WASHINGTON — The U.S. Environmental Protection Agency (EPA) has released its proposed rulemaking to enable year-round sales of E15 and reform the Renewable Identification Number (RIN) market, both of which are certain to face legal challenges.
Last fall, President Trump had vowed to lift summertime sales restrictions for E15, which is currently unavailable for sale to any vehicle other than a flex-fuel vehicle from June 1 to Sept. 15 in most markets. That’s because the EPA had not granted a waiver of summertime Reid vapor pressure (RVP) regulations to E15 that are designed to reduce smog. The EPA had been racing to announce the proposed rule in time for the summer 2019 driving season—a timeline that was cast into doubt because of the partial government shutdown.
The rule proposes regulatory changes to extend the summertime RVP waiver to E15 and define gasoline blended with up to 15% ethanol as “substantially similar” to the fuel used to certify Tier 3 motor vehicles.
“Consistent with President Trump’s direction, EPA is working to propose and finalize these changes by the summer driving season,” said Administrator Andrew Wheeler in a press release announcing the proposed rulemaking.
The EPA is also proposing reforms to the market for RINs, the credits that obligated parties such as refiners under the Renewable Fuel Standard (RFS) use to demonstrate compliance with their biofuel blending quotas. Merchant refiners such as Valero Energy and CVR Refining have argued that RIN speculators have driven up and manipulated the cost of RINs at times, which has eaten into their compliance costs. The EPA is proposing these changes despite acknowledging that it has “yet to see data-based evidence of such behavior.”
The proposed changes include:
- Limiting how long nonobligated parties such as fuel retailers can hold RINs.
- Prohibiting entities other than obligated parties from being able to purchase separate RINs.
- Requiring public disclosure when an individual exceeds RIN holding limits.
- Increasing the compliance frequency from once per year to once per quarter.
In a joint statement, NACS, the Society of Independent Gasoline Marketers of America (SIGMA) and NATSO—the national association for truckstops and travel plazas—denounced the proposed RIN reforms, arguing they would “create chaos” and reduce the incentive for fuel retailers to blend in biofuels.
"EPA's proposal would remove many existing incentives to sell biofuels and would act as a penalty for fuel marketers that want to blend those fuels," said David Fialkov, vice president of government affairs for NATSO, Alexandria, Va. "The 'reforms' that EPA is exploring were conceived by the same refining companies that for years have been trying to undercut the RFS in order to avoid investing in renewable fuels. The changes are not designed to 'enhance RIN transparency' but rather to depress demand for biofuels so that a small subset of refiners can spend as little as possible to meet their obligations."
"While these reforms are supposed to limit volatility and 'improve transparency' in the RIN market, they would generate more problems than solutions," said Paige Anderson, director of government relations for NACS, Alexandria, Va. "Allowing E15 to be sold year-round is only helpful if retailers still have an incentive to sell it—and this proposal takes that incentive away."
The American Petroleum Institute (API), Washington, D.C., lambasted both the E15 and RIN reform proposals. API Vice President of Downstream and Industry Operations Frank Macchiarola pointed to previous statements by the EPA under the Obama administration that the agency did not have the authority under the Clean Air Act to extend the RVP waiver to E15, saying that power belongs only to Congress.
“To make matters worse, the agency’s proposed changes to the RINs market could increase costs for fuel producers and lead to higher prices for consumers,” Macchiarola said. “Additionally, the proposed changes move the goalposts for U.S. energy companies that have already made capital investments and business decisions based on the current RFS program.”
The API represents large U.S. refiners such as Marathon Petroleum, ExxonMobil and Chevron, which generate enough RINs to comply with the RFS and sell the excess to other obligated parties. API has argued that the RFS as a whole is flawed and should be fully reformed or scrapped.
The EPA will hold a public hearing on the proposed E15 and RIN reform rules on March 29.