Background Information

What is heavy fuel oil (HFO)?

Heavy fuel oil is a generic term for fuels with a particularly high viscosity, density, and persistence. HFO is created when petroleum is distilled. 

In the Canadian Arctic, HFO is mainly used as fuel for vessels working in community resupply, bulk carriers serving mining projects, as well as by some larger fishing vessels.

International discussion on HFO

The Government of Canada is working to reduce the risk of marine fuel spills in the Arctic, including the risk of a heavy fuel oil spill from ships. Ongoing discussions at the International Maritime Organization (IMO) on the use of HFO by ships in the Arctic have focused on:

  • Creating guidelines to reduce the risks of marine fuel use by ships in the Arctic; and
  • Creating a potential ban on the use and transport of HFO in the Arctic, based on assessments from IMO members on the likely impacts of a ban

To support discussions at the IMO on a potential ban of HFO in the Arctic, the IMO has given Member countries the chance to run their own assessments on the potential impacts of a ban in their country.

Results of the impact assessment

Between May and October 2019, we worked with many groups to assess the benefits and impacts that a heavy oil fuel ban would have on Canada’s northern, Indigenous and Inuit communities, and economies. We spoke to:

  • Indigenous and Inuit peoples
  • provincial and territorial governments
  • industry stakeholders
  • federal departments
  • environmental organizations

We used publicly available information, feedback from Indigenous and Inuit partners, and data from federal government departments and industry stakeholders to assess the potential costs and benefits of a HFO ban in the Arctic. The impact assessment also considered analyses by consulting firms and academia.

We found that a HFO ban would benefit Arctic communities by reducing the environmental impacts associated with spills:

  • risks to wildlife if they ingest oil
  • possible damage because oil stays in the marine environment for a long time
  • harmful air emissions

Our assessment found that HFO causes greater longer-term environmental risks compared to distillate fuels. We also concluded that a ban, and the higher price of replacement fuels could have negative social and economic impacts on northern, Indigenous and Inuit communities.

Our report identifies three main economic impacts:

(i) Financial and social impacts on Indigenous and Inuit communities, because of more expensive fuels

  • The cost of living could increase from between $250-$700 a year, per household

(ii) Financial impacts on resource sector operations, because of more expensive alternative fuels

  • Roughly $0.75 - $1 CAD per tonne of ore shipped, above any impacts from the 2020 Global Sulphur Cap

(iii) Possible impacts on competitiveness for current or future resource exports, including mining and grain

The impact assessment also found that an HFO ban could impact the health of Indigenous and Inuit peoples living in the Arctic. This would be due to higher costs for non-perishable foods and higher shipping prices.

Long-term industry response to the 2020 Global Sulphur Cap is still unknown but it’s likely that decisions made in 2020 will change the market rates for fuel.

This will make assessing possible impacts of a future HFO ban even harder. We expect that market conditions and fuel prices will stabilize in the coming years once the Global Sulphur Cap is introduced.