ULSD CHANGEOVER: Ready, set, switch!

Fleet owners may sputter at the price of fuel for years to come but at least when ultra low sulfur diesel (ULSD) starts flowing later this year there shouldn't be trucks sputtering to a stop because the right fuel won't be at the right place at the right time. Though the changeover from today's diesel fuel to ULSD won't be as simple as twisting some dials at refineries and pipelines, all indications

Fleet owners may sputter at the price of fuel for years to come but at least when ultra low sulfur diesel (ULSD) starts flowing later this year there shouldn't be trucks sputtering to a stop because the right fuel won't be at the right place at the right time.

Though the changeover from today's diesel fuel to ULSD won't be as simple as twisting some dials at refineries and pipelines, all indications are the big switch will proceed without any major supply hiccups.

To get the legalities squared away, starting with model year 2007, all diesel-powered highway vehicles must be fueled with ULSD. But owners of '06 or earlier model-year vehicles may fuel with ULSD or low sulfur diesel (the diesel now for sale) during a transition period that will end on December 1, 2010, at which time only ULSD will be available for highway vehicles.

It's unlikely there will be much but ULSD for sale long before the end of 2010. Industry experts expect ULSD will very quickly become the dominant fuel for diesel-powered highway vehicles once it starts appearing at the retail level this summer on into fall.

MARKET FORCES

Their consensus holds that market forces will quickly drive the level of ULSD available above the 80% mark initially mandated by the Environmental Protection Agency (EPA) to be reached by this October 1st at retail points of sale.

That's because it will simply be too costly for oil suppliers to refine or import — not to mention distribute — two different highway diesel fuels. Buyers will naturally gravitate to the more abundant fuel in any location, especially as it will be priced lower due to its volume production.

The introduction of ULSD to pre-'07 trucks may affect fuel system components or loosen deposits in fuel tanks. It would thus be wise for fleets to monitor these trucks for fuel system leaks or premature fuel filter plugging during the changeover to ULSD.

On the other hand — and this is the zinger — running anything but ULSD fuel in an '07 truck will wreak much greater havoc.

For starters, it may invalidate the engine warranty and could reduce the efficiency and durability of the engine, permanently damage its pricey exhaust aftertreatment system, reduce fuel economy and possibly even prevent the engine from operating at all.

And to top it off, not fueling ‘07 and later model-year diesel trucks with ULSD will be illegal and punishable with civil penalties.

All told, the big switch should go smoothly for fleets. “Based on the data available to us, we hope for a seamless transition [to ULSD]," remarks John Leon, Shell's diesel fuel category manager.

On the other hand, Richard Moskowitz, asst. general counsel & regulatory counsel for the American Trucking Associations (ATA), says the transition to ULSD concerns ATA in that “it will exacerbate pressure on fuel costs. It will cost five cents more per gallon to produce [ULSD] plus an expected increase in distribution costs.

ENERGY VALUE

“And [we expect] a 1% lower energy value [from ULSD] so it will burn 1% more [per gallon than today's fuel]. If availability of ULSD becomes a problem, we would see price hikes,” adds Moskowitz.

Bob Douglas, Penske Truck Leasing's vp of field maintenance, Northeast region, says that given that refinery output will be 80% ULSD by June 1st “all of a sudden there will be only 20% output available that isn't ULSD. Since most [fleet] fueling locations only have one diesel storage tank there won't be the capacity any way to offer both fuels.

“Due to their greater storage capacity, some truckstops may have both available,” he continues. “However due to federal pump labeling requirements to prevent contaminating ULSD with higher-sulfur fuel, they won't be able to switch back and forth.”

“As of right now it's hard to predict how it will work but there could be fueling sites with different pumps labeled for ULSD and LSD (low-sulfur or 500 ppm),” points out Allen Schaeffer, executive director of the non-profit Diesel Technology Forum (DTF).

Because of the 80% ULSD mandate kicking in this year, “most refiners will go right to [producing primarily] ULSD,” states Joe Petrowski, CEO of Gulf Oil LP. “There will be a significant domestic supply. As for imported supplies, it will depend on where the fuel is drawn from. Northern Europe, for example, has long been a low-sulfur diesel region.

“As terminal operators,” he continues, “we expect it will be hard to have facilities dedicated to both kinds of highway diesel. The federal supply mandate will push 500-ppm sulfur fuel out [very fast]. Ironically, initially only the 2007 trucks will need the ULSD.”

NICKEL VIEW

Petrowski does allow that if there is a substantial price spread between the two fuels higher-sulfur fuel may be available in some locations. “Right now 500-ppm diesel is 13 cents a gallon more than heating oil and 15-ppm fuel is only a nickel more a gallon than 500-ppm fuel,” he relates. “That suggests the market is not anticipating a problem.

“But if market prices change and that nickel spread becomes 13 or 14 cents, you may find terminal operators or truckstops at least considering whether to dedicate a tank or set of pumps to higher-sulfur fuel. Dedicated fueling equipment must be handled carefully” so the price spread must be wide for two fuels to be attractive.

