p. 1



# OAR Box 1865 Prepped by Charmelle Mathews



### Document

Number: 

# 186 ) VIII-K-A- 1
Docket Number: 

# A-83-2 7

Printed 12/3/20083:22:24 PM

Sheet 186 of 198P. 2 

# A~?3-27

# -jsr-k-ANON-UTILIT YOI L MARKET S

Prepare d for : U.S
. ENVIRONMENTA L PROTECTIO NAGENC Y Offic e o f Ai r Qualit yPlannin g an d Standard s Researc h Triangl e Park , Nort h Carolin a 2771 1

Prepare d by : ENERG Y AN D ENVIRONMENTA L ANALYSIS , INC
. 165 5 Nort h For t Mye r Driv e

Suit e 60 0 Arlington , Virgini a 2220 9

Ma y198 9P. 3



### Thi s repor t wa s furnishe dt o th e U.S . Environmenta l Protectio nAgenc y b y Energ y an dEnvironmenta l Analysis , Inc. , Arlington , Virginia , i nfulfillmen t o f Contrac t Numbe r 68-02-4384 . Th e content s o f thi s repor t ar e reproduce d herei na s receive dfro m th e contractor .
Th e opinions , findings , an dconclusion s expresse dar e thos e o f th e autho r an d no t necessaril y

thos e o f th e U.S . Environmenta l Protectio nAgency .

### TABL E O F CONTENT S P. 4



### SECTIO N mL 1
. INTRODUCTIO N1- 1 1. 1 PURPOS E 1- 1 1. 2 SCOP E 1- 1 2
. FACTOR S AFFECTIN G AVAILABILIT Y O F RESIDUA L FUE L OI L 2- 1 2. 1 REFINER Y ISSUE S 2- 1 2. 2 CURREN T AVAILABILIT Y O F FUE L B Y SULFUR GRAD E 2- 2 2. 3 TERMINA L CAPACIT Y AN D AVAILABILIT Y 2- 3 2. 4 DISTRIBUTIO NSYSTE M 2- 5 2. 5 TRANSPORTATIO NCOST S 2- 6 2. 6 POTENTIA L FO R OBTAININ G RESIDUA L FUE L OI L O F VARIOU S SULFUR CONTENT S 2- 7 3
. FACTOR S AFFECTIN G AVAILABILIT Y O F DISTILLAT E FUEL S 3- 1 3. 1 REFINER Y ISSUE S 3- 1 3. 2 SULFUR GRADE S CURRENTL Y MARKETE D 3- 2 3. 3 POTENTIA L FO R OBTAININ G VARIOU S SULFUR GRADE S CONTENT S
. . 3- 3 3. 4 DIESEL/DISTILLAT E ISSUE S 3- 3 4
. EXAMPL E MARKE T AREA S 4- 1 4. 1 NE W YORK/NE W ENGLAND 4- 1 4. 2 CHICAG O 4- 2 4. 3 SOUT H ATLANTI C STATE S 4- 4 5
. CONCLUSION S 5- 1P. 5

1 . INTRODUCTIO N

1. 1 Purpos e

Th e purpos e o f thi s study i s t o evaluat e certai npotentia l impact s o noi l market s o f alternativ e S0 2 NSP S fo r non-utilit y industrial-commercia l - institutiona l boilers . Th e stud y addresse s th e availabilit y o f lo w sulfu r distillat e an

dresidua l fuel s i

nvariou s marke t area s an dth e potentia l fo r obtainin g suc hfuel s wher e the y ar e no t presentl y

available . Specifically , th e stud y ask s whethe r distillat e (No . 2 ) fue l oi l ca nb e obtaine dwit ha sulfu r conten t o f 0. 3 percen t an d0. 4 percent , an

dwhethe r residua l (No . 6 ) fue l oi l ca nb e obtaine dwit hsulfu r content s belo w 0. 3 percent , 0. 5 percent , an d1. 0 percent . Issue s suc ha s refinery production , termina l capacit y an d availability , loca l distributio nsystems , an dtransportatio ncost s ar e discussed . Thre e exampl e marke t area s ar e described : Ne w York/Ne w

England ; Chicago ; an

dth e Sout hAtlanti c States . Finally , th e relationshi po f sulfu r limit s containe dinth e NSP S t o regulation s fo r sulfu r i nautomotiv e diese l fue l i s discussed .
1. 2 Scop e

Researc hfo r thi s pape r wa s don e throug htelephon e an dpersona l interview s wit hpetroleu

m marketers , termina l operators , transportatio ncompanies , an d trad e associations , supplemente dwit hdat a fro m suc hpublication s a s Piatt' s Oilaram Dail y an dEnerg y Informatio nAdministratio ndocuments . Th e result s ar e largel y

anecdota l andar e a nattemp t t o provid e a genera l pictur e o f
curren t marke t conditions . No attemp t wa s mad e t o conduc t a comprehensiv e surve y o f al l distillat e andresidua l fue l oi l distributor s i nal l marke t areas .



### 1- 1P. 6

Fo r residua l oil , th e repor t focuse s o nth e easter npar t o f th e Unite dState s an dth e Grea t Lake s region . Residua l oi l i s chiefl y use dwher e natura l ga s i s no t availabl e an

dwher e th e resi dcanb e carrie db y wate r transport . Majo r resi dmarkets , therefore , ar e alon g th e Eas t Coas t an dt o som

e exten t th e Grea t Lakes , wit hadditiona l market s alon g th e Gul f Coas t an dWes t Coast . Th e Gul f an dWes t Coas t market s ar e ver y localize dan

doperat e separatel y

fro m othe r markets . Thus , th e Eas t Coas t an dGrea t Lake s region s bes t illustrat e potentia l distributio nan dsuppl y issues .



