Comments and Reply

• Many stakeholders expressed support for the proposed regulatory limits and implementation date. Some urged earlier action and a limit below 15 ppm. One party suggested flexibility for excursions as high as 30 ppm, so long as a 15 ppm average is maintained.

• "The CVMA strongly supports Environment Canada's direction to reduce the allowable sulphur content in Canadian on-road diesel fuel in a simple one step approach to a maximum of 15 parts per million (ppm) commencing September 1, 2006 thus harmonizing with the required introduction of this low sulphur diesel in the United States."
• "EMA strongly supports Environment Canada's proposal to require all on-road diesel fuel to meet a sulphur level of 15 ppm or less."
• The AIAMC "urge Environment Canada to adopt a sulphur in diesel fuel regulation that will provide clean diesel to all Canadians by January of 2006 and to consider introducing sulphur free diesel fuel concurrently with the EU [European Union].".
• "CPPI and our member companies fully support the goal of the proposed regulations, which is to require all on-road diesel fuel to meet a maximum sulphur content of 15 ppm in 2006 ... "
• "Imperial Oil supports providing the fuel that is needed to enable the introduction of the new on-road heavy-duty diesel engine emission control technology, by September 1st, 2006."
• "Irving Oil supports the Sulphur in Diesel Fuel Regulations published in Canada Gazette Part 1 on December 22, 2001."
• "North Atlantic Refining Limited supports the proposed Sulphur in Diesel regulations and their general alignment with those prescribed by the US EPA."
• "Shell supports the Environment Canada approach to align this diesel regulation with the changes in diesel fuel quality that are planned in the USA."
• Sunoco strongly supports ... .the primary objective of the proposed regulations, which is to require all on-road diesel fuel to meet a maximum sulphur content of 15 mg/kg in 2006 ... "
• The MRN indicated that " ... generally speaking, all concerns raised by MRN have been adequately addressed in the draft regulations."
• The City of Toronto "fully support the government's proposal to reduce the allowable concentration of sulpur in on-road diesel fuel form 500 ppm to 15 ppm by the deadlines indicated."
• The Saint John Citizens Coalition for Clean Air "support and endorse this proposed Regulation which will lower the maximum limit for sulphur in on-road diesel to 15 milligrams per kilogram of the fuel ... commencing June 1, 2006."
• "The CAW supports the proposed regulations because they will reduce smog thus improving the general health and well being of Canadians."

• "Trans Mountain recommends that the provisions for reporting location and sulphur content averaging included in the Sulphur in Gasoline Regulations should be adopted for on-road diesel and that excursions to 30 ppm sulphur be allowed, so long as a 15 ppm average is maintained."

Reply:As set out in the Minister's Notice of Intent on Cleaner Vehicles, Engines and Fuels, the regulations set a limit of 15 ppm coming into effect in June 1, 2006. This level and timing are required to meet new vehicle emission standards that will be required for the 2007 model year.

Stakeholders representing the fuel industry commented on test methods for sulphur levels to use for compliance and reporting purposes. They also recommended that provisions for alternative test methods be included in the Regulations.

• The CGSB indicated that "Test method ASTM D5453-00 is becoming the method of choice in Canadian petroleum laboratories for diesel fuel, gasoline and Jet fuel. It is not in universal use yet, but when more gasoline is produced with sulphur levels below 50 mg/kg, most likely in mid to late 2003, it can be expected to become the preferred laboratory test method ... CAN/CGSB -3.0 No. 16.0-95 should be allowed as a reference method until December 31, 2003 to allow time for laboratories time to purchase and commission ASTM D5453-00 units. "
• "Shell recommends that CAN/CGSB -3.0 No. 16.0-95 continue to be the reference method until December 31, 2003 and that effective January 01, 2004 ASTM 5453-00 become the reference method."
• In a clarification of its initial comments, Imperial Oil indicated it "supports and is aligned with the CGSB recommendation that the test method ASTM D5453-00 be used after Dec 31, 2003 ... "
• Sunoco indicated that "If Environment Canada wishes to specify a referee test method for this regulation, we recommend that it be ASTM D5453-00, Standard Test Method for Determination of Total Sulphur in Light Hydrocarbons, Motor Fuels and Oils by Ultraviolet Fluorescence. We do not see a need to specify two separate methods in Sections 4.(1) and (2)."
• In addition to its initial comments, CPPI confirmed that" all CPPI members are in support of the CGSB proposal to use the CGSB 16.0 method until the end of 2003, then move to the ASTM D5453 from January 1, 2004."

Many parties requested that the regulations include flexibility to allow use of alternative test methods for reporting purposes.

