COMPLIANCE KIT EPA ULTRA-LOW SULFUR DIESEL (ULSD) FUEL REGULATIONS FOR NON-ROAD, LOCOMOTIVE & MARINE (NRLM) DIESEL FUEL AND HEATING OIL

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1 COMPLIANCE KIT EPA ULTRA-LOW SULFUR DIESEL (ULSD) FUEL REGULATIONS FOR NON-ROAD, LOCOMOTIVE & MARINE (NRLM) DIESEL FUEL AND HEATING OIL EFFECTIVE JUNE 1, 2007 A Compliance Guide for Petroleum Marketers in the Northeast and Mid-Atlantic Area (NEMA)* A Publication of: Prepared by: New England Fuel Institute Legislative & Regulatory Action Center (LRAC) P.O. Box 9137, Watertown, MA Mark S. Morgan, Esq., Regulatory Counsel James Collura, Vice President, Government Affairs & LRAC Director *Compliance information for non-nema areas may be obtained by contacting your state association or the Petroleum Marketers Association of America at or by calling (703) NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 1 of 20

2 Who Should Read This Compliance Kit? I. INTRODUCTION The U.S. Environmental Protection Agency (EPA) regulations described in this compliance kit applies only to petroleum marketers in the Northeast and Mid-Atlantic (NEMA) area. The following states and counties are located in the NEMA area: all six New England states; New York state (except for the counties of Chautauqua, Cattaraugus, and Allegany); New Jersey; Delaware; North Carolina; Virginia; Maryland; District of Columbia; Pennsylvania (except for the counties of Erie, Warren, Mc Kean, Potter, Cameron, Elk, Jefferson, Clarion, Forest, Venango, Mercer, Crawford, Lawrence, Beaver, Washington, and Greene); and the eight eastern-most counties of West Virginia (Jefferson, Berkeley, Morgan, Hampshire, Mineral, Hardy, Grant, and Pendleton). IMPORTANT! Different regulations apply to petroleum marketers outside of the NEMA area. Compliance information for non-nema marketers may be obtained by contacting your state association or the Petroleum Marketers Association of America at or by calling (703) A Look Back at the June 1, 2006 On-Road (or Highway ) ULSD Regulations EPA On-Road (or Highway ) ULSD regulations fell into place on June 1, 2006 and all members should now be in compliance. Non-compliance with these rules could subject members to a fine of up to $32,500 per day, per violation. A Compliance Kit detailing these rules was published by NEFI last year. If you would like to obtain a copy, please contact NEFI s Legislative & Regulatory Action Center (contact information at the end of this document). Below is a review of the June 1, 2006 regulations. Effective June 1, 2006, NEFI members should have Began using the correct sulfur content disclosure language on all product transfer documents (PTDs), including shipping papers and bills of lading, for on- and non-road diesel fuel, kerosene and diesel fuel additives. Records of product transfer must be kept on-file for a period of five years. Affixed the appropriate sulfur content disclosure labels on all on- and non-road diesel fuel dispensers. These labels are available through NEFI (order form at the end of this document). Affixed the appropriate sulfur content disclosure labels on all on- and non-road kerosene fuel dispensers. These labels are available through NEFI (order form at the end of this document). Informed customers (wholesale-purchaser-consumers) that their tank(s) greater than 550 gallons in capacity are subject to the above labeling requirements for diesel & kerosene. IMPORTANT! IRS tax labels are still required on dispensers where on- or off-road dyed diesel and kerosene (regardless of sulfur content) is offered for non-taxable use. The new sulfur content disclosure labels DO NOT replace the IRS tax labels. Both labels are required and each should be clearly and appropriately displayed. JUNE 1, New Sulfur Limits for Non-Road Diesel Fuels The EPA non-road diesel fuel regulations require refiners to drastically reduce the sulfur content in nonroad, locomotive and marine (NRLM) diesel fuel (except for fuels heavier than a No. 2 distillate used in Category 2 and 3 marine engines). Under the regulations, all NRLM diesel fuel produced by refiners may not contain more than 500-ppm sulfur content as of June 1, NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 2 of 20