### 1- 2P. 7

2 . FACTOR S AFFECTINGAVAILABILIT YO F RESIDUA L FUE L OI L

Thi s sectio ndescribe s th e curren t marketin g an ddistributio nstructur e fo r residua l fue l oil . I t als o discusse s ho w a custome r migh t obtai nresi dwit ha sulfu r conten t othe r tha ntha t currentl y markete di

nhi s area .
Residua l fue l oi l (No . 6 ) i s generall y move db y vessel s o r barge s fro m a refiner y t o coasta l terminals , from whic hi t i s trans-shippe db y barge , rail , o r tan k truc k t o inlan dterminal s o r directl y t o a customer . Residua l fue l oi l i s rarel y

pipeline da

nappreciabl e distance , a s i t mus t b e maintaine da t approximatel y

10 5 degree s F ° o r abov e i norde r t o flow . Th e vessels , barges , storag e facilities , an dtank truck s use dfo r resi dofte nar e insulate dan d heated , o r hav e th e capabilit y o f bein g heated .

Factor s tha t affec t th e availabilit y o f residua l fue l oi l wit hvariou s sulfu r content s ar e (1 ) productio ncapabilit y a t refineries ; (2 ) curren t marke t deman dfo r resi db

y sulfu r grade ; (3 ) termina l capacit y an davailability ; (4 ) distributio nsystem ; an d(5 ) transportatio ncosts .
2. 1 Refiner y

Issue s

Th e curren t marke t fo r al l grade s o f residua l fue l oi l i s ver y soft . Th e averag e suppl y

i n198 8 i s 1,32 9 thousan dbarrel s pe r da y dow nfro m a pea k deman do f 3,07 1 thousan dbarrel s pe r da y i n1977 . Muc ho f thi s reductio nha s occurre dinth e import s o f residua l fue l oil . Averag e import s in198 8 ar e 593,00 0 barrels/da y

dow nfro m a 197 7 leve l 1,359,00 0 barrels/day. ' Muc ho f th e importe ddeman dwa s alon g th e Eas t Coas t an dwa s deman dfo r lo

w sulfu r oil .

Monthl y Energ y Revie w Januar y 1989 . U.S . Departmen t o f Energy , Energ y Informatio nAdministration . D0E/EIA-003 5 (89/01) . Apri l 1989 .



### 2- 1P. 8

2. 2 Sulfu r Grade s o f Residua l Currentl y Markete d

Th e availabilit y

o f resi do f variou s sulfu r content s i na marke t are a i s largel y dependen t onth e fue l sulfu r limit s base donth e ai r qualit y require ment s o f loca l Stat e Implementatio nPlans . Thus , 0.3 % sulfu r resi di s readil y availabl e inmarket s tha t ca nb e serve db y New Yor k Harbor , becaus e i t i s require db

y th e Ne w Yor k Cit y

SIP . Incontrast , mos t resi dsol di nth e Southeaster nstate s i s eithe r 2.1 % maximu m sulfu r o r 3.0 % maximu m sulfur , becaus e fuel s wit hthes e sulfu r content s ar e permitte dunde r loca l ai r pollutio nregulations .
Piatt' s Oiloram

Dail y an dPiatt' s Oi l Pric e Handboo k an dOilmana c (compile d yearly ) provid e a genera l pictur e o f th e type s o f residua l fue l oi l (an dothe r products ) typicall y

sol da t th e majo r port s an dterminal s acros s th e country . Th e price s quote dan

dth e availabilit y

o f variou s product s d o no t represen t actua l sales , bu t reflec t Piatt' s sens e o f th e curren t marke t i neac hloca tion .

Inth e Northeast , th e sulfu r grade s availabl e throug hNe w Yor k Harbo r b

y barg e o r carg o and/o r onth e spo t marke t i n198 6 range dfrom

a lo w o f 0.3 % t o 3.0 % maximum . Boston' s resi drange s fro m 0.5 % t o 2.2 % sulfur . Baltimor e showe da marke t onl y

fo r 1.0 % sulfu r resid . Furthe r south , Wilmington , NC ; Charleston , SC ; an dSavannah , GA , liste donl y maximu m 2.1 % sulfu r resi dan dJacksonville , FL ha d1.5 % sulfu r resid .

Inothe r section s o f th e country , fewe r sulfu r grade s o f resi dappea r t o b e readil y available . Th e Gul f Coas t spo t marke t liste dresid s wit h0.7% , 1.0% , an d3.0 % sulfu r maximums . Terminal s i nChicag o showe donl y maximu m 1.0 % sulfu r resid , a s di dDetroit . Onl y maximu m 2.0 % sulfu r resi dwa s liste dfo r Minneapolis/St . Paul . Onth e Wes t Coast , Piatt' s showe dprice s onl y fo r 3.0 % sulfu r resi da t Seattle , Portland , an dSa nFrancisco .



### 2- 2P. 9

Th e listin g o f thes e sulfu r grade s o f resi di ndifferen t region s i na trad e journa l suc ha s Piatt' s reflect s th e existing , readil y availabl e suppl y

o f thes e products . Othe r grade s ma y b e availabl e i

nthes e regions , bu t the y ar e no t commonl y

trade dan

dma y b e handle donl y

throug hindependen t contract s betwee na supplie r an dpurchaser .

