Air and Radiation
EPA420-R-04-014
September 2004
Summary and Analysis of the
Highway Diesel Fuel
2004 Pre-Compliance Reports
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EPA420-R-04-014
September 2004
Summary and Analysis of the
Highway Diesel Fuel
2004 Pre-compliance Reports
Assessment and Standards Division, Transportation and Regional Programs Division
Office of Transportation and Air Quality
Office of Air and Radiation
U.S. Environmental Protection Agency
NOTICE
This technical report does not necessarily represent final EPA decisions or positions.
It is intended to present technical analysis of issues using data that are currently available.
The purpose in the release of such reports is to facilitate the exchange of technical information
and to inform the public of technical developments which may form the basis for a final EPA
decision, position, or regulatory action.
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Executive Summary
Executive Summary
Any refiner or importer planning to produce or import highway diesel fuel in 2006
through 2010, is required to submit to the U.S. Environmental Protection Agency ("EPA" or "the
Agency") pre-compliance reports by June 1 of each year. This report summarizes the results of
the June 2004 pre-compliance reports. The first reports were due in June 2003; the final set of
highway diesel reports will be due next June.
While individual refiners made a number of changes in their 2004 reports relative to their
2003 reports, on balance there was little overall change at both the nationwide and PADD level.
The same general conclusions as in our 2003 summary report can be drawn this year.
Specifically, the 2004 reports continue to indicate: 1) that refiners are on target for complying
with the 15 ppm sulfur standard by June 2006, 2) that 15 ppm sulfur diesel fuel will be widely
available nationwide with 95 percent of highway diesel fuel produced to the 15 ppm sulfur
standard, and 3) that highway diesel fuel production will be sufficient to meet demand - refiners
projected production exceeds the Department of Energy's Energy Information Administration's
(EIA) projected demand. As shown in the report, planned total highway diesel fuel production
appears to be in line with, or slightly above, projected demand. Hence, it appears that the
refining industry as a whole is adequately planning for projected highway diesel demand through
2010.
The pre-compliance reports must contain estimates of the volumes of 15 parts-per-million
(ppm) sulfur highway diesel fuel and 500 ppm sulfur highway diesel fuel that will be produced at
each refinery or imported by each importer from June 2006 through May 2010. For those
refineries planning to participate in the credit trading program, the reports must contain a
projection of how many credits will be generated or used by each refinery. The pre-compliance
reports must also contain information outlining each refinery's timeline for compliance with the
15 ppm sulfur standard and provide information regarding engineering plans (e.g., design and
construction), the status of obtaining any necessary permits, and capital commitments for making
the necessary modifications to produce 15 ppm sulfur highway diesel fuel. Similarly, for the
new nonroad diesel rule, annual pre-compliance reports will be due on June 1 of each year
beginning in 2005 and continuing through 2011.
This year, we received pre-compliance reports and/or information for all refineries that
produced highway diesel fuel in the year 2003. Our conclusions here are based on the
information provided in these reports which project data on fuel volumes, credit generation, and
credit use plans as of June 1, 2004. The reports submitted for 2003 were projections that were
based on more preliminary plans and several refiners changed their plans this year. While this
year's pre-compliance reports may still reflect some preliminary information, as not all refineries
have made final decisions on compliance plans at this point in time, we expect that most refinery
plans are generally final or will be finalized in the very near future. Therefore, the 2004 pre-
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Executive Summary
compliance reports should provide a more accurate prediction than the 2003 reports. Our
summary and analysis of the pre-compliance reports for 2005 will be based on the pre-
compliance reports that are submitted in 2005, and will therefore reflect updated information
relative to the information that we received this year. However, given the status of most refiners,
we expect fewer changes than occurred this year.
11
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Table of Contents
Table of Contents
Executive Summary i
I. Pre-compliance Report Requirements 1
II. Summary Statistics 5
A. Nationwide Analysis 5
1. Number of Refineries and Importers 6
2. Production Versus Consumption 8
3. Availability of 15 ppm sulfur Highway Diesel Fuel 12
4. Projected Credit Generation and Use 13
5. Project Timing 15
6. Revamped Versus Grassroots Projects 16
7. Small and GPA Refiner Options 17
B. PADD Analysis 19
1. PADD 1 24
2. PADD 2 29
3. PADD 3 34
4. PADD 4 39
5. PADD 5 44
Appendix: List of Acronyms 49
References 51
in
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Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
List of Tables and Figures
Table 1.
U.S. Aggregated Report Information
Highway Diesel Fuel Refinery Statistics 2006-2010 7
Table 2.
U.S. Aggregated Report Information
Highway Diesel Fuel Volume and Credits 2006-2010 10
Tables.
Projected Production of Highway Diesel Fuel vs. Estimated Demand 11
Table 4.
Projected Volume of Credits (bbls/day)
Generated and Used by PADD, 2006-2010 14
Table 5.
Intended Small Refiner Compliance Options by Number of Refineries and
Highway Diesel Fuel Production Capacity 18
Table 6.
Projected Number of Highway Diesel Fuel Refineries by PADD for 2006 20
Table 7.
Projected Volumes of Highway Diesel Fuel by PADD for 2006 20
Table 8.
Projected Number of Highway Diesel Fuel Refineries by PADD for 2010 22
Table 9.
Projected Volume of Highway Diesel Fuel by PADD for 2010 22
Table 10.
PADD 1 Highway Diesel Fuel Refinery Statistics 2006-2010 25
Table 11.
PADD 1 Highway Diesel Fuel Volume and Credit Statistics 2006-2010 26
Table 12.
PADD 2 Highway Diesel Fuel Refinery Statistics 2006-2010 30
Table 13.
PADD 2 Highway Diesel Fuel Volume and Credit Statistics 2006-2010 31
Table 14.
PADD 3 Highway Diesel Fuel Refinery Statistics 2006-2010 35
Table 15.
PADD 3 Highway Diesel Fuel Volume and Credit Statistics 2006-2010 36
Table 16.
PADD 4 Highway Diesel Fuel Refinery Statistics 2006-2010 41
Table 17.
PADD 4 Highway Diesel Fuel Volume and Credit Statistics 2006-2010 41
IV
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Table of Contents
Table 18.
PADD 5 Highway Diesel Fuel Refinery Statistics 2006-2010 46
Table 19.
PADD 5 Highway Diesel Fuel Volume and Credit Statistics 2006-2010 46
Figure 1. Number of Refineries Increasing or Decreasing Production
Relative to the Year 2003 8
Figure 2. Nationwide Highway Diesel Fuel Volume Change vs. 2000 9
Figure 3. Projected U.S. Diesel Fuel Production and Demand, 2006-2010 11
Figure 4. Number of Refineries Producing Highway Diesel Fuel in 2006 12
Figure 5. Highway Diesel Fuel Grades by Percent of Production Volume, 2006 13
Figure 6. Projected Start-up Dates for Producing 15 ppm Highway Diesel Fuel 16
Figure 7. Highway Diesel Fuel Production Change 2006 vs. 2000 (by PADD) 21
Figure 8. Highway Diesel Fuel Production Change 2010 vs. 2000 (by PADD 23
Figure 9. PADD 1 Highway Diesel Fuel Volume Change vs. 2000 27
Figure 10. PADD 1 Projected Highway Diesel Fuel Production, 2006-2010 28
Figure 11. PADD 2 Highway Diesel Fuel Volume Change vs. 2000 32
Figure 12. PADD 2 Projected Highway Diesel Fuel Production, 2006-2010 33
Figure 13. PADD 3 Highway Diesel Fuel Volume Change vs. 2000 37
Figure 14. PADD 3 Projected Highway Diesel Fuel Production, 2006-2010 38
Figure 16. PADD 4 Projected Highway Diesel Fuel Production, 2006-2010 43
Figure 17. PADD 5 Highway Diesel Fuel Volume Change vs. 2000 47
Figure 18. PADD 5 Projected Highway Diesel Fuel Production, 2006-2010 48
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I. Pre-compliance Report Requirements
I. Pre-compliance Report Requirements
The 2007 highway diesel final rule (66 FR 5002, January 18, 2001) requires that any
refiner or importer planning to produce or import highway diesel fuel in 2006 must submit
annual pre-compliance reports to the Agency.a Reports were due on June 1, 2003 and June 1,
2004; the final highway diesel pre-compliance reports will be due on June 1, 2005. Similarly,
pre-compliance reports will be due annually on June 1 for the new nonroad diesel final rule (69
FR 38958, June 29, 2004), with the first of these reports also being due on June 1, 2005.b
The pre-compliance reports must contain the following information:
1. Any changes in the refiner's or importer's basic company or facility information
since registration.
2. Estimates of the volumes of 15 parts-per-million (ppm) sulfur diesel fuel and 500
ppm sulfur (if applicable) diesel fuel to be produced from crude oil by each
refinery and/or imported by each importer, as well as the volumes of each grade
of highway diesel fuel produced from other sources.
