p.1 

OAR Box 1865 

Prepped by Charmelle Mathews 

Document Number: 

186) VIII-K-A-1 

Docket Number: 

A-83-27 

Printed 12/3/2008 3:22:24 PM Sheet 186 of 198 
P.2 

A~?3-27 

-jsr-k-ANON-UTILITY OIL MARKETS 

Prepared for: 

U.S. ENVIRONMENTAL PROTECTION AGENCY 

Office of Air Quality Planning and Standards 

Research Triangle Park, North Carolina 27711 

Prepared by: 

ENERGY AND ENVIRONMENTAL ANALYSIS, INC. 

1655 North Fort Myer Drive 

Suite 600 

Arlington, Virginia 22209 

May 1989 
P.3 

This report was furnished to the U.S. Environmental Protection Agency by 

Energy and Environmental Analysis, Inc., Arlington, Virginia, in fulfillment 

of Contract Number 68-02-4384. The contents of this report are reproduced 

herein as received from the contractor. 

The opinions, findings, and conclusions expressed are those of the author and 

not necessarily those of the U.S. Environmental Protection Agency. 
TABLE OF CONTENTS 

P.4 

SECTION mL 

1. INTRODUCTION 1-1 

1.1 PURPOSE 1-1 

1.2 SCOPE 1-1 

2. FACTORS AFFECTING AVAILABILITY OF RESIDUAL FUEL OIL 2-1 

2.1 REFINERY ISSUES 2-1 

2.2 CURRENT AVAILABILITY OF FUEL BY SULFUR GRADE 2-2 

2.3 TERMINAL CAPACITY AND AVAILABILITY 2-3 

2.4 DISTRIBUTION SYSTEM 2-5 

2.5 TRANSPORTATION COSTS 2-6 

2.6 POTENTIAL FOR OBTAINING RESIDUAL FUEL OIL OF VARIOUS SULFUR 

CONTENTS 2-7 

3. FACTORS AFFECTING AVAILABILITY OF DISTILLATE FUELS 3-1 

3.1 REFINERY ISSUES 3-1 

3.2 SULFUR GRADES CURRENTLY MARKETED 3-2 

3.3 POTENTIAL FOR OBTAINING VARIOUS SULFUR GRADES CONTENTS . . 3-3 

3.4 DIESEL/DISTILLATE ISSUES 3-3 

4. EXAMPLE MARKET AREAS 4-1 

4.1 NEW YORK/NEW ENGLAND 4-1 

4.2 CHICAGO 4-2 

4.3 SOUTH ATLANTIC STATES 4-4 

5. CONCLUSIONS 5-1 
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1. INTRODUCTION 

1.1 Purpose 

The purpose of this study is to evaluate certain potential impacts on oil 

markets of alternative S02 NSPS for non-utility industrial-commercial -

institutional boilers. The study addresses the availability of low sulfur 

distillate and residual fuels in various market areas and the potential for 

obtaining such fuels where they are not presently available. Specifically, 

the study asks whether distillate (No. 2) fuel oil can be obtained with a 

sulfur content of 0.3 percent and 0.4 percent, and whether residual (No. 6) 

fuel oil can be obtained with sulfur contents below 0.3 percent, 0.5 percent, 

and 1.0 percent. Issues such as refinery production, terminal capacity and 

availability, local distribution systems, and transportation costs are 

discussed. Three example market areas are described: New York/New England; 

Chicago; and the South Atlantic States. Finally, the relationship of sulfur 

limits contained in the NSPS to regulations for sulfur in automotive diesel 

fuel is discussed. 

1.2 Scope 

Research for this paper was done through telephone and personal interviews 

with petroleum marketers, terminal operators, transportation companies, and 

trade associations, supplemented with data from such publications as Piatt's 

Oilaram Daily and Energy Information Administration documents. The results 

are largely anecdotal and are an attempt to provide a general picture of 

current market conditions. No attempt was made to conduct a comprehensive 

survey of all distillate and residual fuel oil distributors in all market 

areas. 

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For residual oil, the report focuses on the eastern part of the United States 

and the Great Lakes region. Residual oil is chiefly used where natural gas is 

not available and where the resid can be carried by water transport. Major 

resid markets, therefore, are along the East Coast and to some extent the 

Great Lakes, with additional markets along the Gulf Coast and West Coast. The 

Gulf and West Coast markets are very localized and operate separately from 

other markets. Thus, the East Coast and Great Lakes regions best illustrate 

potential distribution and supply issues. 