Insom e cities , fo r example , Columbus , DeMoines , St . Louis , Oklahoma City , Denver , Sal t Lak e City , an dLo s Angeles , n o price s fo r resi dwer e liste di n Piatt' s fo r 1986 . Thi s doe s no t necessaril y mea ntha t resi di s no t use do r coul dno t b e obtaine dthere , bu t i t doe s indicat e tha t ther e ma y b e n o readil y accessibl e market .

2. 3 Termina l Capacit y an dAvailabilit y
Residua l fue l oi l i s typicall y brough t t o a coasta l termina l i na vessel , o r "cargo" , carryin g fro m 175,00 0 t o 225,00 0 barrels , o r a "barge " carryin g fro m 100,00 0 t o 150,00 0 barrels .

Fue l oi l i s generall y purchase db

y th e carg o o r barg e load . Occasionall y a purchase r wil l "tw

o port " a carg o o r barge , sendin g hal f t o a termina l i n Wilmington , NC , an

dhal f t o a termina l inBaltimore , fo r example . Transporta tio ncost s ar e highe r i f a vesse l mus t sto pa t two ports . Similarly , a purchase r ma y

agre e t o spli t a carg o o r barg e wit hanothe r purchase r an dshar e th e transportatio ncharges . Thus , th e minimu m quantit y

o f a produc t tha t i s likel y t o ente r a coasta l termina l i s on e hal f a barge , o r 50,00 0 barrel s (210,00 0 gallons) .
Termina l facilitie s generall y fal l int o thre e categories : thos e owne db y majo r oi l companie s suc ha s Exxo no r Hess , whic husuall y handl e onl y

thei r ow

n products ; thos e owne db y anindependen t wholesaler , suc ha s Steuar t Petroleu m



### 2- 3P.1 0

i nth e middl e Atlanti c states , wh o ma y o r ma y no t als o b e a loca l distributor ; an dindependen t terminals , suc ha s thos e owne db y GAT Xa t majo r port s suc ha s Ne w York , Chicago , Houston , an dLo s Angeles . Independen t terminal s simpl y leas e tan k capacit y

t o anyon e wh o want s it .
Residua l oi l i s generall y store dindedicate dtank s a t a terminal , becaus e i t i s considere da "dirty " oi l an dusuall y

require s heating , o r a t leas t insulated , tanks . Resi di s usuall y store da t 13 5 degree s F° , althoug hi t ca n b e lef t unheate dan

dbrough t u

pt o flow

temperatur e (10 5 degree s F° ) whe ni t i s necessar y

t o mov e it . Tank s ar e generall y heate dwit hstea

m coils . Steam jacket s ca nb e used , bu t thi s metho do f heatin g i s expensive .
Wit hth e recen t declin e i nth e residua l fue l oi l market , fewe r terminal s handl e resid . Fo r example , GATX , a majo r internationa l independen t termina l operato r wit hfourtee nfacilitie s i nNort hAmerica , handle s resi dona regula r basi s onl y

a t Housto nan

dChicago . Ther e ar e onl y thre e resi ddealer s i nth e Middl e Atlanti c states . Ne w Yor k Harbo r appear s t o hav e abou t seve ndealers . Some o f th e majo r oi l companies , suc ha s Mobil , suppl y bunke r C residua l directl y t o ship s i

nNe w Yor k Harbor , bu t d o no t marke t resi dt o othe r customers . Exxo nha s recentl y droppe dou t o f th e residua l fue l oi l marke t on th e Eas t Coast .
Conversation s wit hsevera l termina l operator s indicat e tha t adequat e termina l capacit y i s availabl e t o stor e variou s grade s o f residua l oil . Sinc e th e marke t fo r resi di s dow nsubstantially , mos t terminal s ar e "over-tanked" . However , man y

terminal s ar e removin g exces s tankage , particularl y olde r tanks , i nligh t o f th e sever e environmenta l consequence s o f tan k failures . Thus , whil e exces s tankag e appear s t o b e availabl e a t present , some o f th e existin g industr y infrastructur e i s bein g dismantled .



### 2- 4P.1 1

Tankag e i s generall y

availabl e a t terminal s i na rang e o f sizes , althoug hno t
ever y siz e i s provide dfo r residua l oi l a t eac hfacility . Fo r example , a t it s Housto nfacility , GAT Xha s resi dtank s tha t hol dfro m 25,00 0 barrel s t o 300,00 0 barrels . Tank s fo r othe r product s (i.e. , "clean " fuel s includin g distillat e o r chemicals ) ar e availabl e a s smal l a s 8,00 0 gallons , bu t no t fo r resid . A t GATX' s Chicag o facility , th e smalles t tank s availabl e fo r resi dar e 55,00 0 t o 80,00 0 barrels .