3 Sulfur Reduction Timetable Beginning June 1, 2007, refiners will be required to produce NRLM diesel fuel with a maximum sulfur content of 500-ppm (low-sulfur diesel, or LSD). Beginning June 1, 2010, the sulfur content for NRLM diesel fuel will be reduced further to a maximum of 15-ppm (ultra-low sulfur diesel, or ULSD). The sulfur content of locomotive and marine diesel fuel will be reduced to 15-ppm beginning June 1, Heating Oil & the NRLM Diesel Regulations The EPA s non-road diesel fuel regulations do not change the sulfur content of heating oil. However, the regulations do impose new compliance burdens on heating oil dealers in the NEMA area, including new dispenser labeling requirements and product transfer document information. In this area, any distillate with a sulfur content of 500-ppm or less must be designated as NRLM diesel fuel on product transfer documents (bills of lading, shipping papers and delivery tickets), although it may be used as heating oil. Any distillate over 500-ppm sulfur in this area must be designated for use as heating oil at the retail and Wholesale Purchaser-Consumer level beginning October 1, 2007 and as of this date, greater than 500- ppm sulfur (high sulfur) heating oil may not be sold for use in NRLM diesel engines. There are also new labeling requirements for dispensers of heating oil and dyed kerosene (see below). Heating Oil Use in Stationary Generators after October 1, 2007 Beginning October 1, 2007 all stationary engines (emergency generators, etc.) manufactured, remanufactured or modified on or after April 1, 2006 may only use NRLM diesel fuel with a sulfur content of 500-ppm or less. Stationary engines manufactured, remanufactured or modified before April 1, 2006 may continue to use heating oil with a sulfur content greater than 500-ppm. Jet fuel & other High Sulfur Distillates Although the EPA is not changing the sulfur standards for heating oil and other distillate fuels (such as jet fuel and No. 4 fuel oil), the agency promulgated regulations to prevent the inappropriate use of these typically high sulfur distillates. Sale of these distillate fuels for use in NRLM diesel engines will generally be prohibited unless they meet the 500-ppm (or less) sulfur standard. Downgrading 500-ppm NRLM Diesel fuel to High Sulfur Distillates There is no limit on the amount of 500-ppm NRLM diesel fuel that may be downgraded to a higher sulfur distillate, such as heating oil, kerosene or jet fuel. But again, it is important to remember that high sulfur distillates (such as heating oil) may not be used in NRLM diesel engines. Quality Assurance & Testing Programs Due to the strict liability provisions in NRLM diesel fuel regulations, all parties below the refinery should adopt quality assurance programs designed to prevent unintended commingling of 500-ppm non-road diesel fuel with typically high sulfur fuels such as kerosene, heating oil and jet fuel. Wholesale distributors may want to conduct periodic product sampling and testing, driver training and develop transportation and storage logistics that will reduce the possibility of downstream commingling of NRLM and high sulfur distillates. Product Transfer Documents (Shipping Papers, Delivery Tickets, etc) The NRLM diesel fuel regulations require new information on product transfer documents (PTDs) including bills of lading, shipping papers, delivery tickets, etc for NRLM diesel, dyed kerosene and heating oil. The EPA will require specific wording that accurately describes the sulfur content of the fuel on these documents. Product transfer documents are an integral part of defending against liability for violations of the non-road diesel fuel regulations. PTDs must be kept for at least five years under the new regulations. NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 3 of 20

4 Clarification on Delivery Tickets The on-road (or highway ) diesel fuel requirements effective June 1, 2006 do not require that PTD language be printed on delivery tickets to the ultimate consumer (retail customers and wholesale purchaser consumers). However, the NRLM diesel fuel requirements effective June 1, 2007 do require such language be printed on delivery tickets to the ultimate consumer. Also, the EPA is requiring new delivery ticket language for heating oil to provide notice to ultimate consumers that they may not use heating oil in any diesel powered engines beginning October 1, A marketer may deliver heating oil for use in NRLM diesel engines after October 1, 2007 only if the fuel is compliant (equal to or less than 500-ppm sulfur) and is marketed, shipped and delivered in accordance with its intended use (as an NRLM diesel fuel product). Dispenser Labeling Requirements Under the NRLM diesel fuel regulations, an array of new decals accurately describing the sulfur content and intended use of the fuel must be posted on retail and wholesale purchaser-consumer dispensers of NRLM diesel, dyed kerosene and heating oil. Correct use and placement of these labels is important in order to communicate to the consumer (or diesel engine operator) the type of fuel being dispensed. Nonroad diesel engines for model year 2011 and beyond are designed to operate solely on 15-ppm ULSD non-road fuel. Use of non-compliant fuel will cause temporary performance problems and could result in permanent engine damage. The dispenser labels will help prevent misfueling by consumers. NEFI recently published a comprehensive Compliance Kit on EPA Fuel Dispenser Labeling Requirements that provides specific information on proper use and placement of the on-road diesel fuel and kerosene labels (required as of June 1, 2006) and the new NRLM diesel fuel, dyed kerosene and heating oil labels (required as of June 1, 2007). To inquire about receiving the Labeling Compliance Kit or the required fuel dispenser decals (also available through NEFI), see the order form at the end of this document, LRAC@nefi.com or call (617) Penalties for Non-Compliance Failure to comply with NRLM diesel fuel regulations may result in a fine of up to $32,500 per day, per violation. II. COMPLIANCE SCHEDULE FOR NRLM DIESEL FUEL REGULATIONS Q. When do the NRLM diesel fuel regulations go into effect? NRLM Diesel Fuel Regulation Compliance Schedule -The EPA is phasing in the NRLM diesel fuel regulations over a five-year period beginning in 2007, first by phasing-in low sulfur NRLM fuel and then, later, the ultra-low sulfur fuel. The EPA has set the following compliance dates: June 1, 2007 Refiners must begin producing 500-ppm NRLM diesel fuel. The generic dispenser decal for off-highway diesel fuel required as of June 1, 2006 is replaced by three new decals that are more specific to the sulfur content (high sulfur, low sulfur and ultra-low sulfur NRLM diesel fuel available through NEFI, order form at the end of this document). A new fuel dispenser decal is required for dispensers of heating oil (also available through NEFI, order form at the end of this document). NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 4 of 20

