Diesel Duel Dyeing Rules Are Too Restrictive, Commentator ...

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Steven L. Leifer of Howrey & Simon, Washington, on behalf of United Color Manufacturing, has submitted comments on the temporary and proposed diesel fuel dyeing regulations. Leifer includes with his comments suggested substitute regulatory language addressing the requirements for fuel dyes. He also offers an explanation of what he sees are "the benefits of moving to more flexible criteria for determining acceptable fuel dyes." According to Leifer, "the current temporary regulations are unnecessarily restrictive and may serve to arbitrarily limit the number of participants in the fuel dye manufacture and supply market."

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April 29,

CC:DOM:CORP:T:R (PS-52-93)

Room Internal Revenue Service Constitution Avenue, NW Washington, DC

Dear Docket Manager:

Enclosed are copies, in triplicate, of the fuel dye proposal submitted by United Color Manufacturing to Mr. Frank Boland of the IRS on April 22, . Per my conversation today with Mr. Boland, we are forwarding these copies for inclusion in the formal record at this time.

We thank you for your attention in this matter. Please call me at the above number if I can be of any further assistance.

Sincerely,

William E. McCabe

HOWREY & SIMON For United Color Manufacturing Washington, D.C.

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April 22,

Mr. Frank Boland

Senior Attorney -- Adviser Office of Assistant Chief Counsel Branch 8, PSI Room CC:DOM:PSI:8 Constitution Avenue, NW Washington, DC

Dear Mr. Boland:

On behalf of my client, United Color Manufacturing (UCM), I am submitting the attached proposal relating to the IRS fuel dye program. The proposal includes substitute language for the current provision at 26 CFR section 48..1T(3)(b), which addresses the requirements for fuel dyes. We have also included a general discussion of the benefits of moving to more flexible criteria for determining acceptable fuel dyes. As explained below, UCM believes that the current temporary regulations are unnecessarily restrictive and may serve to arbitrarily limit the number of participants in the fuel dye manufacture and supply market.

The language proposed in the attached document will address these concerns. Rather than defining appropriate dyes in terms of active chemical composition, which proves open to ambiguity and confusion as to what dyes are included in this definition, our proposed provisions define dyes in terms of their physical color intensity. This manner of defining dyes will allow for greater competition in the fuel dye market by removing language that seems to favor one particular manufacturer, and will in turn ensure that dye prices remain competitive, dye quality remains high, and the fuel dye program operates successfully.

If you have any questions concerning our proposal, please feel free to contact me. UCM and I look forward to working with you as you develop the IRS fuel dye regulations in the coming weeks and months.

Sincerely,

Steven L. Leifer

HOWREY & SIMON Washington, D.C.

Attachment

UNITED COLOR MANUFACTURING'S PROPOSALS FOR THE

COLORATION OF DIESEL FUEL

I. UNITED COLOR MANUFACTURING'S PROPOSAL FOR A NEW 26 CFR SECTION

48..1T(3)(b)

A. INTRODUCTION

This paper presents United Color Manufacturing's (UCM's) proposal to modify regulatory language governing the dyeing of diesel fuels. As we have previously informed IRS officials, UCM believes that the temporary regulations are confusing as to which dyes are acceptable for use in high and low sulfur fuels due to the use of the term "active" in describing the necessary dye concentration. Certain of UCM's competitors have claimed that UCM's products do not meet the standard set out in the temporary regulations, when in fact UCM's dyes are essentially identical in color strength on a pound for pound basis to our competitors' dyes. In fact, UCM's dyes are cleaner and more environmentally friendly than the dyes of major competitors, who have counted inert materials such as aliphatic amine salts as part of the active content of their product even though these inert ingredients in no way contribute to color strength.

Our proposal, therefore, removes the term "active" from the regulation, and instead defines appropriate dyes in terms of "color intensity." Our proposed language achieves exactly the same substantive objectives that the temporary regulations do: they require a great enough concentration of dye to enable field agents to make a simple, inexpensive test to ascertain whether nontaxed fuel is being employed in on-road uses in violation of tax laws. Our proposal, however, has the added benefit of enabling cleaner dyes with identical physical color strength to compete fairly in the dye supply market, thereby eliminating the arbitrariness of the current regulations and promoting competition and lower prices in the industry.

The proposed new language assumes that the dye colors for high sulfur fuel and low sulfur fuel will remain blue and red, respectively. In Section II of this proposal, UCM has provided a discussion of the benefits and drawbacks of switching to other dye colors as alternatives to the current program. UCM realizes that other agencies, including EPA and FAA, have their own interests in the coloration of diesel fuels. We hope that our findings presented in Section II will assist IRS in any consideration it may give to moving away from the existing color requirements.

