9. Making the Regulations Work
Following on from the changes proposed to individual specifications for petrol and diesel, this section examines the continuing requirement for the Regulations in general terms and then changes required to the general provisions in order to make the Regulations work more effectively.
9.1 Why Do We Need the Regulations?
The Review has concluded that the Regulations are still necessary from a consumer, health and safety and environmental perspective. They provide:
- Consistency in terms of product;
- Guidelines for the suppliers and manufacturers in respect of what is acceptable;
- A signal for future developments and therefore potential expenditure; and
- Protection in terms of health, safety and the environment.
Consumers are not in a position to determine the quality of fuel at the point of purchase but good quality fuel is essential to the proper running and long life of engines. Often, problems with fuel quality may not be experienced immediately. Different brands of fuel may have been bought over a period of time before a problem is identified, and it will be very difficult to attribute effects such as engine damage to a particular source and supply.
Consumer legislation has developed since the Regulations were first introduced in 1989 and now provides a greater level of protection for the consumer than it did then. However, the Regulations provide aminimum standard for fuel, and therefore certainty as to what is acceptable. In this respect, they provide buyers of petrol and diesel with an additional layer of protection, to ensure them that fuel bought is fit for purpose while also allowing health, safety, and environmental concerns to be addressed.
Some jurisdictions (South Australia and California, for example) have adopted an alternative approach to regulating some of the properties of petrol by means of air toxics models or environmental equivalence formulae. While this approach fits well with the effects-based principles of the RMA, it covers only those properties which are being controlled primarily to meet environmental outcomes, not those for health, safety and consumer protection which, arguably, require more certainty. Given the inclusion of the latter in New Zealand's specifications, introduction of a separate method for assessing environmental compliance does not seem warranted.
9.2 Fit for Purpose
Fuel processing technology and additives used in petrol and diesel to control fuel quality change with time. Fuel problems in recent years have resulted from changes in fuel properties that the specifications did not adequately control or did not address, for example, the problems encountered with high aromatics in premium unleaded petrol in 1996. It is proposed that a general clause be added to Regulations requiring that all fuel be "fit for purpose". This would strengthen the level of consumer protection, particularly in relation to fuel quality problems arising from properties not directly specified.
9.2.1 Changes Proposed to the Regulations
| Current Regulations | Proposed changes |
|---|
| Fit for purpose: Not specified | Immediate inclusion of a general clause requiring that all fuel be "fit for purpose". |
9.3 Test Methods
Changes to some of the test methods have been proposed to bring them into line with current international practice and technological developments. Where new specifications have been added, appropriate test methods have been proposed. The test methods specified have been developed by internationally recognised organisations such as the American Society for Testing and Materials (ASTM) and the Institute of Petroleum (IP). The tables summarising the regulations, proposed changes and timing for petrol and diesel in the summary section, give the test method references.
9.4 Fines for Non-Compliance
The Regulations currently allow for a maximum fine for non-compliant fuel of $10,000. This compares with the Fair Trading Act 1986 that prohibits false or misleading representations made in respect of the supply of goods or services. Maximum fines under the Fair Trading Act are up to $30,000 for an individual and $100,000 for a corporate body.
It is proposed that, as the Petroleum Products Specifications Regulations sit within the wider framework of consumer protection legislation, the maximum fines for non-compliant fuel should be consistent with maximum fines under the Fair Trading Act.
This will require an amendment to the Ministry of Energy (Abolition) Act 1989, under which the Regulations are issued. The Act currently specifies a $10,000 maximum fine.
9.5 Labelling
Provisions for labelling are not a requirement of the current Regulations. General controls on labelling are provided in the Fair Trading Act 1986. The Weights and Measures Regulations 1999 require that all fixed fuel dispensers be labelled with the type of fuel dispensed, but only for inspection purposes. From time to time, consumers experience problems with misfuelling (filling the vehicle with the wrong fuel). Using regular grade where premium is required can affect vehicle performance, whereas putting petrol into a tank instead of diesel, as well as causing potential engine damage, can be quite hazardous.
Recently, there has been marketing of petrol grades other than regular and premium. "Boutique" grades of petrol have been advertised as having higher octane, or lower benzene, or lower sulphur. It is important the consumer is getting the "boutique" qualities being advertised.
To assist consumer awareness and to help avoid misfuelling, it is proposed the Petroleum Products Specifications Regulations be amended.
9.5.1 Changes Proposed to the Regulations
| Current Regulations | Proposed changes |
|---|
| Labelling of dispensers: Not regulated | Immediate petrol and diesel dispensers at service stations be labelled clearly, including for petrol dispensers, clear labelling of the minimum research octane number (RON) |
| Boutique grades: covered by either regular or premium petrol specifications | Immediate boutique grades of petrol (that is, those grades not marketed as regular or premium petrol) meet the octane ratings and other special properties being advertised, as well as all other properties specified in the Regulations. |
9.6 Ensuring Fuel Consistency
It is important that the variability of our fuel is kept within acceptable bounds to enable us to rely on consistent performance from a particular grade of fuel. We also expect fuel properties with public health and environmental impacts to be controlled within acceptable bounds. Consistency is achieved by setting minimum or maximum limits on key properties. In some cases where the range is critical, such as with the density and viscosity of diesel, both limits are specified.
9.6.1 Pool Averaging
An alternative approach to fixed limits is the use of "pool averages". Pool averages allow variability across the national or regional fuel supply, provided that an average value or specification is met over a specified period. A cap or maximum limit is also specified, but usually at a higher value than the equivalent single flat limit.
