Reply to Comments on Submissions Received on the Proposed Amendments to the Sulphur in Diesel Fuel Regulations

Comments and Reply

• General Comments
• Comments on Alignment of the Regulations with US Requirements
• Less Stringent Limits to Accommodate a Proposed Refinery in the Yukon
• Comments on Simple Versus a Complex Regulation
• Comments on Reporting Requirements
• Miscellaneaous Comments
• Comments on Requirements for Rail and Marine Diesel Fuel

General Comments

Almost all stakeholders and governments who commented on the proposed regulations expressed support for the initiative to reduce sulphur in off-road diesel fuel. It is noteworthy that no one opposed new regulations to introduce the regulatory limits.

• The City of Port Moody expressed "support for a reduction in sulphur levels in all fuels in engines" and "request that the timetable for implementation of this [sulphur level] reduction be expedited."
• Ontario Ministry of the Environment concluded "We look forward to this regulation becoming law in the near future."
• Ville de Montréal "support[s] the proposed regulations".
• "The Yukon Government fully supports the proposed amendments ".
• "CPPI commends Environment Canada for producing these regulations, which will meet both the environmental objectives of the government and the economic well being of our industry. . . .We view this as a "smart regulation".
• "Imperial [Oil} would like to reiterate its support of the selected approach of amending the existing regulations" and "fully endorses the recommendations and comments made by CPPI".
• "Petro-Canada finds the proposed regulations generally acceptable."
• "SEPI fully supports this CPPI response."
• "Ultramar Ltd.... concurs with the comments that CPPI will forward you on the draft regulation".
• "The Canadian Vehicle Manufacturers' Association... are generally supportive of the changes."
• "EMA supports Environment Canada's efforts to align requirements for sulfur in non-road diesel fuel with the U.S. EPA." and "support the proposed amendments requiring Canadian non-road diesel fuel to meet a 500 mg/kg limit starting no later than 2007, reduced to 15 mg/kg limit starting no later than 2010 (except for locomotive and marine diesel fuel would remain subject to the 500 mg/kg limit with a limit of 15 mg.kg beginning in 2012.)"

Reply: The final Canadian regulation retains the key elements of the proposed regulations.

Comments on Alignment of the Regulations with US Requirements

Many industry stakeholders and governments expressed support for alignment of requirements for level and timing in Canada's regulations with those of the U.S.

• The Ontario Ministry of the Environment "support Environment Canada's intent to align with the U.S. Clean Air Nonroad Diesel Rule" and "In lieu of advancing the 15 kg/mg [mg/kg] sulphur cap for locomotive and marine diesel fuels to 2010, we realize that alignment with the U.S. is most important".
• Ville de Montréal commented "These reductions ensure consistency between Canadian regulations and those adopted by the United States ".
• CPPI stated "[by] aligning sulphur levels and timing with the U.S. , Canadian refiners will be able to meet the requirements without sacrificing their competitive position vis à vis the U.S. refiners."
• Imperial Oil "continue to endorse the need for Canada to pursue its policy of aligning Canadian engine and fuel standards with those of the USA ."
• Ultramar Ltd. "appreciate: that the implementation dates for the new regulations are consistent with those of a similar regulation in the United States'.
• "EMA supports Environment Canada's efforts to align requirements for sulfur in non-road diesel fuel with the U.S. EPA."

Reply: Consistent with the policy developed and set out in the Federal Agenda on Cleaner Vehicles, Engines and Fuels, the final regulations align with the U.S. EPA requirements for both level and timing.

Less Stringent Limits to Accommodate a Proposed Refinery in the Yukon

The Yukon Department of the Environment and Northern Cross ( Yukon ) Limited, the proponent for a proposed refinery, requested flexibility on the 500 mg/kg limit during an interim period. Environment Canada had follow-up consultations on this issue (see Appendix A). The Yukon Ministry of Energy, Mines and Resources also submitted a second letter on the requested flexibility (Appendix B).