Th e optima l siz e o f a storag e tan k fo r resid , o r an y othe r fue l product , i s dictate db

y economics . A

fue l oi l markete r woul dlik e t o tur nhi s inventor y ove r a leas t ever y

thirt y days . Accordin g t o Bonne r an dMoor e th e averag e turnove r o f product s store da t a termina l migh t b e eigh t time s a year .
2. 4 Distributio nSystem

Onc e residua l fue l oi l i s store da t a coasta l terminal , i t customaril y follow s on e o f two path s t o reac hth e non-utilit y enduser . I t ma y

b e transporte d directl y t o a custome r b

y a tan k truck , whic husuall y carrie s abou t 7,00 0 gallons . Truck s ma y

b e heate do r unheated, bu t typicall y ar e insulate dt o maintai nflo w

temperatur e o f th e fuel . Fo r long trip s incol dweather , flo w temperatur e i s maintaine db y propan e heater s i

ntruck s lik e thos e designe dt o carr y asphalt . Inwarm

weather , resi dca nb e trucke dupt o 50 0 mile s withou t supplementa l heating . Inth e Northeast , colde r temperature s ma y restric t haulin g distanc e i

nunheate dtrucks , bu t th e transpor t o f resi di nheate d vehicle s present s n o technica l difficulties .
Th e secondpat hi s fo r resi dt o b e barge dfrom a coasta l termina l t o a termina l a t aninlan

dport , fro

m whic hi t i s delivere dt o customers . Fo r example , resi di s barge dfro m Steuar t Petroleum' s Pine y Poin t termina l a t th e mout ho f th e Potoma c Rive r t o Washington , o r fro m Philadelphi a o r Baltimor e



### 2- 5P.1 2

directl y t o Washington . Barge s delive r oi l fro m Ne w Yor k Harbo r t o terminal s i nAlbany o r t o coasta l citie s suc ha s Hartford, CN . Ocean-goin g barge s usuall y carr y from 100,00 0 t o 150,00 0 barrels . The y hav e compartment s fo r safet y purposes , bu t almos t alway s carr y jus t on e undifferen tiate dproduct . Coasta l barge s alon g th e Eas t Coas t hol dfro m 20,00 0 t o 120,00 0 barrels , an

dals o generall y

carr y a singl e product . Inlan d(o nth e Mississipp i Rive r system an dth e Grea t Lakes ) barge s typicall y carr y smalle r quantities , from

10,00 0 t o 20,00 0 barrels , an dar e usuall y

combine dinstring s o f 4 t o 2 5 o r more . Some o f thes e barge s hav e fro m 3 t o 1 2 compartments , usuall y 3 , an dca nb e use dt o carr y severa l discret e product s withou t mixing .

Intheory , load s a s smal l a s 1,50 0 t o 3,00 0 barrel s coul db e carrie di ninland barges . Inpractice , however , barge s use dfo r residua l oi l ar e rarel y divided . Whereas , "clea nfuel " barge s fo r distillat e o r gasolin e frequentl y carr y differentiate dproducts , resi dbarge s carr y onl y resi dan

dusuall y

carr y onl y on e typ e o f resid .

Fro m secondary , inlan

dterminals , fue l i s usuall y trucke dt o it s fina l customer . Thi s custome r shoul dhav e th e capacit y t o stor e resi di

na heate d tank , generall y

inminimu

m amount s o f 7,00 0 gallons , o r on e truc k load . Althoug hdistillat e i s typicall y delivere dt o customer s i nsmalle r amounts , resi di s generall y

sol db y th e entir e truckload .
Railroa dcar s ar e use dver y infrequentl y

t o hau l residua l fue l oil .
2. 5 Transportatio nCost s

Th e primar y

transportatio nissu e a s i t relate s t o smal l non-utilit y user s o f residua l fue l oi l i s possibilit y tha t th e use r ma y

hav e t o establis ha suppl y system differen t tha ntha t servin g othe r user s i nhi s area . Th e nee dfo r a



### 2- 6P.1 3

separat e suppl y

system woul daris e fro

m th e inabilit y

(a s describe dabove ) t o mov e ver y

smal l quantitie s o f oi l int o th e termina l servin g th e area . Inthi s case , th e use r woul db e require dt o shi pfue l fro m anothe r terminal . Trans portatio nby

tan k truc k woul dcos t abou t $2.5 0 pe r mil e traveled . Fo r a 10 0 mil e tri pfrom

a termina l thi s woul dad dabou t 4 cent s pe r gallon s t o an y pric e premiu

m associate dwit hth e low sulfu r oil .

I f a use r i s abl e t o ge t oi l fro m a termina l whic hnormall y serve s hi s are a ther e woul db e n o incrementa l transportatio ncos t associate dwit husin g low sulfu r residua l fue l oil . Fo r example , inth e Norther nNe w Englan dare a residua l fue l oi l dow nt o 0.5 % sulfu r i s availabl e a t al l majo r terminal s an d
a s suc han

y residua l oi l use r coul dge t 0.5 % sulfu r fue l a t n o additiona l transportatio ncost . Transportatio no f residua l fue l b y inlan dbarg e i s als o a possibility . Barg e cost s ar e a functio no f th e distanc e traveled , th e siz e o f th e string , an dth e siz e o f th e barge . Cost s fo r a tri pfro m th e Gul f Coas t t o Chicag o ma y cos t from 8 t o 1 5 cent s pe r gallo ni f th e barg e i s par t o f a larg e string . Cost s fo r a nindividua l barg e ar e 4- 5 time s highe r tha nthi s an dwoul dmak e th e fue l completel y

uncompetitive .
Residua l fue l oi l coul db e shippe db y rai l bu t n o evidenc e coul db e foun dtha t thi s i s bein g done . I t i s possibl e tha t rai l woul db e n o les s expensiv e tha n truc k hau l an

dperhap s mor e expensive . On e reaso nfo r th e lac k o f rai l transpor t ma y

b e th e requiremen t tha t th e use r purchas e o r leas e th e rai l car . A t leas t two car s woul db e neede dinorde r t o ensur e tha t suppl y i s no t interrupted .



