From PoliticoPro, By Amy R. Sisk,  The calendar may say August, but several Northeastern states are already making big decisions about how residents will heat their homes this winter.

As of July 1, heating oil suppliers in Connecticut, Massachusetts, Rhode Island and Vermont must comply with new state rules to reduce the amount of sulfur in their product. Delaware, Maine, New Jersey, New York state and Pennsylvania are implementing similar rules.

For millions of homeowners and businesses, the change means their heating systems will emit less sulfur dioxide, which contributes to acid rain and haze. They will also burn through less fuel, and their furnaces will be able to go longer between maintenance visits, according to industry experts, who say any increase in costs should be negligible.

But the switch could prove to be a boon to the heating oil industry, which has lost market share as cleaner fuels like natural gas gain popularity.

“We needed to take away the argument the natural gas industry has used against us the past 20 years, and that’s the environmental aspects of the fuel,” said Matt Cota, executive director of the Vermont Fuel Dealers Association.

Industry experts hope cleaner heating oil will bring the same boost that ultra-low-sulfur diesel has brought to the auto industry since it became mandatory in 2010. Diesel and heating oil are essentially the same substance, though their sulfur levels can vary and heating oil is dyed red to distinguish it from diesel.

“Diesel was dirty. No one thought about buying a diesel car,” Cota said. “Now diesel car sales are doubling because that’s the new clean fuel.”

The states began proposing tightened sulfur limits for heating oil after state environmental officials that make up the Mid-Atlantic/Northeast Visibility Union – which coordinates haze activities to meet EPA rules – decided to address the issue more than five years ago, said John Huber, president of the National Oilheat Research Alliance. The only holdout so far is New Hampshire.

Rhode Island and New York City have also gone a step further by requiring that all heating oil contain a small amount of biodiesel, made from vegetables like soybeans or leftover grease from restaurants. Besides yielding a cleaner-burning fuel, that mandate offers a potential bright spot for biodiesel producers at a time when the biofuel industry is sweating the EPA’s upcoming decision on its Renewable Fuel Standard.

Though the states’ new heating oil mandates vary, many are requiring the fuel to meet a new sulfur limit of 500 parts per million as of July 1 – down from as high as 5,000 ppm. By 2018, that would drop to 15 ppm, the same limit that the EPA has set for diesel fuel for vehicles.

In the Northeast – where oil as a heat source is most prevalent in the United States – heating oil falls behind coal-fired power plants as the second largest emitter of sulfur dioxide, said Arthur Marin, executive director of the Northeast States for Coordinated Air Use Management.

If every state in the region were to move to 500 ppm sulfur in residential and commercial heating oil, the amount of sulfur dioxide in the air would drop by 100,000 tons per year, he said. That would leave heating oil responsible for emitting 20,000 tons per year, a number that would shrink close to zero when states go to 15 ppm.
But even with the sulfur reductions, natural gas still beats out heating oil as the cleaner of the two products, Marin said.

To meet the new requirements this winter, suppliers will blend their traditional, high-sulfur heating oil with ultra-low-sulfur sources, said Chris Herb, president of the Connecticut Energy Marketers Association.

In his state, heating oil in years past contained 3,000 ppm sulfur, Herb said. He said some suppliers have already gone down to 15 ppm.

Customers could see a small bump in the price per gallon of the cleaner heating oil, but the switch’s net effect on price should be zero, Huber said. Oil burns more efficiently with less sulfur, so customers will use 1 to 2 percent less fuel to heat their homes than in years past, he said.

The price of heating oil varies – at times, fuel with 15 ppm sulfur costs less than oil with a higher sulfur content, Huber said. Other times, it can be as much as 30 cents more per gallon.

“It’s a nickel or dime difference, but the consumer comes out ahead,” he said, adding that customers can go longer between repairs and cleaning their heating systems when using lower-sulfur fuel.

Meanwhile, the pressure is building on the heating oil industry as several states weigh policies that would bring natural gas to more homes. Connecticut, for one, passed a law last year that aims to convert 280,000 additional homes to natural gas over the next decade.

The push to expand natural gas infrastructure has Michael Ferrante, president of the Massachusetts Energy Marketers Association, worried for the heating oil industry in his state.

“That can drive a wedge into our success and long-term survival,” he said.
Other states are actively encouraging the use of biodiesel for its environmental benefits. Rhode Island and New York City require that all heating oil contain at least 2 percent “Bioheat,” the industry’s name for heating oil blended with biodiesel.
Though no other states require Bioheat, the substance is already widespread in the Northeast because the RFS requires blending biofuels into the nation’s fuel supply, said Paul Nazzaro, who represents the National Biodiesel Board to the petroleum industry.

“You would have to look really hard for a home heating oil customer who does not have biodiesel in their tank,” he said.

Like others in the biofuels industry, heating oil producers worry about the uncertainty surrounding the EPA’s 2014 renewable fuel volumes. Nazzaro said it’s especially taxing on small producers that have built plants and hired workers based on what they assumed would be higher RFS numbers.

Instead, the draft proposal that the EPA announced last fall would keep this year’s biodiesel mandate the same as last year, at 1.28 billion gallons. Though the renewable fuels industry is pushing the agency to increase that volume, the EPA has not yet announced its final decision.

Despite the debate over RFS, the push to reduce sulfur in heating oil should help the industry stay competitive, Marin said.

“This is one of those win-win situations,” he said. “We were able to provide an environmental and public health benefit, and an economic benefit to the hundreds of small businesses in our region that sell and service heating oil.”
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