EPA finalizes rule to allow year-round E15

 

 

 

 

 

 

 

This summer, driving with E15 will now be possible thanks to the U.S. Environmental Protection Agency’s final rule to allow year-round E15 via a waiver of the Reid Vapor Pressure rules that have limited E15 to only 8 months of the year. Like Olaf, we sometimes closed our eyes and imagined what it’d be like when summer does come and we could see E15 at the pump on our way to the beach or the lake or wherever it is we go in summer and do what people do in summer.

So what does summertime E15 mean for consumers? For the biofuels industry? For farmers? What happens now? What about the RINs and small refinery waivers?

The reactions

First, let’s see what those in the industry have to say. Of course the response is overwhelmingly supportive from the agriculture and biofuels industries. But many took the chance to also criticize the small refinery hardship waivers.

Let’s start with the Renewable Fuels Association. Now that EPA has removed regulatory barriers allowing access to E15 fuel year-round, what does this mean for the ethanol industry, retailers and consumers? RFA President and CEO Geoff Cooper said:

“The ethanol industry thanks President Trump for personally championing this critical regulatory reform that will enhance competition, bolster the rural economy, and provide greater consumer access to cleaner, more affordable fuel options. We have always agreed with the President’s assertion that the outdated summertime prohibition on E15 was ‘unnecessary’ and ‘ridiculous.’

“E15 already has a proven track record for saving drivers money at the pump and reducing emissions, and today’s action will ensure that more Americans are able to enjoy those benefits. Year-round E15 will also provide a badly needed long-term demand boost for our industry and America’s farmers, who face a number of daunting challenges today.

“We are cognizant, however, that the promise of today’s E15 announcement could be undermined if EPA continues its unprecedented assault on the RFS with indiscriminate small refinery hardship waivers. Against the intent of Congress, EPA has been granting RFS exemptions to refiners without requiring them to demonstrate their claimed ‘hardship’ is somehow connected to the RFS. The demand destruction caused by EPA’s waivers must end. We urge the President to build upon the momentum of today’s announcement by reining in EPA’s abuse of the small refiner exemption program.”

The National Biodiesel Board also welcomed the EPA’s final rule and said that they support EPA’s ongoing efforts to increase transparency in the RIN market and appreciates the agency’s commitment to fully vet reforms that could disrupt the RIN market. Kurt Kovarik, NBB’s Vice President of Federal Affairs, also said,

“We thank President Trump for following through on his promise to support the biofuel industry. The regulatory change to allow year-round E15 sales will open the fuel market to additional ethanol use. However, the action does not expand the market for homegrown biodiesel. To expand market access for all renewable fuels, EPA must increase the annual volumes for advanced biofuels, such as biodiesel, and end its practice of granting retroactive small refinery exemptions.”

“NBB and its members applaud EPA’s efforts to increase transparency in the RIN market. We support the agency’s decision to defer final action on other reforms as it evaluates their potentially harmful impact to the biofuel market.”

“NBB will continue to press EPA to stop granting retroactive small refinery exemptions without any mechanism to ensure the annual volumes are met. Retroactive small refinery exemptions have destroyed demand for more than 360 million gallons of biodiesel and renewable diesel over the past year. Efforts to expand the renewable fuel market will be ineffective as long as EPA continues to undercut demand through small refinery exemptions.”

And of course, it comes as no surprise that U.S. Sen. Chuck Grassley of Iowa, a family farmer and member of the Senate Agriculture Committee, released the following statement:

“This is a promise made and a promise kept by President Trump. It’s been a goal of ethanol producers and Midwest farmers for many years. It will be a boon to the rural economy in Iowa, especially considering continued trade uncertainty. This decision is a commonsense step to allowing consumers to make their own decision about what kind of fuel they want to choose at the pump. Banning this higher blend of ethanol for part of the year never made any sense. Ethanol is good for the economy, good for national security and good for the environment. This is another step the Administration has taken to end harmful bureaucratic red tape that hurt American jobs, consumers and domestic industries.”

For his entire career in the U.S. Senate, Grassley has been a steadfast advocate for ethanol and environmentally-friendly alternative energy and helped lead the effort to encourage the Trump administration to approve E15 for year-round sales. He also released a video reaction to the announcement that can be found here. In it, he says summertime E15 is good for farmers, corn prices, well-paying jobs at ethanol plants around the country, the environment, and national security.

