Headlines

November 3, 2009
EPA Brings SCR, DEF Ruling Down to the Wire in Navistar Suit

EPA will have 60 days to either revise its guidance letter to truck and engine manufacturers using selective catalytic reduction (SCR) and diesel exhaust fluid (DEF) to meet 2010 emissions standards, or issue binding regulation to specify proper compliance, sources tell OPIS. The agency's latest, most stringent nitrogen oxides (NOx) emissions standards drop Jan. 1 --  less than 60 days away.
  
The suit was brought in March by Navistar, the only major truck and engine manufacturer to choose exhaust gas recirculation (EGR) instead of SCR as its method of compliance with 2010 NOx cuts. Navistar claimed that EPA's Feb. 18 guidance document effectively establishes regulation -- compliance requirements for operating SCR systems -- without following proper rulemaking proceedings or seeking public comment, and that those guidelines allow SCR users to pollute in excess of the upcoming standards.
  
On Oct. 23, EPA motioned to be granted 60 days to consider "whether to revise its guidance letter 'to clarify that the guidance was not intended to change existing regulations or be binding or regulatory in nature,' or to issue regulations relating to the subject matter of the guidance letter," Daimler AG spokeswoman Maria McCullough told OPIS, quoting EPA statements from the agency's court motion. Daimler is a major manufacturer of engines equipped with SCR through its Detroit Diesel subsidiary and its BlueTec brand.
  
Navistar's main point of contention is that in EPA's guidance, the agency specified that operators of SCR-equipped trucks "could drive up to 1,000 miles without a full tank of urea [DEF]," Navistar spokesman Roy Wiley told OPIS. Navistar argues that drivers could evade upcoming emissions regulations and additional fueling expenses by repeatedly abusing the DEF-free allowance, effectively disabling the SCR system and its NOx abatement for up to 1,000 miles at a time and rendering the SCR system non-compliant.
  
Therefore, explained Wiley, "We filed a suit because EPA didn't follow the rules of establishing guidance" -- the crux of Navistar's case. The company cited that without an opportunity for comment, the SCR guidance:
   --Improperly amends the 2001 rule establishing the 0.2-gram NOx standard
   --Reverses the 2001 "infeasibility" finding in a way that requires another rulemaking
   --Approves a control technology that causes or contributes to an unreasonable risk to public health, welfare or safety
   --Authorizes operation of diesel engines with their emissions control devices bypassed, defeated or rendered inoperative
   --Ignores EPA's own "not-to-exceed" emissions standards.
  
EPA contends that its reconsideration of the guidance "may resolve or otherwise moot some or all of the issues that are the subject of Navistar's petitions for review ... [and] lead to the very result Navistar is requesting," the agency said in its motion. If EPA were to render the guidance unenforceable, Navistar might forfeit its claim that the agency failed to follow proper rulemaking procedure, though EPA would be left without enforceable requirements for emissions compliance using SCR.
  
The D.C. U.S. Court of Appeals scheduled briefings continuing into March 2010, with the possibility for a hearing and decision to follow. Even EPA's 60- day stay may expire after the new emissions standards' Jan. 1 start date. If EPA were to lose, truck and engine makers using SCR would be months into deployment of the technology based on compliance requirements that might change -- setting manufacturers back significantly.
  
Daimler's McCullough maintained, however, that the suit won't interrupt the deployment of SCR and DEF. "In either case, SCR OEMs [original equipment manufacturers] have developed and adopted monitoring standards and equipment that ensure vehicles are operated in compliance with the requirements of the Clean Air Act," she said, pointing to a willingness by manufacturers to ensure that SCR systems work as intended, and that many will de-rate to 55 mph when out of DEF.
  
Nevertheless, McCullough continued, "Detroit Diesel Corporation does not anticipate any delays in the certification of its 2010 engines." The company's DD13 and DD15 engines, both equipped with SCR, have been submitted to EPA and are awaiting 2010 emissions certification. Navistar's initial briefs to the appeals court are
due Nov. 20.

October 29, 2009
Study: 80% of DEF Market to Hit Truckstops and Retail Stations

When EPA's 2010 emissions reductions take effect in two months, 80% of the vocational diesel exhaust fluid (DEF) market (trucks classes 3-8) will be served by truckstops and retail service stations, according to a recent study conducted by Quixote Group Research.
  
