CIPMA Connection

July| 2018

MESSAGE FROM THE PRESIDENT JENNIFER STEWART

IMPROVING SAFETY AT GAS STATIONS & CONVENIENCE STORES IN ALBERTA BY: ALBERTA MINISTRY OF LABOUR

DIESEL FUEL QUALITY – A HIGH PRIORITY BY: JOHN EICHBERGER | FUELS INSTITUTE

UPCOMING EVENTS NEWS UPDATES

FULL MEMBERS

ASSOCIATE MEMBERS

CONNECTION CONTENTS 1

| MESSAGE FROM THE PRESIDENT | Jennifer Stewart

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| IMPROVING SAFETY AT GAS STATIONS & CONVENIENCE STORES IN ALBERTA | By: Alberta Ministry of Labour

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| DIESEL FUEL QUALITY – A HIGH PRIORITY | By: John Eichberger | Fuels Institute

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| UPCOMING EVENTS

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| ADVOCACY UPDATES

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| NEWS UPDATES

MISSION CIPMA’s mission is to ensure the sustainability and growth of a healthy and viable independent fuel marketing and distribution sector at both the wholesale and retail levels in Canada. Our specific goals include: Ensuring that independent fuel marketers thrive and have the opportunity to earn a fair and reasonable return that is proportionate to their business risk and capital investment, and ensuring that Canadian consumers and independent fuel marketers have access to a competitively priced and readily available supply of fuel products in all regions of the country.

MESSAGE FROM THE PRESIDENT JENNIFER STEWART | PRESIDENT & CEO

Dear CIPMA Members and Associate Members There has been no ‘summer lull’ for us here at CIPMA. Our advocacy efforts are in full swing with additional interest and engagement in the Smart Fuelling program, and campaign outreach on credit card fees underway. Details on this and more are available in our Advocacy Bulletin, also published this month.

Our 2018 Membership Survey is still available for input. I encourage all Members to take the time to fill out this important survey. Its results play a significant role in defining our advocacy efforts and communicating about our sector to government and the public at large.

In this edition of Connection, you will find a primer from the Alberta Ministry of Labour with relevant updates to the province’s Occupational Health and Safety Code that came into effect on June 1st. The Fuels Institute also share their insights and outlook on the diesel and heavy-duty vehicle market in Canada.

Registration is open for the annual Golf Challenge in September, I hope you are all able to come out and join us on the green! In the meantime, I hope that summer continues to treat you all well.

As always, please do not hesitate to reach out.

Until next time,

Jennifer Stewart President and CEO Canadian Independent Petroleum Marketers Association Canadian Independent Petroleum Marketers Association | Connection 2018 |

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We want to share the successes of our members.

If you want to feature your company’s recent achievements, updates, or simply want to be featured, please reach out to Jennifer Stewart at jstewart@cipma.org

Canadian Independent Petroleum Marketers Association | Connection 2018 |

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IMPROVING SAFETY AT GAS STATIONS & CONVENIENCE STORES IN ALBERTA B Y A L B E RTA M I N I S T RY O F L A B O U R

The Alberta government has taken steps to improve worker safety at retail fuel outlets and convenience stores. In recent years, “gas and dash” incidents, robberies and other violent incidents at gas stations and convenience stores have resulted in worker deaths and serious injuries.

Changes to the Occupational Health and Safety (OHS) Code came into effect on June 1, 2018. Retail fuel outlets and convenience stores must: • •

require customers prepay for fuel have violence prevention plans with industry specific components

To help employers, workers and consumers understand the changes, Alberta OHS has developed a range of resources. Many of the resources are focused on helping employers to meet the new requirements. All of the resources are available free of charge. For more information, please go to alberta.ca/prepayfuel.

In the fall, Alberta OHS will be carrying out a focused inspection program with fuel outlets and convenience stores. OHS carries out focused inspection programs to help protect workers’ rights under OHS laws and enhance employers’ awareness of their responsibilities. OHS officers conduct focused inspections to raise awareness of hazards and increase compliance with OHS laws.

More information on the focused inspection programs can be found on www.alberta.ca/ohs-compliance.aspx. Priorities and timeframes for focused inspections are announced, but individual work sites are not identified in advance.

