£EPA
United States
Environmental Protection
Agency
Air and Radiation
EPA420-R-03-013
October 2003
Summary and Analysis of the
Highway Diesel Fuel
2003 Pre-compliance Reports
Printed on Recycled Paper
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EPA420-R-03-013
October 2003
Summary and Analysis of the
Highway Diesel Fuel
2003 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 2006-10, is
required to submit to the U.S. Environmental Protection Agency (EPA or the Agency)
pre-compliance reports. These reports are due annually from June 2003 through 2005. They
must contain estimates of the volumes of 15 parts-per-million (ppm) sulfur highway diesel fuel
and 500 ppm sulfur 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.
We received pre-compliance reports and/or information for all refineries that produced
highway diesel fuel in the year 2000. In addition to the reports that we received from current
highway diesel fuel producers, we received reports from six refineries that did not produce
highway diesel fuel in 2000 but indicated that they would shift into the highway diesel fuel
market during the program's temporary compliance option (TCO) from June 2006 through May
2010.
We recognize that the highway diesel fuel 2003 pre-compliance reports reflect
preliminary information as most refineries which are currently in the planning stage are
expecting to make final decisions over the next several months. Our conclusions from these
reports are based on this preliminary information. Future reports that we release (i.e., our
summary and analysis of the pre-compliance reports for 2004 and 2005) will be based on the
pre-compliance reports that are submitted in 2004 and 2005 and will therefore reflect new or
updated information relative to the information that we received this year.
In general, the reports for 2003 indicate that 1) the industry is on target for complying
with the 15 ppm sulfur standard on time, 2) highway diesel fuel production will be sufficient to
meet demand, and 3) 15 ppm sulfur diesel fuel will be widely available nationwide.
Industry is On Target to Comply with the 15ppm Sulfur Standard On Time
While the reported information is preliminary, the results likely provide the clearest
snapshot of the highway diesel fuel market available at the present time. They represent the
assessment of those who have first hand knowledge of the unique situation faced by each
refinery. Furthermore, consistent with the expectations in the highway diesel fuel final rule1 and
EPA's 2002 Highway Diesel Progress Review,2 most companies are in the planning stage now
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Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
and expect to make final decisions before the first quarter of 2004. The reports also indicate that
the compliance flexibility provisions (small refiner options, GPA option, general hardship
provision) in the final rule will be used.
Highway Diesel Fuel Production Will Be Sufficient to Meet Demand
According to the reports, highway diesel fuel production will be sufficient in 2006 and
beyond as refiners' plans are in line with projected growth in highway diesel fuel consumption.
The pre-compliance reports project 2.9 million bbls/day (bbls/day) of highway diesel fuel
production for 2006. In comparison, the highway diesel final rule projected a highway diesel
fuel consumption of 2.6 million bbls/day for 2006, based on the Energy Information
Administrations (EIA) Annual Energy Outlook (AEO) 2000. Projected highway diesel fuel
consumption using EIA's AEO 2003 is around three million bbls/day. Based on this information,
we conclude that refiners appear to be planning for the increased growth projected for the future.
On a Petroleum Administrative Defense District (PADD) basis, increased production is projected
in PADDs 2, 3, and 5, while slight decreases are projected in PADDs 1 and 4. These decreases,
however, are dwarfed by the gains in PADDs 2, 3, and 5, and should be easy to offset through
inter-PADD diesel fuel shipments.
15 ppm Sulfur Highway Diesel Fuel Will Be Available Nationwide
Finally, the reports show that 15 ppm sulfur highway diesel fuel will be widely available.
On a volume basis, 96 percent of highway diesel fuel produced in 2006 is projected to meet the
15 ppm sulfur standard. On a refinery basis, over 90 percent of refineries/importers have stated
that they plan to produce at least some 15 ppm diesel fuel. Given that the majority of highway
diesel fuel is expected to meet the 15 ppm sulfur standard, a large credit volume is also expected.
This will help to accommodate off-spec material and will also provide a supply "safety valve" by
allowing refiners to produce additional 500 ppm highway diesel fuel, should this be necessary,
without violating the program requirements.
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Table of Contents
Table of Contents
Executive Summary 3
Table of Contents 5
List of Tables and Figures 6
I. Pre-compliance Report Requirements 9
II. Summary Statistics 13
A. Nationwide Analysis 13
1. Number of Refineries and Importers 14
2. Production Versus Consumption 16
3. Availability of 15 ppm sulfur Highway Diesel Fuel 21
4. Projected Credit Generation and Use 21
5. Project Timing 22
6. Revamped Versus Grassroots Projects 25
7. Small and GPA Refiner Options 25
B. PADD Analysis 27
1. PADD 1 32
2. PADD 2 37
3. PADD 3 42
4. PADD 4 46
5. PADD 5 51
Appendix: List of Acronyms 55
References 57
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Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
List of Tables and Figures
Table 1. U.S. Aggregated Report Information - Highway Diesel Fuel Refinery Statistics
2006-2010 15
Table 2. U.S. Aggregated Report Information - Highway Diesel Fuel Volume and Credits
2006-2010 17
Table 3. Reported Production of Highway Diesel Fuel vs. Estimated Demand 19
Table 4. Projected Volume of Credits Generated and Used by PADD during the TCO 22
Table 5. Number of Refineries by Engineering/Construction Progress 23
Table 6. Intended Small Refiner Compliance Options by Number of Refineries and Highway
Diesel Fuel Production Capacity 26
Table 7. Projected Number of Highway Diesel Fuel Refineries by PADD for 2006 28
Table 8. Projected Volumes of Highway Diesel Fuel by PADD for 2006 28
Table 9. Projected Number of Highway Diesel Fuel Refineries by PADD for 2010 30
Table 10. Projected Volume of Highway Diesel Fuel by PADD for 2010 30
Table 11. PADD 1 Highway Diesel Fuel Refinery Statistics 2006-2010 34
Table 12. PADD 1 Highway Diesel Fuel Volume and Credit Statistics 2006-2010 34
Table 13. PADD 2 Highway Diesel Fuel Refinery Statistics 2006-2010 38
Table 14. PADD 2 Highway Diesel Fuel Volume and Credit Statistics 2006-2010 38
Table 15. PADD 3 Highway Diesel Fuel Refinery Statistics 2006-2010 42
Table 16. PADD 3 Highway Diesel Fuel Volume and Credit Statistics 2006-2010 42
Table 17. PADD 4 Highway Diesel Fuel Refinery Statistics 2006-2010 47
Table 18. PADD 4 Highway Diesel Fuel Volume and Credit Statistics 2006-2010 47
Table 19. PADD 5 Highway Diesel Fuel Refinery Statistics 2006-2010 51
Table 20. PADD 5 Highway Diesel Fuel Volume and Credit Statistics 2006-2010 51
Figure 1. Percent of Refineries Increasing or Decreasing Highway Diesel Fuel Production
Relative to the Year 2003 16
Figure 2. Nationwide Highway Diesel Fuel Volume Change vs. 2000 18
Figure 3. Projected U.S. Diesel Fuel Production, 2006-2010 20
Figure 4. Projected Start-up Date for Producing 15 ppm Highway Diesel Fuel 24
Figure 5. Highway Diesel Fuel Volume Change 2006 vs. 2000 by PADD 29
Figure 6. Highway Diesel Fuel Volume Change 2010 vs. 2000 by PADD 31
Figure 7. PADD 1 Highway Diesel Fuel Volume Change vs. 2000 35
Figure 8. PADD 1 Projected Highway Diesel Fuel Production 2006-2010 36
Figure 9. PADD 2 Highway Diesel Fuel Volume Change vs. 2000 39
Figure 10. PADD 2 Projected Highway Diesel Fuel Production 2006-2010 40
Figure 11. PADD 3 Highway Diesel Fuel Volume Change vs. 2000 43
Figure 12. PADD 3 Projected Highway Diesel Fuel Production 2006-2010 44
Figure 13. PADD 4 Highway Diesel Fuel Volume Change vs. 2000 48
Figure 14. PADD 4 Projected Highway Diesel Fuel Production 2006-2010 49
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Table of Contents
Figure 15. PADD 5 Highway Diesel Fuel Volume Change vs. 2000 52
Figure 16. PADD 5 Projected Highway Diesel Fuel Production 2006-2010 53
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Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
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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 any refiner
or importer planning to produce or import highway diesel fuel in 2006 to submit annual
pre-compliance reports to the Agency. The purpose of these reports is to help facilitate the
market for credit trading under the highway diesel fuel program's temporary compliance option
(TCO)a. These reports, the first of which were due June 1, 2003,b 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, if
applicable, 500 ppm sulfur diesel fuel to be produced from crude oil in 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.