This approach has been adopted in some other countries, primarily for those parameters, such as aromatics levels in petrol, that are controlled to minimise environmental impact. On balance, it was considered that the use of pool averages was not practical in the small New Zealand market, and that the objectives of the Review could best be achieved by setting appropriate minimum and/or maximum limits on properties.
However, the specifications do propose geographical and seasonal variations where they are appropriate to cope with different climatic conditions. An example is the cold flow properties of diesel.
9.6.2 Mandated Geographical Differences
Mandated geographical differences in fuel quality have been considered in the Review in response to the geographical nature of some air pollution issues. This type of approach is being used overseas to deal with specific urban air quality problems. Such an approach would be in line with the underlying principle that fuel quality standards reflect the level of risk to health and the environment, which in the case of air pollution is essentially a local problem.
The most obvious split would be fuel specifications specific to Auckland and Christchurch, say, to deal with their particular air pollution issues, or perhaps a broader urban/rural split allowing for cleaner "city fuels". An Auckland-region specification would be the most practical to implement, given that all fuel to the region is delivered directly from the Marsden Point Refinery via the Refinery to Auckland Pipeline. However, this would require agreement between the NZRC shareholders and the regions. This option is currently under consideration, with respect to providing Auckland with lower sulphur diesel.
A wider urban/rural split was not considered practical, given the relatively short distances, the mobility of the New Zealand population and the size of the market. Where this approach is being used overseas, the population and market size is far larger than in New Zealand. The Review has therefore not recommended any geographically divided fuel specifications at this time, other than those for cold flow properties of diesel (refer Section 8.1.4).
9.7 Additives
A wide range of additives is used in petrol and diesel to improve certain properties or characteristics of the fuel. For petrol, these include dyes, detergents, stabilisers, combustion improvers and octane enhancers in petrol. Similar sorts of products are used in diesel along with cetane number and cold flow improvers. Some are added at the refinery during blending and others, such as those used for branding or product differentiation may be added during distribution.
The recent problems associated with the use of a particular cold flow improver in diesel have raised public awareness of the use and regulation of additives in fuel. For the most part, the use of additives is neither required or prohibited by the Regulations. However, there are exceptions to this rule for cases where a specific additive or component of an additive is harmful to vehicle systems or to human health and the environment. Lead, for example, was banned in 1996 because of health concerns. Manganese and phosphorus have been identified in this Review as capable of causing engine and catalyst damage. The use of these substances has been regulated by specific limits on their concentrations in petrol.
There are no requirements under the Regulations to obtain specific approval to be able to use an additive in petrol or diesel. However, the use of any new additive requires approval to be obtained from the Environmental Risk Management Authority (ERMA) which must now approve the use of new hazardous substances in New Zealand. In doing so, it does a thorough product lifecycle assessment, including taking into account the use to which a substance will be put and any impacts on health and the environment.
ERMA maintains a register of additives that are allowed to be used in petrol and diesel. It also lists petrol and diesel, and their components, on its register. New additives may be included on the list following an approval process. Any changes to the registered composition of petrol and diesel also must be approved.
It is not considered that the Petroleum Products Specifications Regulations also need to provide for the use of additives to be restricted. The Regulations do need to define clearly the performance required from petrol and diesel. Whether these are best met by using additives is best determined by the supply industry, subject to complying with ERMA's requirements. As a result of the recent diesel filter blocking problems, a filterability test is proposed to be added to the Regulations (see Section 8.2.5). This is an example of regulating to provide a desired outcome.
There may be merit, however, in clearly defining in the Regulations that petrol and diesel additives are intended to improve fuel performance or fuel distribution.
9.7.1 New Regulation Proposed
| Current Regulation | Proposed changes |
|---|
| Additive: referenced in the definitions of diesel and petrol as allowed. | Immediate include new definition - additive means dyes, markers or other additives used to improve performance in the engine, physical properties, safety, odour, viscosity, lubricity, wear and tear, emissions and emissions control durability, and distribution of diesel or petrol. |
The intention is that such a definition will enhance the Regulations by making the purpose of using additives clear. It will still enable industry innovation in the use of additives.
9.8 Fuel for Retail Sale and All Other Fuel
The Regulations distinguish between all fuel "supplied, or available or intended for supply" and fuel that is sold by retail. Retail sale is defined by the Regulations as the sale of fuel "to an end user who has no written supply agreement or written contract with the supplier". Fuel for retail sale must meet all the specification requirements of the Regulations. Petrol and diesel for all other types of sale must meet only those specifications that protect the environment, public health, and human safety; for example, the restriction on the use of lead.
This differentiation enables specially blended petrol and diesel fuel to be sold through commercial agreements, where there is a written agreement between the buyer and the supplier to supply fuel to specific requirements. (In practice, it is understood that the supply of special blends happens very rarely and all fuel sold usually meets all the specifications, irrespective of its intended use.)
Some of the proposed changes to the Regulations are to properties that originally were regarded as primarily performance properties, and therefore only applicable to retail sale. These changes are now intended to manage health, environmental, or safety impacts as well. There are also additional specifications proposed to manage health or environmental impacts.
The Regulations that are proposed to apply to all fuel and just to fuel sold by retail are:
9.9 Strategy for Ongoing Changes to the Regulations
In the eight months since this review was commissioned there have been a number of significant developments in fuel quality standards and policy overseas, notably in Europe, Australia and the United States. Here in New Zealand the issue of fuel quality has also received significant media attention through recent performance problems (related to diesel filterability) and public discussion of environmental and health issues (primarily related to diesel sulphur content). Fuel price has continued to be a sensitive issue over the period, as has competition, with one independent player having effectively disappeared from the retail fuel market. There is no suggestion that the pace of change is likely to slacken off and regular reviews of the Regulations are therefore recommended.
Back to Top