Comments and Reply

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.

• "CPPI members remain committed to supplying on-road diesel fuel with the same ultra low sulphur limit and at the same time as required by the U.S. EPA."
• "Imperial Oil remains committed to supplying on-road diesel fuel with the same ultra low sulphur limit and at the same time as required by the U.S. Environmental Protection Agency."
• "Sunoco is committed to supplying on-road diesel fuel with the same ultra low sulphur limit and at the same time as required by the U.S. EPA."
• "Petro-Canada fully supports aligning the environmental performance of Canada's vehicles and fuels with those of the U.S.A".
• Irving Oil recommended that "the Government of Canada harmonize the diesel sulphur standard, timing and level, with that of the United States."
• Alberta Environment "support[s] Environment Canada's intention to develop a low sulphur diesel regulation that is in line with the U.S. EPA requirements, in terms of sulphur levels and timing."
• EMA recommended that "Environment Canada should adopt fuel and emission requirements that are harmonized with those in the U.S." EMA pointed out that "If fuel requirements are not harmonized, U.S. vehicles traveling in Canada and operated on high-sulphur fuel would suffer severe operational problems and damage to emission control systems".
• CTA indicated support for "a regulatory approach that would lead to North American harmonization of both engine and fuel standards".
• "NRCan supports the initiative to reduce sulphur in on-road diesel, and is pleased that Environment Canada has taken the approach of alignment with the fuel specifications and implementation timing in the U.S."
• "In principle, Industry Canada supports the idea of a regulation that would be aligned with the new standard in the United States, both in terms of level (i.e., a maximum limit of 15 parts par million (ppm) sulphur) and timing (i.e., to come into force in June 1, 2006)."
• "The Ontario Ministry of the Environment supports Environment Canada's intention to align Canada's on-road diesel fuel standards with those of the U.S., both for level and for timing."
• "MNR supports the Environment Canada approach of harmonizing the standard for sulphur content in automotive diesel fuel used in Canada with the U.S. EPA requirements, which are aimed at limiting the maximum sulphur content to 15 parts per million (ppm) as of June 2006."

Reply: The proposed regulations align with the U.S. EPA requirements for both level and timing.

Numerous parties commented on the regulatory limits and implementation date. Many urged earlier action and a limit below 15 ppm. It is noteworthy that no one suggested a limit higher than 15 ppm nor timing on limits on production and imports later than 2006.

• "CVMA strongly support Environment Canada's direction to reduce the allowable sulphur content in Canadian on-road diesel fuel to a maximum of 15 parts per million (ppm) commencing June 2006".
• "Pollution Probe strongly supports Canada's proposal to limit sulphur concentrations in on-road diesel fuel to 15 parts per million (ppm) by June 1, 2006."
• The New Brunswick Lung Association recommended that Canada "take a stronger position than exists in the U.S. by reducing sulphur levels to 15 ppm by 2005 and to zero by 2008".
• Saint John Citizens Coalition For Clean Air "totally support[s] Environment Canada developing regulations to restrict the level of sulphur in on road diesel fuel to a maximum of 15 ppm commencing on June 1, 2006".

• The Engine Manufacturers Association urged "Environment Canada to consider adopting a near-zero (5 ppm or less) level of sulphur in diesel fuel".
• CVMA suggested that "further decreases in sulphur levels beyond 15-ppm to near zero may be required for the introduction of future emission control technologies especially for light-duty diesel applications."
• Ford indicated that "further reductions, to near-zero sulphur, are required for future technologies, especially for light-duty diesel applications."
• The Canadian Public Health Association stated "The 15 ppm limit represents an important next step on the road to improving air quality and protecting Canadians from respiratory conditions, some of which have increased alarmingly during the past few years."
• Friends of the Earth and the Lung Association called "for the sulphur level in all diesel fuel be regulated to 0-15 ppm."

