U.S. regulators made a small but important change to federal rules that will allow refineries to sell and distribute to ship owners less expensive marine fuels that still meet the IMO 2020 clean fuel standard taking effect Jan. 1.
The new global sulfur limit in marine fuels will be reduced from 3.5% to 0.5%. That limit is not as stringent as requirements within the emissions control area (ECA) that extends 200 nautical miles off U.S. shores, in which fuel burned by ships must have a sulfur content of 0.1% or below.
However, fuels burned outside the ECA zone with a sulfur content of between 0.1% and 0.5% — which complies with the new global fuel standard come Jan. 1 — had not been legally cleared for distribution. The changes being made by the U.S. Environmental Protection Agency (EPA) is aimed at solving the problem.
“These targeted regulatory corrections will clear the way for U.S. refiners to provide cleaner marine fuel for ships that sail across the globe,” said EPA Administrator Andrew Wheeler on Dec. 11. “Hitting this key deadline is vital to meeting the terms of this important treaty that protects air quality and human health both at home and abroad.”
Without the rule change — which was requested by U.S. fuel suppliers — a ship looking to purchase fuel in the United States would be able to buy only 0.5% sulfur residual fuel (non-distillate), and only if it was available, according to an EPA document signed by Wheeler on Dec. 10. “Otherwise, the ship would be limited to purchasing higher-price ECA fuel or delaying its fuel purchase to the next port of call to avoid that additional cost,” the document stated.
In addition, U.S. fuel suppliers participating in the global fuel market would be faced with exporting the much cleaner but higher-cost 2020 distillate global marine fuel for distribution elsewhere, which refineries asserted could lead to market inefficiencies and increased costs, as well as cause them to lose a portion of the U.S. share of the global fuel market.
“In sum, removing the restriction on the distribution of distillate fuel between [0.1% and 0.5%] in the United States, for use outside of ECA boundaries, will provide greater flexibility for U.S. fuel suppliers participating in the global marine fuel market, which could reduce fuel costs in that the ship operator would not be faced with either purchasing more expensive ECA fuel or going to another country to purchase fuel,” EPA stated.
“This change … will also provide a level playing field for all potential U.S. suppliers — those that supply distillate or blends as well as residual fuel. Such clarity will aid them in finalizing their fuel supply and distribution plans.”
A recent report by JPMorgan Chase predicted that the IMO 2020 effect on refiners will be generally positive for the industry.