If you have questions, please contact the Alberta OHS Contact Centre at 1-866-415-8690 or 1-800-232-7215 (TTY).

Canadian Independent Petroleum Marketers Association | Connection 2018 |

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THE COLLECTIVE RESULTS OF THE 2018 CIPMA MEMBERSHIP SURVEY play a key role in helping CIPMA communicate to government and stakeholders

MEMBER SURVEY–DATA AS AT DECEMBER 2017

Return completed survey to Rita Molinari rmolinari@cipma.org | Tel 416.358.5207

Your Name:__________________________ Company:__:_________________________ Phone:__:___________________________ _ Your survey responses will be kept confidential. The above identifying information will be removed from our files to preserve confidentiality, once information has been aggregated with other members’ responses.

DIRECTIONS

Please answer questions completely.

Please read the definitions carefully and call Jennifer Stewart at 613.915.5699 if you need clarification on any questions. If exact figures are not readily available, please provide your best estimate. Please answer all questions.

We are looking for data for your company and any controlled subsidiaries (50% or more owned); but not any parent company or companies.

Please note that definitions of Retail, Wholesale, Commercial/Industrial/Farm vary by company. Please use the definitions indicated.

The survey is CONFIDENTIAL, and questions cover a number of areas that help us to build a comprehensive picture of CIPMA’s membership.

You can access the survey and download it by clicking the link below.

Use 2017 fiscal year or calendar year figures.

A. GENERAL

1. Types of Activities Exporting Hauling/Transport Wholesale Importing (province) Importing (USA) Importing (International) Commercial/Industrial Other ____________

2. Types of Facilities Branded Fastfood Bulk Plants Cardlocks Carwashes Food Services Retail Gas

Refining Retail Mobile Refuelling

Conv. Stores Terminals Travel Centre Truck Stops Other_________

3. Number of Operations by Provinces & Territories AB ____ BC ____ MB ____ NB ____ NF ____

NT ____ NS ____ NU ____ ON ____ PE ____

QC _____ SK _____ YT _____ USA ____ Other____

_____________

4. Employees a. The total of individuals employed by your company (count part-timers fully; do not convert to full-time equivalents): _________________________________ b. The total of individuals employed by Dealers, Subsidiaries and Franchisees ________________________________

B. SALES VOLUMES

Please use the following definitions and report all volumes in Megalitres* per year.

(ML/yr) (*Millions of litres per year) Retail volumes: sales sold by your company directly to a consumer.

Wholesale volumes: sales by your company to another business entity, for resale.

Commercial/Industrial/Farm volumes: sales to another business entity which is an end user.

1. Gasoline What are your total annual sales of gasoline (all grades, including ethanol blends)?

Retail _________ML/yr Wholesale _________ML/yr Commercial/Ind/Farm _________ML/yr 2. Heating Oil What are your total annual sales of heating oil (including biofuel blends)?

Retail _______ML/yr Wholesale _______ML/yr Commercial/Ind/Farm _______ML/yr

3. Diesel What are your total annual sales of diesel (all grades including biodiesel)?

Retail _______ML/yr Wholesale _______ML/yr Commercial/Ind/Farm _______ML/yr Check here if you blend or sell biodiesel as motive fuel.

4. Lubricants What are your total annual sales of lubricants?

Retail _______ML/yr Wholesale _______ML/yr Commercial/Ind/Farm _______ML/yr 5. What percentage of ethanol-blended fuel do you sell?

E10 _________ E25 _______ E15 _________ E85 _______ Other _______ 6. Do you sell other Petroleum Products?

(Specify) NO _________________________ YES 7. Sales to Other CIPMA Members To avoid double counting of volumes when aggregating, please indicate what volume you sold to other CIPMA MEMBERS. (A list of CIPMA members is attached)

Gasoline _______ML/yr Heating Oil _______ML/yr Diesel _______ML/yr Lubricants _______ML/yr Other (specify) _______________ML/yr

C. NUMBER OF RETAIL FUEL SITES SUPPLIED (The totals for sections 1, 2 & 3 below should be the same).

1. Retail Sites Selling Motor Fuels Company-Owned Retail Sites: ______ A site owned and operated by your company.

Check here if you blend or sell biofuel as heating fuel.