### 2- 7P.1 4

2. 6 Potentia l fo r Obtainin g Residua l Fue l Oi l o f Variou s Sulfu r Conten t

I t appear s tha t virtuall y an y locatio ni

nth e U.S . coul db e serve db y a tan k truc k o r barg e containin g residua l fue l oil , a s long a s th e use r ca nlocat e th e appropriat e produc t a t a termina l withi na reasonabl e distanc e an di s willin g t o pa y

th e necessar y

transportatio ncos t t o hi s site . Th e ke y constrain t appear s t o b e willingnes s o f a termina l operato r o r distributo r t o obtai nan

dstor e th e product . This , i nturn , depend s ondemand .

Inorde r t o estimat e th e minimu m deman dtha t migh t induc e a distributo r t o marke t a lower sulfu r residua l fue l tha ni s generall y use di na marke t area , th e averag e fue l deman do f a 10 0 MMBtu/h r boile r wa s estimated . A t 50 % capacity , suc ha boile r woul drequir e approximatel y 6,00 0 barrel s pe r month , o r 72,00 0 barrel s pe r year .
Th e minimu

m quantit y

o f residua l oi l tha t dealer s customaril y purchas e a t coasta l terminal s appea r t o b e a barge , o r approximatel y 100,00 0 barrels . Assumin g a

naverag e turnove r rat e o f eigh t time s pe r year , a deale r woul dlik e t o hav e a minimu

m deman do f 800,00 0 barrel s pe r year . Thi s represent s th e deman do f approximatel y eleve n10 0 MMBtu/h r boilers .

I t i s als o possibl e tha t a deale r woul dpurchas e a half-barge , o r 50,00 0 barrels , a t a time unde r a lon g term contractua l arrangement . Thi s woul d requir e from

fiv e t o si x10 0 MMBtu/h r boiler s t o creat e anadequat e deman di n hi s marke t area .
Th e marke t are a serve dfro m a majo r coasta l termina l i s define db y th e practica l consideration s o f transportin g residua l fuel , a s wel l a s b y cost . Althoug hresi dca nb e trucke dupt o 50 0 mile s i nunheate dtruck s i

nsome climate s an

da t some time s o f year , i t appear s tha t a customar y lon g hau l i s



### 2-8P.1 5

20 0 t o 30 0 mile s (fo r example , from Wilmington , NC t o wester nNort hCarolina , o r fro m Richmond , V

A t o Covington , VA) .
Th e deliver y

are a i s extende di f th e resi dca nb e barge dt o a ninlan dpor t an

d the nhaule db

y truck . Insome inlandareas , wher e barge s a s smal l a s 10,00 0 barrel s ma y

b e available , non-utilit y customer s migh t b e abl e t o arrang e t o purchas e a specifie dtyp e o f resi dtha t wa s no t readil y availabl e onth e market . Assumin g tha t appropriat e tan k storag e wa s availabl e a t a ninland terminal , a loca l distributo r migh t b e willin g t o marke t eigh t smal l barg e load s pe r yea r fo r a tota l o f 80,00 0 barrels , an dthu s suppl y

th e averag e fue l need s o f on e 10 0 MMBt upe r hou r boile r customer .



### 2- 9P.1 6

3 . FACTOR S AFFECTIN GAVAILABILIT YO F DISTILLAT E FUEL S

3. 1 Refiner y

Issue s

Th e fina l sulfu r conten t o f bot hdistillat e andresidua l fue l oi l i s a complicate dfunctio no f crud e sulfur , oi l sourc e o r type , an dth e processin g th e oi l undergoe s a t th e refinery . I ngeneral , th e sulfu r conten t o f distil lat e oi l range s 0.01 % t o 0.7% . Th e AST M specificatio nfo r distillat e oi l (AST M D-396-80 ) call s fo r numbe r 2 distillat e t o hav e a sulfu r conten t les s tha n0.5% . Howeve r thi s specificatio nca nb e waive di f bot hth e produce r and purchase r agree .

Th e highes t sulfu r conten t distillat e stream woul dprobabl y

b e a straigh t run ou t o f th e crud e distillatio nunit . Distillat e oi l ca nb e directl y produce d from th e 400-60 0 F ° fractio nou t o f th e distillatio ncolumn . Th e sulfu r conten t o f thi s stream varie s accordin g t o th e typ e o f crud e an dth e sulfu r conten t o f th e crude . Fo r ver y hig hsulfu r Venezuela ncrud e (5 % sulfur ) distillat e oi l sulfu r content s a s hig ha s 2.7 % ar e possible . A "typical " U.S . highsulfu r crud e (2 % sulfur ) woul dproduc e a middl e distillat e stream wit h abou t 0.7 % sulfu r whil e a simila r Wes t Texa s crud e woul dproduc e a 1.3 % sulfu r distillat e stream

from a 2 % sulfu r crude .

An y o f thes e stream s coul db e sol ddirectl y by th e refinery . Inth e past , some utilitie s hav e use dhighsulfu r distillate . However , sinc e i t doe s no t
mee t th e AST M

specificatio nan

dma y caus e some corrosio ni nburners , hig h sulfu r distillat e oi l i s ver y uncommon .

I ngeneral , th e distillat e stream (i.e. , th e 400-60 0 F ° fraction ) i s sen t t o a hydrotreate r o r a catalyti c cracke r t o produc e eithe r lowe r sulfu r distillat e fue l oi l o r highe r valu e product s suc ha s gasoline . Distillat e fue l oil , a s wel l a s othe r products , ar e als o produce dfrom th e highe r boilin g product s



### 3- 1P.1 7

fro m th e distillatio nunit . Thes e "bottoms " ca nb e treate dina variet y o f unit s suc ha s cokers , visibreaker , o r hydrocracker . Inal l o f thes e processe s some o f th e sulfu r i s concentrate di nth e residua l product s o r remove da s hydroge nsulfide .