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2. FACTORS AFFECTING AVAILABILITY OF RESIDUAL FUEL OIL 

This section describes the current marketing and distribution structure for 

residual fuel oil. It also discusses how a customer might obtain resid with a 

sulfur content other than that currently marketed in his area. 

Residual fuel oil (No. 6) is generally moved by vessels or barges from a 

refinery to coastal terminals, from which it is trans-shipped by barge, rail, 

or tank truck to inland terminals or directly to a customer. Residual fuel 

oil is rarely pipelined an appreciable distance, as it must be maintained at 

approximately 105 degrees F° or above in order to flow. The vessels, barges, 

storage facilities, and tank trucks used for resid often are insulated and 

heated, or have the capability of being heated. 

Factors that affect the availability of residual fuel oil with various sulfur 

contents are (1) production capability at refineries; (2) current market 

demand for resid by sulfur grade; (3) terminal capacity and availability; (4) 

distribution system; and (5) transportation costs. 

2.1 Refinery Issues 

The current market for all grades of residual fuel oil is very soft. The 

average supply in 1988 is 1,329 thousand barrels per day down from a peak 

demand of 3,071 thousand barrels per day in 1977. Much of this reduction has 

occurred in the imports of residual fuel oil. Average imports in 1988 are 

593,000 barrels/day down from a 1977 level 1,359,000 barrels/day.' Much of 

the imported demand was along the East Coast and was demand for low sulfur 

oil. 

Monthly Energy Review January 1989. U.S. Department of Energy, Energy 

Information Administration. D0E/EIA-0035 (89/01). April 1989. 

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2.2 Sulfur Grades of Residual Currently Marketed 

The availability of resid of various sulfur contents in a market area is 

largely dependent on the fuel sulfur limits based on the air quality requirements of local State Implementation Plans. Thus, 0.3% sulfur resid is readily 

available in markets that can be served by New York Harbor, because it is 

required by the New York City SIP. In contrast, most resid sold in the 

Southeastern states is either 2.1% maximum sulfur or 3.0% maximum sulfur, 

because fuels with these sulfur contents are permitted under local air 

pollution regulations. 

Piatt's Oiloram Daily and Piatt's Oil Price Handbook and Oilmanac (compiled 

yearly) provide a general picture of the types of residual fuel oil (and other 

products) typically sold at the major ports and terminals across the country. 

The prices quoted and the availability of various products do not represent 

actual sales, but reflect Piatt's sense of the current market in each location. 

In the Northeast, the sulfur grades available through New York Harbor by barge 

or cargo and/or on the spot market in 1986 ranged from a low of 0.3% to 3.0% 

maximum. Boston's resid ranges from 0.5% to 2.2% sulfur. Baltimore showed a 

market only for 1.0% sulfur resid. Further south, Wilmington, NC; Charleston, 

SC; and Savannah, GA, listed only maximum 2.1% sulfur resid and Jacksonville, 

FL had 1.5% sulfur resid. 

In other sections of the country, fewer sulfur grades of resid appear to be 

readily available. The Gulf Coast spot market listed resids with 0.7%, 1.0%, 

and 3.0% sulfur maximums. Terminals in Chicago showed only maximum 1.0% 

sulfur resid, as did Detroit. Only maximum 2.0% sulfur resid was listed for 

Minneapolis/St. Paul. On the West Coast, Piatt's showed prices only for 3.0% 

sulfur resid at Seattle, Portland, and San Francisco. 

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The listing of these sulfur grades of resid in different regions in a trade 

journal such as Piatt's reflects the existing, readily available supply of 

these products. Other grades may be available in these regions, but they are 

not commonly traded and may be handled only through independent contracts 

between a supplier and purchaser. 

In some cities, for example, Columbus, DeMoines, St. Louis, Oklahoma City, 

Denver, Salt Lake City, and Los Angeles, no prices for resid were listed in 

Piatt's for 1986. This does not necessarily mean that resid is not used or 

could not be obtained there, but it does indicate that there may be no readily 

accessible market. 

2.3 Terminal Capacity and Availability 

Residual fuel oil is typically brought to a coastal terminal in a vessel, or 

"cargo", carrying from 175,000 to 225,000 barrels, or a "barge" carrying from 

100,000 to 150,000 barrels. 

