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US EPA aligns diesel fuel regulations with IMO 2020 sulfur requirements

12 December 2019

The US Environmental Protection Agency (EPA) issued a Final Rule that revises US diesel fuel regulations to align them with the IMO 2020 requirements for marine fuels, to ensure that US refiners and suppliers can permissibly distribute cleaner global marine fuel for use in ships operating outside of the Emission Control Areas (ECA) along the US coastline. The international sulfur content limit for fuel used globally outside ECAs—currently 35,000 ppm—is decreasing to 5,000 ppm effective January 1, 2020.

The technical corrections to the diesel fuel regulations will allow fuel suppliers to distribute distillate diesel fuel that complies with the 5,000 ppm international sulfur standard for ships instead of the fuel standards that otherwise apply to distillate diesel fuel in the United States. This new sulfur limit is less stringent as the 1,000 ppm limit that applies in designated US ECAs (in effect since 2015), but is more stringent than the current global limit.

There are two general categories of marine fuel: distillate fuel and residual fuel. Current marine heavy fuel oils (HFO, max 35,000 ppm S) are residual fuels, characterized by higher sulfur content and higher viscosity than distillate fuels (in its preamble, the EPA Final Rule states in error that “residual fuel is much less viscous than distillate fuel” and quotes erroneous viscosity ranges for distillate diesel). Beginning in 2020, the lower sulfur content of global marine fuel means that compliant fuel can be distillate, residual, or blends of both. Technical issues pertaining to the IMO 2020 marine fuels were discussed at the CIMAC Congress held in June 2019 in Vancouver.

Under the Clean Air Act (CAA) fuel program administered by the EPA, marine distillate fuel sold or distributed in the United States has been subject to an EPA 15 ppm sulfur limit since 2012. In contrast, ECA marine fuel, both distillate and residual, sold or distributed in the United States has been subject to a 1,000 ppm sulfur limit since June 2014. The CAA program does not contain requirements for residual fuel that is not ECA fuel. The adopted Final Rule removes the restriction on the distribution of distillate fuel between 1,000 ppm and 5,000 ppm in the United States (for use outside of ECA boundaries), to provide the necessary flexibility for US fuel suppliers who participate in the global marine fuel market.

The IMO regulation can have a significant impact on both the shipping and refining industries, with a large degree of uncertainty regarding the implementation path, including the compliance rate. Due to a sudden switch in the fuel mix, potential shortages of compliant fuel are possible, especially middle distillates, which could spread to other sectors too. Global marine industry consumes about 3.5 million barrels per day of high sulfur (35,000 ppm) HFO fuels.

The marine industry—or at least some parts of it—continue their opposition to the IMO 2020 sulfur limit. According to press reports, Greece’s merchant marine minister told the IMO in November that operators aren’t ready to meet the 2020 fuel requirements. “We are yet to be confronted with the full scale reality of the availability, compatibility and safety challenges and grave risks of the new marine low-sulfur fuel,” he said.

Greece runs roughly 20% of the world’s commercial fleet and has been leading a campaign to push back the IMO implementation date. Countries including Russia, India and Indonesia also have voiced concerns over the fuel switch. The switch to low-sulfur fuels can burden the shipping industry with as much as $50 billion in extra fuel costs over the next four years, as IMO compliant fuels are expected to be up to 40% more expensive than the heavy fuel oil now in use.

Source: US EPA