The new standard

| July 02, 2006

The transition to ultra low sulfur diesel will reduce pollution but at a price.

Cleaner-burning ultra low sulfur diesel is officially on its way as of June 1, and trucking industry experts predict truckers will face higher prices and possible shortages.

Beginning June 1, the Environmental Protection Agency required oil refineries to dedicate at least 80 percent of their supply to 15 parts per million ULSD, a 97 percent reduction from the 500 ppm of low sulfur diesel. The EPA estimates the changeover will eliminate 90 percent of pollution from trucks and buses by 2030.

Owners of 2007 lower-emissions engines will be required by law – and compelled by the threat of a possible voided warranty – to fuel with ULSD. The ’07 engines use diesel particulate filters to eliminate additional soot, and DPFs need ULSD to function properly [see "Feel the Burn" on page 28 for more information on DPFs].

“The emissions technologies incorporated into these trucks are sensitive to sulfur and would not perform well in a high-sulfur environment and could potentially be damaged,” said Rich Moskowitz, assistant general counsel and regulatory affairs counsel for the American Trucking Associations. “The end users have a legal and an economic incentive to make sure these are not mis-fueled.”

ULSD is designed for the ’07 engines but should work about the same as low sulfur diesel in older engines. Truck owners will have a choice between the two, at least until 2010 when the EPA mandates a 100 percent transition to ULSD fuel.

“We expect that the fuel will be completely backward compatible, meaning that it will operate the same way low sulfur diesel operates,” Moskowitz said.

The concerns
Still, ULSD has its drawbacks. The key issues for the trucking industry are price and possible shortages, which go hand in hand.

The EPA predicts ULSD will cost 5 cents more per gallon to refine and distribute, and that cost will probably be passed on to the end user. The cost could go higher if the fuel requires dedicated tanker trucks to transport it.

However, production cost is only part of the equation. Supply and demand play a role. If ULSD is abundant, the increase in price should be reflective of the additional cost to produce it. But supply shortages in certain regions – particularly the areas at the end of the pipelines, such as upstate New York, North Dakota, Nebraska, Washington state and some of the Rocky Mountain areas – may result in localized price spikes, Moskowitz said.

And truck owners won’t be the only ones affected by higher prices.

“Over the long-term, the increased cost of fuel will translate into increased costs for freight transportation, which will ultimately be born by the consumer,” Moskowitz said. “In the short-term, especially in the transition years while both grades of fuel are available in the marketplace, it’s difficult to tell how much of the costs will be passed on.”

On top of the higher price, ULSD has lower energy content and a resulting fuel economy penalty of 1 percent.

“On an individual truck basis, the 1 percent is going to be very difficult to notice,” Moskowitz said. “But across a whole fleet, it’ll be easier to notice and will slightly impact the bottom line.”

Another issue with ULSD is that the process to remove sulfur from the fuel also reduces its lubricity, but terminals plan to incorporate lubricating additives into the fuel before it reaches the consumer, Moskowitz said.

Also, some fleets who have tested ULSD report that it cleans sediment out of fuel systems, clogging the fuel filter more quickly, Moskowitz said. Owner-operators and fleets can address this by planning ahead to change the fuel filter more often.

In a truckstop near you
The new 15 ppm ULSD probably won’t hit most truckstops until Oct. 15, an extension past the original deadline of Sept. 1 (except in California, which will meet the original deadline). During the extra six weeks, retailers will be allowed to label, sell or distribute fuel with 22 ppm as ULSD.

The lag between the June 1 date for ULSD refining and Oct. 15 for the retail implementation date will allow time to build up a supply of ULSD and work out the kinks in transporting it through pipelines and in tankers that may be contaminated with sulfur.

“Perhaps the greatest concern with ULSD is whether the fuel will be available in all parts of the country,” Moskowitz said. “There’s a chance that as you move farther and farther away from the refinery that each of these handoffs will result in a slight contamination of the fuel. At least in certain parts of the country, ULSD may have to be downgraded to low sulfur diesel.”

Because both types of fuel will be available until 2010, the EPA now requires retail establishments and fleets that use in-house central refueling operations to label all pumps either low sulfur diesel or ULSD, even if they choose to distribute only low sulfur diesel.