If the E15 ruling impacts anyone, it’s farmers. In Iowa, the Iowa Corn Growers Association’s President Curt Mether, who is also a farmer near Logan had this to say about how happy they are, but also made a point of criticism about the Small Refinery Exemptions:

“Year-round E15 has been a top priority for the ICGA, and we are happy to see the EPA recognize and follow through with President Trump’s promise on E15. The summer driving season is here and having access to E15 during this time is a step in the right direction for Iowa corn farmers and drivers.”

“While we’re happy to see E15 now available for consumers year-round, if the EPA continues to hand out hundreds of millions of gallons worth of Small Refinery Exemptions under the RFS, any potential near-term benefit provided by this rule will be swiftly gutted by the onslaught of that demand destruction. Simply put, the damage that can be done unilaterally by the EPA through SREs has the potential to far outweigh any benefit this rule provides to Iowa farmers and consumers. We need President Trump to keep the EPA in alignment with his promises on ethanol.”

Here’s what some others had to say:

Emily Skor, CEO of Growth Energy said:

“We are grateful to President Trump for delivering on his promise to unleash the power of E15 all year-long. 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. 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.”

Brooke Coleman, Executive Director of the Advanced Biofuels Business Council said:

“Year-round E15 opens up a vital new market, where innovators in advanced and cellulosic biofuels will have space to grow alongside American farmers. Administrator Wheeler deserves a lot of credit for getting this done in time for the summer driving season – and for discarding several proposals to tilt market away from those invested in biofuels. This could not have happened without strong support from the Oval Office, and we’re hopeful the president will stay engaged with the EPA. The opportunities created today could easily be destroyed by the next deluge of refinery exemptions.”

Jeff Broin, CEO of POET said:

“The Trump Administration’s year-round E15 rule is a huge win for farmers, clean fuels and consumer choice. Millions of drivers will now have the freedom to choose cleaner-burning E15 and enjoy greater savings at the pump when they need it most – during the summer driving season when fuel prices peak. Nationwide adoption of E15 will drive the production of 7 billion gallons of biofuels, creating additional demand for 2 billion bushels of corn each year, and unlocking new domestic demand for homegrown fuels at a critical time for America’s farmers. We extend our deepest thanks and appreciation to President Trump, Vice President Pence, Secretary Perdue, and Administrator Wheeler for putting family farms, rural jobs, cleaner air, and American consumers first and delivering year-round E15 as promised.”

Mike Lorenz, Executive Vice President for Sheetz it comes down to price and saving money:

“This fix provides major regulatory relief for all retailers seeking to offer lower-cost, higher-octane options at the fuel pump. For too long, retailers had to pay millions to retool and relabel pumps each summer and fall, which creates needless confusion for drivers. Now our customers will have uninterrupted, year-round access to E15 and a chance to save money during the busy summer travel season.”

Jim Talent and Rick Santorum, Co-Chairs of Americans for Energy Security and Innovation (AESI) it also comes down to lower prices as well as national security:

“Competition at the fuel pump means lower prices for consumers, stronger markets for our farmers, and greater energy security for the American people. We applaud President Trump for pushing regulators to lift these outdated regulations in time for the summer driving season. Retailers will finally have the regulatory certainty they need to give motorists more affordable fueling options made with clean U.S. energy. With oil prices on the rise and farm income falling, investments in American biofuel production have never been more important. We should seize this opportunity to create more jobs in rural America while taking power away from Iran and other members of the Organization of the Petroleum Exporting Countries (OPEC).”

American Farm Bureau Federation President Zippy Duvall said:

“Removing outdated barriers and regulations is a commitment that this Administration continues to make good on. As our country has worked on breaking our dependency on foreign oil, our farmers have played a major role in helping us become more energy independent. After years of declining farm income, opening up markets to additional fuel choices for consumers helps create new demand that farmers desperately need. While we applaud today’s announcement to allow year-round E15 sales, we look forward to working with the Environmental Protection Agency to address the harm caused by the Small Refinery Exemptions, which have negatively impacted demand for our homegrown renewable fuels.”

New Energy America’s Executive Director Mike Carr was a bit more critical of President Trump than some of the others and said:

“The science supports making E15 available year-round to every American on the road. This long-overdue move will absolutely contribute to reducing carbon emissions in the transportation sector, save Americans money, and support clean energy jobs in rural America. We support any commonsense policy that lessens our dependence on fossil fuels, and moves this vital climate-friendly American technology forward.”

