US EPA grants Midwest states gasoline waiver after tornadoes shut ExxonMobil refinery

The US Environmental Protection Agency has issued an emergency waiver of summertime volatility regulations for gasoline in four Midwest states to address fuel supply shortages after a tornado outbreak shuttered ExxonMobil's Joliet refinery in Illinois, the agency said Aug. 1.

The 251,800 b/d refinery experienced a sustained outage after a tornado decimated Commonwealth Edison's power infrastructure July 15, forcing the refinery to shut down as its crude distillation unit, fluid catalytic cracking unit and catalytic reformer went offline. The facility remains shut.

"With power restored, we're continuing to assess the status of our equipment and working hard to resume operations as quickly and safely as possible," ExxonMobil spokesperson Lauren Kight said in email Aug. 1. "We won't speculate on how long operations may be suspended."

The tornado was part of a derecho that moved across Iowa, Illinois and Indiana, producing a record-breaking 31 tornadoes in the Chicago area July 15, according to the National Weather Service.

The EPA, in coordination with the Department of Energy, determined that the power outage from the tornadoes presented "an extreme and unusual fuel supply circumstance" that was neither reasonably foreseeable nor "attributable to a lack of prudent planning on the part of suppliers of the fuel to the waiver area," EPA Administrator Michael Regan said in an Aug. 1 letter sent to the governors of Illinois, Indiana, Michigan and Wisconsin, who requested the emergency waiver.

Regan added that current circumstances would "prevent the distribution of an adequate supply of compliant gasoline to consumers" in the area. Chicago refined product prices had spiked in recent days, reflecting the tight regional supply in the Midwest.

The waiver applies to certain Clean Air Act requirements and to Indiana's and Michigan's federally approved state implementation plans. It allows gasoline with a Reid vapor pressure (RVP) up to 9.0 psi – or 10.0 psi for gasoline blends with 9%-15% ethanol – to be produced, sold and distributed throughout Illinois, Indiana, Michigan and Wisconsin, compared with the 7.8 psi and lower RVP limits otherwise in effect for those states during the summer to limit the formation of ozone pollution.

The waiver took effect immediately Aug. 1 and is valid through Aug. 20. As the EPA continues to monitor the evolving situation and fuel supply dynamics, it could opt to renew the waiver through Sept. 15, which marks the end of the summertime restrictions on gasoline.

Market impact

The US Chicago gasoline complex plunged after the EPA announced the fuel waiver.

Platts intraday values for the Chicago Generics RBOB differential fell Aug. 1 to 19.50 cents/gal, down 10.25 cents from the last close, while the Buckeye Complex RBOB differential remained unchanged at 19.50 cents/gal. Platts is part of S&P Global Commodity Insights.

The intraday value for the Chicago Generics CBOB differential was unchanged at 18.25 cents/gal, while the BCX CBOB was at 10 cents/gal, down 14 cents compared with the last close.

"This is one instance where government is showing a flexibility and common-sense approach to a somewhat rare natural disaster situation and working with other departments to help with supply issues for the short term," one Midwest source said.