4. Information regarding engineering plans (e.g., design and construction), capital
commitments for making the necessary modifications to produce low sulfur
highway diesel fuel, the status of obtaining any necessary permits, and actual
construction progress.
We recognize that the highway diesel fuel 2003 pre-compliance reports reflect
preliminary information as most refineries which are currently in the planning stage are
expecting to make final decisions over the next several months. Our conclusions from these
reports are based on this preliminary information. Future reports that we release (i.e., our
Summary and Analysis of the Pre-compliance Reports for 2004 and 2005) will be based on the
pre-compliance reports that are submitted in 2004 and 2005 and will therefore reflect any new or
updated information relative to the information that we received this year.
In addition to the information required above 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.
a The TCO is described in the preamble to the 2007 highway diesel final rule at 66 FR 5065, January 18,
2001.
b Subsequent reports are due on June 1, 2004 and 2005. In our proposal for controlling the sulfur content
of nonroad, locomotive, and marine diesel fuel (68 FR 28328, May 23, 2003) we proposed to extend the annual pre-
compliance reporting requirement through 2010 (or until 15 ppm sulfur nonroad diesel fuel is produced, whichever is
later) to help facilitate the introduction of the nonroad diesel fuel standards.
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Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
Small Refiners
The highway diesel final rule provided three compliance options for qualifying small
refiners: 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 it reasonably ensures the existence of sufficient volumes of 15 ppm sulfur highway diesel
fuel in the marketing area(s) that it 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 2003 the sources of 15 ppm sulfur highway diesel fuel decrease, the pre-compliance
reports for 2004 and/or 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.
The pre-compliance reporting requirements for small refiners choosing this option are
identical to 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 also reports 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 they produce all of their highway diesel fuel at the 15 ppm sulfur standard
beginning 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
10
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I. Pre-compliance Report Requirements
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 100 percent of its highway diesel fuel compliant with the 15 ppm
sulfur standard and that its total highway diesel fuel production will be at least 85 percent of its
highway diesel fuel baseline volume.
GPA Refiners
Under the GPA refiner option, GPA refiners under the Tier 2/Gasoline Sulfur program
may 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.
Like the pre-compliance reports from small refiners that choose to use the diesel/gasoline
compliance date option described above, pre-compliance reports from any refiners or importers
expecting to use the GPA refiner option must provide information showing that 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 100 percent of its highway diesel fuel that is compliant with the 15 ppm 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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Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
12
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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.c Of these distillate-
producing refineries, 121 produced highway-compliant diesel fuel (less than or equal to 500 ppm
sulfur) in the year 2000. This number includes data for three refinery/importers that are located
outside of the United States. We received pre-compliance reports or information for all of the
121 refineries that produced highway-compliant diesel fuel in 2000d.
In addition to the reports that we received from current highway diesel fuel producers, we
received reports from five refineries that did not produce highway diesel fuel in 2000 but
indicated that they would beginning in 2006. One additional refinery that did not produce
highway diesel fuel in 2000 indicated that it would shift into the market in 2010.
Reported totals for all refineries and importers planning to produce highway diesel during
and after the first year of the TCO (2006) are summarized in Tables 1 and 2, below. These tables
show that in 2006, 111 refineries reported that they intend to produce an estimated total volume
of 2.9 million barrels per day (bbls/day)e of highway diesel fuel (15 ppm sulfur + 500 ppm
sulfur). Approximately 2.7 million bbls/day, or 96 percent of the national total, is anticipated to
be 15 ppm sulfur highway diesel fuel, with the remaining four percent meeting the 500 ppm
sulfur highway diesel fuel standard.
Over the duration of the TCO, approximately 23.9 billion-gallon credits are anticipated to
be generated, and approximately 1.5 billion-gallon credits (six percent of total credits generated)
are anticipated to be used for a net result of 22.3 billion-gallon credits generated. A total of 34
0 Includes those that produce both high (greater than 500 ppm sulfur) and low (less than or equal to 500
ppm sulfur) sulfur distillate fuel.
d We did not receive pre-compliance reports from any non-refiner importers. However, we have begun to
follow up with them to ensure more complete information on imported highway diesel fuel for next year's report.
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^arrel. 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 2003 Pre-compliance Reports - October 2003
refineries, which produced a total of 487 thousand bbls/day of highway diesel fuel in 2000, will
be unable to generate credits due to their status as a California, small, GPA or hardship refiner.
A more detailed discussion of these results follows.
1. Number of Refineries and Importers
In the final highway diesel rule, we evaluated compliance costs for producing 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 and some
refineries shift out of the highway diesel fuel market due to relatively high desulfurization costs.
Our cost projections for the highway diesel final rule were based on the first scenario to be
conservative. 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, 111 refineries reported that they intend to produce highway
diesel fuel in 2006. Of these 111 refineries, five are new to the highway diesel fuel market.