“Unfortunately, we’re coming up on this Administration’s third summer in office and frankly, the president’s failure to make good on his campaign promise three years ago has further undermined farmers who turned out to vote for him in 2016, and who have experienced incredible hardship ever since. The larger issue — which we cannot allow this move on E15 to distract us from — is the EPA’s continued issuance of refinery waivers to friends in the oil and private equity industries. With farming incomes at 10-year lows, you just can’t keep promising gold and delivering stones. In order for the allowance of E15 throughout the summer months to be more than empty rhetoric, Administrator Wheeler must also replace the 2.6 billion gallons of ethanol demand destroyed through handouts to billionaires in the oil industry. We strongly urge Administrator Wheeler to do right by farmers and our future and put renewable fuels back on the path to growth and to becoming the key American climate solution we need it to be.”

The American Coalition for Ethanol CEO Brian Jennings said:

“For the ethanol industry and farmers, this means greater market access — more ethanol demand over the long term as additional retailers begin offering E15.

We’re also grateful EPA considered the comments ACE and many others made in opposition to sweeping and unnecessary reforms to the way RIN credits are handled under the Renewable Fuel Standard (RFS). Had EPA gone forward with the so-called RIN reforms, it would have dulled the upside benefit of E15 year-round.

Finally, speaking of dulling the upside benefit of E15 year-round, as we have repeatedly cautioned, EPA’s ongoing mismanagement of the RFS through blanket small refinery exemptions (SREs) needs to stop. The net effect of E15 year-round with 2.61 billion gallons worth of SREs that aren’t reallocated means we’re still in the hole when it comes to ethanol demand through the RFS. EPA is currently sitting on nearly 40 requests for refinery waivers from the 2018 compliance year. We discourage EPA from erasing any benefit of today’s rule by granting more waivers at a time when rural America can least afford it.”

Iowa Renewable Fuels Association added something that others didn’t directly bring up and that’s the petroleum industry which has vowed for years to sue the EPA over the E15 rule.

“The key for this rule is not just that it approves year-round E15, but that it does so based on the best science and legal precedents that will survive the Big Oil onslaught in court,” said IRFA. “The petroleum industry has tried everything to stop this day from coming. It’s no surprise they don’t want to compete with E15, which is lower-cost, cleaner, and higher-octane.”

IRFA also expressed appreciation that the final rule did not include demand destroying provisions camouflaged as so-called RIN reforms.

“The last thing rural America needs right now is a rule that would be one step forward, but two steps back,” said Executive Director Monte Shaw. “Some of the proposed RIN changes would have undermined the entire RFS. We urge President Trump to ensure those proposals remain, as President Reagan would say, on the ash heap of history, and that they not be resurrected in the future.”

Overhanging the E15 and RIN rule are 39 small refinery exemption (SRE) requests to the 2018 RFS levels.

“If granted, these SREs would rip the heart out of the RFS,” added Shaw. “Not just because of the destroyed gallons, but because they are simply unjustified given the current market conditions. Today we thank President Trump for fulfilling his E15 promise. Yet if in the coming weeks, the Trump Administration grants these SREs, it will break his other promise to biofuels supporters – to protect the RFS. We are sincerely thankful for today’s action that will create tens of millions of gallons of immediate demand for ethanol, but all of this will mean nothing if unjustified SREs gut hundreds of millions of gallons of demand. The fact is, to grant hardship waivers when RINs can be purchased for less than 10 cents is completely unjustifiable under the law, and we are calling on President Trump to ensure his EPA denies the 2018 SRE requests.”

Not everyone is happy about it

Speaking of the oil industry, there are unhappy folks out there and IRFA’s predictions of lawsuits seems to be a valid one as there seems to be plans to sue the EPA over the ruling already.

Let’s start with Virginia-based Outdoor Power Equipment Institute (OPEI), an international trade association representing small engine, utility vehicle, and outdoor power equipment manufacturers and suppliers, first. This is what they had to say:

“We will continue to advise consumers and professional users of outdoor power equipment to ‘Protect Your Power’ as E15 gasoline sales expand to year-round across the country,” said Kris Kiser, OPEI President and CEO. “With E15 sales expanding to year-round now in time for the summer travel and yard care season, it’s more important than ever for consumers to educate themselves about fuel choices today and to pay attention to what fuels you put in your lawn mower, generator, chainsaw, trimmer, UTV or other small engine product.”

