US EPA poised to lift E15 sales restrictions in the Midwest, but not until 2024

A proposed fuel policy shift that could spur greater blending of ethanol in gasoline sold in the US Midwest was met with trepidation March 1 as renewable fuel producers and refiners both found flaws with the Environmental Protection Agency's proposal.

The proposed rulemaking responds to petitions from eight Midwestern states that sought to exercise their Clean Air Act authority to ensure that a gasoline blend containing 15% ethanol could permanently be sold within their borders year-round.

While E10, which contains 10% ethanol and 90% gasoline, is widely accepted and available from retailers across the country year-round, current law prohibits the sale of E15 in conventional gasoline markets, which make up about 70% of the US gasoline market, from June 1 to Sept. 15 due to EPA restrictions on air pollution from gasoline.

The biofuel industry supported the intent of the proposal to put E15 on par with E10, but expressed dismay that the EPA's actions would not address the coming summer driving season or the rest of the country. The oil industry, on the other hand, argued the policy change would tighten fuel supplies, raise fuel production and distribution costs and risk supply bottlenecks.

Both industries have instead championed a legislative fix providing equal treatment nationwide to all conventional gasoline blends by making them subject to the same fuel volatility limit.

Current law offers a summertime waiver of Reid Vapor Pressure (RVP) volatility allowance requirements to biofuel blends containing 10% ethanol, and a Trump administration rule extending that waiver to blends containing more than 10% ethanol was vacated in 2021 by the DC Circuit Court of Appeals. The Clean Air Act allows the EPA to nix that waiver if a governor can show that it is increasing emissions in their state.

Lower volatility standard

Under the EPA's new proposal, the 1-psi RVP allowance for E10 would be eliminated in Illinois, Iowa, Nebraska, Minnesota, Missouri, Ohio, South Dakota and Wisconsin -- the states whose governors requested the change.

Unlike an emergency fuel waiver that allowed E15 sales to continue uninterrupted last summer by raising the volatility standard for ethanol to 10 psi, the new rule would lower the standard for conventional fuel in the Midwest states back to the 9 psi limit. This would provide the low RVP gasoline blendstock needed for E15 to meet air pollution standards and eliminate the cost advantage the waiver afforded E10 over E15.

The EPA does not have the authority to deny the governors' request if the CAA's supporting documentation requirements are met though it is seeking comment on the data underlying its decision as well as plans to delay implementation of the rule until April 28, 2024.

Delayed action

"There is simply no justification for further delaying this action, which is already months overdue," Renewable Fuels Association CEO Geoff Cooper, said. "By law, EPA should have finalized approval of the governors' petition more than seven months ago, which would have given the marketplace more than enough time to adjust and prepare for implementation this summer."

The CAA requires action on such petitions, most of which were filed in April 2022, within 90 days.

American Coalition for Ethanol CEO Brian Jennings accused the Biden administration of "caving to refiner crocodile tears by kicking the can to 2024."

And Iowa Renewable Fuels Association Executive Director Monte Shaw said the agency's tardiness would leave "Midwest consumers to pay 15 cents/gal or more than necessary" this summer.

The groups urged the EPA to finalize its rule with an effective date in 2023, and to take steps to ensure drivers across the country can take advantage of E15 this summer, including through the issuance of an emergency waiver.

Infeasible, costly

But the oil industry held firm to its position that a policy change this summer was infeasible.

For instance, Magellan Midstream Partners Vice President of Government and Media Affairs Bruce Heine said the winter to summer gasoline RVP conversion for the Magellan pipeline system was already underway.

"EPA recognized in their proposed rule that approving such a significant fuel specification change without providing adequate time for the industry to prepare would result in an inadequate supply of gasoline in the Midwest," Heine said.

Others more vehemently opposed the proposal altogether as it would effectively mandate production of a "boutique fuel" with a lower RVP for the Midwest market.

"Not every refinery, pipeline and terminal serving the Midwest has the ability to seamlessly produce, transport and store a new blend of gasoline, and it could take years to permit and complete infrastructure projects to resolve this," Patrick Kelly, senior director of fuels and vehicle policy at American Fuel & Petrochemical Manufacturers. said.

Will Hupman, vice president of downstream policy at the American Petroleum Institute, argued that "approving the sale of boutique fuels on a state-by-state or regional basis could result in supply bottlenecks and put upward pressure on prices given the limitations of the region's fuel delivery and refining infrastructure."