Australian Convenience Store News - Forecourt

ncreasingly customers and authorities will be asking about the environmental performance of your business. So far, the pressure has been on big corporates to prove their environmental credentials. Now it's your turn. In this and future issues of Australian Convenience Store News we will look at fuel quality and standards, alternative fuels, and environmental issues on the forecourt.

Have you been tested recently? The new fuel tests turn out to be a lot less traumatic than you might initially fear. If you are informed of your obligations and follow some fairly simple procedures, then you should be OK.

Who's testing whom?
New fuel standards for petrol and diesel were introduced on 1 January this year, and fuel sampling has started, with over 370 samples taken, and 200 tested. So far, only a small number of samples have been found to be off-specification and these are under investigation. "One load in New South Wales had a very low octane rating (RON 55-60) and comprised mainly naptha. Then there was a load of diesel that turned out to be mould release oil," said Graeme Marshall, Director, Clean Fuels and Vehicles with Environment Australia. "However, it is reassuring to see widespread compliance with the standards, and a relatively smooth implementation. Involvement by the State authorities has made it more effective."

The testing is being carried out by State departments of fair trading and the Australian Tax Office. They carry ID, and must have your permission to test the fuel. They take three samples, one of which you keep. They also pay for three litres of fuel and give you a receipt. Although testing of fuel is voluntary, refusal would be considered unusual, and you could expect a follow up call from Clean Fuels and Vehicles. "In the few cases so far where testing has been refused there has been a misunderstanding on the part of the retailer about the tester's intentions," added Graeme Marshall. "We have been able to clarify and put retailer's mind at ease."

As a last resort, they can obtain a warrant.

Some sampling follows information received from the public and some from random selection. Approximately 100 reports were received in the first months of implementation. These mainly concerned fuel supplies in New South Wales. Clean Fuels and Vehicles has so far focused on service stations, but from July 2002, distributors and producers will also be included in the sampling program.

Earlier this year an information package went out to over 7,500 service stations and fuel distributors across Australia. The package includes a poster, brochures, a magnet and information sheets on the obligations of fuel suppliers under the legislation. If you have not received yours, contact:
Clean Fuels and Vehicles Community Information Line, 1800 803 772

It is the retailer's responsibility to only sell fuel that is within specification. This sounds fairly onerous, but in reality the main task is to make sure you get the right documentation from your supplier. The full details are in the information pack, but the main one is a statement of whether the fuel complies with the standard under the Act.

"The emphasis was on not adding to the regulatory burden for retailers," Graeme Marshall said. "If a test shows that the fuel is not within specification, the documentation is checked and we follow the document trail." If the fuel is well outside specification and the documentation is in order, then things could get tricky. Producers and importers may be fined up to $550,000 for supplying fuel that does not meet the standards, and individual fines up to $110,000 are possible for retailers who alter the specification after delivery.

Some oil refiners are doing their own testing. "The Caltex fuel testing program has been on the road in Sydney, explaining to fuel operators the requirements under the Act, advising sites on stock reconciliations (a requirement under the Act) and taking petrol samples for a limited testing program," Phil Dunbar, Transport Fuels Marketing Manager, said. "The program will soon be expanded to a wider range of tests and will include south-east Queensland. All results from petrol tested to date have met the requirements of the Act."

Why?
The standards were set under the Fuel Quality Standards Act 2000. The main objectives of the Act are to reduce the level of pollutants and emissions arising from the use of fuel that may cause environmental and health problems; to facilitate the adoption of better engine technology and emission control technology; and to allow the more effective operation of engines.

The introduction of the fuel standards in Australia was to some extent inevitable. "Around the world, vehicle manufacturers are responding to the increasingly stringent requirements for emissions and fuel economy. New vehicle emission design rules consistent with international standards will be introduced into Australia from 2002 to 2006. The technology is becoming available to achieve them but fuel quality is critical," said Rex Scholar, Chief Engineer with the Federal Chamber of Automotive Industries (FCAI). "The Government's aim is harmonisation with international vehicle standards. The FCAI supports harmonization. However, to meet international standards for exhaust emission requirements, we must have international standards of fuel quality."