• Yukon Environment requested "that the regulations and associated sulphur limits be modified such that off-road diesel produced within the Yukon be permitted to reach 750 mg/kg during the interim period between 2007 and 2010 ."
• "NCY [Northern Cross Yukon] requests that some minor flexibility be provided in the 500 mg/kg sulphur specification for 2007 providing for product up to 750 mg/kg provided commercially reasonable efforts are made to comply with the 500 mg/kg limits. NCY requests such flexibility until 2010 for off road diesel and 2012 for rail and marine diesel." and "While NCY is referencing a specific project it is suggested that the above flexibility be applied to any other facilities north of 60 degrees."

Environment Canada initiated further correspondence by email with key stakeholders on this issue (see Appendix A) and received the following views:

• Nunavut - " will not affect our operation"
• Quebec - "no special case for Northern Areas"
• Newfoundland and Labrador - " If it is determined that the refinery will go ahead and is important to the local economy, then I would suggest that a very clear zone be established where the regulations are varied" .
• EMA "oppose[s] any delays for Northern Areas".
• CPPI did not support Yukon 's request:
  • "The Notice of Intent for the regulatory requirement was issued in February 2001 thereby, allowing all refiners in Canada sufficient time to appropriately plan the needed changes to their plants to meet the 500 mg/kg requirement in the timeframe specified in the Gazette 1 Regulations.
  • We see no valid reason to exempt the northern region because one single refiner,[Northern Cross} NCL, for what appear to be reasons of project economics, is unable to meet the 500 mg/kg sulphur limit.
  • "We are not aware of any issue around reliability of supply to the Yukon , so there is no reason to grant the proposed flexibility on these grounds."

  Reply: The final regulations do not add flexibility for any company. While it is recognized that a new refinery would have important economic benefits to the Yukon , consistent application of national environmental fuel standards is important.

  Factors considered in determining resolution of this issue include the following:

  • This regulatory action has been known for some time - in 2001, Environment Canada indicated that it planned to limit sulphur in non-road diesel fuel in alignment with EPA requirements. Companies have had ample time to prepare for new limits.
  • New facilities are normally expected to be built to the best standards.
  • Other northern refineries are subject to the requirements - Alaskan refineries are investing to meet the same limits under the EPA's regulations.
  • Granting relief to support the economics of one facility would result in a tilting of the competitive playing field.

Comments on Simple versus a Complex Regulation

Stakeholders indicated that they universally preferred a simple regulation, without the complexities of the U.S. EPA-style provisions that would allow a small part of the off-road diesel pool to exceed the limits for a short period of time.

• Ville de Montréal stated "We are happy to see....the proposed regulations are easy to apply, without exception or credit exchange programs."
• "CPPI appreciates the efforts made by Environment Canada in adopting a straightforward approach which avoids all the complexities of the parallel U.S. rule."
• Petro-Canada submitted "We appreciate the efforts made by Environment Canada in adopting a straightforward approach which avoids all the complexities of the parallel U.S. rule."
• Ultramar Ltd. "appreciate:....that the reductions in sulphur contents must be made at a specific date and for the entire pool of targeted products and that there is no progressive implementation, as in the case in the United States ."
• "EMA supports a simple regulation requiring Canadian non-road diesel fuel to meet a 500 mg/kg limit starting 2007, reduced to a 15 mg/kg limit starting 2010."

Reply: The Canadian regulations retain the simple approach with flat limits.

Comments on Reporting Requirements

Reporting Frequency

• CPPI and Petro-Canada recommended "that quarterly reporting be required for two years after the compliance date and then changed to annual reporting... This would mean that annual reporting could start August 31, 2008 for on road diesel."

  Reply: The final 15 mg/kg limit on sulphur in non-road diesel fuel comes into effect in mid-2012 for production and imports of diesel fuel. Given the changes until then, Environment Canada feels that quarterly reporting is important during this period in order to provide for closer monitoring of the transition of the diesel fuel standards to the final limit.

  The regulations have been adjusted to provide for annual reporting starting in 2015, after the final limits are in place.

Implementation Date for New Reporting Requirements

• CPPI commented "The January 1, 2006 start date for the regulation could cause a problem if a new report needs to be submitted for 1Q06, which is in advance of the June 1, 2006 production date for 15 mg/kg sulphur diesel. We recommend that the first report become due November 14, 2006 (45 days after the end of the quarter requiring 15 mg/kg diesel)."