• The Canadian Public Health Association urged "Environment Canada to explore ways and means of advancing the timetable for these proposed changes".
• The Saint John Citizens Coalition For Clean Air "would have preferred [the implementation date] to have been 2005".
• The Engine Manufacturers Association indicated that "Environment Canada should require all on-road diesel fuel to meet the 15 ppm sulphur requirement as early as January 1, 2006. Given the agency's expectation of a three-month implementation delay, EMA urges Environment Canada to adopt an effective date for the 15 ppm diesel fuel sulphur requirement of January 1, 2006 and in no event later than April 1, 2006. In order to support the advanced technologies that are expected in the marketplace for model year 2007, it is essential that lower sulphur diesel fuel be commercially available nationwide by those dates. Typically, heavy-duty engine manufacturers begin releasing their new model year engines in September and October. But, the 2007 model year could begin as early as January 2, 2006… Environment Canada should recognize that engines using exhaust gas recirculation technology will begin to be available in Canada as early as mid-2002. While these engines can tolerate the current 500 ppm sulphur fuel, their durability will be improved by having early access to ultra low sulphur fuel."

Reply: As set out in the Minister's Notice of Intent on Cleaner Vehicles, Engines and Fuels, the proposed regulations set a limit of 15 ppm coming into effect in mid-2006. The implementation date for sales in northern regions is September 1, 2007, reflecting fuel distribution and logistical difficulties in northern Canada.

Comments received from stakeholders indicated that they universally preferred a simple, one-step implementation of 15 ppm sulphur in on-road diesel starting in 2006, without the complexities of the U.S. EPA-style provisions that would allow a small part of the on-road diesel pool to exceed the 15 ppm limit for a short period of time.

• CPPI indicated that its "analysis of the Canadian industry suggests that an interim two grade on-road diesel scenario is not practical or compatible with the distribution system in the majority of the country".
• Petro-Canada was of the view that "to prevent stranded capital investments in the existing Canadian distribution system the new fuel should be introduced in a one step manner."
• Shell indicated: "Any scheme that would lead to a two grade phase-in is an implementation approach which we believe would not be practical in Canada. For this reason, Shell supports a one step conversion to ULSD [Ultra Low Sulphur Diesel]."
• Sunoco Inc. expressed concern that "a phase-in approach in the U.S. and a one-step approach in Canada will result in lower-cost 500-ppm on-road diesel availability in the U.S. with none in Canada. This could create an incentive for cross-border refueling pre-2007 vehicles in the U.S., thereby creating a market discontinuity."
• The EMA
  • "opposes any sulphur phase-in process that would have two on-road fuels in the marketplace at the same time."
  • expressed concern that "the existence of two separate heavy-duty fuel streams would be environmentally unsound as it would likely result in the delayed purchase of newer, lower-emitting, heavy-duty engine technologies if truck owners were able to save the costs of operating on lower fuel sulphur levels by keeping their older trucks longer".
  • suggested that to avoid any potential for misfuelling that Environment Canada should put in place "a uniform, nationwide, single fuel sulphur requirement" .
• "CVMA strongly recommends that a "simple" regulation (as described in the discussion paper) be put in place."
• Friends of the Earth and the Lung Association advocated that " The new regulations should be simple - a single target of 2006 with no flexibility".
• Pollution Probe "does not believe that two grades of on-road diesel should be allowed, even for a short period of time."
• Saint John Citizens Coalition For Clean Air was of the view that "The proposed Canadian regulation definitely should not allow for a second on road diesel grade in Canada".
• The Canadian Public Health Association stated "Of the two options proposed, CPHA favours the simple approach of requiring all Canadian on-road diesel fuel to meet a 15 ppm limit."
• Alberta Environment was of the view that "a simpler regulation approach [than the EPA's] is desirable given the relatively small size of the Canadian refining industry".
• The MNR indicated it "favorise également la mise en vigueur d'une norme unique, applicable à tous dans un esprit d'équité et à une date donnée selon les capacités de l'industrie pétrolière à réaliser les modifications des procédés de désulphuration requis." [TRANSLATE
• Ford "support[ed] the "simple" regulations …that require a 15 ppm limit starting June 1, 2006".

Reply: The proposed regulations have a one-step implementation of 15 ppm sulphur in on-road diesel fuel starting in mid-2006

• CVMA indicated that "the likelihood that the lower-sulphur fuel will have a higher price than the old fuel … will impede the acceptance and use of the 15-ppm fuel, rather than encourage users to use the new fuel."
• CTA pointed out that "A scenario under which higher-priced ULSD co-exists with conventional diesel may also inspire companies to delay purchases of trucks with cleaner burning engines."