5 June 1, 2007 (Con t) Two new fuel dispenser decals are required for dispensers of dyed kerosene (low sulfur and ultralow sulfur dyed kerosene, also available through NEFI, order form at the end of this document). Product transfer documents, including shipping papers, bills of lading and delivery tickets, must include new language accurately reflecting sulfur content and authorized use of NRLM fuel and high sulfur distillates. August 1, 2007 Terminal operators must begin distributing 500-ppm NRLM diesel fuel. October 1, 2007 Heating oil dealers and other below the terminal rack distributors and retailers must begin distributing and dispensing 500-ppm NRLM diesel fuel for use in non-road diesel engines. High sulfur heating oil may no longer be used for non-road, locomotive or marine engines. Instead, these engines must use distillates with a maximum sulfur content of 500-ppm or less. High sulfur heating oil may no longer be used for stationary equipment such as emergency generators manufactured, remanufactured or modified on or after April 1, Instead, this equipment must use distillates with a maximum sulfur content of 500-ppm or less. Stationary equipment manufactured, remanufactured or modified before April 1, 2006 may continue to use high sulfur (greater than 500-ppm) heating oil after October 1, June 1, 2010 The sulfur content in diesel fuels for use in non-road motor vehicles, diesel powered equipment and other non-road engines will be reduced to 15-ppm (diesel fuels for use in locomotive and marine engines will remain at 500-ppm sulfur until 2012). New dispenser labels and PTD language for these fuels will be required. January 1, 2011 Model year 2011 non-road diesel engines will be designed to utilize only 15-ppm non-road ULSD. Using higher sulfur diesel in these engines could cause the engine to misfire and may permanently damages these engines (members and their customers should contact diesel engine manufacturers regarding proper fuel use). June 1, 2012 The sulfur content of locomotive and marine engine diesel fuel will be reduced to 15-ppm. New dispenser labels and PTD language for these fuels will be required. All highway and non-road diesel fuel will be 15-ppm ULSD. The sulfur content of heating oil will be determined by market forces. NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 5 of 20

6 III. PRODUCT TRANSFER DOCUMENT (PTD) REQUIREMENTS Q. What information do I need to put on my product transfer documents (PTDs) under the nonroad diesel fuel regulations? 1. Current EPA Regulations for PTD Information - The EPA currently requires petroleum marketers to put basic information on all PTDs (shipping papers, bills of lading, delivery tickets, etc) accompanying the transfer of title or custody of diesel fuel or distillate product. The EPA currently requires PTDs to include each of the following: the names and addresses of the transferor and transferee; the volume of diesel fuel or distillate which is being transferred; the location of the diesel fuel or distillate at the time of the transfer; and date of the transfer. Beginning June 1, 2006, for transfers of non-road, locomotive or marine diesel fuel, the following language is required: For 15-ppm Dyed Ultra-low Sulfur Diesel Fuel* 15-ppm sulfur dyed ULSD. Non-road or tax exempt use only. For 500-ppm Dyed Low Sulfur Diesel Fuel* 500-ppm sulfur dyed LSD. Non-road or tax exempt use only. Not for use in 2007 and later vehicles *You must designate whether the diesel fuel is 1D or 2D (information should be on the PTD received from your supplier. Diesel Grade No. 1D comprises the class of volatile fuel oils from kerosene to the intermediate distillates. Fuels within this classification are applicable for use in high-speed engines in service involving frequent and relatively wide variations in loads and speeds. In cold weather conditions, No.1D fuel allows the engine to start easily. In summary, for heavy-duty high-speed diesel vehicles operating in continued cold-weather conditions, No. 1D fuel provides better operation than the heavier No. 2D. Diesel Grade No. 2D comprises the class of distillate oils of lower volatility. They are applicable for use in high-speed engines in services involving relatively high loads and speeds. This fuel is used more by truck fleets, due to its greater heat value per gallon, particularly in warm to moderate climates. Even though No.1D has better properties for cold weather applications, many still use No. 2D in the winter, using fuel heater/water separators to provide suitable starting, as well as fuel additive conditioners, which are added directly to the fuel tank. IMPORTANT NOTE REGARDING KEROSENE: Kerosene is also subject to the EPA s sulfur reduction requirements. Kerosene PTD language is identical to the above language for diesel fuel, except that the word kerosene must be substituted for the word diesel fuel and the designation ULSK, and LSK and must be substituted for ULSD, and LSD respectively. These PTD language notices are required for all transfers of kerosene, including sales to end users at retail and to wholesale purchaser consumers. NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 6 of 20