• "Most members of the CGSB Middle Distillates Working Group believe that it is important that this provision [providing a mechanism for obtaining permission for use of equivalent methods for sampling and analysis] is added to the Proposed Sulphur in Diesel Fuel Regulations in the same manner as in the Benzene in Gasoline Regulations."
• CPPI recommended " that the provisions for equivalent test methods for reporting purposes that are contained in Section 6 of the "Benzene in Gasoline Regulations" be added to these regulations."
• "Imperial Oil supports the development or adoption of new, improved technologies for sampling and analysis ... Imperial believes that it is important that a similar provision be added to the Proposed Sulphur in Diesel Fuel Regulations, as used in the Benzene in Gasoline Regulations, section 6."
• Sunoco "strongly recommend[ed] that the provisions for equivalent test methods for reporting purposes that are contained in Section 6 of the "Benzene in Gasoline Regulations" be added to these regulations."
• Ultramar requested that Environment Canada to "for this regulation, provide the same flexibility as was provided in the regulations for the concentration of benzene in gasoline."
• "Shell recommends that a mechanism be included in the diesel regulations that would enable refiners or importers to obtain permission for the use of "equivalent methods" for sampling and analysis for reporting purposes."

Reply: The final diesel regulations incorporate changes to the test methods:

• until December 31, 2003, the reference test method is CAN/CGSB -3.0 No. 16.0;
• after December 31, 2003, the reference test method is ASTM D 5453.

For reporting purposes only, the regulations also allow ASTM 6428, ASTM 2622, ASTM D 1266 until December 31, 2003. After that date, the approach used in the Benzene in Gasoline Regulations for alternative test methods has been adopted: the final regulations allow use of alternative test methods for reporting purposes, provided that the test method is demonstrated by the regulatee to be equivalent to ASTM D 5453 using the comparison method ASTM D 4855.

• CPPI noted that "Pipeline transportation of ultra-low sulphur diesel poses many potential problems that have yet to be fully understood ... .Should further work indicate that deliveries of <15 ppm sulphur on-road diesel using the existing pipeline system are not feasible, alternative options would need to be developed ... .We strongly recommend that Natural Resources Canada promptly initiate a study to consider the capabilities and potential limitations of the distribution system and any ensuing commercial issues that may result."
• Imperial Oil supported " the CPPI suggestions and offer our collaboration in the design and study of the distribution systems. This is a high priority for Imperial Oil since the outcome is likely to require significant changes to the current distribution infrastructure in order to meet the proposed September 1, 2006 point of sale requirement."
• "..Shell in conjunction with other refiners and pipeline companies, is studying potential problems associated with the pipeline shipment of ULSD that may be unique to our country ... Shell also suggests that the status of resolution of pipeline distribution issues be considered before Gazette 2 is finalized."
• "Trans Mountain and it shippers do not believe on-road diesel deliveries through its system will be possible after the proposed sulphur in diesel fuel regulations come into effect in June of 2006. However testing will continue to determine if it can be done ... The impact on the company could be as much as $12 million per year in lost revenue if the cost cannot be recovered from its shippers. If this cost were passes on to Trans Mountain's shippers it would result in a toll increase of approximately 12% which would be passed on to the consumers in the Lower Mainland of BC for all volumes that it transports ... .The alternative supply options for the on road diesel deliveries to the Lower Mainland are rail from Edmonton or truck or barge from Washington State. ... .there are increased safety and environmental issues associated with such alternate transport."
• Enbridge Pipelines Inc. indicated "Sulphur pick-up in a batched pipeline can be reduced but not eliminated with capital expenditure. This type of capital expenditure was not mentioned in the Canada Gazette article referenced above."
• TNPI indicated that "There is no question, however, that the movement of U.L.S.D. by pipeline will be a challenge. There will be a substantial cost impact on the pipeline distribution component for U.L.S.D., and possibly other petroleum products, for shippers and the consumer."

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. Natural Resources Canada, in consultation with other federal and provincial government departments and industry, is now considering the structure and terms of reference of a study to investigate the potential constraints of the existing distribution system and the possible effects in terms of distillate supply. The study has not yet been completed.

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 regulations stipulate a sulphur limit of 15 ppm for sales of on-road diesel fuel.

Under the regulations, the 15 ppm limit for sales in the northern supply area comes into effect one year later than in the rest of Canada. The CGSB , Sunoco and Imperial Oil suggested that the definition of "northern supply area" be based on specific geographic boundaries rather than using CAN/CGSB -3.5-99 zones.

• "The CGSB Gasoline Working Group is currently developing new zones due to the acquisition of a new weather data set. The zones as referenced in this Regulation will change in an upcoming edition of CAN/CGSB -3.5. To avoid possible confusion in the future it may be better to define this area using lines of latitude and provincial boundaries."
• Sunoco suggested that the Northern Supply Area definition "be based on specific geographic boundaries rather than using CAN/CGSB -3.5-99 zones, which may be subject to change from time to time as new weather data is acquired. This should help avoid confusion in the future."
• Similarly Imperial Oil indicated that the "Gasoline Committee in CGSB is currently developing new zones based on more current weather data. To avoid the reference becoming obsolete, when the provisions of the proposed regulations come into force, we recommend that the Northern Supply Area be defined by latitude and province."