  Reply: Environment Canada followed up with CPPI seeking a explanation as to why the January 1, 2006 start date would be a problem . Through further discussions along with a revisit to this concern, CPPI concluded that they have no problem with the new report format covering the first quarter 2006 period. The regulations therefore were not changed in this regard

Reporting on Diesel Fuels for other uses

• CPPI suggested that "SCHEDULE 1: Sections 6. (b), (c), 7. (b), (c) [reporting on diesel fuel with sulphur levels greater than 15 mg/kg or 500 mg/kg] should only apply until May 31, 2012 ."

  Reply: Although most fuel will be subject to the regulated limits, a small portion of the pool is not (e.g. fuel for use in stationary diesel engines). This was clarified with CPPI members; the regulations have not been changed in this regard.

Registration Requirements

• CPPI and Petro-Canada suggested that "SCHEDULE 2: The requirements to report on diesel fuel "for any other use" should be removed in Section 4, 10, 11"

  Reply: Schedule 2 sets out registration reporting requirements. Diesel for uses other than on-road, off-road, rail and marine is not subject to the regulatory limits. However, information on who produces/imports such fuel, and the associated volumes, is important for enforcement purposes.

  Following further discussion, CPPI and Petro-Canada indicated that they were comfortable with the reporting requirement remaining in Schedule 1. Therefore the regulations retain the requirement to report one-time information on diesel fuel "for any other use" .

Miscellaneous Comments

Cost Information

• CPPI recommended "that the cost benefit analysis in the RIAS, accompanying the regulations, incorporate the latest cost information [as] included in the August 4, 2004 Purvin & Gertz report entitled "Economic and Environment Impacts of Removing Sulphur from Canadian Gasoline and Distillate Production"."

  Reply: Environment Canada has reflected cost information from the report in the RIAS.

Implementation Timing for Point-of Sales Limits in Northern Regions

Fuel shipments to northern communities take place from mid-May to September along the Mackenzie River and the Arctic Coast . In mid-winter, the fuel is shipped to sites which are only accessible by ice roads. Because fuel shipments are infrequent, turnover of tank volumes is often slow. The proposed regulations allow for an extra 18 months from production or imports of diesel fuel to final sales in the Northern Supply Area.

• The EMA "oppose any delays for Northern Areas".

  Reply: This issue was raised by the EMA previously and addressed in the Reply to Comments on Submissions Received on the August, 2003 Environment Canada Discussion document "Reducing the Level of Sulphur in Canadian Off-Road Diesel Fuel" published October 2004. The implementation date for sales in northern regions is 15 months later than in other regions, reflecting fuel distribution and logistical difficulties in northern Canada . The EMA has not provided any new information to support a change.

  The regulations therefore retain the later implementation date in northern regions of Canada for sales of off road, rail and marine diesel fuels.

Time Period between Limits on Production/Imports and Limits on Sales

• CPPI and Petro-Canada noted "The grace period for meeting the 500 mg/kg sulphur level between point of production/ import to point of sale is 4 months, and 3 months for the 15 mg/kg sulphur level. These time periods should not be different, and in out view should be 4 months, as per the U.S. rule".

  Reply: The amending regulations have been adjusted so that there is a four-month period from production/imports to point of sale for both the 500 and 15 mg/kg sulphur diesel fuel.

Comments on Requirements for Rail and Marine Diesel Fuel

All stakeholders indicated support for a 15 mg/kg sulphur limit for rail and marine diesel fuels through their views on alignment. One stakeholder identified specifically the 15 mg/kg requirement for rail and marine diesel fuels.

• "EMA supports the proposal to require commercial diesel fuel with a maximum sulphur content of 500 ppm for locomotive and marine usage beginning in 2007, with a final level of 15 ppm in 2012."

  Reply: The final regulations retain the 15 mg/kg limit for sulphur in rail and marine diesel fuels, effective in 2012.

Alternative Test Methods for Reporting Purposes

CPPI commented on alternative test methods and applicability to biodiesel.

• "CPPI believes that revisions to the guidance document will have to be made to accompany the new regulations....clarifications required include: 1. the validation of alternative test methods....2. With the broadening of the diesel definition to include non-petroleum fuels such as bio-diesel and biodiesel blends, are the current alternative methods still valid or will new validation be required, and if so, using what Blend grade? (B1-B5, B20, B100?)"

