Supporters of E15 testify in support of year-round sales

by | Apr 1, 2019 | 5 Ag Stories, News

The comment period for the Environmental Protection Agency?s (EPA) E15 rule is open until April 29th. Testimony was given on behalf of E15 at a public hearing in Ypsilanti, MI, last Friday.

National Corn Growers Association Vice President and Minden, Iowa Farmer Kevin Ross says, ?Continued low commodity prices and consecutive years of declining farm income, coupled with recent trade disruptions and EPA?s expansive RFS waivers for refineries, are taking a toll on farmers. While year-round E15 cannot offset the harm from refinery waivers, higher blends of ethanol are a no-cost means to grow demand. Treating 15 percent ethanol blends, or E15, the same as standard 10 percent ethanol blends will expand a domestic market for farmers — as well as benefit both drivers and our environment. E15 can save drivers between 3 and 10 cents per gallon. Since more than 90 percent of vehicles on the road today can use E15, more retailers will be able to offer consumers more choice when this outdated restriction is lifted. Blending more ethanol through E15 reduces greenhouse gas emissions. E15 also has lower volatility than E10 ? controlling fuel volatility is why EPA regulates Reid Vapor Pressure.

This regulatory change just makes sense. NCGA agrees with EPA?s proposal to update interpretations of the Clean Air Act. Prior interpretations were made long before EPA approved E15 in 2011 and before EPA updated the vehicle certification fuel. These major changes make it imperative that EPA revisits how E15 is treated. Specifically, NCGA urges EPA to adopt the proposed interpretive rulemaking that finds E15 is ?substantially similar? to the current E10 certification fuel. This interpretation makes the rule stronger. To ensure E15 sales are not interrupted, NCGA urges EPA to complete this rulemaking by June 1, as well as keep the complex RIN market reform proposal from weighing down the E15 rule. While farmers are not direct participants in the RIN market, we know an effective RIN market helps drive biofuels blending under the Renewable Fuel Standard, and we are concerned with some of the proposals. EPA must ensure RIN market rules are fair to those who are blending biofuels to further the RFS and maintain an efficient RIN marketplace. Farmers stand ready to work with the Administration to clear obstacles to higher blends of ethanol such as E15 and ensure a final rule works for the full ethanol and fuel supply chain. Thank you for moving forward with this overdue regulatory relief that benefits farmers, drivers, and our environment.?

Iowa Governor Kim Reynolds also testified to the hearing.

?Much has occurred since I was here to testify last July. I noted then that trade uncertainty combined with attacks on the RFS has increased angst throughout the countryside and that remains true today. In fact, the economic pressures on rural Iowa have only intensified.

President Trump made a commitment to Iowa last October and Iowans expect it to be kept.

The demand destruction is real, and the data proves it. Moreover, we have seen alarming press reports that the lawsuits challenging these exemptions have unearthed facts that DOE?s analysis and recommendations to deny at least half of the exemption requests were ignored by the EPA. In fact, to date, not a single small refinery exemption has been denied during the entire Trump Administration. As refiners enjoy record profits, Iowa farmers are hurting, ethanol plants have been shuttered, and U.S. ethanol use has declined.

For example, according to a particular refiner?s annual report, they made $408 million last year from reduced compliance costs. Yet they spent $319 million to buy 3 distressed ethanol plants last year, including 1 in Iowa. Clearly, these rampant exemptions are having a disastrous impact and are not in line with the letter or spirit of the RFS.

Renewable Fuels Association (RFA) President and CEO Geoff Cooper made the following testimony.

?RFA appreciates the opportunity to share some of our initial thoughts and comments on the proposed rule providing flexibility for E15 and modifying RFS RIN market regulations. As you know, we have continually advocated for parity in the regulatory treatment of E15 and E10 since the E15 fuel waiver petition was originally filed in 2009.

We strongly support EPA?s proposal allowing E15 to take advantage of the 1-psi Reid Vapor Pressure (RVP) waiver that currently applies to E10 during the summer months. RFA agrees with EPA that our nation?s fuel market has experienced ?changed circumstances? since the RVP waiver was initially adopted in 1990 and we agree that ??the conditions that led [EPA] to provide the original 1-psi waiver for E10 in 1990 are equally applicable to E15 today.? Extending the 1-psi RVP waiver to E15 during the summer volatility control season will open the marketplace to a fuel that provides consumers higher octane, lower cost, and reduced tailpipe emissions.?

?Sub-Sim? Approach in 211(f)(1)

We firmly endorse EPA?s proposal to interpret section 211(h)(4) of the Clean Air Act as being applicable to ethanol blends containing at least 10 percent ethanol, including E15, 2 and we believe EPA?s justification for this interpretation is well supported by the statutory text and Congressional intent.

