Better Air Quality 2004 Agra, December 6-8, Fuel Quality Monitoring and Enforcement Liisa Kiuru, Director, Asia International Fuel Quality Center (IFQC) Better Air Quality 2004 Agra, India, December 6-8, 2004

Better Air Quality 2004 Agra, December 6-8, International Fuel Quality Center

Better Air Quality 2004 Agra, December 6-8, Fuel Quality Building Blocks Source: International Fuel Quality Center (IFQC), 2003 Monitoring and Enforcement

Better Air Quality 2004 Agra, December 6-8, Importance and Objectives of a Fuel Quality Monitoring System (FQMS) Foundation of clean fuels is based on –National standards –Ability to ensure and/or control fuel quality at the point of distribution Monitoring fuel quality Policing and enforcing to ensure compliance Primary objectives are to –Ensure required fuel quality at any point –Protect consumers Environmental / Health / Technical / Financial –Deter tax evasion i.e. adulteration –Deter off-spec fuel Intentional (=adulteration) Unintentional (=contamination)

Better Air Quality 2004 Agra, December 6-8, Core Issues to Consider 1.Identification of responsible authority 2.Industry cooperation 3.Operation budget 4.Capacity –Staff –Equipment 5.Sampling 6.Sanctions and penalties for non-compliance 7.Fuel quality reporting Design, develop and implement your own program

Better Air Quality 2004 Agra, December 6-8, Responsible Authority Govt. organization prescribing fuel quality must hold authority or work closely with the one that holds authority to monitor and enforce the provisions of the fuel quality strategy’s monitoring and enforcement requirements Responsibility may be divided – close coordination needed e.g. main authority, treasury, industry etc. Structure and support establishing and implementing the process dependent on individual circumstances

Better Air Quality 2004 Agra, December 6-8, Industry Cooperation Self monitoring (complimented by random government sampling) Essential for any FQMS to function properly –Self sampling –Testing –Surveys –Submission on reports Industry competition and image as driver for involvement of industry in promoting appropriate fuel quality Depends on type of FQMS

Better Air Quality 2004 Agra, December 6-8, Operating Budget Adequate financial resources are necessary; otherwise limited sampling and testing capabilities –Difficult to verify compliance –Analysis of limited properties Costs vary depending on country: –Breadth of the system –Complexity of the system –Laboratory equipment and test methods used –System framework –Resources (personnel) required –Other (logistics, legal requirements…)

Better Air Quality 2004 Agra, December 6-8, Capacity Staff Depends very much on size of the country and complexity of the system May be partly covered by industry involvement Training of personnel Equipment Depends on fuel properties to be monitored Setting stringent standards without consideration of full capabilities to effectively monitor and enforce may not be prudent Both refining and automotive industries have organizations or groups that are well established to provide best possible methods, machinery and testing apparatus as well as guidance e.g. ASTM

Better Air Quality 2004 Agra, December 6-8, Sampling Good sampling program needed – most countries have some industry monitoring which is complimented by regular and/or random government sampling Number of samples needed to be taken depends on: –Variation of petroleum product distribution –Geographic factors (e.g. size) ensuring representative ratio of samples –Seasonal variation –Total sales as well as geographic distribution analyzed Typical Sampling Procedure –Sampling done at the refinery gate, point of transport, and retail outlets –3 samples taken: 1 sample taken to the laboratory for analysis; 1 sample stays with sampling official as a counter analysis 1 sample stays with manager of point of sampling –Analysis of sample done within 24 hours

Better Air Quality 2004 Agra, December 6-8, Sanctions and Penalties A FQMS can only be as effective as its sampling and enforcement mechanisms Sanctioning and penalty scheme must be legally binding and established early on to act as a deterrent; they can include: –Monetary fines; –Business permit revocations; –Operation restrictions; –Business closures. Government must have authority to use sanctions Malpractice versus carelessness (less severe sanctions) “Name-and-shame” policy –Release non-compliant data to public –Immediate impact on consumer acceptability and confidence

Better Air Quality 2004 Agra, December 6-8, Reporting FQMS is the core implementation tool for the Fuel Quality Strategy  reporting on annual basis is essential e.g. local, national, and regional (EU) reporting requirements Entails carrying out detailed analysis of the annual findings to assess non compliance trends and whether the enforcement mechanisms need revamping. Should include: –Compilation of samples taken and analysis of the results –Details about quantities of each grade sold –Description of FQMS

Better Air Quality 2004 Agra, December 6-8, FQMS in U.S.A (1/2) Most extensive program All fuel quality programs include corresponding monitoring and enforcement mechanisms U.S. relies on various monitoring mechanisms: –recordkeeping, fuel sampling/testing throughout the production and distribution system, fuel quality surveys, audits, registration, certification, attests, labeling Onus is on industry to ensure compliance through these mechanisms Random unannounced inspections conducted by US EPA –take samples + ensure that other aspects of the fuel program are complied with i.e. record keeping Internal Revenue Service also does frequent random inspections to ensure against tax evasion, particularly for diesel fuel

Better Air Quality 2004 Agra, December 6-8, Number of enforcement actions: criminal and civil actions, administrative penalties and injunctive authority –Civil penalties for non-compliance – US$25,000 per violation per day and may recover the cost of the economic benefit from the non- compliance Every party in the distribution chain can be held liable = one of the single most effective deterrents against non- compliance Automotive and petroleum refining industries monitor annual/seasonal trends in fuel properties –Monitoring of trends by Alliance of Automobile Manufacturers (AAM) since the 1970s –Petroleum industry uses surveys to monitor in-use product quality for compliance and competitive product quality reasons FQMS in U.S.A (2/2)

Better Air Quality 2004 Agra, December 6-8, “Directive 98/70/EC on the Quality of Petrol and Diesel Fuels” does not include clear requirements for FQM and enforcement – however it does require submission of reports to the Commission yearly CEN Standards for FQM: “EN Automotive fuels — Assessment of petrol and diesel quality — Fuel quality monitoring system” “EN Automotive fuels — Assessment of petrol and diesel fuel quality — Sampling from retail site pumps and commercial site fuel dispensers” –serve as guideline i.e. not mandatory, but equivalent fuel quality monitoring results need to be guaranteed –no enforcement under the scheme - left to EU Member States FQMS in the EU

Better Air Quality 2004 Agra, December 6-8, Belgium has transposed into national law and has a unique FQM program One of most extensive programs in the EU Ministry of Economy responsible authority due to its traditional role in enforcing excise duty payments Relies mostly on a sampling program as method as well as “name and blame” approach Petroleum Analysis Fund (Fapetro) established through a tax on consumer and oil industry to fund compliance program –Jointly run and funded monitoring program found to decrease costs for each party Enforcement mechanisms include civil actions –In 2001: 612 infringement warnings – refueling stations shut down, generally for a short period of time. FQMS in Belgium

Better Air Quality 2004 Agra, December 6-8, FQMS in Japan Law for fuel quality monitoring in place since 1996 Service station responsibilities: –Testing and reporting required – every 10 days –With “SQ” mark testing required once a year Producer, importer, refiner responsibilities: –Quality verification through self-testing and reporting Samples tested at the National Petroleum Association (NPA), part of Ministry of Economy, Trade and Industry Spot check results updated on the NPA homepage every quarter and published in newspaper Penalties for non-compliance include up to six months in jail or a fine of up to JPY500,000 (approximately U.S. $3,990)