Fuel oil is generally purchased by the cargo or barge load. Occasionally a 

purchaser will "two port" a cargo or barge, sending half to a terminal in 

Wilmington, NC, and half to a terminal in Baltimore, for example. Transportation costs are higher if a vessel must stop at two ports. Similarly, a 

purchaser may agree to split a cargo or barge with another purchaser and share 

the transportation charges. Thus, the minimum quantity of a product that is 

likely to enter a coastal terminal is one half a barge, or 50,000 barrels 

(210,000 gallons). 

Terminal facilities generally fall into three categories: those owned by 

major oil companies such as Exxon or Hess, which usually handle only their own 

products; those owned by an independent wholesaler, such as Steuart Petroleum 

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in the middle Atlantic states, who may or may not also be a local distributor; 

and independent terminals, such as those owned by GATX at major ports such as 

New York, Chicago, Houston, and Los Angeles. Independent terminals simply 

lease tank capacity to anyone who wants it. 

Residual oil is generally stored in dedicated tanks at a terminal, because it 

is considered a "dirty" oil and usually requires heating, or at least 

insulated, tanks. Resid is usually stored at 135 degrees F°, although it can 

be left unheated and brought up to flow temperature (105 degrees F°) when it 

is necessary to move it. Tanks are generally heated with steam coils. Steam 

jackets can be used, but this method of heating is expensive. 

With the recent decline in the residual fuel oil market, fewer terminals 

handle resid. For example, GATX, a major international independent terminal 

operator with fourteen facilities in North America, handles resid on a regular 

basis only at Houston and Chicago. There are only three resid dealers in the 

Middle Atlantic states. New York Harbor appears to have about seven dealers. 

Some of the major oil companies, such as Mobil, supply bunker C residual 

directly to ships in New York Harbor, but do not market resid to other 

customers. Exxon has recently dropped out of the residual fuel oil market on 

the East Coast. 

Conversations with several terminal operators indicate that adequate terminal 

capacity is available to store various grades of residual oil. Since the 

market for resid is down substantially, most terminals are "over-tanked". 

However, many terminals are removing excess tankage, particularly older tanks, 

in light of the severe environmental consequences of tank failures. Thus, 

while excess tankage appears to be available at present, some of the existing 

industry infrastructure is being dismantled. 

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Tankage is generally available at terminals in a range of sizes, although not 

every size is provided for residual oil at each facility. For example, at its 

Houston facility, GATX has resid tanks that hold from 25,000 barrels to 

300,000 barrels. Tanks for other products (i.e., "clean" fuels including 

distillate or chemicals) are available as small as 8,000 gallons, but not for 

resid. At GATX's Chicago facility, the smallest tanks available for resid are 

55,000 to 80,000 barrels. 

The optimal size of a storage tank for resid, or any other fuel product, is 

dictated by economics. A fuel oil marketer would like to turn his inventory 

over a least every thirty days. According to Bonner and Moore the average 

turnover of products stored at a terminal might be eight times a year. 

2.4 Distribution System 

Once residual fuel oil is stored at a coastal terminal, it customarily follows 

one of two paths to reach the non-utility end user. It may be transported 

directly to a customer by a tank truck, which usually carries about 7,000 

gallons. Trucks may be heated or unheated, but typically are insulated to 

maintain flow temperature of the fuel. For long trips in cold weather, flow 

temperature is maintained by propane heaters in trucks like those designed to 

carry asphalt. In warm weather, resid can be trucked up to 500 miles without 

supplemental heating. In the Northeast, colder temperatures may restrict 

hauling distance in unheated trucks, but the transport of resid in heated 

vehicles presents no technical difficulties. 

The second path is for resid to be barged from a coastal terminal to a 

terminal at an inland port, from which it is delivered to customers. For 

example, resid is barged from Steuart Petroleum's Piney Point terminal at the 

mouth of the Potomac River to Washington, or from Philadelphia or Baltimore 

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directly to Washington. Barges deliver oil from New York Harbor to terminals 

in Albany or to coastal cities such as Hartford, CN. 

Ocean-going barges usually carry from 100,000 to 150,000 barrels. They have 

compartments for safety purposes, but almost always carry just one undifferentiated product. Coastal barges along the East Coast hold from 20,000 to 

120,000 barrels, and also generally carry a single product. Inland (on the 

Mississippi River system and the Great Lakes) barges typically carry smaller 

quantities, from 10,000 to 20,000 barrels, and are usually combined in strings 

of 4 to 25 or more. Some of these barges have from 3 to 12 compartments, 

usually 3, and can be used to carry several discrete products without mixing. 