3. Estimates of the numbers of credits to be generated and/or used, if at all.
4. Information regarding engineering plans (e.g., design and construction), the status
of obtaining any necessary permits, and capital commitments for making the
necessary modifications to produce ultra-low sulfur highway diesel fuel, and
actual construction progress. Additionally, the reports summarized here, as well
as the 2005 reports, are required to provide an update of the progress in each of
these areas.
We recognize that the pre-compliance reports may still contain some preliminary
information, as final decisions on desulfurization plans may not have been made in all cases as of
the June 1 reporting deadline. Our conclusions from these reports are based on this preliminary
information, and reflect some updated information from the 2003 pre-compliance reports.1
Likewise, the Summary and Analysis of the Pre-compliance Reports for 2005 will be based on
the pre-compliance reports that are submitted in 2005 and will reflect any new or updated
information relative to the information that we received this year. While we expect that some
information in this year's pre-compliance reports may still be somewhat preliminary, we do
expect that the 2005 reports will contain finalized information for refiners plans for complying
a The primary purpose of these reports is to help facilitate the market for credit trading under the highway
diesel fuel program's temporary compliance option (TCO) which is described in the preamble to the 2007 highway
diesel final rule at 66 FR 5065, January 18, 2001.
b The nonroad diesel fuel pre-compliance reports will be due beginning June 1, 2005, and will continue
annually until June 1, 2011, or until the entity produces/imports nonroad (NR) or nonroad, locomotive, and marine
(NRLM) diesel fuel meeting the 15 ppm sulfur standard.
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Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
with the rule. Given the lead time remaining and the status of most refiners, we anticipate fewer
changes in the 2005 reports than are reflected in the 2004 reports.
In addition to the information listed above that is required for all refiners, small refiners
and Geographic Phase-in Area (GPA) refiners must provide additional information in their pre-
compliance reports. For small refiners, the required information varies according to which small
refiner option the refiner plans to use. The following paragraphs summarize the supplementary
information required for small and GPA refiners.
Small Refiners
In the highway diesel fuel regulations, a small refiner is defined as a refiner who 1)
processes highway diesel fuel from crude oil; 2) employs no more than 1,500 people, based on
the average number of employees for all pay periods for 1999; and, 3) has an average crude oil
capacity less than or equal to 155,000 barrels per calendar day (bpcd).
The highway diesel final rule provided three alternative compliance options for refiners
that qualify for small refiner status: 1) 500 ppm sulfur option, 2) small refiner credit option, and
3) diesel/gasoline compliance date option. A description of the additional reporting
requirements for each of these options follows.
500 ppm Sulfur Option
The 500 ppm sulfur option allows an approved small refiner to continue to produce and
sell highway diesel fuel meeting the 500 ppm sulfur standard through May 31, 2010, provided
that the refiner supplies information showing that sufficient alternate sources of 15 ppm sulfur
highway diesel fuel will exist in the marketing area(s) that the refiner serves.
The pre-compliance report for a small refiner planning to use this option must make a
showing that sufficient sources of 15 ppm sulfur highway diesel fuel will likely exist in the area.
If after 2004 the sources of 15 ppm sulfur highway diesel fuel decrease, the pre-compliance
reports for 2005 must identify this change and must include a supplementary showing that the
sources of 15 ppm sulfur highway diesel fuel are still sufficient.
Small Refiner Credit Option
Under the small refiner credit option, an approved small refiner that chooses to produce
15 ppm sulfur highway diesel fuel prior to June 1, 2010, may generate and sell credits under the
TCO. Since small refiners have no requirement to produce 15 ppm sulfur highway diesel fuel
prior to June 1, 2010, any fuel that they produce at or below the 15 ppm sulfur standard will
qualify for credits under this option. (Additionally, the small refiner could then sell its
remaining highway diesel fuel under the 500 ppm sulfur option described above.)
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I. Pre-compliance Report Requirements
The pre-compliance reporting requirements for small refiners choosing this option are the
same as those for the 500 ppm sulfur option (that is, if the small refiner is also producing 500
ppm sulfur highway diesel fuel), with the additional requirement that the refiner must also report
on any credits it expects to generate and sell.
Diesel/Gasoline Compliance Date Option
Under the diesel/gasoline compliance date option, approved small refiners that are also
subject to the Tier 2/Gasoline Sulfur program (40 CFR Part 80, Subpart H) may extend the
duration of their applicable interim gasoline sulfur standards by three years (until January 1,
2011), provided that all of the highway diesel fuel that they produce meets the 15 ppm sulfur
standard as of June 1, 2006.
Pre-compliance reports from any small refiners expecting to use this option must provide
information showing that diesel desulfurization plans are on track for compliance with the 15
ppm sulfur standard by June 1, 2006. In addition to the information required above for all
refiners regarding the expansion of desulfurization capacity, the pre-compliance reports for small
refiners expecting to use this option need to reasonably show that the refiner will be in a position
by June 1, 2006 to produce 95C percent its highway diesel fuel at the 15 ppm sulfur standard.
Further, the refiner must show that its total highway diesel fuel production will be at least 85
percent of its highway diesel fuel baseline volume.
GPA Refiners
The GPA refiner option under the Tier 2/Gasoline Sulfur program, allows such refiners to
extend the duration of their applicable interim gasoline sulfur standards by two years (until
January 1, 2009), provided that they produce all of their highway diesel fuel at the 15 ppm sulfur
standard beginning June 1, 2006.
Similar to the pre-compliance reports requirements for small refiners that choose to use
the diesel/gasoline compliance date option described above, pre-compliance reports from
refiners or importers expecting to use the GPA refiner option must provide information showing
that their diesel desulfurization plans are on track. In addition to the information about the
expansion of desulfurization capacity required above for all refiners, the pre-compliance reports
for prospective GPA refiners need to reasonably show that the refiner will be in a position by
June 1, 2006 to produce 95 percent of its highway diesel fuel that is compliant with the 15 ppm
0 In the nonroad diesel final rule, we changed the volume requirement (for small refiners and GPA refiners
choosing the diesel/gasoline compliance option) from 100 percent to 95 percent to account for the change in volume
determination from the point of production to the point of delivery. Consequently, refiners that were previously
required to produce 100 percent of their highway diesel fuel to the 15 ppm sulfur standard are now provided with an
allowance to deliver a small amount of 500 ppm sulfur diesel fuel to the next downstream party (e.g., pipeline).
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Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
sulfur standard and that its total highway diesel fuel production will be at least 85 percent of its
highway diesel fuel baseline volume.
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II. Summary Statistics - Nationwide Analysis
II. Summary Statistics
A. Nationwide Analysis
According to the Energy Information Administration (EIA), 160 refineries reported
producing either high or low sulfur distillate (or both) fuels in 2000. Of these
distillate-producing refineries, 115 produced highway-compliant diesel fuel (less than or equal to
500 ppm sulfur) in the year 2003.d This number includes data for four refinery/importers that are
located outside of the continental United States (i.e., in the U.S. Virgin Islands, Puerto Rico, and
Eastern Canada) whose production is targeted to the U.S. market. We received pre-compliance
reports or information for all of the 115 refineries that produced highway-compliant diesel fuel
in 2003.
In addition to the reports that we received from current highway diesel fuel producers, we
received reports from six refineries that plan to enter the market at some point before 2010. Of
these six refineries, four will be entering the market in 2006, one in 2007, and the last will be
entering the market in 2009.
The reported totals for all refineries and importers planning to produce highway diesel
during and after the first year of the TCO (2006) are presented and summarized in Tables 1 and
2, below. These tables show that for 2006, 110 refineries reported that they intend to produce an
estimated total volume of 2.8 million barrels per day (bbls/day)e of highway diesel fuel (15 ppm
sulfur + 500 ppm sulfur). Over 2.6 million bbls/day, or 95 percent of the national total, is
anticipated to be 15 ppm sulfur highway diesel fuel, with the remaining five percent meeting the
500 ppm sulfur highway diesel fuel standard. This projection is just slightly less than what was
projected in the refinery pre-compliance reports for 2003. In last year's reports, it was
anticipated that 111 refineries would produce 2.9 million bbls/day of total highway diesel fuel,
with 96 percent of that fuel meeting the 15 ppm sulfur standard.
d In our Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports, we reported 114
refineries producing highway diesel fuel in 2003. Subsequent to the publication of that report, we received a late
pre-compliance report from an additional refinery that had been producing highway diesel fuel in 2003. In this
report, the number of refineries for 2003 has been adjusted from 114 to 115 to reflect that late submission.
e Diesel fuel volume information was submitted in units of gallons per year pursuant to the pre-compliance
reporting requirements under § 80.594. Since the compliance periods in 2006 and 2010 are not full years, we
converted the reported values which were in units of gallons per year to equivalent barrels per calendar day to
compare the aggregated volumes and credits on an equal basis from 2006 through 2010. Volumes and credits were
converted from an annual basis to a daily basis by dividing by the number of days in each compliance period, and
then converted from gallons to barrels by dividing by 42 gallons/barrel. The aggregated volumes and credits for
2006 were divided by 214 days (the 2006 compliance period is from June 1, 2006 through December 31, 2006), and
the aggregated volumes and credits for 2010 were divided by 151 days (the 2010 compliance period is from January
1, 2010 through May 31, 2010).
