new federal regulations brought into effect an Ultra Low-Sulfur Diesel (ULSD) standard which caps the sulfur content of diesel fuel used by on-road trucks at 15 ppm. The regulations still permit the use of diesel fuel with a sulfur content of 500 ppm or higher in off-road applications such as rail and agricultural machinery.

The OTA's Bradley said the association has always shied away from regulation of fuel prices, and even if a regulatory or legislative response were feasible, he acknowledged that such a measure could not be introduced and passed in time to alleviate the supply crunch the industry is currently experiencing. Accordingly, the association is looking for other ways the federal and provincial governments could help, he continued.

The OTA notes that temporarily allowing on-road trucks to use higher-sulfur diesel would be consistent with a strategy used by the U.S. government to ensure adequate fuel supply in the aftermath of Hurricane Katrina. At that time, "coloured" fuel (typically off-road grade with greater than 500 ppm sulfur content) was temporarily allowed for use in on-road applications.

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