The objective of the research was to "determine fueling, service and maintenance, and fluids and chemicals purchase patterns for vocational trucks to better understand the distribution requirements for DEF," a press release accompanying the study stated. In an October presentation, Quixote Group President Chuck Mattina also detailed growing opportunities for automotive retail chain stores, fleet base refilling operations, dealer service networks, independent service centers, card key lots, worksite and mobile refueling operations.
  
"DEF distribution at both truck stops and retail service stations will satisfy the needs of 80% of the total vocational market," noted Mattina.

Quixote Group found that 46% of the industry refuels specifically at retail service stations, and are particularly important "among class 3-5 vehicle operators and fleets ... 71% currently refuel at retail service stations regularly," he specified. According to Mattina, class 3-5 vehicles are also the most likely to "purchase fluids and chemicals regularly or very frequently at retail stores such as NAPA or AutoZone (50%)."
  
Quixote Group's online survey was fielded to readers of Heavy Duty Trucking magazine in late July 2009, yielding 1,609 respondents representing a cross- section of vocational segments: Distribution and services (32.1%), specialized hauling (15.4%), construction (14.8%), government (9.7%), TL/LTL (9.5%), bulk transport (6.9%) and petroleum (6.1%), according to the press release. Almost 60% of respondents were class 8, with classes 3-5, 6 and 7 each accounting for between 11% and 16%.
  
According to the press release, the study was "conducted on behalf of more than 300 original equipment manufacturers (OEMs), DEF supply companies and related organizations involved in the North American Selective Catalytic Reduction (SCR) Stakeholders Group, an ad-hoc alliance committed to the introduction of SCR technologies for meeting 2010 emissions standards. Quixote Group manages the North American SCR Stakeholders' website, FactsAboutSCR.com, and communications and market analysis for the alliance.

October 21, 2009
Navistar Touts EGR Over SCR and DEF: Cost Savings, Simplicity

In an online webinar Monday, truck and MaxxForce engine manufacturer Navistar touted the reasons the company believes its advanced Exhaust Gas Recirculation (EGR) technology trumps the heavily industry-favored Selective Catalytic Reduction (SCR) as the solution for compliance with EPA's 2010 emissions reduction requirements, effective at year's end: Simplicity, technological superiority, zero operating costs, no infrastructure or aftermarket products and an overall focus on
the customer.
  
Nearly every North American engine manufacturer has opted to use SCR, which requires that truck operators fill up with not only diesel fuel, but diesel exhaust fluid (DEF), the automotive grade urea that the system consumes.

According to Navistar, the industry's collective decision is irresponsible. "We pursued advanced EGR because it was simply the right thing to do when we looked at it from a customer standpoint. Our customers don't need extra hassles or higher operating costs, and MaxxForce advanced EGR is the only solution that avoids both," stated an FAQ on the Navistar website.
  
Navistar Engine Group Director of Marketing Tim Shick told webinar listeners that MaxxForce engine owners bypass extra training, fuels, maintenance, downtime (trucks equipped with SCR will eventually enter a controlled shutdown without DEF) and emissions noncompliance because advanced EGR utilizes four key technologies to achieve an "in-cylinder," rather than a "stop-gap" solution:

   --Advanced high-pressure fuel injection technology
   --Combustion bowl optimization
   --Sophisticated air-management system
   --Proprietary electronic calibration strategies

Shick explained that because trucks using SCR to reduce nitrogen oxides
(NOx) and particulate matter (PM) can still be run for a period of time after running out of DEF, they are constantly in danger of being noncompliant with EPA regulations. Because Navistar's solution is in-cylinder, "EGR takes the emissions burden off the customer," Shick said. Navistar will use credits the company earned from EPA for manufacturing engines that were cleaner than required in previous years to meet 2010 emissions requirements, but Shick ensured all Navistar customers that they would be "fully in compliance 100% of the time."
  
When asked why other manufacturers have almost unanimously chosen SCR over EGR, Shick cited early European implementation and public funding. SCR is an "interim technology" and will be displaced by new technologies that "will render liquid DEF obsolete," he told OPIS. EGR has surpassed SCR both technologically and in cost, Shick continued.
  
Navistar believes the cost of compliance shouldn't be shouldered by the customer, and that cost and compliance should both be non-issues. Rather than paying to top off with DEF, Shick told listeners that with EGR, "the only thing you'll do is turn your truck on and drive," and challenged audiences to prove how SCR and DEF could be cheaper. "When one looks at the entire lifecycle cost of that product, ask yourself if there is any way an SCR system with all the added complexity and infrastructure will cost less than advanced EGR," he said.
  
