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Fuels

E15 Rule Finalized in Time for Summer Sales

EPA issues final rule on year-round sales and RIN market reforms
Photograph: Shutterstock

WASHINGTON — Summer sales of E15 have received the regulatory green light from the U.S. Environmental Protection Agency (EPA), just before seasonal sales restrictions were set to begin on the 15% ethanol blend.

In March, the EPA released proposed rulemaking that would provide a waiver of summertime Reid vapor pressure (RVP) restrictions for E15. Prior to this, E15 was unavailable for sale to any vehicle other than a flex-fuel vehicle from June 1 to Sept. 15 in most markets because it was restricted by seasonal RVP regulations, which are designed to reduce smog during the summer. Last fall, President Trump had vowed to lift summertime sales restrictions for E15, seeking to firm up support with corn farmers, who have been hit by poor growing conditions and the effects of the trade war with China.

At the same time, the EPA had proposed reforms to the trading market for Renewable Identification Numbers (RINs), the credits that obligated parties such as refiners use to demonstrate compliance with biofuel blending obligations under the Renewable Fuel Standard (RFS).

On May 30, the EPA posted its final rulemaking for both E15 and RIN transparency. On E15 specifically, the agency now defines gasoline blended with up to 15% ethanol as “substantially similar” to the fuel used to certify Tier 3 motor vehicles. It also lifts restrictions on the sale of E15 from May 1 through Sept. 15 and extends the 1-pound-per-square-inch RVP waiver that E10 currently has to E15 during the summer.

“As a result of this action, parties will be able to make, distribute and sell E15 made with the same conventional blendstock for oxygenate blending (CBOB) that is used to make E10 by oxygenate blenders during the summer,” the rulemaking states.

Federal rulemaking guidelines typically require a 30-day waiting period after a final rule is published in the Federal Register before it can become effective. But for the E15 changes, the EPA is citing an exception for when “a substantive rule which grants or recognizes an exemption or relieves a restriction.”

RIN Reforms

At the same time, the EPA has finalized reforms to the RIN system to help address concerns from refiners that some actors are manipulating the market and running up RIN prices. The agency, after noting “we have yet to see data-based evidence of such behavior,” has finalized two specific reforms that include:

  • Reporting requirements for obligated parties and nonobligated parties under the RFS—which include many large fuel retailers—requiring public disclosure when RIN holdings exceed certain levels. Nonobligated parties must report when their end-of-day separated D6 RIN holdings exceed 3% of the total implied conventional biofuel volume requirement. Parties must calculate daily RIN holdings and report new information in a quarterly report. The EPA will publish the names of any parties that report exceeding their thresholds.
  • New conventions for parties to follow when reporting RIN prices to EPA and to report whether the RIN transaction was on the spot market or as a result of a term contract.

EPA is not acting on three reforms that it had previously proposed: changes to RIN retirement frequency, limiting how long nonobligated parties can hold RINs and limiting the purchase of RINs to obligated parties.

“We have decided to defer the decision on whether or not to finalize these three proposed reforms as we conduct more thorough analyses of the RIN market and of the manipulation concerns presented by some stakeholders, with help from a third party,” the rulemaking states. “If, after reviewing that data and conducting additional market analysis, we determine that it would be prudent to finalize one or more of these proposed reforms in the future, we will share the analysis that has led us to believe it could be appropriate and will allow time for parties to comment before we proceed with a final rule.”

Industry Response

In crafting the E15 and RIN reform rulemaking, the Trump administration and EPA have been trying to assuage the concerns of both the ethanol and farming industry and refiners.

“I think it is an effective compromise,” EPA Administrator Andrew Wheeler told the Wall Street Journal. “What we’re trying to do is maintain the integrity of the system, not play favorites on any one side.”

NACS, NATSO and the Society of Independent Gasoline Marketers of America (SIGMA) have been supportive of regulatory efforts to ease retailers' ability to offer E15. In a joint statement, they said they did not oppose the RVP waiver or enhanced reporting requirements, and complimented the relative fairness of the final rules.

“We are still analyzing the rule, but at first glance we are pleased that EPA appears to have hit the sweet spot here by reasonably enhancing disclosure requirements without altering market participants’ behavior,” the statement said. “We appreciate that EPA chose not to promulgate unnecessary regulations that came with a high likelihood of unintended, counterproductive consequences.”

Biofuel industry groups also offered praise.

“The approval of year-round E15 is an incredible milestone for the biofuels industry, and the result of over a decade of hard work by Growth Energy, our members, our congressional champions, and folks all across rural America who made their voices heard,” said Emily Skor, CEO of ethanol industry group Growth Energy, in a statement. “With year-round E15, retailers will have the regulatory certainty they need to offer American drivers a cleaner, more affordable fuel choice throughout the year. This action also means savings for American motorists at the pump and a sorely needed market for farmers who are facing a devastating economic downturn.”

Opponents of the rule have argued that the Clean Air Act gives Congress—not the EPA—the authority to provide the RVP waiver. Under previous administrations, the EPA made this same point in declining to begin rulemaking on summer sales of E15. Wheeler told the Journal that the EPA is reinterpreting the law.

The Petroleum Marketers Association of America (PMAA), Alexandria, Va., a federation of 47 state and regional trade associations that collectively represent about 8,000 independent petroleum marketers, is one of these critics of the RVP waiver for E15. Rob Underwood, president of PMAA, told CSP Daily News this past spring that his group believes only Congress can provide the waiver, that there are unresolved concerns about the compatibility of underground storage tanks with E15, and the way some retailers are currently branding E15 can be confusing to consumers.

The American Fuel & Petrochemical Manufacturers (AFPM), Washington, D.C., which represents refiners, threatened a lawsuit if the EPA provides the waiver. With the EPA’s announcement of the final rulemaking, the group has confirmed its next step.

“We’re disappointed that EPA ignored our comments and the plain language of the Clean Air Act, which makes clear that EPA lacks authority,” Chet Thompson, president and CEO of the AFPM, told the Journal. “EPA has left us no choice but to pursue legal action to get this unlawful rule overturned.”

 

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