Miscellaneous Issues

• CPPI suggested that the definition of Diesel Fuel: " ... be amended to change the lower end of the boiling range from 150°C to 130°C to better reflect actual data on Canadian diesel fuels."
• Shell also suggested to "..change specification of diesel fuel to have a lower end boiling range of 130°C instead of 150°C."

Reply: The final diesel regulations have modified the definition of Diesel Fuel to change the lower end boiling range to 130°C. In addition, the definition has also been modified to include any fuel sold or represented as diesel fuel.

Reporting Requirements

• CPPI indicated it "can understand that quarterly monitoring will be useful during the period in 2006 and 2007 that will see the switch to 15 ppm sulphur diesel fuel, but prior to 2006 an annual report with quarterly data should be quite sufficient. If the transition to 15 ppm is smooth, it should also be possible to revert to annual reporting of quarterly data."
• "Shell requests that Environment Canada modify the reporting frequency requirements in Section 5(1) to annual submission of quarterly reports from the proposed quarterly report submission. Shell recognizes that closer tracking of the fuel quality may be needed in the 2006-2007 period. Quarterly submissions should be required for this period only."

Reply: Environment Canada considers that a certain minimum amount of information is required to be reported for monitoring and enforcement purposes. The regulations retain the requirement for quarterly reporting of diesel sulphur levels that is already required under the existing Diesel Fuel Regulations. The date specified for submission of reports has been extended from 30 days after the quarter in the existing regulations to 45 days after the quarter in the new regulations to make it consistent with other fuel regulations.

CPPI indicated that:

• "The requirements of Section 5(2) are of concern. Specifically, records of diesel fuel sold are not kept by "facility", as required by Schedule 1. The distribution and marketing operations of the industry make this a virtually impossible requirement. ... ..We believe that sales data can be supplied on a Provincial basis, as is currently done for Statistics Canada (report 45-004-XPB, Refined Petroleum Products).
• Sections 5 & 6: " ... without greater clarity, this provision causes major problems. ... This rebranding can and does take place well down the distribution system and can be extremely difficult to track."
• "The very general wording of this section [Section 6 (1) (b)] needs much greater clarity to yield consistent and useful data. CPPI is prepared to work with Environment Canada and other stakeholders to better define this requirement."
• "There is also a problem with the requirement of Section 6(2) to identify the volume to be dispatched or imported prior to the dispatch or import. This is impossible to do accurately, as the final volumes of a transaction are determined after the delivery is completed".
• Ultramar indicated that "We are unable to inform you of the final use of our road diesel production given that a large part of our production is sold by third parties (trading partners, wholesalers ... )."
• "Shell does not track diesel sales by facility. Due to the integration of the Canadian distribution system this is not possible. Shell suggests this requirement for reporting of diesel fuel "sold" be removed from Section 6 and Schedule 1 6(a)(iii) and 6(b)(iii). Sales data by fuel by province is available in the Refined Petroleum Products report of Statistics Canada ... In addition, only refiners and importers are required to complete Schedule 1. There are many facilities that sell diesel fuel that are not producers or importers therefore, the sales data would be incomplete."
• CPPI indicated that:
  • "Schedule 1 needs revision. Sales data should be reported separately from the facility data."
  • "Schedule 2 also needs to be revised to clarify what data should be supplied for non-road diesel ... "
• Petro-Canada stated that " ... providing numbers volumes of diesel fuel "produced at the facility" and "sold" will not yield reconcilable numbers for the two categories of diesel fuel called for in the Schedule 1 report. Indicating that the volume are those "intended for (any) use" may be an acceptable solution."

Reply: With respect to volumes of diesel fuel sold, the final regulations have been modified to require only reporting of on-road diesel fuel sold by a company by province. The reporting for volumes of high and low sulphur diesel fuel produced or imported is required on the basis of the sulphur content of the fuel as opposed to the final use of the fuel (on-road versus off-road).