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Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
Over the duration of the TCO, refineries plan to generate approximately 1.7 million
bbls/day of credits. They have plans to use over 264 thousand credits. The remainder of the
credits would be available to respond to any unplanned compliance difficulties.
The following sections discuss this information in more detail.
1. Number of Refineries and Importers
In the highway diesel final rule, we evaluated compliance costs for refiners to produce 15
ppm sulfur highway diesel fuel under two scenarios: 1) all current producers of highway diesel
fuel continue to do so, and 2) some refineries increase production of highway diesel fuel while
some refineries shift out of the highway diesel fuel market due to relatively high desulfurization
costs. To be conservative, our cost projections for the highway diesel final rule were based on
the first scenario. However, we also performed a sensitivity analysis based on the second
scenario. Under this scenario, some refineries that currently produce relatively small volumes of
highway diesel fuel would face relatively high costs per gallon to desulfurize a given volume of
diesel fuel. At the same time, other refineries that currently produce no (or a relatively small
volume of) highway diesel fuel could convert their diesel production from high sulfur (i.e.,
greater than 500 ppm sulfur) down to 15 ppm sulfur at a relatively low cost. Consequently, in
our sensitivity analysis we projected that a number of refineries would shift into or significantly
expand their presence in the highway diesel fuel market. The pre-compliance reports appear to
be supporting this projection.
As shown in Table 1, below, 110 refineries reported that they intend to produce highway
diesel fuel in 2006 (this is down one refinery from the 111 refineries that were projected in the
2003 pre-compliance reports). It is anticipated that four refineries will enter the highway diesel
fuel market and nine will shift out of the highway diesel fuel market in 2006; for an overall
decrease in the number of refineries, but an overall increase in volume, as shown in Table 2.
Of the nine refineries that anticipate shifting out of the market, one refinery reported that
it intends to transport and desulfurize their fuel at another location. As such, its highway diesel
production will not be lost from the market. An additional refinery, the Shell Bakersfield
refinery, is being shut down due to declining crude oil supplies for the refinery.2 Five refineries
noted that they are studying options on whether or not to desulfurize their higher sulfur fuel to 15
ppm. The remaining two refineries did not state their intentions for desulfurization, though it is
likely that these refineries will shift into the nonroad diesel fuel market.
While some refineries may be shifting out of the highway diesel fuel market, others are
planning to shift into the market. The pre-compliance reports project that some refineries will
shift into the market during the TCO (four in 2006 and two more by 2010), resulting in a total of
114 refineries that will be producing highway diesel fuel in 2010. Though small refiners have
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II. Summary Statistics - Nationwide Analysis
the option to delay desulfurization until the year 2010, the reports indicate that currently only
five refineries owned by small refiners plan to utilize this option.
Approximately two-thirds of the reporting refineries are planning to increase production
of highway diesel fuel in 2006 compared to their 2000 production (based on EIA), and one-third
of refineries are planning to decrease production.
Table 1.
U.S. Aggregated Report Information
Highway Diesel Fuel Refinery Statistics 2006-2010
Year
# refineries producing highway diesel fuel
# refineries at 100% 15 ppm
# refineries at 100% 500 ppm
# refineries with 15/500 ppm mix
# refineries increasing production (vs. 2003)
# refineries shifting into the highway market
# refineries decreasing production (vs. 2003)
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
2003
115
115
2006
110
87
12
11
76
4
43
9
57
6
2007
112
89
12
11
81
5
39
8
58
5
2008
112
88
12
12
80
5
40
8
58
5
2009
113
91
11
11
80
6
41
8
60
4
2010
114
97
9
8
86
6
35
7
3
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Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
ft, ft-
2006 2007 2008
Year
2009 2010
| Increasing Production | Decreasing Production
Figure 1. Number of Refineries Increasing or Decreasing Production
Relative to the Year 2003
2. Production Versus Consumption
Table 2, below, shows the projected total production of highway diesel fuel for 2006
through 2010. The pre-compliance reports project that approximately 2.8 million bbls/day of
highway diesel fuel will be produced in 2006. This volume increases to just over 3.0 million
bbls/day for 2010. These volume projections are likely conservative given the fact that not all
imported highway diesel fuel has been accounted for due to lack of reporting from spot market
importers. We estimate that approximately two percent of the total highway diesel fuel supply is
currently unaccounted for based on the pre-compliance information received to date/
f In 2000, approximately 2.6 million bbls/day of highway-compliant (less than or equal to 500 ppm sulfur)
diesel fuel were supplied in the U.S. Of that total supply, imports accounted for 134 thousand bbls/day or 5.2
percent. The refineries located outside of the U.S. from which we received pre-compliance reports produced
approximately 76 thousand bbls/day, or 57 percent of the total volume of highway-compliant diesel fuel that was
imported in 2000 and about three percent of the total volume of highway-compliant diesel fuel that was supplied in
the U. S. in 2000. Therefore, approximately 43 percent of imports or two percent of the total supply of highway
(continued...)
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II. Summary Statistics - Nationwide Analysis
For 2006, on a volume basis, the 76 refineries that anticipate increasing their production
of highway diesel fuel reported a cumulative increase in their highway diesel fuel production
volume of approximately 699 thousand bbls/day, and the 43 refineries planning to decrease
production of highway diesel fuel reported a cumulative decrease in their highway diesel fuel
production volume of over 466 thousand bbls/day. This results in a projected net increase of 233
thousand bbls/day of highway diesel fuel produced in 2006. As shown in Figure 2, this growth
continues into the future, reaching a projected net increase of 544 thousand bbls/day in 2010.
•5!
ffj
« ^
5S
3
1,000,000!
800,000
600,000
400,000
200,000
0
-200,000
-400,000
-600,000
2006
2007
2008
Year
2009
2010
| Volume increase | Volume decrease fj Net volume change (bbls/day) vs. 2000 I
Figure 2. Nationwide Highway Diesel Fuel Volume Change vs. 2000
f(...continued)
diesel fuel is currently unaccounted for based on the pre-compliance information received to date.
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Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
Table 2.
U.S. Aggregated Report Information
Highway Diesel Fuel Volume and Credits 2006-2010g
Year
Total 1 5 ppm, bbls/day
Total 500 ppm, bbls/day
Total 15 + 500 ppm, bbls/day
Net volume change vs. 2000 bbls/day
% change from 2000 highway volume
% 500 of total 15+500 ppm
Credit generation, bbls/day
Credit usage, bbls/day
2006
2,637,120
140,928
2,778,048
232,544
9.1
5.1
415,245
68,985
2007
2,730,429
144,764
2,875,193
329,689
13.0
5.0
420,006
67,008
2008
2,767,278
146,604
2,913,882
368,377
14.5
5.0
424,627
67,019
2009
2,808,308
113,780
2,922,087
376,583
14.8
3.9
433,476
41,088
2010
3,022,236
67,311
3,089,547
544,043
21.4
2.2
20,225
While the pre-compliance reports and this summary report are focused on projected
highway diesel fuel production values, EIA's Annual Energy Outlook (AEO) reports projected
energy consumption values by sector and source in quadrillion British Thermal Units (Btu) per
year. In AEO 2004,3 consumption values were projected for distillate fuel in the transportation
sector for the years 2005 and 2010. We assumed a linear growth rate from 2005 until 2010 to
estimate values for 2006 through 2009. We then converted these values to bbls/day by dividing
by 138,700 Btu/gal4 and 365 days per year. Results of this analysis are shown in Table 3, below.
The resulting EIA-based consumption projections are compared against the pre-compliance
report production projections in Table 3 and Figure 3, below. As shown below, planned total
highway diesel fuel production appears to be in line with, or slightly above, projected demand.
Hence, it appears that the refining industry as a whole is adequately planning for projected
highway diesel demand through 2010.
g The base year for the highway diesel fuel refinery statistics is 2003 as shown in Table 1, above.
However, consistent with the Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports, the
base year for the highway diesel fuel volume statistics is 2000, as shown in Table 2, above, because refinery
distillate production data were not yet available to the Agency for calendar year 2003 at the time of publication of
this report.
10
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II. Summary Statistics - Nationwide Analysis
Table 3.