In answering whether increased fuel economy could make up some of the difference in cost, Shick called the notion that SCR systems provide better fuel economy "a myth," and purported that EGR could actually provide more significant increases in fuel economy than SCR. He referenced a case in which some Navistar trucks equipped with 2010 advanced EGR had performed at an "11% increase even from this year's EGR."
  
After emphasizing the importance of customer-first strategy, the company entertained questions from interested parties and customers at the end of the webinar. A grocery hauler asked, "Will there be a mpg penalty with EGR?"
  
He was met with a "no," followed by silence. When asked about the status of urea distribution in the U.S., Shick replied, "We don't much care, we're not distributing it."

October 16, 2009
DEF Distributors Tackle Market Estimates, Logistics

Big names in diesel exhaust fluid (DEF) supply are making moves to map out their distribution strategies and their production volumes as 2010 looms.
  
As the economy rebounds, fleets turn over and outdated engines are replaced with those using SCR, Mansfield Oil Director of Business Development and Biofuels Bob Gray says the DEF market is likely to see what he calls a "hockey stick growth chart." Gray heads up Mansfield's side of a partnership with Yara North America, the domestic arm of the world's largest DEF producer, to distribute Yara's Air1 brand of DEF throughout the U.S. "I still think we'll get to a billion" gallons in volume "10 years down the road," Gray told OPIS, but stuck to an estimate of "30 million [gallons] for 2010."
  
When asked if pre-recession predictions by the Engine Manufacturers Association of 725 million gallons by 2015 were still relevant, Gray responded, "I really do think you can cut those by 50%." The assumptions also may have been using higher dosing rates (3%-5%) than today's almost-standard 2%. As the nascent market grows, both the quantity of DEF distributed and its recipients (retailers, fleets, etc.) will dictate the methods by which it is packaged and shipped. "In the first three years, 80% of production will probably be 1-2.5 gallon [bottles], [55 gallon] drums, and [275 and 330 gallon] totes," said Gray. Mansfield and Yara will have "most major ports covered," he added. "Baltimore, L.A., Stockton ... and a number of points in between."
  
By contrast, U.S. DEF producer Terra Environmental Technologies (TET) and
distribution partner Brenntag North America emphasized the alliance's "dedicated bulk distribution" to "truck stop and major diesel retailers" at OPIS' recent Fleet Fueling Conference & Exhibition in Atlanta --  "1,000-2,000 gallon above ground storage, eventually [more than] 5,000 gallon below ground [storage], and DEF dispensers [with] point of sale integration."

But for "fleets, dealerships, and service centers," TET's Director of Marketing John Lounsbury specified the company will focus on "tote and drum dispensing systems, temperature controlled enclosures, and minimal point of sale integration." TET will provide "2-gallon dispensing bottles" in both scenarios, noted Lounsbury, indicating that "DEF demand [is] likely to be concentrated in truck stops along interstate routes and in fleet terminals, [whose] locations will closely follow truck stops."
  
Radnor, Pa.-based Airgas, whose AiRx brand of DEF just received certification from the American Petroleum Institute (API), told Atlanta attendees to expect that "totes, drums [and] bottles" won't dip below 60% of "DEF package demand" until 2014, the first year in which bulk demand will account for more than 40% of the market. Jodi Crawford, Airgas Specialty Products business development manager, predicted AiRx would corner 15% of a market of just 16 million gallons ($7 million in revenue) in 2010, scaling up to roughly 106 million gallons by 2014 (just under $48 million in revenue).
  
In such a market, "275 & 330 gallon totes" will account for the "majority of early demand," said Crawford, but indicated that bulk distribution would be a "core competency" supply model that "the market will move to ... over time." Airgas will employ a "geographic focus" that evolves with market demand, Crawford explained: Airgas will use trailers at its "Dallas, Atlanta, & Lima, OH ... branch[es] until [the] market justifies storage," use "existing assets to accept railcar deliveries and gain cost advantage in Southern California," and "fill and ship totes to other branches as need [is] identified with little or no capital."
  