7 However, note that the EPA issued exceptions to the June 1, 2006 PTD requirements: (1) The new PTD language is not required for transfers of any on-road (or highway ) diesel fuel product from a retail dispenser directly into the tank of a motor vehicle. (2) The new PTD language is not required on delivery tickets for on-road (or highway ) diesel fuel delivered directly into a tank owned and operated by a wholesale purchaser-consumer (or WPC, including construction sites, farms, etc), provided that the tank being delivered to is labeled in accordance with EPA regulations and the transferor is keeping detailed shipping records. IMPORTANT! These exceptions do not apply to PTDS for non-road, locomotive or marine engine fuel and heating oil. All PTDs for deliveries of these fuels, including delivery tickets to the ultimate consumer, must contain the appropriate EPA mandated language. 2. NEW Language for Heating Oil PTDs - Beginning June 1, 2007, the EPA requires the following information on all heating oil PTDs (shipping papers, bills of lading, delivery tickets, etc) anytime a person transfers custody or title of heating oil within the NEMA area (including delivery tickets printed in deliveries made to residential, commercial and wholesale purchaser-consumer locations): For Heating Oil Used in Heating Applications, Beginning June 1, 2007(NEMA area only) Dyed Unmarked Heating Oil: Not for use in highway, nonroad, locomotive or marine engines. For Greater than 500-ppm High Sulfur Heating Oil Used in Non-Road Engines, Between June 1 and October 1, 2007 (NEMA area only)* "HS Dyed NRLM-may exceed 500 ppm sulfur. Not for use in nonroad engines requiring ULSD or highway engines." * NOTE: Beginning 10/1/07, high sulfur (greater than 500-ppm sulfur) heating oil may no longer be used in non-road, locomotive or marine engines. Only 500-ppm LSD or 15-ppm ULSD may be used in these engines. Heating oil may be delivered for use in NRLM engines after October 1, 2007 only if the fuel is 500-ppm sulfur or less and the delivery ticket uses the EPA s NRLM diesel fuel language (see subsection 1 above) or is dispensed as such. Using Heating Oil in Stationary Equipment High sulfur (greater than 500-ppm sulfur) heating oil may no longer be used for stationary equipment such as emergency generators manufactured, remanufactured or modified on or after April 1, Instead, this equipment must use distillates with a maximum sulfur content of 500-ppm or less. Stationary equipment manufactured, remanufactured or modified before April 1, 2006 may continue to use heating oil with a sulfur content greater than 500-ppm after October 1, Modifying Your Delivery Tickets Some marketers may still be using the IRS language Dyed Diesel Fuel, Non-Taxable Use Only, Penalty for Taxable Use on their shipping papers and delivery tickets. This language was eliminated in 1995, and this fact may help make room for the new language for NRLM diesel and heating oil (above). If you have recently ordered new tickets or cannot make the modifications to your software and printers by June 1, 2007, we recommend that you purchase a stamp for your tickets as a temporary solution. NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 7 of 20

8 IV. FUEL DISPENSER DECALS Q. What labeling requirements apply to retailers and wholesale purchaser-consumers of diesel fuel, kerosene and heating oil beginning June 1, 2007? 1. Dispenser Label Size and Format - Any retailer or wholesale purchaser-consumer (farmer, construction company, fleet operator, etc) who sells, dispenses, or offers for sale or dispensing, NRLM diesel fuel, dyed kerosene or heating oil must affix conspicuous and legible decals, in block letters of no less than 24-point bold type, and printed in a color contrasting with the background to each dispenser. The fuel product decals available through NEFI meet these requirements and are EPA-approved (order form at the end of this document). 2. Dispenser Label Placement- The NRLM diesel fuel regulations require that the dispenser labels be placed on the vertical surface of each pump housing and on each side that has gallon and price meters. The labels must be on the upper two-thirds of the dispenser in a location where they are clearly visible. 3. Dispenser Label Information - The following labels must be attached to NRLM diesel fuel, dyed kerosene and heating oil dispensers: From June 1, 2007 through May 31, 2010, for pumps dispensing NRLM diesel fuel meeting the 15-ppm sulfur standard: This is only a sample and does not meet size requirements under EPA regulations. From June 1, 2007 through May 31, 2010, for pumps dispensing NRLM diesel fuel meeting the 500-ppm sulfur standard. This is only a sample and does not meet size requirements under EPA regulations. NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 8 of 20

9 From June 1, 2007 through October 1, 2007, for pumps dispensing high sulfur (greater than 500- ppm) heating oil and dyed diesel fuel for use in NRLM engines: This is only a sample and does not meet size requirements under EPA regulations. From June 1, 2007 and beyond, for pumps dispensing non-motor vehicle diesel fuel for use other than in non-road, locomotive or marine engines, such as for use in stationary diesel engines or as heating oil: This is only a sample and does not meet size requirements under EPA regulations. From June 1, 2007 through May 31, 2010, for pumps dispensing dyed kerosene meeting the 15-ppm sulfur standard: NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 9 of 20

