DC Circuit reverses Trump EPA's approval of year-round E15 fuel

A US appeals court July 2 vacated the Environmental Protection Agency's approval of year-round E15 fuel sales, rejecting the regulatory process it took to fulfill former President Donald Trump's October 2018 promise to farm-state senators to blend more ethanol into the nation's gasoline supply.

A three-judge panel of the United States Court of Appeals for the District of Columbia Circuit ruled in favor of the American Fuel & Petrochemical Manufacturers, the refining group's second recent big court win.

The US Supreme Court ruled June 25 that EPA has broad authority to exempt small refiners from the federal biofuel mandate.

D6 ethanol RINs for 2021 compliance jumped July 2 on the news of farm-state lawmakers introducing a bill to limit EPA's ability to grant refinery waivers, even though the outlook for such a bill remains uncertain in the closely divided Congress.

Traders were less moved by the end to summertime E15 sales, sources said.

S&P Global Platts assessed D6 RINs at $1.5825/RIN July 2, up from $1.5450/RIN a day earlier. RINs are tradable credits EPA issues to track production and use of alternative transportation fuels. For corn-based ethanol, one gallon of ethanol yields one RIN.

'Ordinary meaning'

The DC Circuit opinion revolves around the language EPA used in May 2019 to expand a gasoline volatility waiver and allow year-round sales of E15, or gasoline blended with 15% ethanol.

EPA argued that a section of the Clean Air Act that creates a waiver for fuels containing 10% ethanol also applies to fuels "containing at least 10% ethanol," but the judges rejected that interpretation as outside the ordinary meaning of the word "contain" when used as a percentage.

"Consider a label that a bottle of wine 'contains 10% alcohol by volume.' No one would understand that number to be other than a literal statement of the actual amount of alcohol in a serving," the DC Circuit said. "By contrast, the label would be misleading if the wine contained only 5% alcohol or 15% alcohol."

"Here the ordinary meaning of the phrase 'containing gasoline and 10 percent ... ethanol' specifies the relative amount of ethanol in a unit of fuel, not the minimum or maximum ends of an unspecified range."

ClearView Energy Partners said the ruling is a setback for biofuel producers who see higher ethanol blends as key to preserving or expanding domestic sales. They will likely seek an appeal before the full DC Circuit and a potential review by the Supreme Court, ClearView said.

Another win for refiners

AFPM President and CEO Chet Thompson said there was "no ambiguity in the statute," and the Trump administration "overstepped the will of Congress" in approving year-round E15.

"We are glad the Court unanimously found that EPA lacks the authority to grant an RVP waiver to fuel containing more than 10 percent ethanol, consistent with how EPA interpreted its authority for nearly 30 years prior," Thompson said in a July 2 statement.

Biofuel groups said in a joint statement that the court's decision "could deprive American drivers of lower-carbon options at the pump and would result in more carbon in the atmosphere."

"We are working to ensure the continuity of E15 sales through the 2021 summer season and beyond," said the Renewable Fuels Association, Growth Energy, and the National Corn Growers Association.

"This decision could impact summertime sales across all non-RFG areas where nearly two-thirds of retail sites offering E15 currently do business. If E15 in those markets were to end, summertime E15 sales would fall by 90%."

The biofuel groups said they would work with the Biden administration and Congress to "have a solution in place before the 2022 driving season."

Trump estimated at the time that year-round E15 access would curb US dependence on imported oil by as much as 250 million barrels/year.

"Quite simply it means more energy, and what can be wrong with that? And it's very good energy," Trump said in June 2019 after touring an Iowa biofuel plant.