Projected Production of Highway Diesel Fuel vs. Estimated Demand
Year
2000
2006
2007
2008
2009
2010
2004 Total Reported Production
(000 bbls/day)
2,560
2,778
2,875
2,914
2,922
3,090
Estimated Demand
2004 AEO
(000 bbls/day)
2,711
2,788
2,864
2,941
3,017
3,500,000
3,000,000
I
"-> ^ 2,500,000
^J "^
^ ^ 2,000,000
| |
1« | 1,500,000
® | 1,000,000
S "g
•3 I
^ ^ 500,000
0
^v
1
2000 2006 2007 2008 2009 2010
Year
500 ppm sulfur
15 ppm sulfur
AEO 2004 estimated
demand, bbls/day
a ted
Figure 3. Projected U.S. Diesel Fuel Production and Demand, 2006-2010
11
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Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
3. Availability of 15 ppm sulfur Highway Diesel Fuel
The pre-compliance reports show that 15 ppm sulfur diesel fuel will be widely available.
As shown in Figure 4, of the 110 refineries planning on producing highway diesel fuel in 2006,
87 refineries will be producing 100 percent 15 ppm highway diesel fuel. Another 11 plan to
produce a mix of 15 and 500 ppm fuel, and three refineries will be using credits until May 31,
2010 to meet the standard. Only 12 are planning on producing exclusively 500 ppm fuel. Upon
analyzing the data, we found that all 12 of these refineries are in markets where 15 ppm fuel will
be readily available from other sources. As a result, they should not create any 15 ppm
availability problems.
As shown in Figure 5, on a volume basis, it is anticipated that 95 percent of the volume
of highway diesel fuel that will be produced in 2006 will meet the 15 ppm sulfur standard which
is virtually identical to the volume predicted in the 2003 pre-compliance reports.
80-
70-
8
'§ 60-
1" 50~
^ 40-
"I 30-
a
^ 20-
10-
0
100% 500 ppm Mkof 15 and 500 100% 15 ppm
ppm
Type of Highway Diesel Fuel
02003 reports ^2004 reports
Figure 4. Number of Refineries Producing Highway Diesel Fuel in 2006
12
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II. Summary Statistics - Nationwide Analysis
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1
O
sz orio/
53 ZUyo
BH
rf)/
(r/o
1 1
%15ppm %500ppm
D 2003 reports • 2004 reports
Figure 5. Highway Diesel Fuel Grades by Percent of Production Volume, 2006
In the highway diesel final rule, we projected that 15 ppm sulfur highway diesel fuel
would be available nationwide with 80 percent of the highway diesel fuel market converted to
the 15 ppm sulfur level. With 95 percent of the market projected to be 15 ppm sulfur highway
diesel fuel, we can have even greater confidence in the fuel's nationwide availability.
4. Projected Credit Generation and Use
Given that the majority of highway diesel fuel is anticipated to meet the 15 ppm sulfur
standard, a large credit volume is expected within each PADD, as shown in Table 4. This large
credit volume will help to accommodate off-spec distillate material and will also provide a
supply "safety valve" by allowing for an additional volume of 500 ppm sulfur highway diesel
fuel without violating the TCO requirements. In 2006 a total credit generation of 415 thousand
bbls/day is expected to be generated, while approximately 69 thousand bbls/day are expected to
be used. The projected volume of credits used decreases to 20 thousand bbls/day by 2010. Over
13
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
the course of the TCO, credit generation (1,693,354) continues to far exceed credit use
(264,327).
Table 4.
Projected Volume of Credits (bbls/day)
Generated and Used by PADD, 2006-2010
Credits (bbls/day)
Generated
Used
Net
PADD1
211,353
0
211,353
PADD 2
429,101
(27,617)
401,484
PADD 3
959,731
(216,483)
743,246
PADD 4
22,455
0
22,455
PADD 5
70,716
0
70,716
Total US
1,693,354
(264,327)
1,429,029
At this point in time, it is too early to reach any definite conclusions regarding the extent
to which refineries will use credits for compliance purposes or the extent to which they will
make the credits that they generate available for purchase by other refineries. This information
will become clearer with time as the program's implementation date becomes closer. However,
from the reported data that we received, a total of six refineries anticipate that they will be using
credits in 2006 to meet the standards. This number decreases to three refineries by 2010.
14
-------
II. Summary Statistics - Nationwide Analysis
5. Project Timing
In addition to providing highway diesel fuel volume and credit projections, refineries
must also include information outlining both their timeline for compliance with the 15 ppm
sulfur standard and their engineering plans (e.g., design and construction) in their pre-
compliance reports. The 2003 pre-compliance reports indicated that most companies were in the
planning stage and expected to make final decisions before the first quarter of 2004.
For this year's pre-compliance reports, we requested that refineries report more specific
information to us on the status of their highway diesel fuel compliance plans. We provided
refineries with the following five stages on which to report: 1) strategic planning, 2) planning
and front-end engineering, 3) detailed engineering and permitting, 4) procurement and
construction, and 5) commissioning and start-up. As this new reporting requirement was not
requested until May (via the nonroad diesel final rule), not all refineries were able to report their
data according to these five stages.
Of the 104 refineries that reported some information on their project timing, nearly 80
percent reported that they have completed the strategic planning stage, while the remaining few
were still in this stage at the time of reporting.
As with the strategic planning stage, the majority of the refineries reported that they had
either completed the planning and front-end engineering stage or would be doing so in the very
near future (third or fourth quarter of 2004). Various reasons were reported for the remaining
refineries that had not yet completed this stage, such as: no additional work would be needed at
the refinery (already producing 15 ppm sulfur diesel fuel), the refinery will be importing 15 ppm
sulfur diesel fuel, or the refinery will only be producing high sulfur (over 500 ppm) diesel fuel.
Of the refineries that reported information for the detailed engineering and permitting
stage, roughly half are in the midst of this stage and will likely be finished by early 2005. For
the 25 refineries that reported information on permits, most had submitted their permit
applications at the time of reporting. Roughly half of these permits are pending approval. The
remaining refineries reported that they had either received their approvals, or, in the case of four
refineries, had not yet submitted their permit applications.
The majority of the refineries that reported procurement and construction dates projected
that this stage would be complete by the first quarter of 2006. Some of these refineries reported
that they would be done earlier in 2005 (and three refineries are already producing 15 ppm sulfur
highway diesel fuel). A few refineries reported that they would be completing this stage after
the June 2006 deadline, as they will either be using the Small Refiner Delay option or credits to
comply.
Finally, with respect to the commissioning and start-up stage, Figure 6 shows projected
15
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
start-up dates by quarter. Three refineries are already producing 15 ppm and another nine
currently have operational desulfurization units that are capable of producing 15 ppm sulfur
highway diesel fuel. Another 11 refineries anticipate having their desulfurization units up and
running before January 2006. Figure 6 also shows the breakdown of these early refineries by
PADD. As a result, in many places 15 ppm sulfur diesel fuel will be available early to prove out
the distribution system, as well as supply fuel to retrofit fleets.
80 -,
•£ 70-
8i
•e, 60-
^ 50-
30-
20-
10-
0
S
s
• PADD 1
QPADD2
QPADD 3
•PADD4
• PADD 5
Date
Figure 6. Projected Start-up Dates for Producing 15 ppm Highway Diesel Fuel11
6. Revamped Versus Grassroots Projects
In the final highway diesel rule, we projected that, in order to meet the 15 ppm sulfur
standard, refiners would use similar hydrotreating technology to that which is currently being
used to meet the 500 ppm sulfur standard. In doing so, refiners would either need to install new
h While some refineries reported their projected start-up date on a monthly basis, others reported on a
quarterly basis. For those that reported on a quarterly basis, we assumed the month that would correspond with the
end of the quarter to be conservative.
16
-------
II. Summary Statistics - Nationwide Analysis
hydrotreating equipment or revamp their current hydrotreaters/desulfurization equipment.
Seventy-nine refineries reported that they would either be revamping existing equipment
or constructing new facilities, 50 (73 percent) refineries reported plans for revamping existing
equipment, 19 (24 percent) refineries reported that they would be installing new equipment, and
10 (13 percent) refineries reported they would be doing both. This is roughly in line with the
projections that we made in the highway diesel final rule, and also the anticipated plans that
refiners reported last year. In their 2003 pre-compliance reports, 75 percent reported anticipated
plans for revamping existing equipment, 15 percent were anticipating installing a new unit, and
10 percent reported that they would be doing both.
Twelve refineries reported they either did not need to install new desulfurization capacity
or revamp existing desulfurization units, including two refineries that plan to transport part of
their distillate to other refineries for desulfurization. Another six refineries have that they are
still evaluating options and another 14 refineries are currently unsure of their future
desulfurization plans. Some of these refineries are owned by small refiners, some are
anticipating using credits to comply, some refineries expect to refine their high-sulfur diesel fuel
at other facilities, and others reported that they would not be producing 15 ppm sulfur fuel. The
remaining 21 refineries are still in the process of finalizing their plans.