10 From June 1, 2007 through May 31, 2010, for pumps dispensing dyed kerosene meeting the 500-ppm sulfur standard: IMPORTANT! The IRS dispenser decals reading DYED DIESEL FUEL, NONTAXABLE, PENALTY FOR TAXABLE USE and DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE and UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY are still required! Do not remove or cover these decals under penalty of law. IMPORTANT! Decals are not required for delivery trucks or residential heating oil tanks. However, dispenser mechanisms for skid tanks must be labeled (or the skid tank itself if dispenser is too small). The tank/dispenser owner is the only person responsible for labeling. Tanks at wholesale purchaser consumer sites that are 550 gallons or larger also need to be labeled, and you should confirm that the label matches the fuel that you are delivering to the tank before completing the transfer of product. V. RECORD KEEPING REQUIREMENTS Q. What records do I have to keep under the new ULSD requirements and for how long? 1. New Record Keeping Requirements - The non-road diesel fuel regulations require petroleum marketers to maintain the following records for a period of five years: Product transfer documents (bills of lading, shipping papers, delivery tickets, etc. invoices); Sample and test results conducted under a quality assurance program; Sample and test methods documentation; and The actions the party has taken, if any, to stop the sale or distribution of any NRLM diesel fuel found not to be in compliance with the sulfur standards. 2. Importance of Keeping Records - It is extremely important that petroleum marketers keep the required records described above. These records are needed to claim a defense against liability for offspecification fuel. Remember that under the NRLM regulations, all parties along the distribution chain are presumed liable for diesel fuel that does not meet the correct sulfur standard. Your records are the only way to prove that you did not cause the violation. NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 10 of 20

11 VI. QUALITY ASSURANCE PLANS Q. What must I do to ensure that the diesel fuel in my custody remains within the applicable sulfur standard? 1. Downstream Quality Assurance - Under the NRLM regulations, parties in the distribution chain downstream of the refiner or importer are not required to test diesel fuel for sulfur content. However, in order to establish a defense to any violation, downstream parties must conduct a quality assurance program, including sampling and testing. 2. Distributor Quality Assurance Program - Petroleum marketers who distribute 500-ppm NRLM diesel fuel should take the following steps to ensure that sulfur content levels are not exceeded during transportation and storage to the end user: Allow time for multiple storage tank turnovers; Develop fuel sequencing strategies that minimize commingling of fuels; Conduct a random sampling and testing program for NRLM and maintain test results and sampling methods records for at least five years; Inspect PTDs carefully and reject improper fuel; Keep PTDs, shipping papers and bills of lading, delivery tickets, etc for a minimum of five years; If possible, dedicate separate cargo tank vehicles and storage tanks for on-road and off-road distillates; If product segregation is not possible, make certain that residues from high sulfur fuel in trucks and storage tanks (including piping and hoses) are drained or flushed prior to filling with 500-ppm NRLM diesel fuel. Take into consideration the following facts when flushing cargo tank vehicles: o Flat-bottomed cargo tank vehicles tanks are more susceptible to sulfur contamination. Draining at terminal rack prior to loading reduces sulfur contamination. o Angled bottom tanks generally do not add enough sulfur contamination to throw 500-ppm NRLM off-spec. o Flushing compartment with 500-ppm NRLM prior to loading effectively removes any sulfur contamination in both flat bottom and angle bottom cargo tank trucks. Use terminal drain tanks (when available) to purge residue prior to taking on 500-ppm NRLM diesel fuel after transporting heating oil and other high sulfur fuels; Change all fuel filters frequently to prevent sulfur residue contamination; and Train driver in NRLM diesel fuel product handling with emphasis on PTD recognition and proper delivery techniques, including identification of NRLM diesel fuel in storage tanks and develop written fuel handling techniques for bulk plants and cargo tank vehicles. VII. TESTING SULFUR CONTENT Q. If I choose to sample and test for sulfur content, what are the testing requirements? 1. Testing for Sulfur Content - Under the NRLM diesel fuel regulations testing is not required for any party downstream of the refinery gate. However, petroleum marketers who distribute NRLM must conduct NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 11 of 20