Between 2000 and 2003, seven refineries ceased producing highway diesel fuelf The pre-
compliance reports indicate that an additional eight refineries intend to shift out of the highway
diesel fuel market in 2006. However, two of these eight refineries are planning to transport
distillate to neighboring refineries for desulfurization, and two other refineries indicated they are
studying similar options. Based on information available to us, the remaining refineries that are
not intending to produce highway diesel fuel in 2006 are shifting to the off-highway diesel fuel
market. During the TCO, three more refineries are expected to shift into the highway diesel fuel
market to yield a total of 114 refineries producing highway diesel fuel in 2010. This is what we
expected and is consistent with our analysis for the highway diesel final ruleg.
Approximately 40 percent of refineries are planning to decrease production of highway
diesel fuel in 2006 whereas over 60 percent of refineries are planning to increase production (see
Figure 1, below). Specifically, 74 refineries reported that they intend to produce more highway
f Four of these refineries are shutdown, two are specialty product refineries that do not typically produce
motor vehicle fuels (including highway diesel fuel), and one refinery is considered a closely integrated facility with
another refinery in its company and therefore does not report as a separate refinery.
g Refer to Table V.C-22 (Costs Under Non-Highway Production Shift Scenario) of the Regulatory Impact
Analysis for the highway diesel final rule.
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II. Summary Statistics - Nationwide Analysis
diesel fuel than they did in 2000, including five refineries that produced no highway diesel fuel
in 2000h and 45 refineries intend to produce less highway diesel fuel than they did in 2000,
including eight refineries that intend to shift out of the highway diesel fuel market.
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
# refineries shifting into the highway market
# refineries decreasing production
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
2003
2006
2007
2008
2009
2010
111
81
10
20
74
5
45
8
54
7
111
83
9
19
77
5
42
8
54
6
112
85
9
18
77
5
42
7
55
6
112
86
9
17
77
5
42
7
551
6
114
92
8
14
83
6
37
6
h Based on refinery distillate production volumes (confidential business information) provided by the
Energy Information Administration (EIA).
15
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Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
a>
a.
2006
2007
2008
Year
2009
2010
I refineries increasing production n refineries decreasing production
Figure 1. Percent of Refineries Increasing or Decreasing Highway Diesel Fuel Production
Relative to the Year 2003
2. Production Versus Consumption
Table 2, below, shows the total projected production of highway diesel fuel for 2006
through 2010. The pre-compliance reports project 2.9 million bbls/day of highway diesel fuel
production for 2006. This volume increases to approximately 3.2 million bbls/day for 2010.
These volume projections are likely slightly conservative given that not all imported highway
diesel fuel has been accounted for due to the suspected under-reporting by 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 date1.
1 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
On a volume basis, the 74 refineries that are 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 708 thousand bbls/day, and the 45 refineries planning to produce less
highway diesel fuel than in 2000 reported a cumulative decrease in their highway diesel fuel
production volume of approximately 390 thousand bbls/day. This results in a projected net
increase of 318 thousand bbls/day of highway diesel fuel produced in 2006. This growth
continues into the future as shown in Figure 2, below.
Table 2. U.S. Aggregated Report Information - Highway Diesel Fuel Volume and Credits
2006-2010"
Yea-
total 15 ppm, bbls/day
total 500 ppm, bbls/day
15 + 500 ppm total, 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
2006
2007
2008
2009
2010
2,740,357 2,875,585
120,562 110,688
2,860,920 2,986,273
318,015 443,369
12.5
4.2
413,912
28,390
17.4
3.7
432,007
24,790
2,919,188
110,677
3,029,865
486,960
19.1
3.7
439,904
24,647
2,922,284
110,488
3,032,772
489,867
19.3
3.6
441,685
24,934
3,121,229
79,873
3,201,102
658,198
25.9
2.5
21,020
'(...continued)
diesel fuel is currently unaccounted for based on the pre-compliance information received to date.
J The base year for the highway diesel fuel refinery statistics is 2003 as shown in Table 1, above. However,
the base year for the highway diesel fuel volume and credit statistics is 2000 as shown in Table 2, above, because
refinery distillate production data are not yet available for calendar year 2003.
17
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Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
> 1
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Q) ~~
3 J2
U. £1
£1
Q) -
W -c
0) Q)
Q r
> °
II
O) "O
= 0)
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o
,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
-100,000
-200,000
-300,000
-400,000
-500,000
I volume increase
I volume decrease
I net volume change
2006 2007 2008 2009 2010
Year
Figure 2. Nationwide Highway Diesel Fuel Volume Change vs. 2000
Table A2 of the Energy Information Administration's (EIA) Annual Energy Outlook
(AEO) reports projected energy consumption values by sector and source in quadrillion British
Thermal Units (Btu) per year. In both the AEO 20003 and 20034, 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/gal5 and 365 days per year.
Results of this analysis are shown in Table 3, below.
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II. Summary Statistics - Nationwide Analysis
Table 3. Reported Production of Highway Diesel Fuel vs. Estimated Demand
Year
2000
2006
2007
2008
2009
2010
Total Reported
Production
(000 bbls/day)
2,560
2,863
2,986
3,030
3,032
3,203
Estimated Consumption
AEO 2000
(000 bbls/day)
2,622
2,644
2,666
2,687
2,709
Estimated Consumption
AEO 2003
(000 bbls/day)
2,916
3,019
3,123
3,226
3,330
Thus, based on the pre-compliance reports, it would appear that highway diesel fuel
production will be sufficient in 2006 and beyond as refiners' plans are roughly in line with
projected highway diesel fuel consumption. The highway diesel final rule projected a highway
diesel fuel consumption of 2.6 million bbls/day for 2006, based on the EIA's AEO 2000.
Projected highway diesel fuel consumption using more recent data from EIA's AEO 2003 is
around three million bbls/day. Based on this information, we conclude that refiners appear to be
planning for increased growth which is consistent with the more recent data.
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Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
2000
2006
2007
2008
2009
2010
Year
] 15 ppm sulfur n500 ppm sulfur
Figure 3. Projected U.S. Diesel Fuel Production, 2006-2010
20
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II. Summary Statistics - Nationwide Analysis
3. Availability of 15 ppm sulfur Highway Diesel Fuel
The pre-compliance reports show that 15 ppm sulfur diesel fuel will be widely available.
On a volume basis, 96 percent of highway diesel fuel produced in 2006 is projected to meet the
15 ppm sulfur standard. On a refinery basis, over 90 percent of refineries have stated that they
plan to produce some 15 ppm diesel fuel. Specifically for 2006, as shown in Table 1, above, 81
refineries reported that they intend to produce 100 percent of their highway diesel fuel with 15
ppm or less of sulfur, 10 refineries intend to produce 100 percent of their highway diesel fuel at
the 500 ppm sulfur level, and 20 refineries intend to produce a mix of 15 ppm sulfur and 500
ppm sulfur highway diesel fuel. Based on the consistency of the results across all PADDs as
discussed below, the restrictions placed in the highway diesel final rule on credit trading within
Petroleum Administrative Defense Districts (PADDs) appear to be having their desired impact.
