Blended fuels and litigation – a volatile mix

From 2010 both Federal and State laws will generally disallow the sale of standard petrol that is not blended with 10 per cent ethanol (capped) and all diesel will more than likely be bio-diesel. The potential effect upon the boating public and consequently the marine industry could be serious and result in many unwanted legal claims, if the boating public is not well informed.

I hear you ask why should my business by liable as a result of government enforced changes to fuel blends? The reality is, in the USA where similar changes to blended fuels have occurred, legal action has already commenced. As NSW is one of the most litigious states in the world, the question for the marine industry is not “if” but when and who will be sued as a result of an ill-informed customer using blended fuels in their vessel?

Bio-diesel the lesser of two evils

The fact is that all diesel sold today has some degree of bio-additive. Therefore, both (pure) diesel and bio-diesel share the common problem of the fuel being hydroscopic. To minimise the effects of water contamination to bio-diesel fuels following best practice guidelines such as keeping diesel fuel tanks full to limit condensation and using water separation filters still apply. Despite there not being any significant change in the boat user’s use of diesel, the prudent marine service provider should still notify customers of these changes, potential problems and how to avoid any future problems.

Ethanol blended fuels

While the change to bio-diesel appears to have little effect on the boating public and marine industry, stormy waters may lay ahead for the marine industry if it fails to prepare for a change to ethanol blended fuels. It must be noted, due to exceptions in the new laws, the marine industry will be able to continue selling non-ethanol blended fuel (while the petroleum industry continues supply) to the boating public through marine specific outlets such as marinas. So I here you ask why should the marine industry be worried, especially as most outboard engines built after 2005 or later (depending on the make) are able to use ethanol blended fuels? The issue of concern is where the boating public chooses the cheaper or more accessible option and purchases ethanol blended fuel from an ordinary service station, without being fully informed of the risks.

The main issues that have been identified with using ethanol blended fuels in vessels are:

1. Ethanol is extremely corrosive to old and incompatible fuel systems and older engines;
2. Certain fuels tanks, not prepared with protective coatings (old aluminium; fibreglass and plastic tanks), will decompose if ethanol fuels are used;
3. Ethanol fuels are hydroscopic resulting in rusting components and;
4. They are prone to phase separation if the fuel is held in fuel tanks without use for a period of time;
5. If phase separation occurs the dividing phase layer is extremely corrosive to fuel systems, tanks and engines;
6. There is no guarantee that ethanol blends are a consistent 10 per cent (could be more);
7. If the ethanol content is greater than 10 per cent then engine warrantees may be voided.

Safeguarding your business

Following a series of recent NSW BIA technical seminars in which Ken Evans of Mercury presented, and I attended to answer legal concerns, several issues were identified by the industry. These issues, along with some practical legal suggestions on how to prepare your business with respect to both bio-diesel and ethanol blends are listed below:

1. What is my responsibility as a retailer/ broker of vessels?While with respect to imported vessels the Trade Practices Act deems the overseas manufacturer as responsible to make the vessels compliant with Australian standards the retailer/broker is not completely released from their responsibilities some of which are:
   • If the boating public is relying upon your professional opinion as a retailer/broker you should be aware of the specifications of engines, their fuel tanks and systems, and whether they are compatible with ethanol-blended and bio-diesel fuels in accordance with product information and safety standards and;
   • Retailer/brokers should inform customers as to the type of fuel permitted to be used and the effect of using and storing ethanol-blended petrol and bio-diesel;
   • Retailer/brokers should also inform the customer of possible warrantee limitations and requirements.
2. What is the responsibility as a retailer/dispenser of fuel?In addition to the list below a contract, specifying fuel requirements should be entered between the retailer and the supplier. So if the delivered fuel is contaminated the supplier may be liable for breach of contract. Some further practical suggestions are:
   • Where appropriate, businesses supplying fuel should clearly inform their customers that they supply both standard and ethanol-blended or bio-diesel fuels. This may be conveyed by placement of clear signs next to fuel pumps;
   • Businesses supplying fuel should inform their customers of the potential effects of using ethanol-blended and bio-diesel fuels, in engines, fuel filters and particular types of fuel tanks i.e. aluminum, fiberglass and plastic tanks in accordance with product information and compliance standards;
   • Prevention is the best cure. Consider having a service assistant at the fuel pump in the initial phases to clarify the new rules, and the possible effects, or provide written information with every receipt.
3. What is my responsibility as a service and advice provider?Listed below are some guidelines to assist:
   • A professional service provider has a duty of care in their communications and work not mislead or deceive;
   • The provider of services and advice is expected to be knowledgeable of the current industry standards and requirements, and conduct all their work according to such standards;
   • Failure to maintain knowledge and practice of these requirements may possibly lead to a unsuccessful defence to a claim;
   • If you provide professional service and advice to clients they should be advised of any potential issues that may result from using the inappropriate fuel in their vessels;
   • The installation or repair of any piece of equipment should also include an assessment that is to be shown to the customer, relating to potential damage if the wrong fuel is used, or if usage of certain fuels will necessitate additional or special maintenance or operational care.

Additional points

The above suggestions can not be considered a complete list and only provide a guide to assisting in any defence to a claim. Put simply to limit any claim against you or your business the legal tests required for you and your business are:

• All vessels built, serviced or sold should be of a merchantable quality and fit for its purpose;
• Where professional service or advice is provided there is a duty of care to provide up to date, accurate and relevant service and advice to customers;
• While ultimately a business carries insurance to cover against claims, these insurance contracts should be reviewed annually to make sure they remain relevant;
• Finally, written contracts and advices should be used where possible to provide certainty and hard evidence to back up any defence to a claim that may be made against you or your business.

Conclusion

Being involved with NSW BIA technical seminars, witnessing the industry concerns first hand through to reading about the potential effects of ethanol blended fuels in the marine industry has certainly highlighted many serious problems and concerns.

However, the difference between Australia and America, when it comes to the changes in fuel blends, is that in Australia we are well informed before the mole hill has become a mountain. In fact the marine industry has been handed a golden opportunity to put in place best practices resulting in the professional support the boating public expects and financial reward that comes with doing a good job.