DOWNLOAD SURVEY

Download full survey here: www.cipma.org/wp-content/uploads/2018/07/SM_FORM_CIPMA_Member-Survey_JUNE-2018.pdf

Canadian Independent Petroleum Marketers Association | Connection 2018 |

DIESEL FUEL QUALITY – A HIGH PRIORITY

BY JOHN EICHBERGER | FUELS INSTITUTE

Is diesel fuel a big deal? Absolutely. Despite global news about governments trying to reduce the use of diesel fuel in passenger vehicles in order to reduce particulate emissions, there currently is no significant competitor to diesel fuel for the commercial freight market – especially in Canada.

The trucking industry is critical to the growth of the economy. In fact, the Canadian Trucking Alliance estimates that more than 90% of all consumer products and foodstuffs are shipped by truck. The Alliance also estimates that the trucking industry as a whole helps to contribute more than $65 billion to the national economy, that trucks carry more than 225 billion tonne-kilometers of freight and more than 80% of the total tonnage shipped intra-provincially, and that demand for trucking services is expected to grow significantly in the next few years. This forecast is supported by research done by Navigant Research for the Fuels Institute.

In “Tomorrow’s Vehicles,” the Fuels Institute presented forecast data that indicates that the number of registered heavy-duty trucks that operate on diesel fuel is projected to increase by 90% to more than 675,000 vehicles by 2025, representing more than 83% of all heavy-duty vehicles on the road. Further, demand for diesel fuel in the heavy-duty sector is projected to grow 60% to 21.7 billion liters by 2025.

Source: Fuels Institute “Tomorrow’s Vehicles,” Navigant Research

Source: Fuels Institute “Tomorrow’s Vehicles,” Navigant Research

Canadian Independent Petroleum Marketers Association | Connection 2018 |

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But there is a concern in the market. Matching fuel with engine needs is critically important to enhance efficiency and reduce emissions, not just in passenger cars but also in these big rigs. As heavy-duty engine manufacturers have increased the efficiency of their units, the demands for cleaner diesel fuel has become more intense and resulted in many manufacturers advocating changes to the ASTM specification for diesel fuel. This situation has put different sectors of the diesel market – fuel and vehicles – at odds over what should be done.

In light of the importance of this issue, an atypical approach is needed to find a solution that will take into consideration all concerns. In 2017, the Fuels Institute launched the Fuel Quality Council comprised of engine manufacturers, fleet operators, refiners, biodiesel producers, distributors and retailers. The Council is taking a comprehensive look at the situation and will evaluate potential solutions to better understand the costs, returns and potential consequences. Below is an overview of the issue in the market and the collaborative approach being taken by the industry.

The Engines The heavy-duty vehicle market is facing its own challenges to satisfy regulations demanding improved efficiency. In the U.S., by 2027 these vehicles must improve their efficiency by an average of 27% vs 2017, with some vehicle types having to improve by more than 35% – this is a steep hill for these big rigs to climb. (For more details, download the Fuels Institute’s report, “Tomorrow’s Vehicles – A Projection of Medium and Heavy Duty Vehicle Fleet Through 2025.”)

As a result, engine manufacturers are delivering better engines, leveraging a variety of strategies to boost efficiency. One of the most significant changes has been the deployment of the high-pressure common rail (HPCR) injection systems. These units have contributed to much more efficient engine operations but have also introduced new sensitivities.

Today’s HPCRs can inject fuel into the piston chamber at pressures of about 40,000 psi, compared with units that injected fuel at 5,000 psi just a few years ago. And there are indications that future designs may boost pressure to 60,000 psi. In addition, clearances and tolerances within these systems can be as small as 1 micron, which raises the importance of fuel cleanliness.

There are multiple things that can happen if fuels used in these systems contain particles. For one thing, a fuel particle can contribute to injector clogging and failure, which has been reported quite often. In addition, any particle that does pass through the system is injected into the piston chamber at 40,000 psi and can lead to pitting, scoring and erosion of the engine’s metal parts.

The Fuel On the fuel side of the equation, there was a major change to U.S. diesel fuel composition in 2006 with a 97% reduction in sulfur content, resulting in ultra-low sulfur diesel (ULSD) with not more than 15 ppm sulfur. This was mandated by the U.S. Environmental Protection Agency to enable vehicle emissions control technology. Today, all on-road diesel fuel meets this sulfur cap.