All areas of the country will have 15 ppm sulfur highway diesel fuel available.
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 96 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.
Conversely, 500 ppm sulfur highway diesel fuel may have even less widespread availability than
the 40 percent of the country projected in the highway diesel final rule. Its main source of
distribution may be directly from refinery racks.
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.
21
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
Table 4. Projected Volume of Credits Generated and Used by PADDk during the TCO
Credits
(million gallons)
Generated
Used
Net
PADD1
2,928
(40)
2,889
PADD2
6,191
(435)
5,756
PADD3
14,166
(988)
13,177
PADD4
284
0
284
PADD5
545
(66)
479
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.
Nevertheless, preliminary information from the pre-compliance reports shows that six refineries
will be using credits generated by other refineries within their companies and within the same
PADD. The reports also show that one refinery is planning on purchasing credits. Most
refineries appear to be using credits as an internal insurance policy/safety valve should they need
to or want to produce an additional volume of 500 ppm sulfur highway diesel fuel during the
TCO. For example, credits could be used to produce additional volumes of 500 ppm sulfur fuel
during turnaround or upset situations as well as in response to changes in the market (e.g.,
increases in demand for highway diesel fuel).
5. Project Timing
In addition to highway diesel fuel volume and credit projections, the pre-compliance
reports must 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 2003 pre-compliance reports indicated that most companies are in the
planning stage now and expect to make final decisions before the first quarter of 2004. This
information is consistent with the expectations in the highway diesel final rule and EPA's 2002
Highway Diesel Progress Review. Consequently, it was not possible for the 2003 reports to
contain a substantial amount of information on specific engineering plans. What information
was reported on engineering, construction, and unit start-up dates is summarized below in Table
k Under the highway diesel fuel program, credits may only be used in the PADD in which they were
generated. Additional limitations on credit generation and use apply in PADD 5 - Alaska and Hawaii are separate
credit trading regions under the highway diesel fuel program. In addition, refineries located in states with a state-
approved 15 ppm sulfur highway diesel fuel program are not allowed to participate in the credit program (See 66 FR
5068, January 18, 2001, for more information). To protect confidential business information, data for refineries
located in Alaska and Hawaii was included in PADD 5 for the purposes of this report.
22
-------
II. Summary Statistics - Nationwide Analysis
5 and Figure 4. We expect that additional information on engineering plans and timing will be
included in the 2004 pre-compliance reports.
Table 5. Number of Refineries by Engineering/Construction Progress
Started by June 2003
Completed by June 2003
Engineering
33
2
Construction
5
1
As shown in Figure 4, below, many refiners appear to be staggering their start-up, which
should help to ease the transition to 15 ppm sulfur highway diesel fuel in 2006. Of the reports
that contained information on engineering, construction, and unit start-up progress, about 37
percent indicated that they will come online prior to June 1, 2006.
23
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
CO
CD
CD
.Q
E
28
2Q
24
22
20
18
16
14
^2
10
8
6
4
2
0
Figure 4. Projected Start-up Date for Producing 15 ppm Highway Diesel Fuel1
1 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.
24
-------
II. Summary Statistics - Nationwide Analysis
6. Revamped Versus Grassroots Projects
We stated in the highway diesel final rule that we expect refiners will meet the 15 ppm
sulfur standard using an extension of the same hydrotreating technology which is used today to
meet the 500 ppm sulfur standard. Meeting the new standard will generally require refiners to
install additional hydrotreating equipment. We projected that approximately 80 percent of
refineries would revamp additional hydrotreating capacity and other related equipment to their
existing desulfurization unit. However, we also projected that approximately 20 percent would
conclude that it would not be economical to add onto their existing unit and could instead build
an entirely new hydrotreater.
Given the preliminary nature of the 2003 reports, not all refineries were yet in a position
to provide sufficient detail in their reports on final decisions for refinery modifications,
nevertheless, forty-seven refineries submitted information in their pre-compliance reports on
whether they were planning to revamp existing equipment or install new equipment. Thirty-five
refineries (75 percent) indicated that they are planning to revamp existing equipment to comply
with the requirements of the highway diesel fuel program. Seven additional refineries (15
percent) reported that they are planning to install a new unit and five other refineries (10 percent)
stated that they are planning to revamp existing equipment as well as install new equipment.
The results of this sample appear to be consistent with our projections in the highway diesel final
rule.
7. Small and GPA Refiner Options
The highway diesel fuel regulations contain three options which provide qualified small
refiners with additional flexibilities to the TCO. Option A allows an approved small refiner's
refinery to produce all of its highway diesel fuel (up to a volume limit tied to the refinery's
highway diesel fuel baseline volume) at the 500 ppm sulfur level during the TCO years (June
2006 through May 2010), 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.
Six refineries with a total highway diesel fuel production capacity of approximately eight
thousand bbls/day (based on EIA data for 2000) have chosen option A. Option B allows a small
refiner to generate credits for any volume of 15 ppm sulfur highway diesel fuel produced. Five
refineries with a total highway diesel fuel production capacity of approximately 31 thousand
bbls/day (based on EIA data for 2000) have chosen option B. Finally, option C allows a small
refiner's refinery to extend its compliance date for the Tier 2 gasoline sulfur standards by three
years in exchange for producing all 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 with a total highway diesel fuel production capacity of approximately 99 thousand
bbls/day (based on EIA data for 2000) have chosen option C.
25
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
Table 6. 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
5
9
20
Highway Diesel Fuel
Production Capacity
(000 bbls/day)
8
31
99
138
The highway diesel fuel regulations also contain an option that allows a GPA refinery to
extend its compliance date for the final Tier 2 gasoline sulfur standards by two years in exchange
for producing all 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. Eleven of the 35
GPA refineries with a total highway diesel fuel production volume of approximately 88 thousand
bbls/day (based on EIA data for 2000) have chosen this option.
26
-------
II. Summary Statistics - PADD Analysis
B. PADD Analysis
Tables 7 through 10 below show the projected numbers of refineries and volumes of
highway diesel fuel produced in each PADD for the first and last years of the TCO. In each
PADD, one refinery is projected to shift into the highway diesel fuel market in 2006 and an
additional refinery is projected to shift into the highway diesel fuel market in PADD 3 by 2010.
One refinery in PADDs 2 and 3 returns to the highway diesel fuel market between 2006 and
2010. This is what we expected and is consistent with our analysis for the highway diesel final
rule.
Relative to the year 2000, on a PADD basis, increases in total highway diesel fuel
production are projected in PADDs 2, 3, and 5, while slight decreases are projected in PADDs 1
and 4. However, as shown in Tables 8 and 10 and Figures 5 and 6, below, these decreases are
dwarfed by the gains in PADDs 2, 3, and 5, and should be easy to offset through inter-PADD
diesel fuel shipments. Overall, a net increase of 318 thousand bbls/day of highway diesel fuel
production is expected in 2006 and an increase of 658 thousand bbls/day is anticipated in 2010.
