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EPA Releases E15 Rule; Clock Ticks

By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) — The EPA on Tuesday released a much-anticipated rule to allow year-round E15 sales and to reform the biofuels credits market, with plans to finalize the rule by the start of the summer driving season on June 1.

The rule also includes proposed reforms to the market for Renewable Identification Numbers, or RINs.

EPA proposed a number of reforms that include prohibiting certain parties from being able to purchase separated RINs, requiring public disclosure when RIN holdings exceed specified thresholds, limiting the length of time a non-obligated party can hold RINs, and increasing the compliance frequency of the program from annually to quarterly.

Obligated parties to the RFS, including refiners and others, are allowed to buy RINs or blend biofuels to comply with the law.

Once the proposal is published in the Federal Register, it will launch a 30-day public comment period that ends on April 29.

The proposal would make E15 “substantially similar” to E10 blends, essentially eliminating the summer driving restriction in some areas of the country.

Ethanol and gasoline are both low volatility. When the two fuels are mixed, the volatility spikes, but only at blends just below E10. As more ethanol is blended with gasoline, the vapor pressure decreases, which essentially means E15 reduces vapor pressure.

For years, the ethanol industry has called on the EPA to equalize the Reid vapor pressure regulations for E10 and E15 during the summer driving season. Because of those requirements, E15 has largely not been available to some wholesale suppliers and retailers during the summer. The industry has contended that adding 5% more ethanol in the summer would actually reduce tailpipe emissions.

Ethanol increases the RVP, which measures the release of volatile organic compounds into the atmosphere. The RVP for gasoline is the lowest, or most stringent, during the summer months when the weather is hot. E10 currently receives an RVP waiver, which keeps the fuel in compliance with RVP requirements year-round. However, E15 is not given the same waiver, so it can’t be sold in the summer.

The EPA regulates RVP for gasoline and gasoline-ethanol blended from June 1 to Sept. 15, restricting the retail sale of ethanol blends above E10.

TAKING SIDES

The EPA proposal comes with a bevy of mixed reaction both for and against.

“I’m still reviewing the proposed rule, and while I have some concerns about certain details, this is a significant step in the right direction and puts E15 on track for approval by summer driving season,” Sen. Charles Grassley, R-Iowa, said in a statement. “Ending the nonsensical ban on summertime sales of higher blends of ethanol is a no-brainer and a big victory for Iowa, Midwest farmers and the country as whole.”

Renewable Fuels Association President and CEO Geoff Cooper said in a statement the proposal is important for morale in the industry.

“With just 80 days left before the start of the summer driving season, finalizing and implementing the E15 regulatory fix remains a tall order,” Cooper said.

“That is why we have urged EPA to separate the year-round E15 provisions from the RIN reform provisions, and move forward as quickly as possible to finalize a practical and defensible year-round E15 solution,” Cooper said. “With ethanol plants shutting down or idling and farmers experiencing the worst conditions in more than a decade, removing the summertime ban on E15 once and for all would send a desperately needed signal to the marketplace.”

Cooper said the RFA continues to review the details of the proposal and will provide “extensive technical and legal comments to support an expeditious and legally sound resolution of this decades-old red tape barrier.”

American Coalition for Ethanol CEO Brian Jennings said it is important that EPA finalize the rule quickly.

“Time is of the essence, particularly since EPA insists on saddling the E15 rulemaking with controversial RIN reforms that will need to be carefully reviewed to ensure they don’t undermine ethanol demand,” he said in a statement.

“Without a final rule in place by June 1, this year would mark the eighth time since EPA originally approved a waiver for E15, that fuel marketers in many parts of the country have had to prohibit their customers from purchasing a lower-cost, higher-quality fuel option at the pump during the busy summer driving months.”

Growth Energy CEO Emily Skor said her organization will continue to review the proposal.

“This rule is a critical milestone for rural Americans who make renewable biofuels and for all American drivers, who may soon have a cleaner, more affordable, higher-octane fuel all year long,” she said in a statement.

“We are still reviewing details of the proposal, and we look forward to working with the EPA to ensure that any changes — particularly in the RIN market — do not upend the marketplace, and continue to encourage investment in E15 and other higher ethanol blends.”

The American Petroleum Institute said EPA’s proposal is a “lose-lose” for United States consumers.

“The administration needs to scrap this anti-consumer policy that exacerbates problems with the failed Renewable Fuel Standard,” said API Vice President of Downstream and Industry Operations Frank Macchiarola.

“This proposal is a bad deal for consumers. Extending the sale of E15 gasoline to the summer months makes no sense. Studies have shown that E15 gasoline can damage vehicle engines and fuel systems — potentially leaving Americans to pay expensive car repair bills due to bad policy out of Washington. To make matters worse, the agency’s proposed changes to the RINs market, could increase costs for fuel producers and lead to higher prices for consumers.”

The Fueling American Jobs Coalition, a group consisting of small-refinery interests, said RIN reform is important for the economy.

“The coalition is pleased that EPA has adhered to the clear and unmistakable position articulated by the president that policy in this area must reflect a careful balance between the need to maintain jobs and investment in the vital refining sector and the desire of some in the biofuels sector to expand the use of higher blends of ethanol,” the FAJC said in a statement.

“From the renewable fuels industry to Midwestern politicians, there has been widespread recognition of the need for significant reforms to the volatile and opaque RIN market. Refiners, small business owners, and consumers concerned with the potential for price spikes and manipulation also welcome long-overdue action to propose needed reforms.”

Read the proposed rule here: https://www.epa.gov/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(CC/AG)

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