• Sunoco recommended that " reports and records be kept for three years instead of five years in order to harmonize with other regulations."
• CPPI recommended that "more flexibility be incorporated in Section 5(8) to allow for centralized record keeping by companies with multiple facilities."
• Shell indicated that "Section 6(1) requires that records be kept for the production import and sale of diesel fuels. Section 5(5) requires producers and importers of diesel to register with Environment Canada. How will Environment Canada know who is selling diesel fuels in Canada and who should be keeping records under Section 6(1)? What is the value of keeping records if you don't know who is keeping them?"

Reply: With respect to these concerns, the requirements of the final regulations have not been modified for the following reasons. Environment Canada:

• requires that records be kept at facilities or place of business in Canada in order to allow enforcement officers to have ready access to records when carrying out inspections under the Act or regulation;
• considers that records should be maintained at a production facility or place of business in Canada for a five year period in order to keep in line with most regulations made under CEPA, 1999.

• CPPI suggested that "In adopting a single step approach in Canada, the value of a date for compliance at the point of production or import seems to have been made redundant and should be removed."
• Shell also recommended to "Eliminate the compliance date for production of ULSD (Section 3) since the compliance date for point of sale (September 2006) is all that is required."

Reply: The final regulations do not incorporate any changes in this regard. 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 on June 1, 2006 for diesel produced or imported. Environment Canada considers that this requirement will facilitate a smooth transition to low sulphur diesel fuel in the marketplace. The requirement aligns with that passed by the U.S. EPA.

• CPPI " ... strongly recommend that the regulations come into force either: (a) on the date that they are published in the Canada Gazette Part 2, or (b) on a specific date (we recommend January 1, 2003 to simplify records keeping)."
• Ultramar suggested that " ... the entry into force of the regulations to be in accordance with standard practice, i.e., upon publication in the Canada Gazette or on a date stipulated on publication in the Canada Gazette."
• Shell suggests that "the regulations come into force on the date the regulations are published in the Canada Gazette2."

Reply: The final diesel regulations specify January 1, 2003 as the coming into force date.

• The CGSB and Imperial Oil recommended that "In order to give stakeholders reasonable time to adapt to revised regulations and standards for sampling and analysis, ... . Subsection 1(2) of the Proposed Sulphur in Diesel Fuel Regulations be amended to read as follows:
• 1(2) Any regulation, standard or method that is incorporated by reference in these Regulations is incorporated as amended from time to time. The amended regulation, standard or method is incorporated in these Regulations 120 days after the date of its publication."
• Sunoco recommended that "Section 1.(2) be amended to allow a period of 120 days from the date of publication for any amendments to be incorporated into the regulation."
• "Shell recommends that such incorporation [amendments to standard and methods] occur 120 days after the date of publication of the amended regulations, standard or method. This would give primary suppliers adequate time to be in compliance with the changes."

Reply: Modifying subsection 1(2) as suggested would result in two reference test methods being specified during the 120 day transition period which could create difficulties in enforcing the regulations. In addition, it is noted that the above comments address a broad issue that is pertinent not just to the Sulphur in Diesel Fuel Regulations, but to most fuels regulations and even to most environment regulations. As such, the recommended changes would establish a precedent and therefore would require broad consideration of potential implications across various regulations and industries.

The final regulations do not incorporate any changes in this regard.

• "CTA would request that the Government of Canada work with the oil industry and engine manufacturers to ensure that ULSD will not impact diesel fuel lubricity."

Reply:In its final rule establishing the low sulphur diesel fuel regulation for the U.S., the EPA recognized that refiners would likely rely on hydrotreating to achieve the 15 ppm sulphur limit and that this process may reduce concentrations of those components of diesel fuel which contribute to adequate lubricity. The EPA indicated that this may result in an increased need for the use of lubricity additives. However the EPA did not establish a regulatory limit for lubricity, deciding it was best to allow the industry and the market to address the lubricity issue in the most economical manner and in a way that provides the greatest flexibility.

Environment Canada is taking a similar approach. The Canadian Petroleum Products Institute (CPPI) has informed Environment Canada that unlike the previous reduction in the sulphur content of diesel fuel to 500 ppm, this time refiners are fully aware of the potential problem and are therefore prepared. CPPI does not anticipate lubricity problems as 15-ppm diesel fuel is introduced in Canada.