In theory, loads as small as 1,500 to 3,000 barrels could be carried in inland 

barges. In practice, however, barges used for residual oil are rarely 

divided. Whereas, "clean fuel" barges for distillate or gasoline frequently 

carry differentiated products, resid barges carry only resid and usually carry 

only one type of resid. 

From secondary, inland terminals, fuel is usually trucked to its final 

customer. This customer should have the capacity to store resid in a heated 

tank, generally in minimum amounts of 7,000 gallons, or one truck load. 

Although distillate is typically delivered to customers in smaller amounts, 

resid is generally sold by the entire truckload. 

Railroad cars are used very infrequently to haul residual fuel oil. 

2.5 Transportation Costs 

The primary transportation issue as it relates to small non-utility users of 

residual fuel oil is possibility that the user may have to establish a supply 

system different than that serving other users in his area. The need for a 

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separate supply system would arise from the inability (as described above) to 

move very small quantities of oil into the terminal serving the area. In this 

case, the user would be required to ship fuel from another terminal. Transportation by tank truck would cost about $2.50 per mile traveled. For a 100 

mile trip from a terminal this would add about 4 cents per gallons to any 

price premium associated with the low sulfur oil. 

If a user is able to get oil from a terminal which normally serves his area 

there would be no incremental transportation cost associated with using low 

sulfur residual fuel oil. For example, in the Northern New England area 

residual fuel oil down to 0.5% sulfur is available at all major terminals and 

as such any residual oil user could get 0.5% sulfur fuel at no additional 

transportation cost. 

Transportation of residual fuel by inland barge is also a possibility. Barge 

costs are a function of the distance traveled, the size of the string, and the 

size of the barge. Costs for a trip from the Gulf Coast to Chicago may cost 

from 8 to 15 cents per gallon if the barge is part of a large string. Costs 

for an individual barge are 4-5 times higher than this and would make the fuel 

completely uncompetitive. 

Residual fuel oil could be shipped by rail but no evidence could be found that 

this is being done. It is possible that rail would be no less expensive than 

truck haul and perhaps more expensive. One reason for the lack of rail 

transport may be the requirement that the user purchase or lease the rail car. 

At least two cars would be needed in order to ensure that supply is not 

interrupted. 

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2.6 Potential for Obtaining Residual Fuel Oil of Various Sulfur Content 

It appears that virtually any location in the U.S. could be served by a tank 

truck or barge containing residual fuel oil, as long as the user can locate 

the appropriate product at a terminal within a reasonable distance and is 

willing to pay the necessary transportation cost to his site. The key 

constraint appears to be willingness of a terminal operator or distributor to 

obtain and store the product. This, in turn, depends on demand. 

In order to estimate the minimum demand that might induce a distributor to 

market a lower sulfur residual fuel than is generally used in a market area, 

the average fuel demand of a 100 MMBtu/hr boiler was estimated. At 50% 

capacity, such a boiler would require approximately 6,000 barrels per month, 

or 72,000 barrels per year. 

The minimum quantity of residual oil that dealers customarily purchase at 

coastal terminals appear to be a barge, or approximately 100,000 barrels. 

Assuming an average turnover rate of eight times per year, a dealer would like 

to have a minimum demand of 800,000 barrels per year. This represents the 

demand of approximately eleven 100 MMBtu/hr boilers. 

It is also possible that a dealer would purchase a half-barge, or 50,000 

barrels, at a time under a long term contractual arrangement. This would 

require from five to six 100 MMBtu/hr boilers to create an adequate demand in 

his market area. 

The market area served from a major coastal terminal is defined by the 

practical considerations of transporting residual fuel, as well as by cost. 

Although resid can be trucked up to 500 miles in unheated trucks in some 

climates and at some times of year, it appears that a customary long haul is 

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200 to 300 miles (for example, from Wilmington, NC to western North Carolina, 

or from Richmond, VA to Covington, VA). 

The delivery area is extended if the resid can be barged to an inland port and 

then hauled by truck. In some inland areas, where barges as small as 10,000 

barrels may be available, non-utility customers might be able to arrange to 

purchase a specified type of resid that was not readily available on the 

market. Assuming that appropriate tank storage was available at an inland 

terminal, a local distributor might be willing to market eight small barge 

loads per year for a total of 80,000 barrels, and thus supply the average fuel 

needs of one 100 MMBtu per hour boiler customer. 