12 sampling and testing in order to raise a defense against a violation of the sulfur limits. If you don t test, you can t contest the violation. 2. Testing Frequency - First, remember that sulfur testing is not required for any party downstream of the refiner or importer. However, to raise a defense against liability for fuel exceeding established sulfur limits, periodic testing and sampling must occur above the retail level. The regulations do not provide how often sampling and testing must occur, though it is certain that testing every batch of NRLM diesel fuel is not required. Periodic random testing, perhaps once per month may be sufficient. To raise a defense against liability, sampling and testing of the specific batch of diesel fuel found to be out of compliance is not required. It is sufficient that a periodic sampling and testing program is in place. 3. Applicable Tests - Currently, there is no reliable field tests to determine sulfur content in diesel fuel. Sulfur testing must be conducted by an off-site laboratory. EPA recommends the following test methods as the most cost effective ($75-$100 per test) and accurate choice for below the terminal rack testing (for more information, visit ASTM D5453: Total Sulfur in Light Hydrocarbons, Motor Fuels & Oils by Ultraviolet Fluorescence ASTM D7039: Sulfur in Gasoline, Diesel Fuel by Wavelength Dispersive X-ray Fluorescence 4. Sampling Protocol The ASTM D-4057 standard practice for manual sampling of petroleum and petroleum products is recommended as a basis for a sampling protocol in testing below the terminal rack. 5. Testing Laboratories - The EPA is currently compiling a list of certified testing laboratories. Check with your fuel supplier to find a testing laboratory near you. WARNING! The EPA uses its own sulfur test method for enforcement purposes. When determining compliance with sulfur limits, only the EPA test results are considered. REMEMBER! Save all sampling and test results and methodology for at least five years. VIII. LIABILITY Q. Who is liable for non-road locomotive or marine diesel fuel that is found to exceed allowable sulfur limits? 1. Joint and Several Liability - The EPA has adopted a joint and several liability approach for violations of allowable sulfur limits. In other words, anytime NRLM diesel fuel exceeds allowable sulfur limits, every party along the distribution chain that has had custody or title to the fuel is presumed to have caused the violation. It is up to each party to prove they did not cause the violation. 2. Defenses to Liability - In order for a party along the distribution chain to prove they did not cause the violation, the following must be shown: The violation was not caused by the party or the party s employee; PTDs in the party s possession account for all non-compliant fuel and/or additives and shows that the fuel was in compliance while under the party s custody; The party has in place a quality assurance program that includes periodic sampling and testing; and Upon learning of the non-compliant fuel, the party immediately removed it from commerce and took steps to prevent future violations. NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 12 of 20

13 IX. DIESEL ADDITIVES, KEROSENE, BIODIESEL & OIL BLENDING Q. Some distributors blend additives into diesel fuel to improve performance, including biodiesel, kerosene in cold weather conditions, and used oil. Can such blending continue under the NRLM diesel fuel regulations? 1. Biodiesel - Biodiesel has virtually no sulfur content. Bio-diesel temperature should be kept at a minimum of 10 degrees F above its cloud point when splash blending. Keep all product transfer documents for bio-diesel with the PTDs of the blended diesel fuel. For more information on appropriate biodiesel use and blending practices, visit the National Biodiesel Board (NBB) website at 2. Kerosene - Kerosene blended into NRLM diesel fuel must meet the 500-ppm sulfur content standard. 3. Used Oil - Used oil blended into diesel fuel is generally not allowed. 4. Diesel Fuel Additives in General - Diesel fuel additives with a sulfur content greater than 500-ppm may be blended with NRLM so long as the resulting blend does not exceed the 500-ppm maximum sulfur content standard. Kerosene is not considered an additive by the EPA and must meet the 500-ppm maximum sulfur standard when blending with NRLM diesel fuel. APPENDICES FOLLOW ON THE NEXT PAGE NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 13 of 20

14 APPENDIX A: SAMPLE DIESEL FUEL QUALITY ASSURANCE PLAN (COMPANY NAME AND ADDRESS) DIESEL FUEL QUALITY ASSURANCE PLAN FOR COMPLIANCE WITH EPA NON-ROAD, LOCOMOTIVE AND MARINE DIESEL FUEL REGULATIONS INTRODUCTION This quality assurance plan is designed to ensure compliance with 40 CFR Part 80 non-road, locomotive and marine (NRLM) diesel fuel sulfur reduction regulations. This plan is adopted as company policy and shall be followed at all times by employees when attending to the transportation, storage and delivery of diesel fuels, heating oil and kerosene while in the custody of Acme Oil, Inc. (the Company). This quality assurance plan includes the following: A periodic sampling and testing program to ensure the diesel fuel meets the applicable sulfur standards and requirements, Procedures for the detection of non-complaint fuel, Procedures to promptly remedy failures that cause violations, and Procedures to prevent future violations of a similar nature from occurring. Adherence to the procedures of the fuel quality assurance program is a prerequisite to defend against enforcement actions brought by state and/or federal environmental authorities for non-compliance with applicable diesel fuel. Employees who fail to implement this policy will be subject to immediate termination. Diesel Fuel Quality Assurance Procedures I. PROCEDURES TO PREVENT UNINTENDED DIESEL FUEL COMMINGLING AND MIS-FUELING a) Product Transfer Documents i) In order to prevent unintended commingling of diesel fuels with different sulfur content, all employees involved in transporting, handling, delivery or other wise managing diesel fuel while in the custody of the Company shall closely examine all product transfer documents, bills of lading and shipping papers to ensure that correct product descriptor language is used and sulfur content indicated matches the fuel to which the document is assigned. ii) If at any time the information on a product transfer document does not comply with product descriptor language requirements or accurately describe the sulfur content of the diesel fuel to which it is assigned, the fuel shall be immediately removed from the distribution stream until correct product transfer documents can be generated. NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 14 of 20