7. Small and GPA Refiner Options
Small Refiners
As discussed in greater detail above, the highway diesel fuel regulations contain three
options which provide qualified small refiners with additional flexibilities to the TCO. Option
A, the 500 ppm Sulfur Option, allows a refinery owned by an approved small refiner to delay
production of 15 ppm sulfur fuel until the end of the TCO (May 2010). This option would
enable a refinery to continue to produce all of its highway diesel fuel at the 500 ppm sulfur
standard during the TCO years, provided the refiner shows in its pre-compliance report that
adequate supplies of 15 ppm sulfur highway diesel fuel will be available in the refinery's
marketing area. Option A was chosen by six refineries. Based on the reports received from
these refineries, it is expected that their total production for 2006 will be five thousand bbls/day
of 500 ppm highway diesel fuel.
Option B, the Small Refiner Credit Option, allows a small refiner to generate credits for
any 'early' (since small refiners have until 2010 to comply with the 15 ppm standards under the
highway diesel rule) volume of 15 ppm sulfur highway diesel fuel produced. This option was
chosen by six refineries. Refineries using this option will likely have a mix of 500 ppm and 15
ppm highway diesel fuel in 2006. Based on reported data, it is anticipated that in 2006 the six
17
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
refineries choosing this option will produce a total of 33 thousand bbls/day, of which 15 ppm
sulfur fuel is 96 percent of the total production volume.
Lastly, option C, the Diesel/Gasoline Compliance Date Option, allows a refinery owned
by a small refiner the ability to delay its compliance date for the Tier 2 gasoline sulfur standards
for up to three years if the refinery produces 95 percent of its highway diesel fuel (above a
minimum volume limit tied to the refinery's baseline volume) at the 15 ppm sulfur standard by
June 1, 2006. Nine refineries have chosen this option. These refineries reported that they expect
to produce 99 thousand bbls/day of 15 ppm sulfur highway diesel fuel in 2006.
The volumes reported by refineries regarding the small refiner options are shown in
Table 5 below.
Table 5.
Intended Small Refiner Compliance Options by Number of Refineries and
Highway Diesel Fuel Production Capacity
Option
A.
B.
C.
Description
500 ppm sulfur Option
Credit Option
Diesel/Gasoline Compliance Date Option
Total
Number of
Refineries
6
9
6
21
2006 Highway Diesel Fuel
Production Capacity
(000 bbls/day)
5
33
99
138
GPA Refiners
The highway diesel fuel regulations also contain an option that allows a GPA refinery to
delay its compliance date for the final Tier 2 gasoline sulfur standards by two years provided that
the refinery produces 95 percent of its highway diesel fuel (above a minimum volume threshold
tied to the refinery's baseline volume) at the 15 ppm sulfur standard by June 1, 2006. Twelve of
the 35 GPA refineries reported that they would be using this option with an anticipated
production volume in 2006 of approximately 92 thousand bbls/day.
18
-------
II. Summary Statistics - PADD Analysis
B. PADD Analysis
The following discussion presents information specific to each PADD. Tables 6 through
9 below show the reported number of refineries and anticipated highway diesel fuel volumes for
each PADD for 2006 and 2010. A total of four refineries will be shifting into the highway diesel
fuel market in 2006, and an additional two will shift into the market by the end of the TCO. At
the start of the TCO in 2006, over 415 thousand bbls/day of credits will be generated, though
only six refineries anticipate that they will need to use those credits.
As shown in the tables, a decrease in production (relative to the year 2000) is projected
for PADD 1 (from slightly over 10 percent in 2006 to less than two percent in 2010), and PADD
4 (less than one percent), and increases are projected in all of the other PADDs. Data from Table
32 of EIA's Petroleum Supply Annual for 2000-2003 show that PADDs 2 and 3 have historically
transferred fuel to PADD 1 in relatively large quantities such that inter-PADD transfers should
be able to offset the decrease in PADD 1. Similarly, the slight decrease that is predicted for
PADD 4 in 2010, should be able to be offset by inter-PADD transfers as well.
More detailed information by PADD is shown in Tables 10 through 19, below.
19
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
Table 6.
Projected Number of Highway Diesel Fuel Refineries by PADD for 2006
PADD
# refineries producing highway diesel fuel
# refineries at 100% 15 ppm
# refineries at 100% 500 ppm
# refineries with 15/500 ppm mix
# refineries increasing production (vs. EIA 2003)
# refineries shifting into the highway market
# refineries decreasing production (vs. EIA 2003)
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
1
11
9
0
2
7
0
6
2
10
0
2
23
17
3
3
19
1
6
2
13
1
3
39
30
6
3
25
0
17
3
25
5
4
15
12
2
1
8
1
7
0
2
0
5
22
19
1
2
17
2
7
2
7
0
Total U.S.
110
87
12
11
76
4
43
9
57
6
Table 7.
Projected Volumes of Highway Diesel Fuel by PADD for 2006
PADD
Total 1 5 ppm (bbls/day)
Total 500 ppm (bbls/day)
Total 15 + 500 ppm (bbls/day)
Net volume change vs. 2000 (bbls/day)
% change from 2000 highway volume
% 500 of total 15+500 ppm
Credit generation (bbls/day)
Credit usage (bbls/day)
1"
268,454
1,097
269,551
-30,951
-10.3
0.4
52,120
0
2
679,160
38,768
717,928
63,791
9.8
5.4
105,870
6,905
3
1,163,014
88,139
1,251,153
132,604
11.9
7.0
234,885
62,081
4
117,981
3,247
121,228
354
0.3
2.7
5,830
0
5
408,510
9,677
418,187
66,745
19.0
2.3
16,540
0
Total U.S.
2,637,120
140,928
2,778,048
232,544
9.1
5.1
415,245
68,985
* The change that is projected for PADD 1 will be offset by imports and inter-PADD transfers. Historically, PADDs
2 and 3 have transferred fuel to PADD 1 in relatively large quantities.
20
-------
II. Summary Statistics - PADD Analysis
1 f\0 000
140 000
"^s 1 90 000
* 1 00 000
•*
t**
80 000
^ 5U,UUU
§
a f.f\ noo
o
^, 40 000
%)
a
*H 90 000
^^
%>
us
sj n
•S u
Si
in nnn
40 000
1
i
2
3 4
PADD
5
Figure 7. Highway Diesel Fuel Production Change 2006 vs. 2000 (by PADD)
21
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
Table 8.
Projected Number of Highway Diesel Fuel Refineries by PADD for 2010
PADD
# refineries producing highway diesel fuel
# refineries at 100% 15 ppm
# refineries at 100% 500 ppm
# refineries with 15/500 ppm mix
# refineries increasing production (vs. 2003)
# refineries shifting into the highway market
# refineries decreasing production (vs. 2003)
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
1
12
10
0
2
8
1
6
2
2
25
19
3
3
22
1
3
0
3
39
33
4
2
28
0
14
3
4
15
14
1
0
8
1
7
0
5
23
21
1
1
20
3
5
2
Total U.S.
114
97
9
8
86
6
35
7
0
1
2
0
0
3
Table 9.
Projected Volume of Highway Diesel Fuel by PADD for 2010
PADD
Total 1 5 ppm (bbls/day)
Total 500 ppm (bbls/day)
Total 15 + 500 ppm (bbls/day)
Net volume change vs. 2000 (bbls/day)
% change from 2000 highway volume
% 500 of total 15+500 ppm
Credit generation (bbls/day)
Credit usage (bbls/day)
1"
293,706
1,167
294,874
-5,629
-1.9
0.4
0
0
2
803,955
38,894
842,849
188,712
28.8
4.6
0
6,954
3
1,382,321
24,641
1,406,962
288,413
25.8
1.8
0
13,272
4
119,269
1,249
120,518
-356
-0.3
1.0
0
0
5
422,985
1,360
424,345
72,903
20.7
0.3
0
0
Total U.S.
3,022,236
67,311
3,089,547
544,043
21.4
2.2
0
20,225
* The change that is projected for PADD 1 will be offset by imports and inter-PADD transfers. Historically, PADDs
2 and 3 have transferred fuel to PADD 1 in relatively large quantities.