“Even if they’re not carrying the ultra low yet, they’ll be required to label their tanks low sulfur,” said Mindy Long, senior director of communications for NATSO, the National Association of Truckstop Operators. “They’ll probably label them all low sulfur now and re-label in Oct. 15. They want to make sure nothing is being sold as ultra low when it’s not ultra low.”

Retailers are required to ensure that anything they sell as ULSD meets the 15 ppm requirement.

“The fines from the EPA can be as much $32,500 per day for labeling it ULSD if it wasn’t in compliance,” Long said.

To get ready for the change, many truckstops are planning to wait until the supply of ULSD is steady and then gradually clean out their tanks, Long said.

“Many of them are planning to take the tanks down as low as they can with normal use, in their normal pattern, through people filling up their trucks. Then they’ll refill with ULSD,” Long said. “They won’t label it ULSD, and it probably won’t meet the requirements, but it’ll be cleaning out the tanks.”

The truckstops will repeat this several times until the tanks are clean enough that ULSD reaches the right ppm levels.

“If you were to take our tanks out of commission, it would cost the truckstops, but this way minimizes disruption,” Long said.

With a little planning, the transition shouldn’t be too time consuming or expensive for the truckstops, she said.

“Our hope is that it’s going to be smooth,” she said. “It’s not going to be something that someone can just decide on Oct. 15 that they’ll start carrying ULSD.

“For the drivers, we hope it’ll be a seamless transition.”

Just the Facts

  • The EPA mandates that oil refineries must allocate 80 percent of their supply to making ULSD (vs. 20 percent maximum of low sulfur diesel) as of June 1.

  • ULSD has a sulfur content of 15 parts per million, a 97 percent reduction from low sulfur diesel.
  • Truckstops will be fined heavily if they label anything ULSD that doesn’t meet the 15 ppm requirement.
  • Truckers without ’07 engines aren’t required to buy ULSD, and truckstops aren’t required to sell it.
  • Truckers and fleets who own ’07 trucks will be required to fuel with ULSD.
  • ULSD is not expected to negatively impact older engines.
  • ULSD is expected to cost more per gallon than low sulfur diesel, but no one is sure how much more.
  • ULSD may get contaminated with sulfur in the pipelines, causing shortages and price spikes in some regions.
  • The EPA estimates the change to ULSD will result in a 90 percent reduction in pollution by 2030.

What Do Truckers Say?
“I think it’s probably a good idea because of the emissions that we face, but I don’t think they’ve done enough research on what it’s going to do to our current engines. Not everyone can afford a new truck.”
Bobby Randall
Dallas
Saia Motorfreight

“I think it will result in less miles per gallon and will be harmful to the engine. From what I’ve heard, it doesn’t provide enough lubricant.”
Jeff Seider
Ravenna, Ohio
Quality Carriers


FTC: No Manipulation in Post-Katrina Gas Prices
In a report mandated by Congress, the Federal Trade Commission said May 22 that its investigation into post-Katrina gas prices revealed no illegal market manipulation.

The FTC analyzed financial data for 30 refiners, 23 wholesalers and 24 single-location retailers. It found seven refiners, two wholesalers and six retailers had higher average gasoline prices in September 2005 compared to August. These higher prices were not attributable to higher costs or to national or international market trends.

Further study indicated that factors such as regional market trends explained the pricing in nearly all the cases, the FTC reported.

Harry Reid, U.S. Senate Democratic leader, said the investigation showed only that “federal investigators don’t have the tools they need to protect the American people from gas price gouging.” The Nevada senator urged passage of an anti-gouging bill introduced by U.S. Sen. Maria Cantwell, D-Wash.

The report vindicated refiners, said Bob Slaughter, president of the National Petrochemical and Refiners Association. Mergers and acquisitions actually have increased U.S. refining capacity, Slaughter said.

The report defies belief, said Tyson Slocum, energy program director for the consumer group Public Citizen.

“The FTC has become increasingly political, losing its traditional independence and favoring big oil, and the agency is too quick to point blame at small retailers rather than large refiners, despite the fact that a May 2004 U.S. Government Accountability Office report found that mergers in the oil industry have led to higher prices,” Slocum said.
- Jill Dunn


Repos Up in Hot Truck Market
Repossessions and liquidations of tractor-trailer trucks nationwide have been high for the past five quarters, but repossessed trucks are finding buyers quickly, reported Nassau Asset Management, which serves the equipment finance industry.