Overall, Petrowski says “don't expect 500-ppm fuel to be around for long except in pockets here and there. Keep in mind no one wants to be in the blacksmith business as the cars are going by.”

Sounding a cautious note, Shell's Leon suggest that during the early stages of the phase-in “a relatively small number of 2007 model vehicles requiring ULSD will be on the road and their owners may have to take additional steps to ensure they are able to refuel with ULSD.”

He says this will most likely occur in areas farthest from refineries “where the fuel must pass through multiple distribution points and hand-offs.” But, he adds, “in general there should be enough ULSD to have product available throughout the country. Nearly 100% of Shell's diesel production will be ULSD, with a small amount of higher-sulfur diesel produced for off-road use.”

According to Paul Orrico, director of fuel product development for Ryder System Inc., “by October 15 Ryder and anyone with bulk tanks will start to receive ULSD. Ryder will convert as quickly as possible to all ULSD for three reasons: it's the right thing to do; ULSD will be the dominant fuel; and we want to handle one set of tanks and pumps not two.”

Indeed, along with whatever the initial fuel price for ULSD fuel will be — as set by the market — and the potential for a 1% drop in fuel economy when burned in pre-‘07 trucks, there is concern that ULSD could really slam fleets that don't pay close attention to bulk storage housekeeping.

“Fuel chemistry changes can change the way fuel interacts with storage and vehicle fuel tanks,” says Shell's Leon. “Depending on the chemistry of ULSD, some deposits may be removed from the tank resulting in the need to change fuel filters ahead of their regularly scheduled maintenance. In addition, filters on storage tanks or dispenser pumps may also require filter changes in the initial introduction of ULSD.”

SULFUR ALERT

ULSD can be easily contaminated by residual sulfur in bulk storage tanks so that it no longer meets the legal definition of ULSD. That can lead to expensive damage to '07 engines and leave the entity responsible for fueling from the bulk storage open to incredibly stiff fines.

“The federal fine for dispensing ULSD fuel that does not meet the spec is $32,500 per day per incident for a minimum of 25 days plus a fine based on the economic gain from each incident as determined by the Environmental Protection Agency,” advises Harvey Citgo manager of fuel quality, technology & fuel services David.

To avoid such monstrous fees and to protect next year's trucks from high-sulfur fuel, there are some housekeeping steps to take.

“We expect it will take about three tankerloads of fuel designated as ULSD to flush out our storage tanks enough that they will qualify for holding ULSD and then we can label the pumps ULSD,” says Ryder's Orrico.

“The more high-volume your fueling operation is, the quicker it will wash through [to ULSD],” he continues. “But anyone who does not run through a lot of inventory needs to start weaning tanks now to be sure they will be carrying ULSD by the time they get their first '07 engine.”

TANK COMPLIANCE

Penske's Douglas estimates it will take three or four tankerloads to “cleanse out” or dilute a 500-ppm storage tank to a 15-ppm level. “And you once you've done that, you cannot switch back and forth due to the dispenser labeling requirement. We are working with our fuel suppliers to ensure” tank compliance, he adds.

Citgo's Harvey cautions not to count tank turns alone to figure when it's safe to label a fueling site as ULSD. “When you think you have it down [to being ULSD], take a sample from the tank and have it analyzed by an independent lab using the federally allowed test measure.” He notes such a test should run only about $50 — but could save tens of thousands in non-compliance fines.

Out on the road, notes DTF's Schaeffer, ensuring drivers fuel with the right fuel will be aided by stickers on the vehicle as well as the pump labels.

When it comes to running ULSD in pre-‘07 trucks, keep in mind ULSD's sulfur content is capped at 15 parts per million (15 ppm) while today's diesel fuel's sulfur content is 500 ppm. Sulfur plugs up the diesel particulate filters (DPF) that '07 engines will use to reduce particulate matter emissions.

But because sulfur increases the needed lubricity of diesel fuel, ULSD will require a new chemical lubricity package to make up for the drop in sulfur. That will add to the cost of producing ULSD but will help make the fuel transition transparent for truck owners and operators.

“As necessary,” says Shell's Leon, “additives to increase lubricity and inhibit corrosion will be added to ULSD prior to its retail sale. With these additives, ULSD will perform as well or better than [current fuel] for preserving engine life and maximizing intervals between oil changes.”

MAINTENANCE CHECKS

Leon figures a “small number of vehicles may require preventative maintenance in the form of upgrading certain engine and fuel system seals that may not perform well in the transition to the new fuel and could leak.” He advises reviewing maintenance records to ensure fuel system seals have been changed with recommended materials at recommended intervals.

“Studies on test fleets have indicated that fuel system leaks are not exclusive to a particular engine type, fuel type or geographic region,” Leon notes. “It is anticipated that only a very small fraction of vehicles will be affected, primarily older, pre-1993 high-mileage vehicles with original seals still in place.”

Penske's Douglas says that “unlike the fuel systems issues that had to be worked through when the switch to 500-ppm fuel came in the early '90s, we feel confident that won't happen this time. We've run existing trucks on ULSD and have seen no reliability impact and less than a 1% mpg decline in '06 or older trucks.”

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