However, in 2007 tank owners (both in the U.S. and Canada) began reporting incidents of “rapid and severe corrosion of metal components in underground storage tanks (USTs) storing diesel fuel,” as characterized in EPA’s 2016 report, “Investigation of Corrosion-Influencing Factors in Underground Storage Tanks with Diesel Service.” This study found that 83% of the tanks they sampled were affected by moderate or severe corrosion, that corrosion is geographically widespread and that many tank owners may not be aware of corrosion in their systems.

Separately, some engine manufacturers claim that the diesel specification set by ASTM is inadequate to facilitate efficient operation of these modern engines. They point to tolerance within the standard for particulate and water content which is incompatible with engine designs and have expressed a desire to add additional standards that are not currently addressed in the specification.

Others note that the distribution system can introduce problems ranging from the fuel picking up contaminants throughout the system, absorbing water and lubricity agents at different stages, the introduction of various additives designed to address different issues, the interaction of the fuel with added biodiesel, practices of using tanker trucks for different fuel products and the aforementioned corrosion issue.

But where within the supply chain diesel fuel is becoming problematic, when and how to implement changes that will result in better and more consistent fuel quality remains unclear. There is no silver bullet. Even if ASTM were to change their specifications to match the needs of modern engines, without improvements to the distribution system, fuel quality would still be suspect. Further, if current ASTM specifications are inadequate, no amount of improved product handling or filtration will make up for deficiency in the fuel.

Collaboration Can Relieve the Pressure By bringing the various sectors of the heavy-duty vehicle and fuels market together, the Fuel Quality Council can help facilitate improvements to the system. The Council is working to define the scope of the problem by surveying engine manufacturers, fleet operators and fuel providers; reviewing fuel quality sample data to better understand the current quality of diesel fuel at the nozzle; evaluating and encouraging application of best practices throughout the product distribution system; interviewing stakeholders to understand perspectives relative to potential changes in fuel specifications; and assessing the costs and benefits of potential changes to the market.

In the meantime, it is important for all members of the fuel supply and distribution system to employ best practices to maintain diesel fuel product quality, monitor tanks for water and corrosion and be diligent about their operations. Fuel quality is in everyone’s best interest – here’s to working together to figure out the best path forward.

Canadian Independent Petroleum Marketers Association | Connection 2018 |

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UPCOMING EVENTS CIPMA CONNECTION | 2018 EVENTS

WEBINAR: FEDERAL FUELS REGULATIONS 101 Tuesday, August 28, 2018 | 1:00 PM - 3:00 PM During this 2-hour webinar, Environment and Climate Change Canada’s Fuels Regulatory Administration team will offer CIPMA Members some clarity on the Federal Regulations, with special focus on the regulations and reporting requirements that apply when importing conventional and renewable fuels into Canada.

Webinar login details coming soon.

CIPMA GOLF CHALLENGE Thursday, September 13, 2018 | Glen Abbey Golf Club, Oakville, ON Event registration is open. Sponsorship opportunities are available.

Click for more details

EASTERN MEMBERS MEETING Tuesday, October 23, 2018 | Halifax More details coming soon.

Canadian Independent Petroleum Marketers Association | Connection 2018 |

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ADVOCACY UPDATES Government advocacy is the main priority for the CIPMA team, and having a voice on important issues at the municipal, provincial and federal levels of government is one of the key reasons why Members join our organization. CIPMA Members receive quarterly updates on the association’s advocacy efforts, which are also posted on the Members Only section of cipma.org.

Canadian Independent Petroleum Marketers Association | Connection 2018 |

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NEWS UPDATES This section presents a series of media articles of interest to the sector. The headlines included below are taken directly from media sources and are not written by CIPMA or CIPMA team members.

GLOBAL

OIL RISES ON TIGHT SUPPLY OUTLOOK Oil prices rose on July 30, with U.S. crude futures jumping more than 2 percent, as traders continued to focus on supply disruptions and a possible hit to crude output from U.S. sanctions on Iran.

THE GLOBAL ENERGY SYSTEM IS BECOMING MORE ELECTRIC, BUT NOT FAST ENOUGH The energy sector is becoming ever more electric, according to the International Energy Agency (IEA), the global energy research agency, but overall spending on the sector fell in 2017.