B. PROPOSED NEW 26 CFR SECTION 48..1T(3)(b)

UCM suggests that section 48..1T(3)(b) be modified to read as follows:

(3)(b) DYEING AND MARKING REQUIREMENTS --

(1) DYEING; HIGH SULFUR FUEL. Diesel fuel that is required to be dyed blue pursuant to the Environmental Protection Ageny's high sulfur diesel fuel requirement (40 CFR 80.29) satisfies the dyeing requirement of this paragraph (b) only if it contains:

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(i) 25 parts per million (ppm), or 8.3 pounds per thousand

barrels of fuel, of a hydrocarbon soluble indelible liquid blue dye which is equivalent in color intensity to a theoretical 30% solution by weight of C.I. Solvent Blue 36 when compared spectrophotometrically; or

(ii) any other dye of a type and in a concentration that is

approved by the Commissioner.

(2) DYEING; LOW-SULFUR FUEL. Diesel fuel that is not described in paragraph (b)(1) of this Section satisfies the dyeing requirement of this paragraph (b) only if it contains:

(i) 15 parts per million (ppm), or 5 pounds per thousand barrels

of fuel, of a hydrocarbon soluble indelible liquid red dye which is equivalent in color intensity to a theoretical 45% solution by weight of C.I. Solvent Red 26 when compared spectrophotometrically; or

(ii) any other dye of a type and in a concentration that is

approved by the Commissioner.

II. A DISCUSSION OF THE BENEFITS AND DRAWBACKS OF CHANGING THE

EXISTING DYE COLORS IN DIESEL FUELS

The following section presents a discussion of the issues involved in the use of different colors to dye diesel fuels, and provides UCM's position on the many possibilities that are available. Generally, UCM favors a continuation of the existing fuel dye program with some minor modifications. However, UCM realizes that pressure has been mounting to move away from blue dye towards more extensive use of red dye. We have attempted to address the potential drawbacks and benefits of such a move, and to suggest other feasible alternatives that we believe deserve further consideration.

A. PURPOSE OF COLORATION

The purpose of coloration is to provide a convenient visual identification of fuel quality, either to (1) distinguish high sulfur content from low sulfur content fuel for environmental purposes, or (2) to detect the presence of untaxed fuel, either high or low sulfur, accidentally or fraudulently added to taxed fuel.

B. BASIS OF EVALUATION

In order to establish definite coloring recommendations, it is necessary to define a sampling and analytical protocol for the examination of fuel samples. UCM bases its evaluations on 100 milliliter fuel samples collected in 4 ounce Boston flat bottles made from clear flint glass. Samples are also examined in 1 centimeter path length glass cells in a laboratory-based scanning spectrophotometer, although portable field instruments costing approximately $2,000 are also very suitable. We then proceeded to determine the minimum amount of dye required to be present in the sample such that it had a slight but discernible difference from uncolored taxed diesel fuel. The fuel for the test was a composite mixture of three samples of on-road diesel fuel purchased from the service stations of three major East Coast refineries. The other fuel used in these tests was a high sulfur heating fuel with an ASTM color of approximately 2.0.

C. RECOMMENDATION FOR DYEING HIGH SULFUR UNTAXED FUEL

Of all the possibilities, the dye most suitable for coloring this type of fuel is a blue dye, as the regulations currently require. Blue dye is furthest removed in optical properties from the yellow to brownish "natural color" of this type of fuel and therefore is the color most readily detected. The colored fuel will rarely, if ever, be blue in appearance, but rather will appear to be shades of green which vary according to the base color of the undyed fuel. Experience indicates that the minimum level of blue dye that can be visually detected in the fuel is equivalent to 5 parts per million (ppm) of standard strength Unisol Liquid Blue A or counterparts from other manufacturers. /1/

On the premise that it is desirable to detect adulteration of 4 parts taxed or low sulfur untaxed fuel by 1 part of high sulfur fuel, the recommended coloration level for the high sulfur fuel will be 5 x 5 ppm, or 25 ppm of Unisol Liquid Blue A (or its counterparts) as conventionally supplied which are tinctorially equivalent to a 30% solution of C.I. Solvent Blue 36. Since the shade of green obtained by adding the blue dye to various grades of high sulfur fuel can vary significantly, a more uniform appearance would result if a green dye, (made from a mixture of the same blue and some yellow dye), were to be used in place of blue alone. An appropriate green can be prepared by mixing 2 parts by weight of Unisol Liquid Blue A, (C.I. Solvent Blue 98), with 1 of Unisol Liquid Yellow DR, (C.I. Solvent Orange 98), at their conventional, as supplied, concentration. When high sulfur fuel colored either blue or green, as recommended above, is added to blue dyed aviation fuel, the latter becomes a dark turquoise blue even at the ratio of 1 part of diesel fuel to 9 parts of aviation fuel. This color difference is very obvious when compared to an unadulterated sample of aviation fuel which is a bright royal blue.

