Canada’s ban on heavy fuel oils could come with a price

Sealift companies say they are still assessing the impact of Canada’s new ban on ships using or carrying heavy fuel oils while travelling in Arctic waters.

Canada’s ban, which took effect July 1, coincides with a United Nations prohibition on using those fuels in international Arctic waters, which was proposed in 2021 and implemented this month.

“Heavy fuel oil is tar-like, persistent, and the dirtiest fuel on the planet,” said Andrew Dumbrille, North America strategic and technical adviser for the Clean Arctic Alliance.

“It sticks around in the marine environment and emulsifies in the ocean’s surface, allowing it to spread to coastal shorelines, impacting many Inuit communities who depend on the ocean for food and harvesting.”

Shipping companies might not be the only ones facing higher costs.

In 2020, Transport Canada reported that fuel price increases caused by the heavy fuel oil ban could increase expenditures in Nunavut by up to $679 per household as community resupply products become more expensive.

Nunatsiaq News contacted Transport Canada for comment on the possible cost per household from the ban, but none was provided. According to the Bank of Canada inflation calculator, that household cost could be $805 updated for 2024.

Heavy fuel oil costs less than other fuels, but its thick texture means it remains in the environment longer in the event of a spill, according to the federal government.

The ban is intended to reduce the risk of spills in the Arctic and the production of black carbon emissions which melt sea ice and accelerate global warming, Pablo Rodriguez, the federal transport minister, said in a news release.

Black carbon emission levels are rising in the Arctic with increased shipping traffic threatening the region’s ecosystems, according to a report by the International Council on Clean Transportation.

The ban “meant to rule out heavy fuel oil as a choice in the Arctic, but unfortunately, there are loopholes that don’t really make it a ban at all,” said Dumbrille.

According to Transport Canada, all double-hulled ships with protected fuel tanks will be exempted from the ban until July 1, 2029.

Vessels responsible for Arctic community resupply or those that are Arctic-flagged and belong to a national registry can apply for a two-year waiver.

According to the International Council on Clean Transportation, these loopholes, if fully taken advantage of, will end up banning just 30 per cent of heavy fuel oil carriage and 16 per cent of its use.

Black carbon emissions would be reduced by just 5 per cent, it said.

Nunavut Eastern Arctic Shipping Inc., one of Canada’s biggest Arctic sealift firms which resupplies goods to 18 Nunavut communities, qualified and received the five-year exemption for its ships in time for July 1.

“We appreciate the phase-in approach with the ban, which is crucial for the stability and resilience of our supply chain for communities,” said Daniel Dagenais, president and CEO of NEAS.

The five-year timeline allows the company to consider investing in alternative fuels or vessels in order to remain in compliance with the interim minister’s order, which Rodriguez put in place while federal regulations are amended.

It’s too early to discern direct impacts from the ban, but Dagenais said there’s the potential for higher shipping costs.

“If we need to change to an alternative fuel that comes with a premium, it will be reflected in the ocean freight costs. And if we need to source our vessels differently, we need to consider ships as investments that will surpass the 2029 deadline,” he said.

Nunavut Sealink and Supply Inc., another major player in the Arctic sealift industry, also qualifies for the five-year exemption.

“While we understand the impact, the cost of the alternative fuel is more because of the regulation change so there are economic kickbacks for our customers,” said Brian Tattuinee, the company’s business development manager.