OIL COMPANY SPENDING AND OIL RESERVES ARE ON THE RISE One of the most significant threats to global oil supplies is the oil industry’s investment slump of 2015 and 2016. The crash in oil prices resulted in significant cuts to capital expenditures, which means that some production will be delayed or canceled.

REGIONAL OIL PRODUCERS EYE DOWNSTREAM EXPANSION Middle East oil producers are looking downstream for their future. The region’s national oil companies have embarked on a new phase of investment in refining and petrochemicals projects both at home and overseas.

Canadian Independent Petroleum Marketers Association | Connection 2018 |

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GLOBAL ENERGY SPENDING TOTALED $1.8 TRILLION IN 2017 AS CLEAN ENERGY INVESTMENT DROPPED 3% Total global energy investment fell by 2% in 2017, totalling $1.8 billion according to the International Energy Agency’s World Energy Investment 2018 report which was published this week, which also showed $750 billion was spent on the electricity sector, compared to only $715 billion on oil & gas supply, while investment in renewables and energy efficiency fell by 3%.

UNITED STATES

EUROPE TO BECOME ‘MASSIVE’ BUYER OF U.S. LNG, TRUMP SAYS Europe will build more terminals to import U.S. liquefied natural gas, the head of the European Commission told U.S. President Donald Trump during a meeting aimed at averting a transatlantic trade war.

WHAT HAPPENS IF TRUMP TAPS THE STRATEGIC PETROLEUM RESERVE President Donald Trump has been talking a lot about controlling global oil prices, tweeting about Saudi Arabia’s need to ramp up production and, during a press conference with Russian President Vladimir Putin, posing the idea of “regulating oil prices.

NATIONAL

CANADIAN RETAIL GASOLINE PRICES AVERAGE 138.2 CENTS PER LITRE IN JULY As of July 31, the Canadian average retail regular gasoline price was 138.2 cents per litre, up from 111.0 cents per litre in July 2017, while the average retail diesel price hit 129.4 cents per litre, versus 104.1 for the same time last year, according to Kent Group Ltd. For more information and analytics, click here.

FEDERAL GOVERNMENT’S TRANS MOUNTAIN DEAL COULD REQUIRE TRUMP’S APPROVAL The federal government’s proposed $4.5-billion acquisition of the Trans Mountain pipeline faces U.S. regulatory hurdles that could provide an avenue for President Donald Trump to intervene.

PIPELINE PROSPECTS IN CANADA SNARL RAIL TALKS, CENOVUS CEO SAYS Canada’s improved pipeline picture may be a boon to the nation’s oil patch in a few years, but that expected good fortune is hurting efforts to move more crude in the near term.

IF TRUDEAU’S CLIMATE POLICY SEEMS ABSURD, THAT’S BECAUSE IT’S NOT ACTUALLY ABOUT CLIMATE OPINION: The fastest increases in prosperity and cleanliness in human history were supported by private industry, not corporate welfare and green subsidies.

OTTAWA SAYS EMISSION STANDARDS MUST STRENGTHEN AS U.S. MOVES TO EASE RULES As Donald Trump’s administration moves towards easing U.S. fuel emission standards for vehicles, the Liberal government says Canada’s standards need to become “stronger,” and it will conduct its own assessment after the American review.

WESTERN REGION TRANS MOUNTAIN PIPELINE WORK TO RESUME IN AUGUST: KINDER MORGAN CANADA BOSS The head of Kinder Morgan Canada says work is to resume next month to prepare a route for the Trans Mountain pipeline expansion.

NATURAL RESOURCES MINISTER VOICES DISBELIEF THAT TRANS MOUNTAIN SALE COULD POSE U.S. SECURITY RISK Newly appointed Natural Resources Minister Amarjeet Sohi says the idea that Ottawa’s $4.5-billion purchase of the Trans Mountain pipeline could be blocked by the United States on national security grounds “inconceivable.”

