Friday (1/15) marks New Jersey's deadline to comment on its proposal to lower the sulfur content in heating oil to 500 parts per million or less in 2014 and to 15ppm or less in 2016, with the state's Department of Environmental Protection holding a public hearing Jan. 5 at the state capital in Trenton on the proposal.

Should N.J. move ahead with its Nov. 16, 2009 announced specifications, it would be the first state to require a lower sulfur content in heating oil, which follows federal laws that have cut the sulfur content in transportation distillate fuels.

"EPA hopes and expects its regional neighbors to join the effort," said Raymond Werner, chief for EPA's Region 2 Air Programs Branch.

The two phased proposed rule by NJDEP, amendment N.J.A.C. 7:27-9.2, would require No.2 oil and lighter grades to have a sulfur content of 500ppm or less and No.4 oil 2,500ppm or less as of July 1, 2014. No.5, No.6 and heavier fuel oils are required to have a sulfur content of 5,000ppm or lower starting July 1, 2014 except for municipalities in southern N.J. The second phase would require No.2 oil and lighter grades to drop the sulfur content another 97 percent to 15ppm or lower starting July 1, 2016.

No.2 or heating oil grade material and No.1 or kerosene currently have a sulfur content between 3,000ppm and 2,000ppm, with little used No.4 oil having a 7,000ppm sulfur reading. No.5 and No.6 residual fuel oil have a sulfur reading ranging from 20,000ppm to 3,000ppm.

NJDEP official William O'Sullivan, who chaired the hearing, said the proposal followed five years of deliberations by the agency, which included interaction with the oil industry.

Al Mannato, Fuel Issues Manager with the American Petroleum Institute, said, "API believes a transition to 500ppm is workable."

Mannato said the N.J. proposal fits with federal regulations for lower sulfur content in distillate fuels. He also said the API believed it was important for all states to work together to avoid pockets of different fuel specifications that challenge the supply chain to support multiple products.

June 1, 2006 began the four-year implementation of ultra-low sulfur diesel fuel that dropped the sulfur content in low sulfur diesel from 500ppm to 15ppm. Diesel's sulfur reading for non-road, locomotive and marine is currently transitioning to 500ppm or lower by 2014.

However, Mannato said that 15ppm sulfur should not become a home heating oil standard, with the API preferring a 50ppm sulfur specification for the light oil. API also wants this standard to take effect two years later in July 1, 2018 to give the industry more time to address the change.

Mannato said establishing a heating oil standard equal with transportation fuels would create competition for the fuel that could drive up prices for homeowners using No.2 oil to warm their homes, especially with demand growing internationally.

The 50ppm sulfur level was also seen by the API as a way to absorb off spec product, and noted that was the fuel oil specification for some other countries that export fuel to the U.S.

James Benton, executive director of the New Jersey Petroleum Council, who also provided testimony at the Jan. 5 hearing, said N.J., a critical hub for the petroleum industry, imports roughly 20 percent of its fuel with another 30 percent satisfied by Gulf Coast refiners. He was concerned that the regulation could limit supplies because of the more stringent sulfur specification. He also said it could force suppliers to invest in expensive sulfur removal technology, which is now only located at refineries.

Eric DeGesero, executive vice president of the Fuel Merchants Association of New Jersey, also disagreed with the timeline in lowering No.2 oil to 15ppm, but preferred an even faster implementation date.

Citing competitive issues for its members, DeGesero is concerned that a higher sulfur reading for No.2 oil compared with transportation fuels could create an image problem for heating oil, making it seem as if it's a dirty fuel.

"We quite simply don't want to be the sulfur sink," he said.

DeGesero said he could not see an issue with refiners producing the same sulfur type of fuel for both transportation and as a heating fuel, noting too its restricted geographic and seasonal use.

The largest concentration of heating oil demand is in the Northeast and upper Mid-Atlantic regions. There's also heating oil demand in the upper Midwest and Pacific Northwest, with those two regions reverting to ULSD quality product when No.2 oil supply runs out.

He said too that Philadelphia, Pa.-based Sunoco, Inc., a major fuel supplier for the region, only supplies 15ppm product to heating oil customers in southern N.J. now, a practice started roughly two years ago.

"So you're seeing a choking out of 500ppm already," said DeGesero.

An API report cited by NJDEP "found that even without any change to the allowable sulfur-by-weight specifications in heating oil" the 2010 production of low sulfur heating oil in the eastern U.S. will reach 250,000 bpd compared to 90,000 bpd for high sulfur heating oil, or approximately 73 and 27 percent of the total distillate fuel oil production in the eastern U.S.

"This closely corresponds to the nationwide relative production values for high and low sulfur heating oil in 2010," writes the NJDEP. The API projects 2010 production of 423,000 bpd for low sulfur heating oil and 155,000 bpd of high sulfur heating oil.