15 iii) In any case where a product transfer document is found to be incorrect, every effort shall be made to determine how the error occurred and procedures immediately implemented to ensure that the same error is not made in the future. b) Diesel Fuel Dispenser Decals i) In order to prevent downstream mis-fueling or unintended commingling of diesel fuels, kerosene or heating oil with different sulfur content, all company owned or operated dispensers at bulk plants, retail outlets, wholesale-purchaser consumer locations and skid tank sites shall at all times have an EPA approved decal affixed that accurately reflects the sulfur content and permitted uses of the fuel. ii) Dispenser decals shall be placed on the vertical surface of each pump housing and on each side that has gallon and price meters. The decals must be on the upper two-thirds of the dispenser in a location where they are clearly visible. iii) A dispenser decal may be placed directly on the outer surface of a skid tank if the dispensing units have no surface area to accommodate the required decal. Placement of decals on skid tanks shall be in a location that is conspicuous to the person operating the dispenser. iv) Anytime diesel fuel in a storage tank attached to a dispenser is re-designated or does not conform to the information on an existing dispenser decal, the decal shall be immediately changed to accurately reflect the product in the tank. c) Preventing Contamination During Loading of Cargo Tank Vehicles i) Every effort should be made to segregate compartments for storage of 500-ppm NRLM diesel fuel. In the event compartment segregation is not possible, the following fuel sequencing procedures shall be followed: Before loading, confirm last contents of compartment using shipping paper information. If switching compartment to 500-ppm NRLM from fuels with higher sulfur content, such as heating oil, drain compartment dry. When draining make sure vehicle is on level ground. Confirm compartment is empty using a pail check or other suitable means after checking the compartment retain sensor and the manifold sight glass upstream of the faucet valve. If applicable, flush manifold, pump and other piping and product handling systems to eliminate risk of contamination During loading, confirm delivery into correct line and compartment. d) Preventing Contamination During Unloading of Cargo Tank Vehicles i) Contamination can result during cargo tank unloading through product handling systems. To prevent contamination during unloading from a cargo tank vehicle adhere to the following: Schedule and sequence deliveries to minimize flushing Unload 500-ppm NRLM diesel fuel first. NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 15 of 20

16 If delivery of higher sulfur product first is necessary, drain or flush manifolds, pumps or other product handling systems prior to unloading 500-ppm NRLM diesel fuel. e) Preventing Contamination During Bulk Plant Delivery i) Contamination may result during delivery of 500-ppm NRLM diesel fuel to bulk plant storage. Adhere to the following procedures when unloading at bulk plant facilities: Prior to delivery of 500-ppm NRLM diesel fuel at bulk plant storage, ensure that tank and product handling systems are readied by flushing lines if necessary. Prior to delivery, verify incoming product using shipping documentation, product tags, seals, etc. Prior to unloading, confirm delivery into correct receipt line and tank. For common receipt lines ensure line displacement and any flush volume delivered before opening valve to 500-ppm NRLM diesel fuel tank. After unloading, verify product was delivered as intended by confirming level change is 500-ppm NRLM diesel fuel tank plus any other tanks receiving line displacements or flush volumes. II SAMPLING AND TESTING a) Testing Protocol and Frequency i) In order to prevent contaminated fuel from entering the distribution stream, the following random testing and sampling procedures shall be required: All ULSD (15-ppm sulfur) and LSD (500-ppm sulfur) storage tanks at bulk plants shall be tested for sulfur content once per month. In the event a bulk storage tank is turned over from heating oil or other high sulfur distillate to 500-ppm NRLM diesel fuel, a sulfur test shall be performed to ensure the turnover has been completed. Random testing of cargo tank vehicles shall occur after loading product at the terminal but before the first delivery to a retail site, bulk plant or wholesalepurchaser consumer. Random testing shall occur once per month. Testing shall occur at a bulk plant, retail site, wholesale-purchaser consumer location or at a cargo tank vehicle anytime there is reason to believe that 500- ppm NRLM diesel fuel stored at these sites exceeds applicable sulfur limits. All testing shall be conducted by an EPA certified ULSD testing laboratory. III EMPLOYEE RESPONSIBILITIES FOR IMPLEMENTING THE QUALITY ASSURANCE PLAN a) Organizational Chart Fuel Quality Manager -The Fuel Quality Manager is responsible for implementing and managing the Company s diesel fuel quality assurance program. The Fuel Quality Manager shall: o collect and submit samples for testing, NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 16 of 20