  Reply: Environment Canada intends to revise the guidance document to clarify that demonstrations of equivalency of alternative test methods established for petroleum based diesel fuel are valid only for petroleum based diesel fuel. Persons wishing to use alternative test methods for biodiesel and blends of biodiesel will need to demonstrate equivalency in respect of these fuels.

Definitions of Biodiesel and Diesel Fuels

• CPPI commented that
  • "the definition for biodiesel is missing in the regulations, and needs to be included."
  • "the definition of "diesel fuel" should be expanded to read: "... ... represented as diesel fuel, biodiesel fuel or biodiesel fuel blend."
• CVMA felt "a definition for biodiesel fuel should be included in the regulations. The definition should clearly indicate that biodiesel fuel intended to include biodiesel/diesel fuel, blends."

  Reply: The final regulations now include a definition for biodiesel, provided below:

  " biodiesel fuel" means a fuel that is composed of or derived from plant or animal oils or plant or animal fats and is intended to be used in diesel engines. ( carburant biodiesel )

  The definition of diesel fuel was also adjusted to clarify that it includes a blend of biodiesel fuel and diesel fuel, provided below:

  " diesel fuel" means a fuel that can evaporate at atmospheric pressure, that boils within the range of 130ºC to 400ºC and that is for use in diesel engines or any fuel that is sold or represented as diesel fuel, as biodiesel fuel or as a blend of biodiesel fuel and diesel fuel. ( carburant diesel )

Definition of Off-road Engine

• CPPI felt that "The definition for "off-road engine" does not make it clear what is included and what is excluded" and "We suggest the definition be expanded to make it perfectly clear what engines this regulation is intended to cover (or exclude) and that it be consistent with the US EPA regulations."

  Reply: Both the Canadian Off-road Compression-Ignition Engine Regulations, and the US EPA Nonroad Rule cover the same off-road equipment for which these regulations apply. The definition as presented in these regulations are essentially the same.

  The definition of off-road engine was adjusted to clarify that it does not include stationary diesel engines, as provided below:

  " off-road engine" means a diesel engine, except for aircraft engines, locomotive engines, vessel engines and engines used to propel on-road vehicles, that is used or designed to be used

  1.  by itself and that is designed and intended to be moved from one location of use to another; or
  2.  in or on a machine that
     1.  is designed and intended to be moved from one location of use to another,
     2.  is self-propelled,
     3.  serves a dual purpose by both propelling itself and performing another function, or
     4.  is designed to be propelled while performing its function. ( moteur hors route )

Labeling Requirements

• CVMA submitted that "the regulations should have requirements with respect to the labeling of this fuel to prevent misuse for on-road diesel vehicles.... Environment Canada should take the necessary steps to warn individuals about the impacts of using dyed off-road diesel on advanced emission control technology on-road diesel vehicles."

  Reply: The proposed regulations do not include the various flexibilities of the EPA rule, thereby minimizing the number of grades of diesel fuel on the market and the potential for misfuelling. Beginning in 2010, all diesel fuel for use in on-road and off-road applications is required to meet the 15 mg/kg sulphur limit. The regulations also include provisions requiring diesel fuel to be identified for its intended use prior to dispatch from a production facility or point of import.

Record Keeping Requirements

• CPPI commented "Although there is no amendment connected with this section [Subsection 5.(7)], the requirement is for production reports to be retained at the point of production. Some companies have government reports prepared at their central office, away from the point of production. It would seem reasonable that reports be retained where they are prepared. This request could be accommodated with a simple change as follows: "5.(7) A copy... ...shall be maintained ... ...at the production facility or place of business in Canada or at the place of business of the importer."

  Reply: This comment is beyond the scope of the proposed amendments. The regulations require that records be kept at the production facility in order to provide ready access by enforcement officers during an inspection. During an on-site inspection, enforcement officers may verify the numbers that are reported in quarterly/annual reports, and also examine the documentation supporting notices and reports. Having copies of the notices and reports retained by the regulatee at the facility makes it possible to easily cross-reference and match up supporting documentation with the information that has been submitted to the Minister. Enforcement officers can therefore determine the accuracy of information in the notices and reports that the regulatees has submitted to the Minister of Environment.