The current petrol standard is compatible with the Euro 2 petrol engine standard. By 2005, it will align with Euro 3 for most parameters (excluding MTBE which is still permitted at higher levels in Europe). Similarly, the current diesel standard reflects the Euro 3 diesel engine standard (with the exception of higher permitted sulphur levels) and by 2006 will align with Euro 4.

"Australia is well past the stage where it can rely on voluntary standards," added Ewen Macpherson, Deputy Director, AIP. "Broader supply patterns including imports, alternative fuels and instances of fuel substitution mean we need a consistent set of standards to ensure fuel quality. This was also an opportunity to introduce operability standards which should be announced later this year. Once these are in place with the Euro 3 petrol (2005) and Euro 4 diesel (2006), Australia will have the most comprehensive standards in the world."

Over the longer term, past 2006, the main challenge for oil refiners is to reduce sulphur levels in petrol and diesel to near zero. This is the only way the next level of international emission standards can be met by existing vehicle technology. This time, the car manufacturers and importers are working closely with the oil refiners to establish and propose a realistic timetable. The next level of standards will not come cheap or easy.

With all this harmony, we could be forgiven for asking why there are some loud, discordant voices in the media. It seems not all issues are resolved to everyone's satisfaction. The main ones are MTBE and ethanol levels in petrol.

MTBE or ethanol? It's not that simple
Following similar moves in Western Australia and Queensland, the national fuel standards introduced a virtual ban on the addition of MTBE to petrol by setting the maximum MTBE content at 1% by volume from January 2004.

MTBE, or methyl tertiary butyl ether, is a petrochemical fuel additive that lifts the octane rating and reduces some air pollutants. It has been widely used in the United States - more so in states that mandate minimum levels of oxygenate to promote cleaner air in smoggy cities such as Los Angeles. Where MTBE was found to have entered the water supply system, contaminating the smell and taste of drinking water, it was banned. In California it is to be phased out by 2004. To meet the mandated oxygenate levels, refiners in California will use ethanol, the other popular oxygenate. The European Commission standard for 2005 onwards permits the same level of MTBE as the current standard, 15% by volume. The addition of MTBE is one means by which European refiners can now achieve tighter controls over other components of fuel, such as aromatics.

Ethanol, an alcohol produced from agricultural crops, can be used as a fuel in itself or blended with petrol. Like MTBE, it increases the octane rating and reduces emissions. Both have a lower energy content than petrol. Ethanol is widely used in Brazil where cars are modified to use either pure ethanol or a 22% blend. In the US, blends are limited to 10% ethanol and in Europe to approximately 8%. The Government's recent fuel testing program found a number of sites in New South Wales with ethanol levels up to 20%. While these levels are not considered breaches of the Fuel Quality Standards Act, the ACCC has expressed concern relating to potential misleading conduct under the Trade Practices Act. The ethanol specification is to be decided later this year with the results of a technical assessment of the use of petrol blends with 20% ethanol in the current Australian vehicle fleet.

In Australia, refiners do not need to use MTBE or ethanol for octane enhancement, producing high-octane fuel through their processing capacity while staying within the international standards that apply to other octane boosters such as aromatics and benzene. However, ethanol blends up to 10% are supplied by BP in Queensland and by a Caltex distributor in New South Wales. Ethanol blends up to 20% are supplied by Manildra Park Petroleum.

Most Asian refineries add MTBE and until 2004 importers may import petrol containing substantial quantities of MTBE into some Australian states. Fuel importers are concerned that MTBE is a key ingredient in imported fuel and their supply price will increase with the ban.

Ethanol producers claim that blends up to 20% have no adverse impact on the existing vehicle fleet. However, car manufacturers and importers disagree. "Internationally, blends with up to 10% ethanol are "approved" by the vehicle manufacturers, and FCAI supports the 10% limit," said Rex Scholar. "A blend of 20% ethanol will not be approved because of problems with operational and engine durability as well as degradation of fuel system components."

We will take a closer look at the ethanol issues in the next installment of this series - Alternative Fuels. Suffice to say, the issues - environmental, technical and political - are complex, and we will try to get behind the arguments to understand what it means for you and your customers.