Reply: The proposed regulations require a one-step implementation of 15 ppm on-road diesel fuel, and therefore there will only be one on-road diesel fuel in the marketplace.

Many parties commented on the possibility of including flexibility provisions in the regulations, particularly to address the possibility of unforeseen circumstances that could delay the introduction of low sulphur diesel fuel.

• CPPI stated that "There should be no doubt that some kind of flexibility, as a minimum to cover uncontrollable events, is beneficial to supply continuity… Perhaps the most serious unknown is the ability of engineering, procurement and construction resources to complete their work in time for the effective date of this proposed regulation."
• Imperial Oil indicated that
  • "Given the constraints of the Canadian distribution system, Imperial Oil prefers a simple one step approach to the regulation but it must include flexible and accessible "safety valve" provisions to ensure supply continuity should uncontrollable events occur."
  • "Environment Canada should keep aware of the process in the U.S. and maintain flexibility to adjust should the U.S. rules be significantly amended with regard to level or timing."
• Petro-Canada stated that "to accommodate timing of the USA regulation and refinery construction requirements there needs to be appropriate program safety valves integrated into any final regulation."
• Shell encouraged "Environment Canada to closely track developments in the U.S. regulatory system as it pertains to the ULSD issue and to retain the flexibility to ensure Canadian action on ULSD is aligned with our major trading partner."
• Irving Oil pointed out that "Allowing some companies to import, refine, or market non-compliant diesel after the proposed June 2006 deadline serves to penalize those companies that have invested in infrastructure, or in securing compliant diesel for import."
• CVMA does not support the inclusion of U.S. style flexibilities for refiners and importers in the proposed on-road diesel sulphur regulations."
• Ford "want[s] policies in place that allow Environment Canada to bring low-sulphur diesel to the market place as quickly and completely as possible. If flexibility mechanisms will help bring that about then we will not oppose them".
• According to Pollution Probe, "Flexibility mechanisms or so-called "safety valves" that weaken the proposed sulphur reductions, or allow for delayed compliance, will have environmental and health costs and are not acceptable."
• Saint John Citizens Coalition For Clean Air made the following points
  • "[do] not permit our regulation to get tangled up in "a safety valve" … This should be avoided in Canada, as it will be expensive and difficult to manage and very confusing for the consumer when he or she purchases the diesel fuel in 2006."
  • "These "safety valves" or escape hatches can be abused, manipulated and result in making a mockery of an otherwise decent public policy objective."
• Industry Canada believes "that a "safety valve" needs to be included in the Canadian regulation…. The mechanism should only be available to a refiner who can demonstrate that all reasonable actions are being taken to comply with the regulation, but who will be in default for a period of time due to events beyond the refiner's control."
• Natural Resources Canada recommended that "a safety valve must be built into the regulations, preferably according to the Minister of the Environment's discretion to grant temporary exemptions, to allow for project delays and other unforeseen events that may delay implementation of ULSD in specific areas."

Given the initial comments by refiners seeking some form of flexibility in the regulations, Environment Canada sought clarification from CPPI on the circumstances under which industry considered that flexibility might be necessary. CPPI's response stated that

"The ULSD flexibility objective can be adequately served at this point in time by an appropriate statement in the RIAS [Regulatory Impact Assessment Statement]"… The RIAS should recognize that Canadian refiners are competing both internationally and domestically for specialized engineering and construction resources. These implementation issues are expected to be manageable, but are difficult to predict with absolute certainty several years in advance."

Reply: The proposed regulations adopt a simple, straightforward approach, requiring 15 ppm sulphur in on-road diesel fuel across Canada starting in 2006. The regulations do not include U.S. EPA-style flexibility or "safety valve" provisions that would allow a small part of the on-road diesel pool to exceed the 15 ppm limit for a short period of time.

