WASHINGTON — For supporters of E15, the 15% ethanol blend, its national rollout has always been a matter of when—not if. With the U.S. Environmental Protection Agency (EPA) promising to have rulemaking that would allow E15’s year-round sale ready before the summer 2019 driving season, that finish line appears to finally be in sight.
Fuel retailers in most markets can currently sell E15 from June 1 to Sept. 15 only to drivers of flex-fuel vehicles because of seasonal Reid vapor pressure (RVP) restrictions on the ethanol blend.
“Year-round sales will be huge,” Mike Lorenz, senior vice president of fuel for Sheetz Inc., Altoona, Pa., told CSP Fuels. Sheetz has E15 at more than 200 locations and markets it under the Unleaded 88 branding, which is used by more than 90% of retailers who sell the ethanol blend.
“It’s so disruptive to try to sell a product for eight months out of the year. Let’s face it: There’s no other grade of gasoline that has that restriction,” he said. “It’s extremely confusing for the consumer. That would be a huge win that we can sell it year-round like other grades of gasoline.”
Between Sept. 15 and June 1 of each year, Sheetz has seen E15 gallons ramp up, only to pull back during the summer, and then to slowly build back up again after the seasonal RVP restrictions end. Up until now, Sheetz has not crafted a marketing effort around E15 because it did not seem worth the effort.
“You get out to Sept. 15 and you’ve got so many months to ramp up, get the message out there, and before you know it, it’s June 1 again,” Lorenz said. “There’s just no way to convey that message to the consumer—it’s too difficult to start talking about RVPs and waivers.”
However, despite assurances from the EPA that it is prioritizing the rulemaking, the partial government shutdown has left some E15 supporters nervous about the agency’s ability to meet its summer 2019 timeline.
At a recent biofuels conference, Stephen Censky, deputy secretary of the U.S. Department of Agriculture (USDA), which needs to sign off on the EPA’s rulemaking, said he was “hopeful” the EPA would make the summer target, Reuters reported. Should the EPA not make its deadline, it could use “discretionary enforcement” of the summer RVP restrictions, Censky said. Bill Wehrum, the EPA’s assistant administrator for the Office of Air and Radiation, which is drafting the E15 rule, told Reuters that the agency still plans to have a 45-day public comment period after its release.
The RIN Equation
Mike O’Brien, vice president of market development for Growth Energy, a Washington, D.C.-based biofuels trade group that works with retailers on installing E15, is optimistic about the rulemaking process happening in time for summer 2019 sales. He also expects more large retailers to enter the business with the rulemaking in place.
“My sense is there is a lot of other players right behind the RVP barrier who would move fairly soon into E15,” he told CSP Fuels.
There are about 1,751 sites currently selling E15. That number is expected to move higher in 2019 not only because of the pending RVP rule but also because of the growing number of terminals that offer preblended E15—now at more than 100.
That said, depending on the retailer and its markets, it can take months to years to get E15 installed on the forecourt. “It takes a bit of time to prep for it, so if you wait until the time it’s ready, you might be behind the eight ball on it,” O’Brien said. “Do you want to be in that situation where E15 shows up, you can sell it year-round, and you already have competitors?”
The price of Renewable Identification Numbers (RINs), credits that fuel retailers can earn and sell as they blend in biofuels, has also become less of a financial incentive for retailers interested in E15. Prices have fallen from more than 90 cents in November 2016, when President Trump was elected, to only about 20 cents in early February, according to Bloomberg data.
At the same time as the E15 rule, the EPA also plans to announce a draft rule on RIN trading limits in response to the oil industry’s concerns that RIN prices are overexposed to speculation, Reuters reported.
However, O’Brien said that for retailers, the price of RINs is just one factor in making the economics work.
“It’s like a math equation,” he said. “RIN is one of the numbers, but it’s also the gasoline-to-ethanol [price] spread. And there are ways to manage the spread.”
Lorenz of Sheetz is optimistic enough about E15’s chances for year-round sales that his team is mapping out its plans for the summer.
“We won't have to be relabel dispensers, so really from our standpoint the preparation is ... starting to think about marketing,” he said. “So we're putting together marketing plans currently that we want to roll out.”