Ingeneral , fo r non-utilit y distillat e oi l users , ther e appear s t o b e littl e o r n o economi c o r othe r incentiv e t o us e a hig hsulfu r distillat e oil , i.e. , on e greate r tha n0.5% . Lowe r sulfu r distillate s ca nb e produced , bu t ar e expecte dt o hav e th e same distributio nan davailabilit y

problem s a s woul dlow sulfu r residua l oil .

3. 2 Sulfu r Grade s Currentl y Markete d

N o complete nationa l trackin g system fo r distillat e fue l oi l sulfu r conten t exists . However , th e Nationa l Institut e fo r Petroleu m an dEnerg y Researc h (NIPER ) conduct s survey s o f individua l refinerie s an dprovide s dat a onth e qualit y o f th e fue l produced . NIPE Rreport s onfue l produce db y domesti c refineries . Thei r surve y doe s no t cove r al l distillat e fue l produce dan ddoe s no t cove r an

y importe ddistillate . Th e completenes s o f th e surve y i s unknown . Th e NIPE Rsurve y

cover s refiner y

outpu t an

dno t suppliers . I t i s possibl e tha t a larg e distributo r coul db e obtainin g supplie s fro m severa l source s an

d sulfu r conten t o f th e fue l coul db e variable . Inaddition , th e NIPE Rsurve y i s a sna psho t o f sulfu r content . I f a refinery' s feedstoc k change s o r i f th e produc t mi xchange s th e sulfu r conten t coul dvary .
Accordin g t o NIPE R# 2 distillat e fue l oi l produce di nth e U.S . in198 6 range s fro m 0.03 % t o 0.50 % sulfu r wit ha naverag e o f abou t 0.25% . Inal l area s excep t th e Rock y

Mountai nare a th e averag e sulfu r conten t i s les s tha n0.3% . Inth e Rock y

Mountai nregio nth e averag e sulfu r conten t i s 0.34%.* *

Dickson , C . an

dP . Woodward . Heatin g Oils , 1986 . Nationa l Institut e fo r Petroleu m an dEnerg y Research . Bartlesville , OK . Augus t 1986 .



### 3- 2P.1 8

Sinc e distillat e sulfu r conten t i s considere dlow , loca l distributor s d o no t routinel y

measur e o r guarante e sulfu r levels . Fina l user s rarel y hav e an

y ide a o f th e sulfu r content o f th e distillat e fue l oi l the y ar e using .
3. 3 Potentia l fo r Obtainin g Variou s Sulfu r Grade s

Sinc e th e sulfu r conten t o f # 2 distillat e fue l oi l i s no t routinel y measured , th e potentia l fo r a use r t o obtai na sulfu r conten t differen t tha ntha t normall y markete di

nhi s are a i s low . T o obtai na differen t o r eve na guarantee dsulfu r leve l a use r woul dhav e t o obtai na separat e termina l storag e tan k an

darrang e fo r a secur e supply . Unde r thes e circumstance s th e same problem s woul dappl y a s hav e bee npreviousl y discusse dwit hregar dt o residua l fue l oil . Tha t i s th e use r woul dnee dt o finda distributo r willin g t o guarante e th e sulfu r content o f th e oil . Sinc e normall y No . 2 distillat e i s no t sol dby

sulfu r conten t thi s requiremen t alon e ma y mak e i t ver y

dif ficul t t o finda supplier .

I f a use r ca nfin da supplie r th e NIPE Rdat a implie s tha t a sulfu r limi t o f 0.3 % coul dbe me t i

nmos t o f th e U.S . However , th e limitation s o f th e NIPE R dat a mak e i t difficul t t o demonstrat e tha t thi s sulfu r fue l i s alway s avail able .
3. 4 Diesel/Distillat e Issue s

EPA i s considerin g settin g a sulfu r limi t o nhighwa y diese l fuel . Althoug ha fina l decisio nha s no t bee nmade , a limi t o f 0.05 % ha s bee ndiscussed . Thi s limi t woul dbe ineffec t n o soone r tha n199 2 an dappl y onl y t o highwa y

vehicl e diese l use . Base do ndiscussion s betwee nEP A an dindustry , i t appear s tha t thi s limi t woul dhav e n o affectio no nth e current sulfu r conten t o f No . 2 distillat e fue l oil . Refinerie s hav e tol dEPA tha t the y

inten dt o marke t two



### 3- 3P.1 9

type s o f diese l fue l - on e subjec t t o regulatio nan don e (nonhighway ) no t subjec t t o regulation . Thi s implie s tha t selec t diese l stream s ar e likel y t o b e desulfurize dwit hn o impac t onth e distillat e sulfu r content .



### 3- 44 . EXAMPL E MARKE T AREA S

Inorde r t o illustrat e ho w a buye r migh t obtai nfuel s o f variou s sulfu r contents , thre e sampl e marke t area s wer e selected : Ne w York/Ne w

England ; Chicago ; an

dth e Sout hAtlanti c States . Th e followin g section s briefl y describ e th e curren t distributio nan davailabilit y

o f distillat e an

dresidua l fuel s o f variou s sulfu r content s an dwha t a buye r woul dhav e t o d o i f h e wantedt o obtai na fue l tha t wa s no t presentl y availabl e i

nhi s area . Distillat e fuel s o f 0. 2 percent , 0. 3 percent , an d0. 5 percen t sulfu r ar e discussed . Residua l fuel s wit hsulfu r content s o f belo w 0. 3 percent , 0. 5 percent , an

d1. 0 percen t ar e discussed .

