NPRA 2007 Annual Meeting
Transition Issues
•Production ramped up quickly
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•Distribution from refinery to terminals went well
–Now have limited number of terminals carrying low sulfur diesel
–Terminals carrying only ULSD may be supplying more than highway demand
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•Winter diesel (Ultra-Low-Sulfur Kerosene) issues
–Warm weather
–“Winterized diesel” produced and more use of additives
SThe transition in 2006 to ULSD went well.  In 2005, the production potential had taken a backseat to concerns over distribution, but most ULSD made it to terminals without contamination.  In fact in some cases, it made it to terminals well under the 15 ppm required at retail.

SIn many cases, terminals opted to carry only ULSD.   As a result, ULSD is being used to supply diesel outside the highway market.  Some of the outages this past fall in PADD 2 that were occurring at the end of the distribution system may have been exacerbated by the limited flexibility this situation creates.  Suppliers were reporting stronger than usual seasonal demand in the Midwest, which uses diesel fuel for farm use.  Even without the ULSD program this can create temporary terminal outages.  Some refinery problems contributed to the tight supply.  It did not appear that ULSD was the main cause of the outages, but more a contributing factor.

SThe other transition issue that emerged was the need to use ultra-low-sulfur kerosene as a blending component in winter highway diesel.   Some marketers that normally line up kerosene supplies in the summer, were not finding suppliers willing to commit.  ULSK suppliers were focusing on the transition to diesel at that time. There was also some change in supply sources, which adds to transition pressures.

SWinter-quality diesel was supplied using the typical means.  In addition to blending with kerosene at terminals, some suppliers produced a “winterized diesel” at the refinery that already had lighter distillate material blended in to keep it from gelling in colder weather; however, some suppliers used more additives that prevent gelling than in the past.

SWhen the cold snap hit in February, gelling issues popped up in several areas.  But these seemed to be more issues of terminals and fleet operators getting caught with winter product in their tanks that was not blended for temperatures as low as they dropped.  ULSK was moved to those areas, but that does not happen quickly.