22
-------
II. Summary Statistics - PADD Analysis
Qfinmn
1 2^m
^ 9on mn
* iso mo
1 ^'ooo
%
1
1234
PADD
5
Figure 8. Highway Diesel Fuel Production Change 2010 vs. 2000 (by PADD)
23
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
1. PADD1
Number of Refineries
Reported totals for all PADD 1 refineries and importers are summarized in Tables 10 and
11, below. These tables show that for the first year of the TCO (2006), 11 refineries projected
the production of a volume of over 269 thousand bbls/day total (15 ppm sulfur + 500 ppm sulfur)
highway diesel fuel. This projection is down slightly from the numbers reported in the 2003 pre-
compliance reports of 12 refineries producing an estimated 285 thousand bbls/day of highway
diesel fuel. More specifically, nine refineries reported that they intend to produce 100 percent of
their highway diesel fuel with 15 ppm or less of sulfur in 2006, and no refineries intend to
produce 100 percent of their highway diesel fuel at the 500 ppm sulfur level. Two refineries
reported that they intend to produce a mix of 15 ppm and 500 ppm sulfur highway diesel fuel.
Seven refineries reported that they intend to produce more highway diesel fuel than they did in
2000, while six refineries intend to produce less highway diesel fuel than they did in 2000. Four
refineries intend to shift out of the highway diesel fuel market and one refinery intends to enter
the highway diesel fuel market in 2010.
Highway Diesel Fuel Production1
As shown in Table 10, the seven refineries planning to produce more highway diesel fuel
than in 2000 reported a cumulative increase in their highway diesel fuel production volume of
approximately 79 thousand bbls/day, and the six refineries planning to produce less highway
diesel fuel than in 2000 reported a cumulative decrease in their highway diesel fuel production
volume of approximately 110 thousand bbls/day. This results in a projected net decrease of
approximately 31 thousand bbls/day for 2006. However, in 2010, the projected net reduction in
the volume of highway diesel fuel produced decreases to less than six thousand bbls/day.
While these results indicate that there will be a reduction in the production of highway
diesel fuel in PADD 1, these reductions are not of great concern given the fact that the overall
1 As described above, the base volume of highway diesel fuel for the year 2000 (as shown in Table 11) that
we for comparisons is slightly higher than the volume used in the Summary and Analysis of the Highway Diesel
Fuel 2003 Pre-compliance Reports. One PADD 1 refinery submitted a pre-compliance report at such a time that it
was not feasible to include its data in the 2003 pre-compliance report summary. Thus, we have included this data in
today's Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports.
24
-------
II. Summary Statistics - PADD Analysis
decline in net fuel volume (relative to 2000 volumes) decreases throughout the duration of the
TCO, and the volume increases in PADDs 2 and 3, which historically transport diesel fuel to
PADD 1, are much larger.
Availability of 15 ppm Sulfur Highway Diesel Fuel
As shown below in Figure 10, in 2006 more than 268 thousand bbls/day, or 99 percent of
the PADD 1 total, are anticipated to be 15 ppm sulfur highway diesel fuel, and the remaining one
thousand bbls/day are anticipated to be 500 ppm sulfur highway diesel fuel. The projections for
2010 also show that the amount of 15 ppm sulfur highway diesel fuel continues to be 99 percent
of the total highway diesel fuel production for PADD 1.
Credit Generation and Use
In 2006 for PADD 1, 52 thousand bbls/day credits are anticipated to be generated, while
no credits are anticipated to be used.
Table 10.
PADD 1 Highway Diesel Fuel Refinery Statistics 2006-2010
Year
# refineries producing highway diesel fuel
# refineries at 100% 15 ppm
# refineries at 100% 500 ppm
# refineries with 15/500 ppm mix
# refineries increasing production (vs. 2003)
# refineries shifting into the highway market
# refineries decreasing production (vs. 2003)
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
# refineries that were not able to provide volume data
2003
13
13
2006
11
9
0
2
7
0
6
2
10
0
2
2007
11
9
0
2
7
0
6
2
10
0
2
2008
11
8
0
3
7
0
6
2
10
0
2
2009
12
9
0
3
8
1
6
2
11
0
2
2010
12
10
0
2
8
1
6
2
0
2
25
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
Table 11.
PADD 1 Highway Diesel Fuel Volume and Credit Statistics 2006-2010*
Year
Total 1 5 ppm (bbls/day)
Total 500 ppm (bbls/day)
Total 15 + 500 ppm (bbls/day)
Net volume change vs. 2000 (bbls/day)
% change from 2000 highway volume
% 500 of total 15 + 500 ppm
Credit generation (bbls/day)
Credit usage (bbls/day)
2000
297,903
297,903
100.0
2006
268,454
1,097
269,551
-30,951
-10.3
0.4
52,120
0
2007
268,186
1,159
269,345
-31,157
-10.4
0.4
52,014
0
2008
272,180
2,815
274,995
-25,508
-8.5
1.0
51,488
0
2009
293,397
2,815
296,212
-4,291
-1.4
1.0
55,731
0
2010
293,706
1,167
294,874
-5,629
-1.9
0.4
0
* The change that is projected for PADD 1 will be offset by imports and inter-PADD transfers. Historically, PADDs
2 and 3 have transferred fuel to PADD 1 in relatively large quantities.
26
-------
II. Summary Statistics - PADD Analysis
150,000
100,000
50,000
0
-50,000
-100,000
-150,000
2006 2007 2008 2009 2010
Year
Volume Increase Q] Volume Decrease Q Net Volume Change
Figure 9. PADD 1 Highway Diesel Fuel Volume Change vs. 2000
27
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
350,000
t
^ 300,000
250,000
200,000
150000
| 100,000
t
£ 50,000
0
2000 2006 2007 2008 2009 2010
Year
15 ppm sulfur [] 500 ppm sulfur
Figure 10. PADD 1 Projected Highway Diesel Fuel Production, 2006-2010
28
-------
II. Summary Statistics - PADD Analysis
2. PADD 2
Number of Refineries
The reported totals for all PADD 2 refineries are summarized in Tables 12 and 13, below.
These tables show that for 2006, the first year of the TCO, 23 refineries reported that they intend
to produce an estimated volume of approximately 718 thousand bbls/day total (15 ppm sulfur +
500 ppm sulfur) highway diesel fuel. This projection is slightly down from the 739 thousand
bbls/day that refiners estimated in the 2003 pre-compliance reports. In the 2004 pre-compliance
reports 17 refineries reported that they intend to produce 100 percent of their highway diesel fuel
with 15 ppm or less of sulfur. Additionally, three refineries intend to produce 100 percent of
their highway diesel fuel at the 500 ppm sulfur level, and three refineries intend to produce a mix
of 15 ppm sulfur and 500 ppm sulfur highway diesel fuel. Nineteen refineries reported that they
intend to produce more highway diesel fuel than they did in 2000, including one refinery that
produced no highway diesel fuel in 2000. Six refineries reported that they intend to produce less
highway diesel fuel than they did in 2000, including one refinery that intends to temporarily shift
out of the highway diesel fuel market. This is consistent with the projections in the 2003 pre-
compliance reports.
In 2010, the last year of the TCO, the one refinery that produced highway diesel fuel in
2000 but will be shifting out of the highway market in 2006 expects to shift back into the
highway diesel fuel market with all of its highway diesel fuel production meeting the 15 ppm
sulfur standard.
Highway Diesel Fuel Production
As shown in Figure 11, below, the 19 refineries planning to produce more highway diesel
fuel in 2006 than they did in 2000 reported a cumulative increase in their highway diesel fuel
production volume of over 136 thousand bbls/day, and the five refineries planning to produce
less highway diesel fuel than they did in 2000 reported a cumulative decrease in their highway
diesel fuel production volume of approximately 72 thousand bbls/day. This results in a net
increase of nearly 64 thousand bbls/day of highway diesel fuel production. In 2010, the net
increase rises to approximately 188 thousand bbls/day.
29
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
Availability of 15 ppm Sulfur Highway Diesel Fuel
As shown below in Table 13, 679 thousand bbls/day, or 95 percent of the PADD 2 total,
are anticipated to be 15 ppm sulfur highway diesel fuel in 2006. The remaining five percent
(almost 39 thousand bbls/day) is anticipated to be 500 ppm sulfur highway diesel fuel. Though
the projected volume of total highway diesel fuel for 2006 is less than the amount anticipated in
the 2003 pre-compliance reports, the projected volume increases during the TCO. In 2010, it is
projected that over 842 thousand bbls/day will be produced, which is greater than the 818
thousand bbls/day volume that was projected in last year's pre-compliance reports.
Projected Credit Generation and Use
In 2006 for PADD 2, nearly 106 thousand bbls/day of credits are anticipated to be
generated while approximately seven thousand bbls/day of credits are expected to be used. This
will yield a net generation of 99 thousand bbls/day of credits.
Table 12.
PADD 2 Highway Diesel Fuel Refinery Statistics 2006-2010
Year
# refineries producing highway diesel fuel
# refineries at 100% 15 ppm
# refineries at 100% 500 ppm
# refineries with 15/500 ppm mix
# refineries increasing production (vs. 2003)
# refineries shifting into the highway market
# refineries decreasing production (vs. 2003)
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
2003
24
24
2006
23
17
3
3
19
1
6
2
13
1
2007
24
18
3
3
20
1
5
1
13
1
2008
24
18
3
3
20
1
5
1
13
1
2009
24
18
3
3
20
1
5
1
13
1
2010
25
19
3
3
22
1
3
0
1
30
-------
II. Summary Statistics - PADD Analysis
Table 13.