Nassau’s data indicates that truck repossessions and liquidations began to rise in the first quarter of 2005. On a quarter-over-quarter basis, repossessions rose 61 percent in the first quarter 2005; 30 percent in the second quarter of 2005 and 32 percent in the third quarter of 2005. The third quarter of 2005 was the peak in terms of volume, but repossessions were up 145 percent over the fourth quarter of 2004.

Nassau President Edward Castagna cites high fuel costs as a major factor, but he believes that the upswing reflects a positive trend: industry growth over the past few years. There are more financed vehicles on the road as the industry rebounded from the 2001 downturn, and more vehicles often means more repossessions and liquidations.

Trucks that Nassau has repossessed or liquidated are reselling quickly, Castagna says. “We feel the rush to change out fleets before year end may leave a surplus of used trucks on the secondary market. We intend to monitor resale speed and price levels for the remainder of 2006.”

Nassau’s NasTrac Quarterly Index reveals trends in equipment repossessions and orderly liquidations based upon the company’s own internal activity.
- From Staff Reports


Bush Taps New FMCSA Administrator
President Bush nominated John Hill to be the new administrator of the Federal Motor Carrier Safety Administration.

Hill, a native of Indiana, now serves as assistant administrator and chief safety officer for the FMCSA. During that time, he has served as the department lead for pandemic influenza and the secretary representative concerning Hurricane Katrina at the Department of Transportation.

Prior to that, he served as major commercial vehicle enforcement division commander for the Indiana State Police. He received his bachelor’s degree from Taylor University.

Bill Graves, the president and CEO for the American Trucking Associations, commended the nomination of Hill.

“As an industry, we face many challenges in moving the nation’s goods in a safe, efficient, secure and environmentally sound manner,” he said. “As the chief safety officer of FMCSA, John Hill has demonstrated an understanding of those challenges and the need to bridge the operational needs of the trucking industry with the regulatory responsibilities of the agency.”

The FMCSA also filled its deputy administrator slot. U.S. Transportation Secretary Norman Mineta appointed David Hugel to the position.

Hugel joined the agency May 30 and will serve as the acting administrator until Hill takes over the post.

Hugel joins the U.S. Department of Transportation after heading the Maryland Division of Motor Vehicles for the past three years. He replaces Warren Hoemann who left the deputy’s post effective May 13.

Hugel has worked in the public and private sectors but has focused on motor vehicle issues for the past 19 years. He was an on-site consultant at the U.S. Department of Transportation, assisting the FMCSA and the Federal Highway Administration’s Office of Motor Carriers.

There, he was involved in a wide variety of issues ranging from implementation of congressionally mandated changes for commercial drivers licenses to a comprehensive revision of federal motor carrier safety regulations. From 1987 to 1995, he was director of government affairs for the American Association of Motor Vehicle Administrators.

A Vietnam veteran, Hugel has a juris doctorate and master’s degree in criminal justice from the University of Baltimore.
- Brittani Tingle


Survey: Minneapolis Motorists Have Best Manners
A survey of driver behavior in 20 cities indicated Minneapolis is the most courteous city and Miami the least, while Los Angeles is the city most likely to have motorists involved in distracting activities.

The Driver’s Seat Road Rage Survey was released May 16. The AutoVantage auto club commissioned an independent research company to conduct 2,040 interviews with a margin of error of 2.2 percent.

Nashville ranked as the second most courteous city, followed by St. Louis. After Miami, Phoenix drivers were the rudest, followed by New York.

Thirty percent of respondents reported seeing drivers engaged in non-driving behavior while driving, such as shaving or reading. Forty-three percent of Los Angeles respondents witnessed this, compared to only 18 percent of Seattle respondents.

Drivers nationwide named speeding as their biggest cause of driving stress, with 57 percent reporting they witnessed it daily. Half reported seeing daily tailgating, and 40 percent stated other drivers cut over without notice daily.

Forty percent of those surveyed said they reacted to rude or bad driving behavior by honking their horn, while 32 percent cursed the other driver. Only 5 percent reported the motorist to authorities.

The survey indicated no difference in experiences between men and women but showed that younger drivers and those with the longest commute are the most sensitive to aggressive or rude driving.

Miami Herald columnist Larry Lebowitz panned the report, calling it “a well-executed ploy by a little-known automobile club

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