2-9 
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3. FACTORS AFFECTING AVAILABILITY OF DISTILLATE FUELS 

3.1 Refinery Issues 

The final sulfur content of both distillate and residual fuel oil is a 

complicated function of crude sulfur, oil source or type, and the processing 

the oil undergoes at the refinery. In general, the sulfur content of distillate oil ranges 0.01% to 0.7%. The ASTM specification for distillate oil 

(ASTM D-396-80) calls for number 2 distillate to have a sulfur content less 

than 0.5%. However this specification can be waived if both the producer and 

purchaser agree. 

The highest sulfur content distillate stream would probably be a straight run 

out of the crude distillation unit. Distillate oil can be directly produced 

from the 400-600 F° fraction out of the distillation column. The sulfur 

content of this stream varies according to the type of crude and the sulfur 

content of the crude. For very high sulfur Venezuelan crude (5% sulfur) 

distillate oil sulfur contents as high as 2.7% are possible. A "typical" U.S. 

high sulfur crude (2% sulfur) would produce a middle distillate stream with 

about 0.7% sulfur while a similar West Texas crude would produce a 1.3% sulfur 

distillate stream from a 2% sulfur crude. 

Any of these streams could be sold directly by the refinery. In the past, 

some utilities have used high sulfur distillate. However, since it does not 

meet the ASTM specification and may cause some corrosion in burners, high 

sulfur distillate oil is very uncommon. 

In general, the distillate stream (i.e., the 400-600 F° fraction) is sent to a 

hydrotreater or a catalytic cracker to produce either lower sulfur distillate 

fuel oil or higher value products such as gasoline. Distillate fuel oil, as 

well as other products, are also produced from the higher boiling products 

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from the distillation unit. These "bottoms" can be treated in a variety of 

units such as cokers, visibreaker, or hydrocracker. In all of these processes 

some of the sulfur is concentrated in the residual products or removed as 

hydrogen sulfide. 

In general, for non-utility distillate oil users, there appears to be little 

or no economic or other incentive to use a high sulfur distillate oil, i.e., 

one greater than 0.5%. Lower sulfur distillates can be produced, but are 

expected to have the same distribution and availability problems as would low 

sulfur residual oil. 

3.2 Sulfur Grades Currently Marketed 

No complete national tracking system for distillate fuel oil sulfur content 

exists. However, the National Institute for Petroleum and Energy Research 

(NIPER) conducts surveys of individual refineries and provides data on the 

quality of the fuel produced. NIPER reports on fuel produced by domestic 

refineries. Their survey does not cover all distillate fuel produced and does 

not cover any imported distillate. The completeness of the survey is unknown. 

The NIPER survey covers refinery output and not suppliers. It is possible 

that a large distributor could be obtaining supplies from several sources and 

sulfur content of the fuel could be variable. In addition, the NIPER survey 

is a snap shot of sulfur content. If a refinery's feedstock changes or if the 

product mix changes the sulfur content could vary. 

According to NIPER #2 distillate fuel oil produced in the U.S. in 1986 ranges 

from 0.03% to 0.50% sulfur with an average of about 0.25%. In all areas 

except the Rocky Mountain area the average sulfur content is less than 0.3%. 

In the Rocky Mountain region the average sulfur content is 0.34%.** 

Dickson, C. and P. Woodward. Heating Oils, 1986. National Institute for 

Petroleum and Energy Research. Bartlesville, OK. August 1986. 

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Since distillate sulfur content is considered low, local distributors do not 

routinely measure or guarantee sulfur levels. Final users rarely have any 

idea of the sulfur content of the distillate fuel oil they are using. 

3.3 Potential for Obtaining Various Sulfur Grades 

Since the sulfur content of #2 distillate fuel oil is not routinely measured, 

the potential for a user to obtain a sulfur content different than that 

normally marketed in his area is low. To obtain a different or even a 

guaranteed sulfur level a user would have to obtain a separate terminal 

storage tank and arrange for a secure supply. Under these circumstances the 

same problems would apply as have been previously discussed with regard to 

residual fuel oil. That is the user would need to find a distributor willing 

to guarantee the sulfur content of the oil. Since normally No. 2 distillate 

is not sold by sulfur content this requirement alone may make it very difficult to find a supplier. 