PADD 2 Highway Diesel Fuel Volume and Credit Statistics 2006-2010
Year
Total 1 5 ppm (bbls/day)
Total 500 ppm (bbls/day)
Total 15 + 500 ppm (bbls/day)
Net volume change vs. 2000 (bbls/day)
% change from 2000 highway volume
% 500 of total 15 + 500 ppm
Credit generation (bbls/day)
Credit usage (bbls/day)
2000
654,137
654,137
100.0
2006
679,160
38,768
717,928
63,791
9.8
5.4
105,870
6,905
2007
735,075
38,768
773,843
119,706
18.3
5.0
108,174
6,904
2008
729,093
38,778
767,871
113,734
17.4
5.1
106,882
6,904
2009
734,578
38,524
773,102
118,965
18.2
5.0
108,174
6,904
2010
803,955
38,894
842,849
188,712
28.8
4.6
6,954
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
.&
-50,000
100,000
2006 2007
2008
Year
2009 2010
[] Volume Increase [] Volume Decrease [] Net Volume Change
Figure 11. PADD 2 Highway Diesel Fuel Volume Change vs. 2000
32
-------
II. Summary Statistics - PADD Analysis
15
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
2000 2006 2007 2008 2009 2010
Year
15 ppm sulfijr Q 500 ppm sulfijr
Figure 12. PADD 2 Projected Highway Diesel Fuel Production, 2006-2010
33
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
3. PADD 3
Number of Refineries
Reported totals for all PADD 3 refineries are summarized in Tables 14 and 15, below.
These tables show that in 2006, the first year of the TCO, 39 refineries reported that they intend
to produce an estimated volume of over 1.2 million bbls/day total (15 ppm sulfur + 500 ppm
sulfur) highway diesel fuel. Specifically, 30 refineries (up from the 29 refineries reported in
2003) reported that they intend to produce 100 percent of their highway diesel fuel with 15 ppm
or less of sulfur. Also, six refineries intend to produce 100 percent of their highway diesel fuel
at the 500 ppm sulfur level, and three refineries intend to produce a mix of 15 ppm sulfur and
500 ppm sulfur highway diesel fuel. It was reported that 25 refineries intend to produce more
highway diesel fuel in 2006 than they did in 2000, this is up from the 23 refineries that reported
an expected increase in the 2003 pre-compliance reports. In the 2003 reports, one refinery that
produced no highway diesel fuel in 2000 indicated its intention to enter the highway market;
however, this year's reports show that there will not be any refineries entering the highway
market during the TCO. Seventeen refineries intend to produce less highway diesel fuel than
they did in 2000, including three refineries that intend to shift out of the highway diesel fuel
market.
Highway Diesel Fuel Production
As shown in Figure 13, below, the 25 refineries planning to produce more highway diesel
fuel than they did in 2000 reported a cumulative increase in their highway diesel fuel production
volume of approximately 370 thousand bbls/day, and the 17 refineries planning to produce less
highway diesel fuel than they did in 2000 reported a cumulative decrease in their highway diesel
fuel production volume of approximately 237 thousand bbls/day. This results in a net increase of
132 thousand bbls/day of highway diesel fuel production. In 2010, the net increase is
approximately 189 thousand bbls/day.
Availability of 15 ppm Sulfur Highway Diesel Fuel
Table 15 shows that in 2006 over 1.1 million bbls/day, or 93 percent of the PADD 3 total,
are anticipated to be 15 ppm sulfur highway diesel fuel, the remaining percentage (88 thousand
bbls/day) is anticipated to be 500 ppm sulfur highway diesel fuel.
34
-------
II. Summary Statistics - PADD Analysis
Credit Generation and Use
In 2006, credit generation is anticipated to be approximately 235 thousand bbls/day, and
only approximately 62 thousand bbls/day are anticipated to be used; yielding a net credit
generation of almost 173 thousand bbls/day.
Table 14.
PADD 3 Highway Diesel Fuel Refinery Statistics 2006-2010
Year
# refineries producing highway diesel fuel
# refineries at 100% 15 ppm
# refineries at 100% 500 ppm
# refineries with 15/500 ppm mix
# refineries increasing production (vs. 2003)
# refineries shifting into the highway market
# refineries decreasing production (vs. 2003)
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
2003
42
42
2006
39
30
6
3
25
0
17
3
25
5
2007
39
30
6
3
26
0
16
3
25
4
2008
39
30
6
3
26
0
16
3
25
4
2009
39
31
5
3
24
0
18
3
26
3
2010
39
33
4
2
28
0
14
3
2
35
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
Table 15.
PADD 3 Highway Diesel Fuel Volume and Credit Statistics 2006-2010
Year
Total 1 5 ppm (bbls/day)
Total 500 ppm (bbls/day)
Total 15 + 500 ppm (bbls/day)
Net volume change vs. 2000 (bbls/day)
% change from 2000 highway volume
% 500 of total 15 + 500 ppm
Credit generation (bbls/day)
Credit usage (bbls/day)
2000
1,118,549
1,118,549
100.0
2006
1,163,014
88,139
1,251,153
132,604
11.9
7.0
234,885
62,081
2007
1,193,122
91,931
1,285,053
166,504
14.9
7.2
236,102
60,104
2008
1,225,061
91,945
1,317,006
198,457
17.7
7.0
242,732
60,115
2009
1,242,437
59,531
1,301,968
183,419
16.4
4.6
246,012
34,184
2010
1,382,321
24,641
1,406,962
288,413
25.8
1.8
13,272
36
-------
II. Summary Statistics - PADD Analysis
if!
500,000
400,000
300,000
200,000
100,000
0
-100,000
-200,000
-300,000
2006 2007 2008 2009 2010
Year
Volume Increase | Volume Decrease Q| Net Volume Change
Figure 13. PADD 3 Highway Diesel Fuel Volume Change vs. 2000
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
1,600,000
1,400,000
1,200,000
--1,000,000
1 800,000
600,000
400,000
200,000
0
2000 2006 2007 2008 2009 2010
Year
15 ppm sulfur £\ 500 ppm sulfur
Figure 14. PADD 3 Projected Highway Diesel Fuel Production, 2006-2010
38
-------
II. Summary Statistics - PADD Analysis
4. PADD 4
Number of Refineries
Reported totals for all PADD 4 refineries are summarized in Tables 16 and 17, below.
These tables show that for the first year of the TCO (2006), 15 refineries reported that they
intend to produce an estimated volume of 121 thousand bbls/day total (15 ppm sulfur +500 ppm
sulfur) highway diesel fuel. The 2004 reports show that 12 refineries intend to produce 100
percent of their highway diesel fuel with 15 ppm or less of sulfur and one refinery intends to
produce a mix of 15 ppm sulfur and 500 ppm sulfur highway diesel fuel. Similar to the 2003
reports, two refineries still intend to produce 100 percent of their highway diesel fuel at the 500
ppm sulfur level. For 2006, eight refineries reported that they intend to produce more highway
diesel fuel than they did in 2000, including one refinery that produced no highway diesel fuel in
2000. Seven refineries intend to produce less highway diesel fuel than they did in 2000.
Highway Diesel Fuel Production
As shown in Figure 15, below, in 2006, the eight refineries planning to produce more
highway diesel fuel than they did in 2000 reported a cumulative increase in their highway diesel
fuel production volume of approximately 22 thousand bbls/day, and the seven refineries planning
to produce less highway diesel fuel than they did in 2000 reported a cumulative decrease in their
highway diesel fuel production volume of just over 21 thousand bbls/day. This results in
essentially no net change in production (a slight increase of approximately 350 bbls/day)
Projected production in PADD 4 remains essentially constant through 2010, as shown in Figure
16.
Availability of 15 ppm Sulfur Highway Diesel Fuel
As shown in Table 17, below, in 2006, approximately 118 thousand bbls/day, or 97
percent of the PADD 4 total, are anticipated to be 15 ppm sulfur highway diesel fuel. Though
the volume of highway diesel fuel is projected to decrease slightly in 2010, the percentage of
highway diesel fuel at the 15 ppm sulfur standard is expected to increase to 99 percent of the
total volume of highway diesel fuel produced in PADD 4.
39
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
Credit Generation and Use
The volume of credits generated in 2006 are anticipated to be approximately 5,830
bbls/day for PADD 4. As with the projections from 2003, no credits are anticipated to be used in
this PADD. Further, two refineries have indicated that they are planning to produce 100 percent
of their highway diesel at the 500 ppm sulfur level until 2010.
40
-------
II. Summary Statistics - PADD Analysis
Table 16.