4. 1 Ne w York/Ne w

England

Becaus e o f curren t ai r qualit y requirement s i

nNew Yor k City , residua l fue l oi l a t 0. 3 percen t sulfu r i s readil y availabl e i

nNe w Yor k Harbor . Any purchase r withi ntruckin g distanc e (30 0 t o 50 0 miles ) o f New Yor k Harbo r shoul db e abl e t o arrang e deliver y o f 0. 3 percen t sulfu r resi dwit hrelativ e ease , a s lon g a s h e i s willin g t o pa y transportatio ncost s an dca nlocat e a distributo r wh o ha s acces s to , o r coul dpurchase , th e produc t fro m a whole sale r there . T o ensur e wintertim e delivery , heate dtruck s probabl y woul db e required .
Resi dwit hsulfu r conten t guarantee da t a leve l belo w 0. 3 percen t doe s no t appea r t o b e currentl y available . A

custome r probabl y

woul dhav e t o arrang e directl y wit ha refiner y

t o purchas e thi s ver y lo w sulfu r product , an

darrang e fo r transport , storag e a t a terminal , an dfina l deliver y

ona individua l basis . I t i s likel y

tha t th e minimu

m purchas e h e coul dmak e woul db e by th e barg e load , o r 100,00 0 t o 120,00 0 barrel s a t a time .



### 4- 1P.2 1

Outsid e o f ih e Ne w

Yor k Harbo r area , i t doe s no t appea r tha t resi dwit hsulfu r conten t belo w

1. 0 percen t i s readil y availabl e a t th e presen t time . Ther e appear s t o b e a marke t fo r 1. 0 percen t sulfu r resi dinNe w Haven , CN

an dfo r 1. 5 percen t sulfu r resi di nAlbany .

T o ge t resi dwit hlowe r tha n1.0 % o r 1.5 % sulfu r i nthes e areas , a custome r woul dhav e t o hav e i t trucke dfrom New Yor k Harbo r o r finda distributo r willin g t o barg e th e produc t t o a loca l termina l an dthe ndistribut e i t b y truck .

Inth e Bosto nare a an dmos t o f Ne w

England , 0. 5 percen t sulfu r an dabov e appear s t o b e readil y availabl e t o market s withi ntruckin g distance . I f a lowe r sulfu r fue l (les s tha n0.5% ) wer e needed , a buye r migh t b e abl e t o truc k i t from Ne w Yor k Harbo r or , a s inth e previou s cases , finda distributo r wh o woul dbarg e i t fro

m a refiner y

o r from Ne w Yor k Harbo r t o a termina l close r t o hi s customers .

Mos t o f th e No . 2 distillat e fue l i nNe w York/Ne w

Englan dare a i s les s tha n 0.3 % sulfu r althoug hsome appea r t o b e a s higha s 0.48% . No . 1 heatin g oi l
an dNo . 1 diese l fue l oi l ar e availabl e wit hsulfu r content s o f abou t 0.1% . Ther e i s a chanc e tha t a custome r coul dmee t a 0.3 % o r highe r limi t b y usin g No . 2 distillat e oi l assumin g a distributo r woul db e willin g t o guarante e sulfu r conten t an

dtha t i t coul db e found .
4. 2 Chicag o
Accordin g t o Piatt's , residua l fue l oi l delivere dt o Chicag o ha s a maximu m sulfu r conten t o f 1.0% . Usin g norma l distributio npattern s thi s woul d represen t th e lowes t sulfu r fue l availabl e t o non-utilit y users . T o obtai na lowe r sulfu r residua l fue l a use r woul dhav e t o mak e arrangement s t o barg e residua l fue l upth e Mississipp i fro m th e Gul f Coas t o r mak e arrangement s wit h



### 4- 2P.2 2

a loca l refine r t o suppl y lowe r sulfu r resid . I t i s ver y unlikel y

tha t a non-utilit y

use r woul db e abl e t o us e th e minimu m orde r tha t a refiner y woul d demand . I f th e oi l wa s move dupth e Mississippi , i t i s possibl e fo r quan titie s a s smal l a s 330 0 bbl s o r 138,60 0 gallon s t o b e delivered . Assumin g tha t spac e coul db e obtaine da t a termina l residua l fue l oi l wit h0.7 % sulfu r an dperhap s a s low

a s 0.5 % sulfu r coul db e obtained . I f thes e connection s ca n b e mad e 0.5 % t o 0.7 % sulfu r residua l oi l woul db e availabl e i nth e Chicag o area .
Th e additiona l cos t o f thi s oi l i s almos t impossibl e t o estimate . Sinc e much
o f th e resi duse dinth e Chicag o are a already arrive s b

y barg e i t i s possibl e tha t n o incrementa l transpor t cos t woul db e associate dwit hth e low sulfu r oil . I f a specia l shipmen t wer e require dth e cos t woul db e 8 t o 1 5 cents / gallo ndependin g onseason , siz e o f deliver y an dth e numbe r o f othe r barge s movin g a t th e same time . I t i s unlikel y tha t an

y incrementa l truc k transpor t cost s woul db e incurre dsinc e norma l 1 % sulfu r resi dwoul db e transporte dby trucks .