Canadian Independent Petroleum Marketers Association | Connection 2018 |

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IMPERIAL OIL SEEKS TO DIVERSIFY REFINERY’S SUPPLY AFTER SYNCRUDE OUTAGE An unplanned shutdown this summer of Canada’s Syncrude oil sands site has caused Imperial Oil Ltd to look to lessen its biggest refinery’s reliance on it, Imperial’s chief executive said on July 27.

2 OUT OF 3 CANADIANS AGREE PROVINCES SHOULD HAVE FINAL SAY ON CARBON TAX, SURVEY SUGGESTS With Saskatchewan and Ontario’s premiers bucking under a federal carbon pricing plan, new research suggests that a majority of Canadians believe that provinces should indeed have the final say on carbon pricing.

RESEARCH POINTS TO HYDROGEN ELECTRIC TRUCKS AS BEST OPTION FOR THE FUTURE A research group from the University of Calgary believes the future of freight in Alberta will be heavily reliant on the use of hydrogen fuel cell electric trucks.

HERE’S HOW MUCH DOUG FORD SAYS ELIMINATING CAP-AND-TRADE WILL SAVE The new Ontario government is moving forward on its promise to “end the cap-and-trade and carbon tax era in Ontario.” Ford, who is currently making headlines with his promise to cut Toronto city council almost in half and cancel regional chair elections in Peel, York, Niagara and Muskoka, says that eliminating carbon taxes will save the average family $260 per year and help reduce gas prices by 10 cents per litre.

RANDALL DENLEY: EVEN IF $5M IS LOW, GETTING OUT OF CAP AND TRADE IS A BARGAIN AT 100 TIMES THAT AMOUNT OPINION: The idea that companies could claim a refund for what they have paid over the last 18 months just doesn’t make sense.

ATLANTIC REGION NEWFOUNDLAND AND LABRADOR ANNOUNCES AGREEMENT TO DEVELOP DEEPWATER OIL PROJECT AT BAY DU NORD

ONTARIO / QUÉBEC REGION ONTARIO INTRODUCES LEGISLATION TO KILL CAP-AND-TRADE PROGRAM Ontario’s new Progressive Conservative government has tabled legislation to kill the province’s capand-trade program, which put a price on carbon emissions, but will pay virtually no compensation to the companies that purchased $2.9-billion in emission allowances under the plan.

ONTARIO GOVERNMENT INTRODUCES LEGISLATION TO SCRAP CAP-AND-TRADE PROGRAM Ontario’s new Progressive Conservative government expects to spend up to $5 million to compensate companies that bought into the province’s cap-andtrade system, the provincial environment minister said July 25 before moving to repeal the carbon pricing program.

Newfoundland and Labrador is a major step closer to developing its deepest offshore oil site at Bay du Nord, with the potential of billions in revenues and hundreds of jobs.

UNANSWERED QUESTIONS CASTING SHADOW ON $6.8B OIL ANNOUNCEMENT, SAYS OPPOSITION The Liberal government’s announcement of a $6.8 billion offshore deepwater oil project is good news for Newfoundland and Labrador as long as a few pressing questions can be answered, says Opposition natural resources critic Keith Hutchings.

‘NOT HOLDING MY BREATH’: CANADA LOSING THE EAST COAST LNG RACE Having already lost the race to sell liquefied natural gas across the Pacific to energy-hungry Asian economies, Canada is now falling further behind in the race to sell LNG across the Atlantic as well.

Canadian Independent Petroleum Marketers Association | Connection 2018 |

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PETER MACKAY: TRUDEAU HAS FAILED OUR ENERGY SECTOR. ENERGY EAST CAN SAVE IT OPINION: Much of the route exists and it would quickly create thousands of jobs. (Don’t we have an infrastructure bank looking for big projects like this?)

COMPANY AIMING TO CONVERT PLASTICS INTO FUEL SEEKS ENVIRONMENTAL APPROVAL A company on Nova Scotia’s South Shore that plans to turn plastic waste into diesel and kerosene says it expects no significant environmental effects from its operations.

Canadian Independent Petroleum Marketers Association | Connection 2018 |

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Jennifer Stewart, President and CEO jstewart@cipma.org | Cell: 613.915.5699

Rita Molinari, CMP, Operations Manager rmolinari@cipma.org | Cell: 416.358.5207

MAILING ADDRESS | 3-1750 The Queensway, Suite 115 - Toronto, ON., M9C 5H5