17 o o o o o o o o o take all necessary steps to immediately remove diesel fuel from the distribution stream that does not comply with applicable sulfur standards, ensure that no diesel fuel is subject to unintended commingling or mis-fueling while in the custody of the company, monitor and direct all diesel fuel deliveries, ensure compliance with product transfer document and dispenser labeling requirements, direct drivers on all matters concerning the diesel fuel quality assurance plan, conduct periodic evaluations of fuel quality assurance practices and procedures in order to measure effectiveness of the program, maintain all records necessary for diesel fuel management, take corrective action to prevent unintended commingling or mis-fueling of diesel fuel, and implement and maintain and manage the Company s diesel fuel quality assurance plan. Drivers - Drivers shall take an active role in the day-to-day implementation of the Company s fuel quality assurance program, including; o strict adherence to all loading, unloading, fuel sequencing, product transfer document inspection procedures and all other aspects of the diesel fuel quality assurance program. o provide immediate notice to the Fuel Quality Manager anytime there is reason to believe unintended commingling or mis-fueling, of diesel fuels has occurred. CALCULATING SULFUR CONTENT The below chart illustrates adjusted sulfur content from the mixture of two fuels in a cargo tank compartment with differing sulfur ppm. See calculation instructions below to determine whether mixtures will violate 500-ppm NRLM diesel fuel sulfur content standard. DIESEL FUEL CONTAMINATION CALCULATOR Previous Product in Compartment Gasoline Low Sulfur Diesel Heating Oil Gasoline Low Sulfur Diesel Heating Oil Gallons Left in Compartment Sulfur Content (PPM) Gallons of ULSD Introduced ULSD Sulfur Content Resulting Sulfur Content(PPM) NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 17 of 20

18 HOW THE CALCULATION WORKS: Example: Step One Step Two Step Three Step Four Answer: 1000 gallons of 12-ppm ULSD is added to 5 gallons of 40-ppm gasoline Multiply the number of gallons left in compartment X its sulfur content Ex: 5 gals X 40-ppm = 200 Multiply the number of ULSD gallons added X its sulfur content Ex: 1000 gals X 12-ppm = Add the two together figures together Ex: = Divide the sum of the two figures by the total number of gallons Ex: divided by ppm is the sulfur content of the mixture. Employee Signature Date Supervising Manager s Signature Date NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 18 of 20

19 APPENDIX B: ADDITIONAL INFORMATION For further compliance information or to order EPA-Compliant Decals: Jim Collura, Director NEFI Legislative & Regulatory Action Center P.O. Box 9137 Watertown, MA Tel: (617) Fax: (617) For more information regarding the EPA s Ultra-Low Sulfur Diesel program: Clean Diesel Fuel Alliance Information Center (866) 406-FUEL (or ) info@clean-diesel.org Diesel Fuel Regulations and Additional Resources: NRLM Diesel Fuel Question and Answer Document: ULSD Sampling and Testing: ASTM International Bently Tribology Services, Inc. 100 Barr Harbor Drive, PO Box C700, Fuel Testing Laboratories West Conshohocken, PA, Peabody, MA (610) Tel: (978) Fax: (978) Additional information on Biodiesel and Blending: National Biodiesel Board 3337a Emerald Lane Jefferson City, MO (800) YOUR HELP IS NEEDED AND APPRECIATED! This compliance kit is yet another valuable members-only resource made possible only by generous member donations to the NEFI Legislative & Regulatory Action Center! If you found this kit useful and you would like to make a contribution, please LRAC@nefi.com or call (617) to request an LRAC pledge form. Thank you for your support we cannot do it without you! NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 19 of 20

20 APPENDIX C: REVISION HISTORY Version Date Revisions May-02 Publication May-03 Fixed typographical and formatting errors May-11 (a) Expanded the PTD section for NRLM and Heating oil, and added the new EPA-mandated PTD language for high sulfur heating oil used in NRLM applications between June 1 and October 1, (b) Replaced the third bullet under Section IV. Dispenser Decals with the High Sulfur decal required on pumps until October 1, (c) Added an entry to Section I clarifying heating oil use in stationary generators after October 1, 2007 and made appropriate changes elsewhere in the doc. (d) Added an entry on the difference between 1D and 2D grades of diesel fuel in Section III. (e) Noted in the list of deadlines that new dispenser labels and PTD language will be required on June 1, 2010 and (f) Fixed several typographical and formatting errors and made general improvements to make content more concise and easier to read May-14 (a) Added a note regarding Kerosene PTD language to Section III(1) and removed the entry in Section I, Kerosene and Jet Fuel and renamed it Jet Fuel and other High Sulfur Distillates removing references to Kerosene. The EPA classifies kerosene as a diesel fuel; therefore it is subject NRLM Diesel Fuel regulations. (b) Notes added to first and second pages about obtaining a non-nema area kit from PMAA Jun-08 (a) Added two new dyed kerosene decals approved by the EPA and corrected references to the same throughout the document. (b) Added NEFI Member Bently Tribology Services to the additional information section. BTS is an EPA-accredited laboratory for sulfur content fuel testing Sep-27 Added nonroad to the PTD language requirement for heating oil, per the EPA as of September 27, NEFI Compliance Kit ~ Pub May-02 ~ Ver (Rev Sep-27) Page 20 of 20