In all PADDs, 15 ppm sulfur highway diesel fuel will dominate the highway market, ranging
from 94 percent of the highway diesel fuel in PADD 4 to 97 percent in PADD 1. Additional
information on each PADD is described in the following sections.
27
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
Table 7. 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
# refineries shifting into the highway market
# refineries decreasing production
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
1
12
10
0
2
7
1
6
1
9
1
2
24
16
3
5
19
1
6
1
14
2
3
39
29
4
6
23
1
20
4
25
3
4
15
10
2
3
8
1
7
0
2
0
5
21
16
1
4
17
1
6
2
4
1
total U.S.
111
81
10
20
74
5
45
8
54
7
Table 8. Projected Volumes of Highway Diesel Fuel by PADD for 2006
PADD
total 15 ppm, bbls/day
total 500 ppm, bbls/day
15 + 500 ppm total, 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
275,993
9,107
285,100
-12,803
-4.3
3.2
48,949
4,411
2
695,585
43,877
739,461
85,324
13.0
5.9
109,582
7,016
3
1,278,380
44,777
1,323,157
204,608
18.3
3.4
240,725
15,605
4
110,767
7,027
117,795
-3,079
-2.5
6.0
4,972
0
5
379,633
15,774
395,407
43,965
12.5
4.0
9,684
1,357
total U.S.
2,740,357
120,562
2,860,920
318,015
12.5
4.2
413,912
28,390
28
-------
II. Summary Statistics - PADD Analysis
220 000 -,
200 000 J
180 000
c 160 000
140 000
120 000
0) -^
i? « inn ooo
v 80 000
(/) (-1 <->v_/, v_/v_/v_/
*" S
Q~ *-* 60 000
>
re 40 000
= 20 000
S 0
-20 000
-40 000
I I
1
2
3 4
PADD
5
Figure 5. Highway Diesel Fuel Volume Change 2006 vs. 2000 by PADD
29
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
Table 9. 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
# refineries shifting into the highway market
# refineries decreasing production
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
1
12
10
0
2
7
1
6
1
0
2
25
17
3
5
20
1
5
0
2
3
41
34
3
4
30
2
14
3
2
4
15
14
1
0
8
1
7
0
0
5
21
17
1
3
18
1
5
2
1
total U.S.
114
92
8
14
83
6
37
6
5
Table 10. Projected Volume of Highway Diesel Fuel by PADD for 2010
PADD
total 15 ppm, bbls/day
total 500 ppm, bbls/day
15 + 500 ppm total, 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
293,332
2,360
295,692
-2,211
-0.7
0.8
0
0
2
778,886
39,156
818,042
163,905
25.1
4.8
0
7,228
3
1,530,579
29,934
1,560,513
441,964
39.5
1.9
0
13,272
4
119,807
1,249
121,056
183
0.2
1.0
0
0
5
398,624
7,175
405,799
54,357
15.5
1.8
0
520
total U.S.
3,121,229
79,873
3,201,102
658,198
25.9
2.5
0
21,020
30
-------
II. Summary Statistics - PADD Analysis
500 000 -,
450 000
400 000
3 350 000
"o
> 300 ooo
0 -r;
,3 re 250 000
flj 200 000
2. n
Q *""* 150 000
^^
| 100 000
£
.? en nnn
o
-50 000
1
2
3 4
PADD
5
Figure 6. Highway Diesel Fuel Volume Change 2010 vs. 2000 by PADD
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
1. PADD1
Number of Refineries
Reported totals for all PADD 1 refineries are summarized in Tables 11 and 12, below.
These tables show that for the first year of the TCO (2006), 12 refineries reported that they
intend to produce an estimated volume of 285 thousand bbls/day total (15 ppm sulfur + 500 ppm
sulfur) highway diesel fuel. Specifically, 10 refineries reported that they intend to produce 100
percent of their highway diesel fuel with 15 ppm or less of sulfur, no refineries intend to produce
100 percent of their highway diesel fuel at the 500 ppm sulfur level, and two refineries intend to
produce a mix of 15 ppm sulfur and 500 ppm sulfur highway diesel fuel. Seven 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 intend to produce less
highway diesel fuel than they did in 2000, including one refinery that intends to shift out of the
highway diesel fuel market. No further change in either the number of refineries producing
highway diesel fuel or the number of refineries increasing or decreasing highway diesel fuel
production is expected for 2010.
Highway Diesel Fuel Production
As shown in Figure 7, below, 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 75 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 87 thousand bbls/day. This results in a net decrease of 13
thousand bbls/day. In 2010, this net reduction decreases to approximately two 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 pipeline connections
between PADDs 1 and 3. In the year 2000, PADD 3 supplied approximately 473 thousand
bbls/day of highway diesel fuel (or 42 percent of its highway diesel fuel production)"16 to PADD
1. The projected production decrease of 13 thousand bbls/day in PADD 1 represents only three
percent of the amount of highway diesel fuel that was shipped from PADD 3 to PADD 1 in
m This is consistent with the historical trend. Based on data from EIA's Petroleum Supply Annual, 44
percent of the highway diesel fuel produced in PADD 3 was shipped to PADD 1, on average, from 1995 through
2002.
32
-------
II. Summary Statistics - PADD Analysis
2000. Furthermore, from 1995 to 2002, the amount of highway diesel fuel shipped from PADD
3 to PADD 1 increased by 28 percent. Finally, the net production increase in PADD 3, which is
projected to be 205 thousand bbls/day, dwarfs the net decrease of 13 thousand bbls/day which is
projected in PADD 1. Therefore, PADD 3 appears to be fully capable of addressing the small
reported decrease in PADD 1 production.
In addition to the movement of highway diesel fuel from PADD 3 to PADD 1, some
highway diesel fuel is supplied to PADD 1 via imports. Of the 134 thousand bbls/day of
highway-compliant diesel fuel that were imported into the U.S. in 2000, PADD 1 received 81
percent or 109 thousand bbls/day7. As stated above, the refineries located outside of the U.S.
from which we received pre-compliance reports produced approximately 76 thousand bbls/day
of highway diesel fuel for the U.S. in the year 2000. This volume represents 57 percent of the
total volume of highway-compliant diesel fuel that was imported in 2000 and about three
percent of highway diesel fuel supply in 2000. Assuming that the remaining imports, which
represent 43 percent of total imports or two percent of the total supply of highway diesel fuel in
2000 (58 thousand bbls/day) remain constant, and assuming PADD 1 received 81 percent, it
would have an additional volume of 47 thousand bbls/day of highway diesel fuel. This volume
far outweighs the projected 13 thousand bbls/day decrease in production.
