US restricts use of some fuels in scrubbers

Late last year the US Environmental Protection Agency (EPA) amended its diesel fuel regulations to permit fuel suppliers to distribute distillate diesel fuel that complies with the sulphur standard that applies internationally for ships, rather than the fuel standards that otherwise apply to distillate diesel fuel in the US.

The rule removes the restriction on the distribution of distillate fuel between 1,000 ppm and 5,000 ppm in the US (0.1% to 0.50%) (for use outside of US Emission Control Area boundaries), to provide the necessary flexibility for US fuel suppliers who participate in the global marine fuel market.

The amendment showed that the EPA intended to regulate the production and distribution of fuel in the US, regardless of where that fuel may be burned and whether the fuel is bunkered into ships equipped with scrubbers that will burn the fuel entirely outside of US waters.

Standard Club said that members should note that IMO-compliant fuel cannot be used in US ECA. Only distillate fuel below 1,000 ppm can be burned in US ECA, which encompasses 200nm off the US coastline.

David McCullough and Susan Lafferty, partners in the Energy & Infrastructure Practice Group of Eversheds Sutherland (US) LLP , observed that, with the January 1st implementation of IMO 2020, the EPA asserted that it was taking steps to allow for the distribution of distillate fuel with sulphur content of up to 5,000 ppm sulphur—something that it asserts was previously prohibited. “While this rule does provide some certainty to fuel distributors that they can distribute what might otherwise be considered high-sulphur distillate, it may also belie EPA’s true intent of increasing its ability to bring enforcement actions for the production of off-spec fuel used entirely outside of US waters”, the lawyers said.

Prior to the rulemaking, EPA’s authority to regulate the production and distribution of bunker fuel intended for use solely outside of US waters was less clear. The Clean Air Act generally only regulated emissions of pollutants in the United States. As a result, the EPA could regulate the pollutant content of gasoline, diesel and other fuels that would be burned in the US – but not fuel that was exported.

In the case of bunker fuel in excess of 1,000 ppm sulphur content that will be burned entirely outside of an emission control area, the emissions from that fuel will necessarily occur entirely outside of US jurisdiction. Nonetheless, in its most recent rulemaking, EPA asserts that it has the ability to regulate the production and distribution of such fuel within the US.

In doing so, EPA has capped the sulphur content of all distillate fuel used as a bunker fuel at 5,000 ppm — regardless of whether that fuel is bunkered into vessels equipped with scrubbers that will burn the fuel entirely outside of US waters.

The lawyers said that this was concerning for some bunker fuel suppliers who believed that it would restrict their ability to supply vessels with fuel that may still qualify as distillate fuel, but exceed 5,000 ppm. “As a result, the already potentially tight supply of compliant fuel may become tighter.”