Aug 20, 2021
Efforts to restore nationwide year-round sales of a 15% ethanol fuel blend are shaping up along three different avenues as biofuel and farm groups pursue an uphill battle to provide retailers with assurances on access to the fuel before next summer.
The DC Circuit Court of Appeals July 2 vacated a 2019 Environmental Protection Agency rule that extended a summertime waiver of Reid Vapor Pressure (RVP) requirements to biofuel blends containing more than 10% ethanol (American Fuel & Petrochemical Manufacturers v. EPA, 19-1124).
The implications of that ruling are poised to devastate the market expansion of homegrown biofuels if this barrier to sales is not resolved before next summer, the Renewable Fuels Association said.
While E10, which contains 10% ethanol and 90% gasoline, is widely accepted and available from retailers across the country year-round, E15, a fuel blend with 15% ethanol, cannot be sold in conventional gasoline markets from June 1 to Sept. 15 due to EPA restrictions on air pollution from gasoline. That blackout period has deterred some retailers from offering E15, but was lifted by the Trump administration.
Just as thousands of retailers were showing interest in offering E15, as RIN values and the blending economics for E15 were attractive, “the court decision came out, and everybody slammed on the brakes,” RFA CEO Geoff Cooper told S&P Global Platts Aug. 20.
“We’ve heard directly from retailers who tell us that they’re putting their plans to expand into E15 on the shelf until there’s more clarity around the path forward,” he said. “So it really is sort of hard to overstate what a big deal this is for the future of the industry.”
About 80% of the roughly 2,500 existing E15 retail locations are located in conventional gasoline markets that are impacted by the ruling, Chris Bliley, senior vice president of regulatory affairs for the biofuel trade group Growth Energy, said Aug. 20.
“We’re trying to turn over every stone because this is so important for higher biofuel blends,” Bliley said, noting that industry groups are pursing a legal remedy through the court system, legislative action on Capitol Hill and a regulatory solution with the EPA.
“We’re going to do everything we can to provide as much certainty as we can to retailers to be able to sell these higher blends through this summer driving season, and then get a solution in place before next summer,” he said.
American Petroleum Institute Senior Vice President and Chief Legal Officer Paul Afonso commended the court’s July 2 decision, saying, “We appreciate the court’s recognition that EPA was clearly outside of its current statutory authority by extending the RVP waiver to E15 fuel.”
But Growth Energy, the National Corn Growers Association, and the RFA believe the three-judge panel presiding over the case made significant legal errors, resulting in a ruling inconsistent with the congressional intent of the Clean Air Act to promote ethanol and limit fuel volatility. E15 has more ethanol and a lower RVP than E10. They asked the full court to rehear the case, in a petition filed Aug. 16.
The DC Circuit has yet to act on the rehearing request. As such, E15 sales have not yet been halted this summer as the court withheld issuance of the mandate that puts the ruling into effect until seven days after disposition of timely filed rehearing requests.
If the rehearing request is denied, the case would mark the second recent big court win for the refining group American Fuel & Petrochemical Manufacturers. The first came in June when the US Supreme Court ruled that the EPA had broad authority to exempt small refiners from the federal biofuel mandate.
“EPA doesn’t have any different authority today than it did last month when the court ruled unanimously that the agency overstepped its bounds, and decades of precedent, by applying a Clean Air Act waiver to E15,” an AFPM spokesperson said in an email Aug. 20. “We’re confident another review of this matter will yield the same result.”
If the DC Circuit does not agree to rehear the case and the mandate is issued prior to the Sept. 15 end of the summer season for E15, Cooper said his organization has asked the EPA “to exercise enforcement discretion and not enforce against any retailers that are selling E15 through mid-September.”
Legislation has already been put forward in the House and Senate that would ensure year-round access to E15 in all fuel markets, and the massive infrastructure package and the budget reconciliation process present potential vehicles for moving that legislation.
“But if we’re going to solve this issue legislatively, it’s going to be quite a heavy lift,” Cooper said.
“You’ve got the oil- and refiners-state members of Congress lined up against this legislation, and you’ve got the farm-state legislators strongly advocating for it,” Cooper said. “Those battle lines are the same as they’ve always been,” creating “a pretty tricky path forward.”
Bliley was more optimistic about legislative prospects.
“All this does is allow retailers to sell E15 year-round. This doesn’t require anybody to sell it. This isn’t pushing anybody to sell it, so we don’t understand why people would be opposed to simply providing the ability to retailers to sell a fuel in the summer months that they can sell nine months out of the year,” Bliley said.
The regulatory path is another option but it also presents challenges, mainly from a timing perspective.
Cooper contended that the EPA could take steps to remedy the situation through its own volition by launching another rulemaking process that takes a different approach to removing the RVP barrier for E15 than the Trump-era EPA took.
“We certainly are encouraging them to do so, and we’ll continue to work with the agency to try and get something going on the regulatory side,” Cooper said. But getting a rulemaking done before next summer, when the process typically takes 1.5 to 2 years, would be a difficult feat though not impossible.
Cooper noted that the EPA under the Trump administration got the 2019 rule at issue completed in about nine months.
The one silver lining, Cooper said, was that the RVP waiver is only needed in conventional gasoline markets, so the court’s ruling does not impede year-round E15 sales in reformulated gasoline markets, though that represents only about 30% of the US gasoline market. “So regardless of how things go with this court decision, we are going to be focused on getting retailers in those markets to expand their offerings of E15,” he said.