Knowledge

Red diesel: What do the new rules mean for fuel distributors?

In our continuing series of articles covering the implications of the red diesel rebate changes, we now consider the impact on fuel storage facilities of the resultant decreased requirement for red diesel and increased demand for white.

Looking at the implications of red diesel rebate changes, we consider the impact on fuel storage facilities of the resultant decreased requirement for red diesel and increased demand for white.

On April 1 2022, the Government changed the rules on who is eligible to use red diesel – with the aim of taxing most users of diesel more appropriately given the harmful emissions they produce.

Various sectors lost their entitlement: construction, plant hire, road maintenance, haulage and logistics, manufacturing, mining and quarrying, and commercial and backup power generation.

Russell Rhodes

If you’re a distributor supplying any of these industries, you’re no doubt aware of the change in legislation. But have you fully considered what it will mean for your facilities and processes?

With fewer operations using red diesel, you’re going to need to store more white diesel to meet demand, and you’re going to have to be very careful not to contaminate any of your customers’ white diesel tanks with red dye.

Russell Rhodes, BDM Scotland & Northern England, Adler and Allan, discusses the implications and options available to your operation.

Option 1: Don’t change anything

You can decide to keep your depot as it is – but do consider that you will need to engage with your RDCO to alter your delivery schedule, so you can refill your white diesel stocks more regularly as demand increases.

Also be aware that white diesel is considerably more valuable (especially now) and is vulnerable to theft. You should consider additional security measures, such as CCTV monitoring, as well as spill response cover given that theft often also results in damage, careless handling, and spills.

Option 2: Repurpose some tanks from red to white diesel

To meet the change in demand, this is a sensible strategy, but you will need to ensure the tanks are fully cleaned prior to the grade change, as you cannot risk putting traces of red dye into a customer’s white diesel tanks.

You should engage with an environmental services partner to ensure your tanks are cleaned with 100% compliance and minimum disruption to your operations.

Option 3: Consolidate your red and white diesel in separate depots

To make operations more clear-cut, you might decide to separate your red and white diesel storage to entirely different depots, for a more focused distribution strategy and less risk of any cross-contamination.

A specialist environmental services provider can undertake the fuel uplift and transfer, cleaning and buyback in preparation.

Option 4: Increase your overall tank capacity

Another strategy is to increase your overall tank storage to accommodate the greater demand for white diesel.

Consult an expert in fuel infrastructure to advise on the new tank supply, undertake safe and compliant installation, and provide long- term maintenance.

Option 5: Install an injection system

One final option is to switch entirely to storing white diesel but install an injection system to convert white to red diesel on demand, claiming back the tax. This would require a specialist to install a fuel injection system and process at your depot.

Finding the right option for you

Whichever strategy you decide fits your operations; you’ll need to act swiftly. An upfront investment will ensure you keep up with the changing fuel demands of customers, avoid contaminating any white diesel stocks, and have adequate security measures in place.

Russell Rhodes is business development manager, Scotland & Northern England, for Adler and Allan – a company with expertise in fuel handling and tank storage as well as the relevant legislation.