D. RECOMMENDATION FOR DYEING LOW SULFUR UNTAXED FUEL

Low sulfur fuel, as currently produced, tends to be much lighter and more color stable than high sulfur fuel. Of the various available options, the most appropriate dye for easy detection is a red or possibly a reddish orange, made by mixing red dye with a little yellow dye. The addition of a small amount of yellow to the red, once again, tends to "swamp" the light yellow base color of the undyed fuel such that different grades acquire a much more uniform appearance. In order to detect an adulteration level of 1 part of untaxed fuel mixed with 4 parts of taxed fuel, a red dye at a concentration equivalent to 15 ppm, Unisol Liquid Red B or its counterparts, is proposed. As conventionally supplied, these dyes are tinctorially equivalent to a 45% solution of C.I. Solvent Red 26.

To produce a visually effective orange, the addition of another 5 ppm of Unisol Liquid Yellow DR is recommended. As off-road diesel fuel will increasingly have low sulfur rather than a high sulfur content, it is probably best that it remain red, since red is a more effective color. Addition of low sulfur fuel colored either red or orange, as recommended above, is easily detected at the 20% contamination level in red AVGAS, when the latter acquires a much deeper and more yellow hue.

While UCM recognizes that the concept of using a purple dye has been discussed by some, we believe that from a tinctorial point of view this option is less than ideal. The dull yellowish tint of even low sulfur diesel fuel is spectrally complementary to purples and violets, meaning that when purple dye is added to diesel fuel it appears to be dirtier and dirtier until the original base color of the fuel is optically neutralized. At high enough concentrations purple dye will start to show, but is not readily discemible.

If the IRS does decide to change the color of dyes required in high and low sulfur diesel fuels, UCM would strongly urge that sufficient time be afforded dye suppliers and customers to deplete existing stocks of the dyes currently required. A regulation that changes dye color which is implemented too rapidly will cause great economic hardship on an industry-wide basis.

E. PROPOSED ANALYTICAL TECHNIQUE

UCM proposes the following as the most appropriate method for testing the color intensity of dyes:

Weigh a milligram of the dye to be evaluated numerically equal to 10 times its standard concentration in the fuel. For instance, 150 milligrams for Unisol Liquid Red B if it is being used at 15 ppm and 250 milligrams for Unisol Liquid Blue A if it is used at 25 ppm. Dilute the dye with the chosen solvent to 100 milliliters volume in graduated flask. Pipette 1.0 milliliters of the well mixed solution into another 100 milliliter graduated flask and bring to the mark, and mix well.

Fill two, 1 centimeter glass spectro cells to the required level, one with the undyed solvent and the second with the dyed solution. Scan the dyed solution in comparison to the undyed with the spectrophotometer in the absorbance mode. Determine the intensity of absorbance of the dye at its wavelength of maximum absorbance and record for reference. The wavelength and intensity of absorbance will vary slightly from solvent to solvent and machine to machine.

III. CONCLUSION

We hope that our specific proposal for a new diesel fuel dyeing provision is helpful to the Service in developing its final regulations, and that our more general discussion of the issues surrounding fuel dyes is illuminating. UCM believes that under our proposed language, many different sources of fuel dye will be encouraged to participate in the marketplace, and the result will be lower costs to customers and cleaner, more environmentally beneficial products. If UCM can assist the IRS by providing additional information or answering any questions regarding fuel dyes, we will be more than happy to do so. We appreciate the opportunity to present our ideas and recommendations to you, and look forward to working with you in the future.

FOOTNOTE

/1/ High sulfur fuel dyed as recommended appears a medium bluish-green color, which when added to uncolored fuel at the above dilution ratio imparts a weak but discernible green coloration to it. When added to low sulfur untaxed fuel, (which we recommend should be colored red), this fuel is converted to a dirty purple to brown shade which is quite distinct from the clear red of the unadulterated fuel.

END OF FOOTNOTE