I f sulfu r content s below 0.5 % wer e require di t i s difficul t t o finda wa y t o obtai nresi dfue l oil . Th e onl y confirme dsource s o f 0.3 % sulfu r residua l fue l ar e delivere d b

y ocea ngoin g barge s o r ships . Quantitie s shippe dar e to o larg e t o b e use db

y an y singl e o r eve nsevera l smal l non-utilit y users . I f oi l wit hles s tha n0.5 % sulfu r wer e required , the nNo . 2 distillat e oi l woul d b e used . Inth e centra l regio naccordin g t o NIPE Rthi s fue l typicall y a s a sulfu r conten t o f 0.2 % t o 0.28% . Occasiona l shipment s o f highe r sulfu r (upt o 0.44% ) distillat e oi l ar e reported . Th e exten t t o whic hth e NIPE Rreporte d sulfu r content s woul db e guarantee di s no t known . N o incrementa l transpor t o r us e charge s ove r norma l distillat e ar e expected .

I f sulfu r content s les s tha n0.3 % wer e required , th e sourc e coul dus e No . 1 fue l oi l o r No . 1 Diese l fuel . No . 1 heatin g generall y ha s sulfu r content s o f



### 4- 3P.2 3

0.1 5 o r les s an

dNo . 1 diese l fue l generall y ha s a sulfu r conten t les s tha n 0.1% .
4. 3 Sout hAtlanti c State s

Residua l fue l oi l i

nth e Sout hAtlanti c state s i s generall y delivere d b

y ocea n goin g vesse l t o Norfolk , Morehea dCit y o r a variet y

o f other port s an

d delivere d t o en

duser s b

y truck . On e wa y

haul s o f 250-30 0 mile s d o occur .
Accordin g t o Piatt' s th e lowes t sulfu r residua l fue l oi l expecte dt o b e generall y

availabl e i s 1 % sulfur . I f lowe r sulfu r fue l wer e require da smal l non-utilit y

use r woul dhav e t o mak e alternat e an ddifficul t arrangements . I n th e norther nportio no f th e are a (i.e. , a s fo r sout ho f Richmond , VA) , residua l fue l a s lo

w a s 0.3 % sulfu r coul db e delivere db y truc k fro

m Ne w York . Truc k hau l ove r thi s distanc e coul dad d7 t o 1 5 cent s pe r gallo nt o th e cos t
o f resi ddependin g onth e norma l transpor t cos t o f highsulfu r fue l oil .

A sourc e i

nth e souther no r wester nportion s o f th e are a woul dprobabl y b e force dt o obtai nlo

w sulfu r resi dshippe donth e inlan dwate r way s t o Tennesse e o r Ohi o location s an dhaule deas t b

y truck . Residua l fue l oi l wit h
a sulfu r conten t a s lo w a s 0.5 % ma y

b e abl e t o b e obtaine db y thi s routing .
Additiona l cost s fo r thi s typ e o f tri par e almos t impossibl e t o estimat e sinc e i t i s no t presentl y

bein g done . A

roughestimat e ma y

b e tha t barg e cost s coul dad d8 t o 1 5 cent s pe r gallo nt o th e pric e o f th e fuel . Truc k transpor t cost s ma y

no t increas e sinc e th e norma l transpor t rout e i s already s o long .
Residua l fue l oi l belo w 0.5 % sulfu r doe s no t see m t o b e availabl e b

y an y reasonabl e transpor t metho dfo r th e wester nan dsouther narea s o f th e sout h at!anti c states .



### 4- 4I f fue l les s tha n0.5 % wer e require dman y source s woul dhav e t o us e No . 2 distillate . I nthi s are a th e sulfu r conten t o f No . 2 distillat e i s reporte d
a s 0.3 % sulfu r o r less . I f fue l sulfu r les s tha n0.3 % wer e require deithe r No . 1 heatin g oi l o r No . 1 diese l woul db e required .



### 4- 55 . CONCLUSION S

o Usin g norma l distributio nsystem s th e sulfu r conten t o f residua l fue l oi l availabl e t o a non-utilit y use r varie s from

0.3 % t o 1.5 % dependin g o n location .

o Singl e o r eve nsevera l smal l non-utilit y user s d o no t hav e enoug hdeman d t o shap e a marke t an

d caus e ver y

lo w sulfu r residua l fue l oi l t o ente r a market .

o Usin g drasti c transportatio nroute s mos t o f th e Easter nUnite dState s ma y b e abl e t o obtai nresidua l fue l oi l i n th e 0.5%-07 % sulfu r range . Th e abilit y o f a particula r use r t o obtai nthi s sulfu r produc t depend s o n hi s abilit y t o finda transporte r (i.e. , truc k o r barg e company ) willin g t o transpor t th e materials .

o Limite ddat a indicate s tha t th e nationa l averag e sulfu r conten t o f No . 2 distillat e fue l i s abou t 0.25% .

o Th e sulfu r conten t o f distillat e fue l oi l appear s t o var y b y regio nan

d perhap s accordin g t o refiner y feedstoc k an

d produc t mix .

o No . 2 distillat e i s generall y no t sol do r guarantee db y sulfu r content . Th e abilit y

an d willingnes s o f distributor s t o guarante e a sulfu r leve l belo w AST M specification s i s no t known .

o I n thre e exampl e marke t analyses , th e abilit yo f a non-utilit yuse rt o receiv e reliabl e supplie s o f ver ylo w sulfu rresidua l fue l oi l i s ver y limited

.



### 5- 1