Availability of 15 ppm Sulfur Highway Diesel Fuel
As shown in Figure 8, below, in 2006, approximately 276 thousand bbls/day, or 97
percent of the PADD 1 total, are anticipated to be 15 ppm sulfur highway diesel fuel, and the
remaining nine thousand bbls/day, or three percent of the PADD 1 total, are anticipated to be 500
ppm sulfur highway diesel fuel. In 2010, the amount of 15 ppm sulfur highway diesel fuel
increases to 99 percent of the total highway diesel fuel production for PADD 1.
Credit Generation and Use
In 2006, approximately 440 million-gallon credits are anticipated to be generated, and
only 40 million-gallon credits are anticipated to be used to yield a net amount of 400 million-
gallon credits generated.
33
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
Table 11. 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
# refineries shifting into the highway market
# refineries decreasing production
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
2003
12
2006
12
10
0
2
7
1
6
1
9
1
2007
2008
12
10
0
2
7
1
6
1
10
0
12
10
0
2
7
1
6
1
10
0
2009
12
10
0
2
7
1
6
1
10
0
2010
12
10
0
2
7
1
6
1
Table 12. PADD 1 Highway Diesel Fuel Volume and Credit Statistics 2006-2010
Year
total 15 ppm, bbls/day
total 500 ppm, bbls/day
15 + 500 ppm total, 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
2006
2007
2008
2009
2010
275,993 292,472 292,523 292,472 293,332
297,903 9,107 2,342 2,342 2,342 2,360
297,903 285,100 294,814 294,864 294,814 295,692
-12,803
-4.3
3.2
48,949
4,411
-3,089
-1.0
0.8
53,245
0
-3,038
-1.0
0.8
53,245
0
34
-------
II. Summary Statistics - PADD Analysis
u. w
o
o.
t
0)
c
re
6
o
>
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
-10,000
-20,000
-30,000
40,000
-50,000
-60,000
-70,000
-80,000
-90,000
-100,000
n\£ilume increase
I volume decrease
rjnet volume change
2006
2007
2008
Year
2009
2010
Figure 7. PADD 1 Highway Diesel Fuel Volume Change vs. 2000
35
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
^o nnn
300 000
0> -£
3 m
LL -8 9^n nnn
0> ^
W .Q
.2 £1
o ' ' 9nn nnn
§ ^
s o
9- i^n nnn
sH
o y mn nnn
1?
O Q.
> en nnn
n
2000 2006
2007 2008
Year
15 ppm sulfur 500 ppm sulfur
2009 2010
Figure 8. PADD 1 Projected Highway Diesel Fuel Production 2006-2010
36
-------
II. Summary Statistics - PADD Analysis
2. PADD 2
Number of Refineries
Reported totals for all PADD 2 refineries and importers are summarized in Tables 13 and
14, below. These tables show that for 2006, the first year of the TCO, 24 refineries reported that
they intend to produce an estimated volume of 739 thousand bbls/day total (15 ppm sulfur + 500
ppm sulfur) highway diesel fuel. Specifically, 16 refineries reported that they intend to produce
100 percent of their highway diesel fuel with 15 ppm or less of sulfur, three refineries intend to
produce 100 percent of their highway diesel fuel at the 500 ppm sulfur level, and five 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. On the other hand, only six
refineries 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.
During 2010, the last year of the TCO, the one refinery that produced highway diesel fuel
in 2000 but shifted out of the highway market in 2006 shifts back into the highway diesel fuel
market with all of its highway diesel fuel production meeting the 15 ppm sulfur standard.
Production of Highway Diesel Fuel
As shown in Figure 9, below, the 19 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 127 thousand bbls/day, and the six 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 42 thousand bbls/day. This results in a net increase of
85 thousand bbls/day of highway diesel fuel production. In 2010, the net increase is
approximately 164 thousand bbls/day - almost double the net increase in production for 2006.
Availability of 15 ppm Sulfur Highway Diesel Fuel
As shown in Figure 10, below, in 2006, approximately 696 thousand bbls/day, or 94
percent of the PADD 2 total, are anticipated to be 15 ppm sulfur highway diesel fuel, and the
remaining 44 thousand bbls/day, or six percent of the PADD 2 total, are anticipated to be 500
ppm sulfur highway diesel fuel.
37
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
Projected Credits Generation and Use
In 2006, approximately 985 million-gallon credits are anticipated to be generated, and
only approximately 63 million-gallon credits are anticipated to be used to yield a net amount of
922 million-gallon credits generated.
Table 13. 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
# refineries shifting into the highway market
# refineries decreasing production
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
2003
2006
2007
2008
2009
2010
24
16
3
5
19
1
6
1
14
2
24
16
3
5
19
1
6
1
13
2
24
16
3
5
18
1
7
1
13
2
24
16
3
5
19
1
6
1
25
17
3
5
20
1
5
0
Table 14. PADD 2 Highway Diesel Fuel Volume and Credit Statistics 2006-2010
Year
total 15 ppm, bbls/day
total 500 ppm, bbls/day
15 + 500 ppm total, 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
2006
2007
2008
2009
2010
695,585 726,075
43,877 40,404
739,461 766,479
85,324
13.0
5.9
109,582
7,016
112,342
17.2
5.3
111,743
7,083
721,977
40,414
762,391
108,254
16.5
5.3
110,788
7,091
729,701
40,203
769,904
115,767
17.7
5.2
112,941
7,083
778,886
39,156
818,042
163,905
25.1
4.8
7,228
38
-------
II. Summary Statistics - PADD Analysis
n\£>lume increase
jMDlume decrease
rj net volume change
2006
2007
2008
Year
2009
2010
Figure 9. PADD 2 Highway Diesel Fuel Volume Change vs. 2000
39
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
900 000
800 000 -|
0 "> 700 000 -
t I
j}j J2 soo 000
s. Z
Q ~
> ~° 500 000
ro S
* 0
E. o. 400 000
E ^
*r ~O
O
-------
II. Summary Statistics - PADD Analysis
3. PADD 3
Number of Refineries
Reported totals for all PADD 3 refineries and importers are summarized in Tables 15 and
16, below. These tables show that for the first year of the TCO (2006), 39 refineries reported
that they intend to produce an estimated volume of 1.3 million bbls/day total (15 ppm sulfur +
500 ppm sulfur) highway diesel fuel. Specifically, 29 refineries reported that they intend to
produce 100 percent of their highway diesel fuel with 15 ppm or less of sulfur, four refineries
intend to produce 100 percent of their highway diesel fuel at the 500 ppm sulfur level, and six
refineries intend to produce a mix of 15 ppm sulfur and 500 ppm sulfur highway diesel fuel. In
2006, 23 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. Twenty refineries
intend to produce less highway diesel fuel than they did in 2000. This includes four refineries
that intend to shift out of the highway diesel fuel market. However, one of these four refineries
only shifts out of the market temporarily as it plans to shift back into it in 2008 and two of the
four refineries intend to transport diesel fuel to other refineries for desulfurization to 15 ppm
sulfur or less.