• The AIAMC suggested that "..other diesel attributes such as cetane, lubricity, aromatics, density and distillation need to be at the recommended levels specified in the WWFC [World Wide Fuel Charter] to ensure that future advanced diesel vehicles become reality ... .Environment Canada should recognize the influence of cetane number on emissions and fuel consumption ...In Europe, diesel fuel is approximately 10 cetane numbers higher than North American diesel fuel and it has a significant effect on NOx emissions."
• The CVMA indicated it would "... welcome on-going efforts to continue improvements to on-road fuels based on the Worldwide Fuel Charter recommendations."
• North Atlantic recommended "that, the Canadian government look at establishing a target for [cetane number] on road diesel in the 45 to 50 range as a means of reducing emissions at source rather than relying solely on the after treatment technology planned for diesel engines by 2007."

Reply: Environment Canada does not intend to regulate other properties of diesel fuel at this time. Under the Notice of Intent, Environment Canada stated it would gather data on diesel fuel properties under a voluntary survey with refiners and importers. Properties addressed in the survey include cetane, aromatics, and polycyclic aromatic hydrocarbons. The survey commenced in July 2001.

Some stakeholders recommended that the proposed regulations also set sulphur limits for off-road diesel.

• The City of Toronto recommended "limiting the allowable sulphur concentration in off-road diesel fuel to 15 ppm to harmonize with the level in on-road diesel fuel."
• The CTA "believes that the removal of sulphur from diesel is needed regardless of whether it is consumed on or off-road - both pollute our air. ...if Environment Canada would firmly commit to one grade of diesel fuel being produced in Canada, or greatly restrict the consumers of this product, the off-road/on-road supply debate may be mute."

Reply: The Minister's Notice of Intent on Cleaner Vehicles, Engines and Fuels addresses off-road diesel fuel. It states:

• "Environment Canada plans to recommend a regulatory limit for sulphur in off-road diesel. The limit would be established in the same time frame that the EPA plans for developing limits for sulphur in U.S. off-road diesel (expected to be in 2001). In preparation for this, Environment Canada will gather information on where off-road diesel is used, the effects of sulphur reduction on emissions, and the costs of reducing sulphur in diesel for use in all off-road engines and vehicles, including rail and marine applications."
• It is currently anticipated that the U.S. will move forward with proposing a sulphur limit for off-road diesel sometime in 2002. Environment Canada will continue monitor U.S. activities in this regard.

Petro-Canada commented on the possibility of including flexibility provisions in the regulations to address the possibility of unforeseen circumstances that could delay the introduction of low sulphur diesel fuel.

• Petro-Canada believed "the principle of alignment with the USA will require an amendment of the regulation in the event that there is a substantial shift in the USA approach to either the diesel fuel quality, or to the implementation timing. Similarly, if engineering, materials procurement, or construction constraints occur for any of these major projects then we again believe that an amendment will be warranted. Alternatively, as generally discussed in the past, a parallel regulation could be created under CEPA to broaden the Minister's discretionary powers to temporarily waive product quality or to extend the compliance deadline."

Reply: Environment Canada discussed this issue at length in the December 2001 document responding to comments from stakeholders on the proposed Regulations. It states:

• "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."
• "The proposed regulations adopt a simple, traightforward 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.""

Consequently, no changes have been made in this regard to the final regulations.

• The CGSB indicated that "Section (3) lists the maximum allowable sulphur concentration in mg/kg. The existing Diesel Fuel Regulation quotes a maximum level of 0.05% by weight sulphur. ...The use of differing significant digits and forms is confusing. The different test methods quoted also require reporting to different levels of significant digits, this adds to the confusion."
• "Shell believes it is important to avoid any confusion or inconsistency related to the significant digits of limits and reporting format."
• CGSB and Shell both recommended that "the document ASTM E29- Standard Practice for Using Significant Digits in Test Data to Determine Conformance with Specifications be utilized to help alleviate these concerns

Reply: Environment Canada has reviewed the significant digits of the limits specified in the Regulations and is satisfied that expressing limits in mg/kg does not create issues with significant figures. Therefore, no changes have been made to the regulations in this regard.