In the uncertain, in-motion market, TET's efforts to provide "tools to maintain a steady supply" include an automated DEF calculator Lounsbury demonstrated in Atlanta. Companies input the number of SCR trucks it operates, the average miles travelled by each truck annually, average fuel economy and DEF dosage rate. Out comes the "average yearly volume of DEF you will consume" and the corresponding "recommended form of package to be used when ordering DEF:" 0-300 gallons, bottles; 300-800 gallons, drums; 800-3,000 gallons, IBCs/totes; 3,000-4,000, mini bulk; 5,000+, bulk. In the example used, a fleet with 10 SCR trucks averaging 100,000 miles per year and 6 mpg requires a yearly volume of 3,333 gallons of DEF when dosing at 2% DEF per gallon of diesel fuel.

October 14, 2009
Heavyweights Present DEF Supply Strategies

Industry experts want fleets and truckstops to familiarize themselves with some key questions and strategies to explore when sourcing supply and distribution of diesel exhaust fluid (DEF), including domestic versus international production, quality standardization, distribution and handling capabilities, and supply chain logistics.
  
DEF supply is ramping up quickly to meet EPA's 2010 clean air requirements and the demands of fleets using Selective Catalytic Reduction (SCR) emissions reduction gear. At OPIS' recent Fleet Fueling Conference & Exhibition in Atlanta, European juggernauts Yara and Brenntag drew on their experience with Adblue, DEF's European precursor, in outlining these important factors to consider before signing a DEF supply contract.
  
Brenntag's Director of Business Development Alan Smith cautioned that as many companies enter the DEF market, they ask, "How can you ensure you have the right supplier?" and provided the following guidelines:
  
-Review production processes from manufacture through the entire supply chain to ensure quality standards are met.
  
-Ask who is supplying the AUS-32 (urea) to find out if it's a long-term supply source.
  
-Ask who is packaging, handling, or delivering the DEF to explain their quality process.
      -Is this an ISO facility?
      -Do they have proper equipment?
      -Do they have a laboratory on site?
  
-Visit potential suppliers and audit their facilities.
      --Is your supplier's core competency in the packages required for DEF -- IBC,
drums, small bulk?
      --Do they have box trucks for these packages?
      --Do they have stainless tanks and delivery systems?
      --Do they have experience handling urea and or DEF?
  
Yara presented (and answered) some questions of its own, with a selection of "myths" versus "facts" aimed at promoting imports (which Yara will engage in extensively) and debunking apprehension over European crossover. "Myth: DEF
grade urea produced overseas contains formaldehyde and will not meet North American specifications when dissolved/blended," according to Dombroski, who continued to specify, "Fact: Urea produced overseas for DEF use in North America meets the same ISO standards as domestically produced DEF and does not
contain formaldehydes." Dombroski also dispelled the notion that DEF could be
made in house, citing as myth that a company could "buy dry urea and blend it with deionized water at [their own] facility, instead contending that "blending is an exact process and setting up your own dissolving plant can be relatively costly."
  
"50% of urea used is imported," said Dombroski. "Domestic production [is] limited to start but will grow," he added, detailing that "imported product in liquid and dry forms will also help supply the [North American] market." At the conference, Yara signed contracts with U.S. distributor Mansfield Oil to sell Air1 DEF imported from Oslo, Norway-based Yara International by Yara North America in Tampa, Fla., as well as DEF produced domestically for Yara by Cherokee Nitrogen Co. in Atlanta.
  
By contrast, Brenntag touted its mutually exclusive, domestic sourcing
partnership with Terra Environmental Technologies (TET) to market the Sioux City, Iowa-based manufacturer's TerraCair brand of DEF across North America, "leveraged through Brenntag's extensive network of locations," according to the chemical distributor. Smith presented supply strategies, including the strengths of Brenntag's "single supply/single channel" supply model with TET, versus the "multiple supply/single channel" and "single supply/multiple channel" infrastructures used by competitors.
  
All DEF suppliers have "similar elements," said Smith, including "urea supply (AUS-32), packaging and distribution." But Brenntag and TET's "single supply/single channel" arrangement creates competitive advantages and core competencies, Smith explained, including "a constant name throughout the process, dedicated tonnage, standardized delivery systems and supply partners, and national or international coverage."
  
Though "DEF will be produced and supplied from a variety of areas and methods ... ample supply of DEF will be available in 2010 to meet North American demand," Dombroski summarized. "Domestic production and plants," likely including Yara's own, "will continue to ramp up as demand rises," he finished.