The RIAS accompanying the regulations includes the following statement:

"One consequence of aligning with the U.S. is that Canadian refiners will be competing for specialized engineering and construction resources with the U.S. refiners. The Canadian refiners have indicated that they expect this implementation issue to be manageable, but that it is difficult to predict with absolute certainty several years in advance. Environment Canada will monitor this situation over the years prior to 2006 to see if any serious widespread difficulties arise."

• CPPI noted that "Potential contamination of ultra low sulphur products is a serious issue for pipelines and the whole distribution system…"
• Natural Resources Canada noted that "Contamination of ULSD batches is a concern even with only one grade of on-road diesel in the distribution system. … Consideration should be given to allowing some tolerance between the sulphur level exiting the refinery and at the engine, at least during a phase-in period."
• CTA pointed out that "it will be critical to assure consumers that 15 ppm diesel is in fact what it claims to be, and that the possibility of contamination at the pump is all but eliminated. This suggests the need for the Canadian regulation to include rigorous standards for quality control and testing of all fuels sold as ULSD".

Reply: The presence of higher sulphur products and crude in the distribution system creates the potential for contamination of 15 ppm diesel fuel. In developing its regulations, the EPA examined how pipelines would have to be managed to minimize contamination of low-sulphur diesel fuel. The EPA found that more careful pipeline management, including larger product interface and increased volumes of re-blending contaminated batches would occur, resulting in additional pipeline and distribution system costs. Canada will face these same types of issues with the introduction of 15 ppm diesel fuel. This issue and the estimated additional costs were discussed at length in the discussion document distributed in May 2001.

The EPA has determined that a level of 15 ppm sulphur in diesel fuel will be necessary for new on-road vehicle emission standards to be met. Therefore, the proposed regulations stipulate a sulphur limit of 15 ppm for sales of on-road diesel fuel.

Stakeholders expressed concern regarding potential misfuelling and possible implications on warranty of after-treatment devices. Most of these comments related to the situation of two grades of on-road diesel fuel being allowed during a transition period.

• The CVMA indicated that
  • "Misfuelled vehicles will not only have higher emissions than if they were correctly fueled, the after-treatment devices will eventually fail due to sulphur poisoning and plugging."
  • "Another concern with a fuel phase-in is the potential incompatibility of the older, high-sulphur fuel with the lubricating oils that are to be used with the 15-ppm sulphur diesel fuel. Presence of sulphur in the fuel creates acids, which means that current lubricating oils contain additives to counteract acidity …. Thus, if higher-sulphur fuel is used with the lubricating oil designed for the 15-ppm fuel, no correction of the acidity will occur and there is a potential for increased engine wear and damage."
• The EMA made a number of points regarding misfuelling:
  • "In order to avoid the myriad potential problems with contamination and misfuelling, and the increased distribution cost posed by a complex fuel phase-in, Environment Canada should adopt a straightforward, simple fuel requirement: all commercially available on-road diesel fuel must meet a 15 ppm cap on sulphur content."
  • "The harm to engine and aftertreatment systems from using higher level sulphur fuel would be severe. Engine systems may be poisoned, and irreversible damage may occur."
• The CTA submitted that should "the federal government opt for a U.S. style rule permitting two grades of diesel, it is obvious that Canada will have to follow the U.S. lead in developing an awareness program to reduce the possibility of misfuelling at the pump."
• Irving Oil suggested that the "The best safeguard to minimize or eliminate misfuelling and contamination of low-sulphur diesel fuel would be to ensure market penetration of ULSD in advance of the regulated deadline."
• Sunoco encouraged "Environment Canada to ensure that enforcement provisions are rigorous to prevent the occurrence of misfuelling."
• Industry Canada suggested that "Misfuelling could be addressed in the same manner as today - on-road (low sulphur) diesel would be clear and off-road diesel would be dyed".

Reply: Potential for misfuelling of diesel on-road vehicles exists presently, as diesel fuel for off-road use can have a sulphur level higher than the limit for on-road diesel fuel. This situation will continue to exist when sulphur in on-road diesel fuel is reduced to 15 ppm. With the more stringent 15 ppm limit, there will be a greater risk of contamination from higher sulphur products resulting in the regulated limit being exceeded. As discussed above, this will require more careful pipeline and storage tank management.