PADD 4 Highway Diesel Fuel Refinery Statistics 2006-2010
Year
# refineries producing highway diesel fuel
# refineries at 100% 15 ppm
# refineries at 100% 500 ppm
# refineries with 15/500 ppm mix
# refineries increasing production (vs. 2003)
# refineries shifting into the highway market
# refineries decreasing production (vs. 2003)
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
2003
14
14
2006
15
12
2
1
8
1
7
0
2
0
2007
15
12
2
1
8
1
7
0
2
0
2008
15
12
2
1
8
1
7
0
2
0
2009
15
13
2
0
8
1
7
0
2
0
2010
15
14
1
0
8
1
7
0
0
Table 17.
PADD 4 Highway Diesel Fuel Volume and Credit Statistics 2006-2010
Year
Total 1 5 ppm (bbls/day)
Total 500 ppm (bbls/day)
Total 15 + 500 ppm (bbls/day)
Net volume change vs. 2000 (bbls/day)
% change from 2000 highway volume
% 500 of total 15 + 500 ppm
Credit generation (bbls/day)
Credit usage (bbls/day)
2000
120,874
120,874
100.0
2006
117,981
3,247
121,228
354
0.3
2.7
5,830
0
2007
116,856
3,232
120,087
-787
-0.7
2.7
5,537
0
2008
117,132
3,232
120,364
-510
-0.4
2.7
5,520
0
2009
116,657
3,197
119,854
-1,020
-0.8
2.7
5,568
0
2010
119,269
1,249
120,518
-356
-0.3
1.0
0
41
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Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
25,000
20,000
15,000
10,000
5,000
0
-5,000
-10,000
-15,000
-20,000
-25,000
2006 2007 2008 2009 2010
Year
O Volume Increase • Volume Decrease ONet Volume Change
Figure 15. PADD 4 Highway Diesel Fuel Volume Change vs. 2000
42
-------
II. Summary Statistics - PADD Analysis
140,00
t^ 120,00
I 100,00
>, ^ 80,00
^ ^
•^ ^ 60,00
5 40,00
Q>
1 20,00
•2
5>
-
r\
J
•
^
2000 2006 2007 2008 2009 2010
Year
1 1 5 ppm sulfur G 500 ppm sulfur
Figure 16. PADD 4 Projected Highway Diesel Fuel Production, 2006-2010
43
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Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
5. PADD 5j
Number of Refineries
Reported totals for all PADD 5 refineries are summarized in Tables 18 and 19, below.
These tables show that in 2006, 22 refineries reported that they intend to produce a total volume
of 418 thousand bbls/day of highway diesel fuel, 19 of which will be producing 100 percent of
their highway diesel fuel at the 15 ppm sulfur standard. Furthermore, in 2006, two refineries
expect to shift into the highway market, and one additional refinery will enter the market in
2007. In comparison, the 2003 pre-compliance reports only projected an increase of 351
thousand bbls/day with 16 refineries producing 100 percent of their highway diesel fuel at the 15
ppm sulfur standard. Only one refinery reported in its 2003 pre-compliance report that it would
be entering the highway diesel market in 2006.
Highway Diesel Fuel Production
Seventeen refineries reported that they intend to produce more highway diesel fuel for
2006 than they did in 2000, including the two refineries that will be shifting into the highway
diesel market in 2006. This will increase to 20 refineries increasing production over the duration
of the TCO. Seven refineries intend to produce less highway diesel fuel in 2006 than they did in
2000, including two refineries that intend to shift out of the highway diesel fuel market.
However, by 2010, only five refineries anticipate producing less highway diesel fuel than they
did in 2000.
As shown in Figure 17, below, the 17 refineries planning to increase their highway diesel
fuel production in 2006 reported a cumulative increase in their highway diesel fuel production
volume of approximately 92 thousand bbls/day, and the five refineries planning to produce less
highway diesel fuel in 2006 than they did in 2000 reported a cumulative decrease in their
highway diesel fuel production volume of 25 thousand bbls/day. This results in a net increase in
production of nearly 67 thousand bbls/day. In 2010, the net projected increase in production
rises to 72 thousand bbls/day.
3 While the Summary and Analysis of the 2003 pre-compliance reports did not include the six refineries
located in Alaska, we have included them in the analysis for 2004 Based on the pre-compliance reports that we
received, some refineries in Alaska are planning to produce some 15 ppm sulfur diesel fuel beginning in 2006.
Other refineries are still evaluating, but likely will elect to supply highway diesel fuel from refineries which may be
located outside of Alaska.
44
-------
II. Summary Statistics - PADD Analysis
Availability of 15 ppm Sulfur Highway Diesel Fuel
As shown in Table 19, below, in 2006, over 409 thousand bbls/day, or 98 percent of the
PADD 5 total, are anticipated to be 15 ppm sulfur highway diesel fuel. Only 10 thousand
bbls/day are expected to be 500 ppm sulfur highway diesel fuel. The percentage of highway
diesel fuel at the 15 ppm sulfur standard is expected to increase to over 99 percent of the total
volume of highway diesel fuel produced in PADD 5 in 2010. significant increase in projected
production of highway diesel fuel over the duration of the TCO.
Credit Generation and Use
The reports for PADD 5 projected that for 2006, credit generation will likely total
approximately 16 thousand bbls/day. On the other hand, no credits are expected to be used in
PADD 5 during the TCO.
45
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Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
Table 18.
PADD 5 Highway Diesel Fuel Refinery Statistics 2006-2010
Year
# refineries producing highway diesel fuel
# refineries at 100% 15 ppm
# refineries at 100% 500 ppm
# refineries with 15/500 ppm mix
# refineries increasing production (vs. 2003)
# refineries shifting into the highway market
# refineries decreasing production (vs. 2003)
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
2003
22
22
2006
22
19
1
2
17
2
7
2
7
0
2007
23
20
1
2
20
3
5
2
8
0
2008
23
20
1
2
19
3
6
2
8
0
2009
23
20
1
2
20
3
5
2
8
0
2010
23
21
1
1
20
3
5
2
0
Table 19.
PADD 5 Highway Diesel Fuel Volume and Credit Statistics 2006-2010
Year
Total 1 5 ppm (bbls/day)
Total 500 ppm (bbls/day)
Total 15 + 500 ppm (bbls/day)
Net volume change vs. 2000 (bbls/day)
% change from 2000 highway volume
% 500 of total 15 + 500 ppm
Credit generation (bbls/day)
Credit usage (bbls/day)
2000
351,442
351,442
100.0
2006
408,510
9,677
418,187
66,745
19.0
2.3
16,540
0
2007
417,190
9,674
426,864
75,422
21.5
2.3
18,179
0
2008
423,812
9,834
433,646
82,204
23.4
2.3
18,006
0
2009
421,239
9,713
430,951
79,509
22.6
2.3
17,991
0
2010
422,985
1,360
424,345
72,903
20.7
0.3
0
46
-------
II. Summary Statistics - PADD Analysis
SO
2006 2007 2008 2009 2010
Year
G Volume Increase | Volume Decrease ONet Volume Change
Figure 17. PADD 5 Highway Diesel Fuel Volume Change vs. 2000
47
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
500,00
1 450,00
•^ 400,00
| 350,00
^ ^ 300,00
« •§
£ 1 250,00
•^ ^j.
& ^ 200,00
sCj s — '
^ 150,00
| 100,00
| 50,00
ML
0 -,
o
\J
0
o
w
o
\J
o
\J
o
\J
o
\J
o
\J
o
\J
r>
-
" \ \ \ \ \
2000 2006 2007 2008 2009 2010
Year
n 1 5 ppm sulfur [] 500 ppm sulfur
Figure 18. PADD 5 Projected Highway Diesel Fuel Production, 2006-2010
48
-------
Appendix: List of Acronyms
Appendix: List of Acronyms
AEO
bbls/day
bpcd
EIA
EPA (or, "the Agency")
FR
GPA
PADD
ppm
TCO
Annual Energy Outlook
barrels per day
barrels per calendar day
Energy Information Administration
U.S. Environmental Protection Agency
Federal Register
Geographic Phase-in Area
Petroleum Administrative Districts for Defense
parts-pet •-million
Temporary Compliance Option
49
-------
Summary and Analysis of the Highway Diesel Fuel 2004 Pre-compliance Reports - September 2004
50
-------
References
References
1. Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports, U.S.
Environmental Protection Agency, EPA420-R-03-013, October 2003,
http ://www. epa.gov/otaq/regs/hd2007/420r03 013 .pdf.
2. Shell Bakersfield Refinery Closure Public Information Center
http://www.shellbakersfieldrefmery.com/
3. Energy Information Administration, Annual Energy Outlook 2003,
DOE/EIA-0383(2003), January 2003.
4. U. S. Department of Energy, Transportation Energy Data Book, 2002.
51
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