If a user can find a supplier the NIPER data implies that a sulfur limit of 

0.3% could be met in most of the U.S. However, the limitations of the NIPER 

data make it difficult to demonstrate that this sulfur fuel is always available. 

3.4 Diesel/Distillate Issues 

EPA is considering setting a sulfur limit on highway diesel fuel. Although a 

final decision has not been made, a limit of 0.05% has been discussed. This 

limit would be in effect no sooner than 1992 and apply only to highway vehicle 

diesel use. Based on discussions between EPA and industry, it appears that 

this limit would have no affection on the current sulfur content of No. 2 

distillate fuel oil. Refineries have told EPA that they intend to market two 

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types of diesel fuel - one subject to regulation and one (non highway) not 

subject to regulation. This implies that select diesel streams are likely to 

be desulfurized with no impact on the distillate sulfur content. 

3-4 
4. EXAMPLE MARKET AREAS 

In order to illustrate how a buyer might obtain fuels of various sulfur 

contents, three sample market areas were selected: New York/New England; 

Chicago; and the South Atlantic States. The following sections briefly 

describe the current distribution and availability of distillate and residual 

fuels of various sulfur contents and what a buyer would have to do if he 

wanted to obtain a fuel that was not presently available in his area. 

Distillate fuels of 0.2 percent, 0.3 percent, and 0.5 percent sulfur are 

discussed. Residual fuels with sulfur contents of below 0.3 percent, 

0.5 percent, and 1.0 percent are discussed. 

4.1 New York/New England 

Because of current air quality requirements in New York City, residual fuel 

oil at 0.3 percent sulfur is readily available in New York Harbor. Any 

purchaser within trucking distance (300 to 500 miles) of New York Harbor 

should be able to arrange delivery of 0.3 percent sulfur resid with relative 

ease, as long as he is willing to pay transportation costs and can locate a 

distributor who has access to, or could purchase, the product from a wholesaler there. To ensure wintertime delivery, heated trucks probably would be 

required. 

Resid with sulfur content guaranteed at a level below 0.3 percent does not 

appear to be currently available. A customer probably would have to arrange 

directly with a refinery to purchase this very low sulfur product, and arrange 

for transport, storage at a terminal, and final delivery on a individual 

basis. It is likely that the minimum purchase he could make would be by the 

barge load, or 100,000 to 120,000 barrels at a time. 

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Outside of ihe New York Harbor area, it does not appear that resid with sulfur 

content below 1.0 percent is readily available at the present time. There 

appears to be a market for 1.0 percent sulfur resid in New Haven, CN and for 

1.5 percent sulfur resid in Albany. 

To get resid with lower than 1.0% or 1.5% sulfur in these areas, a customer 

would have to have it trucked from New York Harbor or find a distributor 

willing to barge the product to a local terminal and then distribute it by 

truck. 

In the Boston area and most of New England, 0.5 percent sulfur and above 

appears to be readily available to markets within trucking distance. If a 

lower sulfur fuel (less than 0.5%) were needed, a buyer might be able to truck 

it from New York Harbor or, as in the previous cases, find a distributor who 

would barge it from a refinery or from New York Harbor to a terminal closer to 

his customers. 

Most of the No. 2 distillate fuel in New York/New England area is less than 

0.3% sulfur although some appear to be as high as 0.48%. No. 1 heating oil 

and No. 1 diesel fuel oil are available with sulfur contents of about 0.1%. 

There is a chance that a customer could meet a 0.3% or higher limit by using 

No. 2 distillate oil assuming a distributor would be willing to guarantee 

sulfur content and that it could be found. 

4.2 Chicago 

According to Piatt's, residual fuel oil delivered to Chicago has a maximum 

sulfur content of 1.0%. Using normal distribution patterns this would 

represent the lowest sulfur fuel available to non-utility users. To obtain a 

lower sulfur residual fuel a user would have to make arrangements to barge 

residual fuel up the Mississippi from the Gulf Coast or make arrangements with 

4-2 
P.22 

a local refiner to supply lower sulfur resid. It is very unlikely that a 

non-utility user would be able to use the minimum order that a refinery would 

demand. If the oil was moved up the Mississippi, it is possible for quantities as small as 3300 bbls or 138,600 gallons to be delivered. Assuming 

that space could be obtained at a terminal residual fuel oil with 0.7% sulfur 

and perhaps as low as 0.5% sulfur could be obtained. If these connections can 

be made 0.5% to 0.7% sulfur residual oil would be available in the Chicago 

area. 