In 2010, the number of refineries producing highway diesel fuel increases by two as one
refinery shifts back into the market after temporarily shifting out of it in 2006 and one additional
refinery shifts into the highway diesel fuel market for the first time.
Highway Diesel Fuel Production
As shown in Figure 11, below, the 23 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 401 thousand bbls/day, and the 20 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 197 thousand bbls/day. This results in a net increase of
205 thousand bbls/day of highway diesel fuel production. In 2010, the net increase is
approximately 442 thousand bbls/day - more than double the net increase in production for
2006.
Availability of 15 ppm Sulfur Highway Diesel Fuel
As shown in Figure 12, below, in 2006, approximately 1.3 million bbls/day, or 97 percent
of the PADD 3 total, are anticipated to be 15 ppm sulfur highway diesel fuel, and the remaining
three percent is anticipated to be 500 ppm sulfur highway diesel fuel.
41
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
Credit Generation and Use
In 2006, approximately 2.2 billion-gallon credits are anticipated to be generated, and only
approximately 140 million-gallon credits are anticipated to be used to yield a net amount of
2,060 million-gallon credits generated.
Table 15. 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
# refineries shifting into the highway market
# refineries decreasing production
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
2003
2006
2007
2008
2009
2010
39
29
4
6
23
1
20
4
25
3
39
29
3
7
25
1
18
4
25
3
40
31
3
6
26
1
17
3
26
3
40
31
3
6
25
1
18
3
261
3
41
34
3
4
30
2
14
3
Table 16. PADD 3 Highway Diesel Fuel Volume and Credit Statistics 2006-2010
Year
total 15 ppm, bbls/day
total 500 ppm, bbls/day
15 + 500 ppm total, 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
2006
2007
2008
2009
2010
1,348,552
48,506
1,397,058
278,509
24.9
3.5
252,152
16,605
1,392,153
48,518
1,440,671
322,122
28.8
3.4
260,988
16,616
1,391,643
48,490
1,440,133
321,584
28.8
3.4
260,612|
16,605
1,530,579
29,934
1,560,513
441,964
39.5
1.9
13,272
42
-------
II. Summary Statistics - PADD Analysis
finn nnn -,
ouu,uuu
cnn nnn -
Q) OUU,UUU T
3 "D
^ -2 400,000 -
o o
*" Q. ^nn nnn
>. w ZUU,UUU
« g 5
s y *" 1 nn nnn
_£ 3 _Q IUU.UUU
^ o £, n
1 oi u
~ | -100,000
? 9nn nnn
C Q -ZUU,UUU
WJ -^
^ onn nnn
H
I
I
r
.
1
t
J
H
I
(J -OUU,UUU
2006 2007
"
"
b
H
r
b
1
"
^
-
L^-U-
2008
Year
2009
n volume increase
y volume decrease
n net volume change
2010
Figure 11. PADD 3 Highway Diesel Fuel Volume Change vs. 2000
43
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
o
It
1,700,000
1,600,000
1,500,000
1,400,000
1,300,000
1,200,000
1,100,000
1,000,000
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
115 ppm sulfur n 500 ppm sulfur
Figure 12. PADD 3 Projected Highway Diesel Fuel Production 2006-2010
44
-------
II. Summary Statistics - PADD Analysis
4. PADD 4
Number of Refineries
Reported totals for all PADD 4 refineries and importers are summarized in Tables 17 and
18, 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 118 thousand bbls/day total (15 ppm sulfur +
500 ppm sulfur) highway diesel fuel. Specifically, 10 refineries reported that they intend to
produce 100 percent of their highway diesel fuel with 15 ppm or less of sulfur, two 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. In
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 13, 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 approximately 25 thousand bbls/day. This results in a
net decrease in production of approximately three thousand bbls/day. After 2006, the net
production volume of highway diesel fuel relative to 2000 switches to slightly positive through
2010.
While these results indicate that there will be a reduction in the production of highway
diesel fuel in PADD 4 in 2006, this reduction is not of great concern given the movement of fuel
between PADDs 2 and 4. In the year 2000, PADD 2 supplied approximately 32 thousand
bbls/day of highway diesel fuel (or five percent of its highway diesel fuel production)"8 to PADD
4. The projected production decrease of three thousand bbls/day in PADD 4 represents only 10
percent of the amount of highway diesel fuel that was shipped from PADD 2 to PADD 4 in
n This is consistent with the historical trend. Based on data from EIA's Petroleum Supply Annual, 44
percent of the highway diesel fuel produced in PADD 3 was shipped to PADD 1, on average, from 1995 through
2002.
45
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
2000. In addition, the net production increase in PADD 2, which is projected to be 85 thousand
bbls/day, far outweighs the net decrease of three thousand bbls/day which is projected in PADD
4. Therefore, PADD 2 appears to be fully capable of addressing the small reported decrease in
PADD 4 production.
Availability of 15 ppm Sulfur Highway Diesel Fuel
As shown in Figure 13, below, in 2006, approximately 111 thousand bbls/day, or 94
percent of the PADD 4 total, are anticipated to be 15 ppm sulfur highway diesel fuel, and the
remaining seven thousand bbls/day, or six percent of the PADD 4 total, are anticipated to be 500
ppm sulfur highway diesel fuel. 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 highway diesel fuel
produced in PADD 4.
Credit Generation and Use
As shown in Figure 14, below, in 2006, approximately 45 million credits are anticipated
to be generated and no credits are anticipated to be used. Note that in 2006 two refineries have
indicated that they intend to produce all of their highway diesel at the 500 ppm sulfur level but
no credits are anticipated to be used. These refineries are owned by small refiners. Under the
500 ppm option, small refiners may continue producing all of their highway diesel fuel at the 500
ppm sulfur standard without be required to purchase credits to do so as other refiners are under
the TCO.
