What Does the Coming Clean Fuels Regulation Mean for Contractors?
The Clean Fuels Regulation (CFR) comes into affect in December of 2022. What will its implementation mean to the petroleum industry and to contractors that work in it? The objective of the CFR is straight forward – reduce green house gases, and hopefully, limit the planet’s average temperature rise. How regulated companies comply is the difficult part.
My initial understanding of the regulation before looking closer was that ‘cleaner’ fuels meant that refiners would have to increase ethanol in gasoline and bio-constituents in diesel. Since 2010 Canada’s gasoline has had at least a 5% ethanol component and 2% bio materials (vegetable oils, animal fats, etc.) in diesel. The jury is still out on how much ethanol a gasoline engine can withstand without damage but it’s generally believed that 10% ethanol is safe. There have been lots of cost/benefit analyses done on the environmental effects of farming (like corn) to produce ethanol. This may have contributed to the Canadian government’s choice to not impose higher ‘green’ components to our fuels.
The new regulation offers fuel suppliers several options as they chase down compliance credits. If a refiner wants, it can increase ethanol and the bio in its fuels but whatever action they take must lower carbon intensity. Companies will be seeking credits that are measured in units of CO2e – that’s Carbon Dioxide or an (e) equivalent of Carbon Dioxide. For example, an integrated oil company could change its extraction or refining processes, have its trucks use hydrogen fuel cells, use carbon capture sequestration or build a network of electric vehicle charging stations to gather its compliance credits. My lay-understanding of climate change issues had me wondering why all service stations would not use Stage 1 vapour recovery. Stage 1 is a vapour balancing system that happens when gasoline is delivered to a terminal, bulk plant or service station. As the cargo operator fills a tank, the vapour in the tank’s ullage would be returned to the tanker, and ultimately, safely destroyed at the refinery or terminal. The balancing system prevents vapours from being vented into the atmosphere. Stage 1 has been required in some parts of Canada like the lower Fraser Valley since the early 90’s. All of Alberta is considered an attainment area so does not have to comply with the CCME Compliance Document for Air Zone Management. For many years Alberta petroleum marketers have been installing two-point re-fueling systems to allow for Stage 1 compliance but this province has never had air pollution levels that are high enough to warrant application of the federal standard. Gasoline vapours are not categorized as a green house gas like vapours from a car’s exhaust pipe are. Vapours that escape from a storage tank’s vent does contribute to the creation of ozone but it seems to be well down the scale as a contributor to climate change. We shouldn’t expect a national implementation of Stage 1 to gather carbon intensity compliance credits.
So, what should our contractors expect from the Clean Fuels Regulation’s implementation? For sure, engineers and contractors that do work for exploration, extraction and refining operations will be busy finding and installing processes that make those activities more efficient. Ultimately, the service station of the future will offer quick-charging for electric vehicles, biogas, renewable diesel or even natural gas as its fuel offerings. In the meantime, the biggest change our contractors will recognize is to their mileage charge rates. One of the stated objectives of the Clean Fuels Regulation is to make fuel more expensive for consumers in order to reduce consumption. Today’s rates of $1.40 to $1.60 a litre across the country is going to seem cheap once the federal government triples or quadruples the carbon tax to meet it’s 2030 Paris commitments. Some oil companies have publicly stated that a carbon tax applied at the pump is the best way of achieving lower carbon intensity.
Regulators and politicians are looking straight at Alberta in its fight against climate change. We are by far the country’s larges emitter (accounting for 38% of total emissions). Alberta’s main industries, oil and gas, agriculture and forestry are all huge carbon emitters. It’s going to be a major challenge for those industries and its supporting cast of engineers and contractors to find efficiencies. It’s hard to imagine climate change commitments being possible without a wholesale electrification shift and the acceptance of nuclear as a main source of energy.
APSSCA Executive Director