The additional cost of this oil is almost impossible to estimate. Since much 

of the resid used in the Chicago area already arrives by barge it is possible 

that no incremental transport cost would be associated with the low sulfur 

oil. If a special shipment were required the cost would be 8 to 15 cents/ 

gallon depending on season, size of delivery and the number of other barges 

moving at the same time. It is unlikely that any incremental truck transport 

costs would be incurred since normal 1% sulfur resid would be transported by 

trucks. 

If sulfur contents below 0.5% were required it is difficult to find a way to 

obtain resid fuel oil. The only confirmed sources of 0.3% sulfur residual 

fuel are delivered by ocean going barges or ships. Quantities shipped are too 

large to be used by any single or even several small non-utility users. If 

oil with less than 0.5% sulfur were required, then No. 2 distillate oil would 

be used. In the central region according to NIPER this fuel typically as a 

sulfur content of 0.2% to 0.28%. Occasional shipments of higher sulfur (up to 

0.44%) distillate oil are reported. The extent to which the NIPER reported 

sulfur contents would be guaranteed is not known. No incremental transport or 

use charges over normal distillate are expected. 

If sulfur contents less than 0.3% were required, the source could use No. 1 

fuel oil or No. 1 Diesel fuel. No. 1 heating generally has sulfur contents of 

4-3 
P.23 

0.15 or less and No. 1 diesel fuel generally has a sulfur content less than 

0.1%. 

4.3 South Atlantic States 

Residual fuel oil in the South Atlantic states is generally delivered by ocean 

going vessel to Norfolk, Morehead City or a variety of other ports and 

delivered to end users by truck. One way hauls of 250-300 miles do occur. 

According to Piatt's the lowest sulfur residual fuel oil expected to be 

generally available is 1% sulfur. If lower sulfur fuel were required a small 

non-utility user would have to make alternate and difficult arrangements. In 

the northern portion of the area (i.e., as for south of Richmond, VA), 

residual fuel as low as 0.3% sulfur could be delivered by truck from New York. 

Truck haul over this distance could add 7 to 15 cents per gallon to the cost 

of resid depending on the normal transport cost of high sulfur fuel oil. 

A source in the southern or western portions of the area would probably be 

forced to obtain low sulfur resid shipped on the inland water ways to 

Tennessee or Ohio locations and hauled east by truck. Residual fuel oil with 

a sulfur content as low as 0.5% may be able to be obtained by this routing. 

Additional costs for this type of trip are almost impossible to estimate since 

it is not presently being done. A rough estimate may be that barge costs 

could add 8 to 15 cents per gallon to the price of the fuel. Truck transport 

costs may not increase since the normal transport route is already so long. 

Residual fuel oil below 0.5% sulfur does not seem to be available by any 

reasonable transport method for the western and southern areas of the south 

at!antic states. 

4-4 
If fuel less than 0.5% were required many sources would have to use No. 2 

distillate. In this area the sulfur content of No. 2 distillate is reported 

as 0.3% sulfur or less. If fuel sulfur less than 0.3% were required either 

No. 1 heating oil or No. 1 diesel would be required. 

4-5 
5. CONCLUSIONS 

o Using normal distribution systems the sulfur content of residual fuel oil 

available to a non-utility user varies from 0.3% to 1.5% depending on 

location. 

o Single or even several small non-utility users do not have enough demand 

to shape a market and cause very low sulfur residual fuel oil to enter a 

market. 

o Using drastic transportation routes most of the Eastern United States may 

be able to obtain residual fuel oil in the 0.5%-07% sulfur range. The 

ability of a particular user to obtain this sulfur product depends on his 

ability to find a transporter (i.e., truck or barge company) willing to 

transport the materials. 

o Limited data indicates that the national average sulfur content of No. 2 

distillate fuel is about 0.25%. 

o The sulfur content of distillate fuel oil appears to vary by region and 

perhaps according to refinery feedstock and product mix. 

o No. 2 distillate is generally not sold or guaranteed by sulfur content. 

The ability and willingness of distributors to guarantee a sulfur level 

below ASTM specifications is not known. 

o In three example market analyses, the ability of a non-utility user to 

receive reliable supplies of very low sulfur residual fuel oi l is very 

limited. 

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