46
-------
II. Summary Statistics - PADD Analysis
Table 17. 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
# refineries shifting into the highway market
# refineries decreasing production
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
2003
2006
2007
2008
15
10
2
3
8
1
7
0
2
0
15
12
2
1
8
1
7
0
2
0
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
Table 18. PADD 4 Highway Diesel Fuel Volume and Credit Statistics 2006-2010
Year
total 15 ppm, bbls/day
total 500 ppm, bbls/day
15 + 500 ppm total, 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
110,767
7,027
117,795
-3,079
-2.5
6.0
4,972
0
2007
117,810
3,220
121,030
156
0.1
2.7
5,187
0
2008
118,305
3,222
121,527
654
0.5
2.7
5,192
0
2009
118,379
3,197
121,576
702
0.6
2.6
5,207
0
2010
119,807
1,249
121,056
183
0.2
1.0
0
47
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
0)
0)
§ o
3
O)
O
30,000
25,000
20,000
15,000
10,000
5,000
0
-5,000
-10,000
-15,000
-20,000
-25,000
-30,000
| volume increase
| volume decrease
| net volume change
2006 2007 2008 2009 2010
Year
Figure 13. PADD 4 Highway Diesel Fuel Volume Change vs. 2000
48
-------
II. Summary Statistics - PADD Analysis
nn nnn
190 nnn
110,000
-u ->; 100,000
ii "
P qn nnn
fl> *fl
S8 -S sn nnn
^ ~o yn nnn
>« Si /U,UUU
f-c
o fin nnn
£ Q_ DU.UUU
O) c
£c cr\ nnn
ft "O
o o> 40 nnn
C 3
c "o ^n nnn
^ o_ on nnn
m nnn
n
=
2000 2006
2007 2008
Year
15 ppm sulfur 500 ppm sulfur
^^
2009 2010
Figure 14. PADD 4 Projected Highway Diesel Fuel Production 2006-2010
49
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
5. PADD 5°
Number of Refineries
Reported totals for all PADD 5 refineries and importers are summarized in Tables 19 and
20, below. These tables show that for the first year of the TCO (2006), 21 refineries reported
that they intend to produce an estimated volume of 395 thousand bbls/day total (15 ppm sulfur +
500 ppm sulfur) highway diesel fuel. Specifically, 16 refineries reported that they intend to
produce 100 percent of their highway diesel fuel with 15 ppm or less of sulfur, one refinery
intends to produce 100 percent of its highway diesel fuel at the 500 ppm sulfur level, and four
refineries intend to produce a mix of 15 ppm sulfur and 500 ppm sulfur highway diesel fuel. In
2006, 17 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
intend to produce less highway diesel fuel than they did in 2000, including two refineries that
intend to shift out of the highway diesel fuel market.
Highway Diesel Fuel Production
As shown in Figure 15, below, the 17 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 83 thousand bbls/day, and the six 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 39 thousand bbls/day. This results in a net increase in
production of 44 thousand bbls/day. In 2010, the net increase in production is projected to be 54
thousand bbls/day.
0 The six refineries located in Alaska are not included in this report for the year 2000 or 2006-2010. The
State of Alaska is currently exempt from the 500 ppm sulfur standard for highway diesel fuel. Therefore, it is not
possible to determine, based on EIA data, the specific portion of each Alaskan refinery's distillate fuel production
that is consumed by highway vehicles. Based on the 2003 pre-compliance reports, at least one refinery in Alaska is
planning to produce some 15 ppm sulfur diesel fuel beginning in 2006. Other refiners appear to be planning to
supply highway diesel fuel from refineries located outside of Alaska.
50
-------
II. Summary Statistics - PADD Analysis
Availability of 15 ppm Sulfur Highway Diesel Fuel
As shown in Figure 16, below, in 2006, approximately 380 thousand bbls/day, or 96
percent of the PADD 5 total, are anticipated to be 15 ppm sulfur highway diesel fuel, and the
remaining 16 thousand bbls/day, or four percent of the PADD 5 total, are anticipated to be 500
ppm sulfur highway diesel fuel. In 2010, the percentage of highway diesel fuel at the 15 ppm
sulfur standard is expected to increase to 98 percent of the total volume highway diesel fuel
produced in PADD 5.
Credit Generation and Use
In 2006, approximately 87 million credits are anticipated to be generated and no credits
are anticipated to be used.
Table 19. 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
# refineries shifting into the highway market
# refineries decreasing production
# refineries shifting out of the highway market
# refineries generating credits
# refineries using credits
22
2003 2006
2007
2008
21
16
17
21
16
1
4
18
1
5
2
4
1
21
16
1
4
18
1
5
2
4
1
2009
21
16
1
4
18
1
5
2
4
1
2010
21
17
1
3
18
1
5
2
Table 20. PADD 5 Highway Diesel Fuel Volume and Credit Statistics 2006-2010
Year
total 15 ppm, bbls/day
total 500 ppm, bbls/day
15 + 500 ppm total, 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
2006
2007
2008
2009
379,633
15,774
395,407
43,965
12.5
4.0
9,684
1,357
390,675
16,216
406,892
55,450
15.8
4.0
9,679
1,102
394,230
16,181
410,411
58,969
16.8
3.9
9,692
939
390,088
16,256
406,344
54,902
15.6
4.0
9,679
1,246
2010
398,624
7,175
405,799
54,357
15.5
1.8
520
51
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
0) _
3 ^
U_ «
gt Q
v) a.
2 S
Q ^
>, ~o
re o>
to
=
£ -a .a
O) p 5,
a,
O)
O
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
-10,000
-20,000
-30,000
-40,000
-50,000
volume increase
volume decrease
net volume change
2006 2007 2008 2009 2010
Year
Figure 15. PADD 5 Highway Diesel Fuel Volume Change vs. 2000
52
-------
II. Summary Statistics - PADD Analysis
4E>0 000
4nn nnn
"3 ^ ^n nnn
£|
fij onn nnn
.2 £
Q *"
>"o ocn nnn
« t
J 0
en ^ 900 000
^ ^
t "0
o a) -i en nnn
E -o
1 | 100,000
>
50,000
0
]
I
2000
n
2006
r=
2007 2008
Year
15 ppm sulfur B500 ppm sulfur
=
^^=
2009 2010
u
Figure 16. PADD 5 Projected Highway Diesel Fuel Production 2006-2010
53
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
54
-------
Appendix: List of Acronyms
Appendix: List of Acronyms
AEO Annual Energy Outlook
EIA Energy Information Administration
EPA or the Agency U.S. Environmental Protection Agency
FR Federal Register
GPA Geographic Phase-in Area
PADD Petroleum Administrative Districts for Defense
ppm parts-per-million
TCO Temporary Compliance Option
55
-------
Summary and Analysis of the Highway Diesel Fuel 2003 Pre-compliance Reports - October 2003
56
-------
References
References
1. U. S. Environmental Protection Agency, Control of Air Pollution From New Motor
Vehicles: Heavy-Duty Engine and Vehicle Standards and Highway Diesel Fuel Sulfur
Control Requirements; Final Rule, 66 FR 5002, January 18, 2001.
2. U. S. Environmental Protection Agency, Highway Diesel Progress Review,
EPA420-R-02-016, June 2002.
3. Energy Information Administration, Annual Energy Outlook 2000,
DOE/EIA-0383(2000), December 1999.
4. Energy Information Administration, Annual Energy Outlook 2003,
DOE/EIA-0383(2003), January 2003.
5. U. S. Department of Energy, Transportation Energy Data Book, 2002.
6. Energy Information Administration, Petroleum Supply Annual 2000, Volume 1,
DOE/EIA-0340(00)/1, June 2001.
7. ibid.
8. ibid.
57
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