The number of fuel trucks shipping ultra low sulfur diesel from Delta Western tanks in Haines to northern locations has dropped from roughly 12 per day to three or four, and the borough’s recent fuel tariff increase is a factor, a company official said this week.

Terminal manager Fred Gray of Haines attributed the loss of truck traffic to market conditions and increased costs, including the Haines Borough’s increased fuel tariff.

The price of his fuel to customers has gone up, he said. “The customers are not coming to Haines. They’re getting their fuel from Tesoro in the Kenai or from the refinery at the North Pole,” Gray said.

He declined to provide names of customers.

The tariff “has had a significant impact on our overhead costs and our business overall,” Gray said.

He declined to explain how it was that Delta Western, barging fuel out of Seattle, has been able to compete for Interior customers against refineries located in or near cities there.

Gray said the entire cost of the tariff increase was passed on, and said Alaska Marine Lines’ Don Reid’s recent statement that his company would pass on a proposed borough dock fee increase to its customers “summed it up perfectly.”

“We didn’t absorb any of it, just like AML’s not going to absorb any of it,” Gray said.

Gray said the fuel export business has brought two long-haul truckers to establish homes in the valley and that truckers passing through patronize businesses like restaurants. “It has an impact on the community.”

Haines Borough manager Mark Earnest has characterized the local tariff as just one of many possible factors in the drop in truck traffic. He said last week he’d talked recently with Delta Western president Amy Humphreys about the matter.

Humphreys was not available for comment this week.

The assembly increased the fuel tariff in December, the first revision in dock rates on fuel since 1994. The changes were projected to raise an additional $168,000 for the borough, based on recent shipments of 12.5 million gallons per year.

A combination of factors may have made shipping ultra low sulphur diesel (ULSD) from Seattle competitive. A federal requirement mandating use of new, cleaner ULSD became effective for Alaska communities on the road system Aug. 1 and for Bush communities Dec. 1.

Of six refineries in Alaska, Tesoro’s Nikiski plant may be the only one currently producing ULSD, according to state documents and two independent sources familiar with the industry.

Most refining in Alaska is focused on jet fuel for refueling planes in Anchorage.

Mark Foster, an Anchorage-based economic consultant, worked on a 2008 study commissioned by the State of Alaska that predicted that increased demand for ULSD and low production in Alaska would trigger shipments from the Lower 48 to meet increased demand due to the new requirements.

Foster said because Alaska refineries are very small compared to ones outside, their cost of making ULSD may be as much as 30 cents more per gallon, compared to a Lower 48 refinery which can produce the cleaner fuel for just a few cents more per gallon. “Economics of scale are important when you’re talking about refining. It’s like Wal-Mart being able to undercut the local guys.”

The Tesoro plant is the state’s second largest.

Because the Tesoro plant makes ULSD in batches, not continually, the market for Delta Western’s product may be seasonal, Foster said. “If you’re a competitor, like Delta Western, you’re looking for times of the year when Tesoro isn’t focused on ULSD, and you try to get your margin in during those cases. It’s partly a cat and mouse game.”

Tesoro officials could not be reached at press time.