Most outdoor power equipment is not designed, built or warranted to run on fuel containing 15 percent ethanol. “Fuel containing more than 10 percent ethanol can damage or destroy equipment,” said Kiser. Consumers are advised to check their owners’ manuals for guidance on correctly fueling their outdoor power equipment products, but “should be generally aware that only fuels containing 10 percent or less ethanol should be used,” he said.

He added, “As the fuels marketplace is evolving, you can no longer count on being able to put the same fuel in your mower that you also use in your car or truck. You must pay attention at the pump so you can protect your power equipment. You must put the right fuel in the right engine product. And for outdoor power equipment, that means E10 or less.”

Along with boat, snowmobile, motorcycle, automobile and other manufacturers, OPEI has long advised and educated consumers about the changing fuels marketplace, with mid-level ethanol blends being introduced for a subset of the automobile fleet. Mid-level ethanol fuels are not for use in non-road products, such as mowers, chainsaws, generators, UTVs, ATVs, boats, snowmobiles, motorcycles, and other outdoor power equipment.

“It is unfortunate our government is not willing to invest in stronger education for consumers about fueling choices. The small warning stickers placed on fuel pumps are not enough to prevent mis-fueling and do little to educate consumers. Consumers need to be vigilant year-round when it comes to fueling their outdoor power equipment and remember that E10 or less is always best,” said Kiser.

Earlier this year, the organization issued the results of a study conducted online with The Harris Poll that showed Americans are confused when it comes to fueling choices. OPEI’s research found that only 1 in 5 Americans (20%) say they notice ethanol content at a fuel pump, while more than 4 times as many (86%) notice price (similar to last year, 20% and 85%, respectively).

Among those who own outdoor power equipment, less than half (42%) of respondents pay attention to the type of fuel they use. More than 1 in 10 outdoor power equipment owners are fueling incorrectly.

Twelve percent admit to using fuel with higher than recommended ethanol (E15/E30/E50/E85) for their outdoor power equipment (up from 7% in 2015)

Fifty-eight percent don’t pay attention to or are not at all sure about what fuel they use.

The American Petroleum Institute came out with a headline of “EPA’s year-round E15 and RIN reform rule won’t fix the broken fuels mandate, could hurt U.S. consumers.” How’s that for a warning? API literally said it will hurt consumers and their vehicles in their statement:

“Extending this waiver is an anti-consumer policy that risks causing costly engine and fuel system damage to nearly three out of four vehicles on the road today,” said API Vice President of Downstream and Industry Operations Frank Macchiarola. “EPA has acted outside its statutory authority in granting year-round E15 and rushed through the rulemaking process in order to meet an arbitrary deadline. This premature policy attempts to push E15 into the market before it is ready.”

EPA also finalized reforms to the Renewable Identification Number (RIN) market.

“While we are encouraged that EPA limited the scope of the proposed RIN reforms, the rule does nothing to address the ethanol blendwall, which is the main structural problem with the RFS,” Maccchiarola said. 

“The outdated RFS mandate was premised on the faulty assumptions of ever-increasing gasoline demand and reliance on foreign sources of oil, and the near-term commercial availability of advanced and cellulosic biofuels. History has proved these assumptions wrong, and we urge EPA to instead focus its attention on protecting consumers and fixing the RFS, which has strong bipartisan support.”

Chet Thompson, President and CEO of the American Fuel & Petrochemical Manufacturers (AFPM), said, “The statutory language leaves no question that the EPA lacks authority to extend the E10 volatility waiver to E15. Finalizing this aspect of the proposed rule would clearly be unlawful, and we strongly oppose it.”

According to Bloomberg, “Marathon Petroleum Corp. warned the EPA’s move to consider E15 “substantially similar” to conventional E10 gasoline is “arbitrary and capricious” — a fatal failing under a federal law governing rulemaking. And the American Fuel and Petrochemical Manufacturers insisted the EPA is taking action previously rejected by Congress.”

Bottom Line

So while most of us are singing along like Olaf about the happiness of summer and what wonderful news this particular summer brings with the E15 ruling, not everyone is happy – just ask OPEI and most in the petroleum industry. We predict they will try to block, sue or do whatever they can to not allow summertime E15 – kind of like Anna trying to bring Olaf down as he happily sings about how wonderful summer is. The big question is what comes next? What will happen with the small refinery waivers? With RINs? We can’t wait to see what happens next.