Reply: The final diesel regulations have modified the definition of Northern Supply Area so it is based on geographic boundaries. The definition has also been revised to exclude primary roads in the North in order to address concerns expressed about potential misfuelling as discussed below. On this issue, there were subsequent consultations with the CTA, CPPI and the governments of Yukon, Northwest Territories, Quebec and Newfoundland. The resulting definition is a consensus of the above parties. Maps showing the Northern Supply Area are provided in Appendix 1.

Concerns were raised by the CVMA, EMA and the CTA regarding potential misfuelling in the North due to the later effective date for sales in the northern supply region.

• CVMA indicated that "...delaying 15 ppm sulphur diesel to northern regions until September 1, 2007 could also delay availability of vehicles equipped with sulphur-sensitive after-treatment devices in this region. Therefore, we do not support delaying the Sept. 1, 2006 implementation date in order to accommodate a later northern launch. Mandatory pump labelling is essential to address the delay period that applies to the northern regions."
• "EMA urges Environment Canada to adopt a single nationwide implementation date of September 1, 2006 for sale limits ... In the event that an implementation delay is allowed for northern regions, Environment Canada should require pump labeling to identify the higher sulphur fuel.
• The CTA indicated that "Carrier not based in the north, but who service this area [Northern Supply Area], could not dispatch their 2007 equipment into these communities without a guaranteed ULSD fuel supply ... We believe it may be possible to come up with a solution to this problem, as it would appear to be limited to a fairly small number of northern communities served by road."

Reply: The implementation date for sales in northern regions is September 1, 2007, reflecting fuel distribution and logistical difficulties in northern Canada. To address the concerns raised, the final regulations have modified the definition of Northern Supply Area to exclude Newfoundland and most primary roads in the North. Environment Canada believes that this will mitigate potential need for labelling of high sulphur diesel fuel in the North.

• "CVMA remains concerned about the possibility of misfuelling prior to September 1, 2006 (September 1, 2007 for northern regions) and the potentially severe harm to engines and after-treatment devices that may occur as a result."

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 existing 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 an issue Natural Resources Canada will be studying .

A number of parties commented on the potential use of economic instruments to promote the early introduction of low sulphur on-road diesel fuel.

• The City of Toronto recommended "promoting non-regulatory tools, for example tax incentives, to encourage the early introduction of the lower sulphur on-road diesel fuel."
• North Atlantic indicated "It is our view that the Canadian government should rethink its position on incentives and adopt either a tax incentive or credit trading program modeled after that adopted by the US EPA ... . A fiscal incentive for companies to make early investment given the potential benefits to the population, in our opinion, warrants consideration."
• Irving Oil Limited recommended " ... Canada should consider the use of non-regulatory instruments to provide an incentive for earlier introduction of cleaner transportation fuels ... We recommend the Government of Canada consider developing a strategy to manage the outcome of limited North American construction resources being unable to meet the deadlines ... This situation is urgent. To address this potential outcome, we recommend the Government develop an incentive program that would serve to stagger construction throughout the next four and one half years."
• "CTA does not support the line of argument used by Environment Canada that the potential for regional disparities mitigates against the use of fiscal incentives for the early introduction of ULSDS. An excise tax cut that would, for example, bring the price of ULSDS down to the same level as conventional diesel might speed the introduction of ULSDS in those parts of the country that do not rely on a common-carrier pipeline distribution system."
• CPPI members are committed to achieving the goal [of the Regulations] without any need for fiscal measures of any kind."
• Ultramar requested that Environment Canada "do not put in place tax incentives for accelerating the availability of diesel at 15 ppm on the market."

Reply: Environment Canada has worked with the National Round

Table on the Economy and the Environment (NRTEE), which has explored opportunities to apply fiscal instruments to complement the cleaner vehicles and fuels agenda, including the early introduction of low-sulphur diesel prior to 2006. The Cleaner Transportation Working Group under the NRTEE was not able to reach agreement on a recommendation regarding the use of a tax differential to accelerate the introduction of low-sulphur diesel.

In its final analysis, the Government of Canada determined that Regulations under CEPA are the most appropriate measure.

• The CTA indicated concerns "as to how Environment Canada arrived at the Gazette's additional cost estimate per truck to operate on ULSD fuel - $240 to $470 annually. Based on CTA's own calculations ... CTA's cost projections vary from $1,017 to $3,714 annually per tractor."

Reply:Environment Canada' s cost estimate is based on the EPA estimate which is an average cost of vehicles ranging from light heavy-duty trucks to heavy heavy-duty trucks and urban buses. Environment Canada recognizes that cost estimates vary depending on factors such as the cost of the fuel, the distance traveled, size of engine and the fuel consumption rate of the engine. Accordingly, the information provided by the CTA has been added to the RIAS.