RFA also strongly supports EPA?s recommendation to define E15 as ?substantially similar? to the Tier 3 certification fuel, which is E10, and we believe the reasoning for this proposal is both legally and scientifically sound. We agree that E15 has ?similar effects on emissions, materials compatibility, and driveability? as E10. However, we oppose EPA?s proposal to impose certain restrictions on the use of E15 under the ?sub sim? approach, including many of the conditions currently applied to E15 as a consequence of the 211(f)(4) partial waivers granted in 2010 and 2011. Moreover, there is nothing in the language of the statute that contemplates the possibility of conditions on a ?sub sim? determination under section 211(f)(1). If EPA were to consider placing conditions on E15, it would have to proceed under section 211(c) in a separate rulemaking. There is no factual basis for pursuing such conditions, however, given E15?s characteristics, which are either superior to E10 or, as EPA has acknowledged, substantially similar.

Interpretation of 211(f)(4)

In the proposed rule EPA also interprets the constraints in section 211(f)(4) to apply only to fuel manufacturers such as refiners and importers, but not to parties that blend oxygenate into certified fuel. Although this interpretation of section 211(f)(4) provides a separate and independent basis for the allowing applying the 1 psi waiver to E15, it would impact certain entities in the supply chain differently. Because the fuel manufacturer interpretation is an alternative basis for the action, and because the sub-sim determination would apply to fuel manufacturers and oxygenate blenders equally, RFA requests that EPA ensure the final rule allows E15 to be lawfully blended from the same gasoline blendstock that is used to make E10 during the summer by both fuel manufacturers and oxygenate blenders.

Further, while EPA correctly concludes that E15 produced from the same gasoline blendstock for oxygenate blending (BOB) as E10 would likely have ?slightly less? evaporative emissions than E10, the Agency?s review of studies focused on E15 exhaust emissions appears to exclude several important analyses that properly considered the impact of fuel blending practices and test fuel parameters on tailpipe emissions. EPA also omits studies showing that the organics emitted from the tailpipe will have a lower 3 ozone forming potential with E15 in comparison to E10. We encourage EPA to broaden and strengthen its review of available studies and data pertaining to E15 exhaust and evaporative emissions. RFA will provide additional information regarding these emissions studies and data in its formal written comments responding to the proposed rule.

E15 Made at Blender Pumps

In addition, RFA encourages EPA to consider a more flexible approach to regulation of E15 made at blender pumps. A majority of the retail dispensers selling E15 today are, in fact, blender pumps that mix E85 and E10 together to make the finished fuel. Much of the E85 that is used to make E15 via blender pumps today contains natural gasoline denaturant that meets Tier 3 sulfur limits. Under your proposal, E15 made in this manner would not qualify for the 1-psi RVP waiver, even if the finished fuel met applicable sulfur and benzene standards and had volatility of 10.0 psi or less. This seems unreasonable, especially because E15 made from E85 and E10 via a blender pump typically contains just 1 percent natural gasoline.

Rather than effectively eliminate the use of natural gasoline as a component of E85 and E15 altogether, we recommend that EPA adopt the approach to E15 made at blender pumps first proposed in the Renewables Enhancement and Growth Support (REGS) rule. Under that approach, EPA proposed to allow entities who manufacture E15 at blender pumps to use product transfer documents (PTDs), in lieu of performing batch testing, to demonstrate compliance with applicable sulfur, benzene, CHONS, and volatility requirements. RFA believes the approach proposed in the REGS package is reasonable and we encourage the Agency to finalize that approach in the rulemaking under consideration today.

RIN Reforms

In regard to the proposal?s RIN reform concepts, RFA generally opposes any changes that would reduce RFS compliance flexibility, diminish liquidity in the RIN market, give certain parties in the marketplace unfairly advantaged positions, add unnecessary complexity, increase administrative burdens, or impugn the RIN market?s ability to incentivize expansion of renewable fuel consumption. RFA does not believe any of the four main options proposed represent an improvement or enhancement of the current 4 RIN program. It is our understanding that the purpose of the RIN reform concepts is to enhance transparency in the marketplace; we do not believe any of the four primary proposed options would accomplish that objective, however.

At the same time, as we have expressed to EPA in the past, we believe there is more the Agency could do to enhance RIN market transparency and public visibility. For example, providing the ?RINs Holding Report? in more frequent intervals (e.g., weekly or monthly) would help market participants and the public better understand what broad categories of parties are holding and transacting RINs in near real-time. We also believe EPA should finalize the proposals included in the REGS rule regarding disclosure of certain information related to small refinery exemptions, as this would help the public understand what parties are being exempted from their obligations to obtain and surrender RINs to demonstrate compliance with RFS obligations.

Whereas we see little or no value in the four primary RIN reform concepts proposed in this rulemaking, some of the ideas presented in the proposal?s discussion of ?Enhancing EPA?s Market Monitoring Capabilities? may indeed enhance transparency and likely warrant further exploration. However, we do not believe any of the RIN reform concepts discussed in the proposal should be finalized at this time.

Small Refinery Exemptions

While RFS small refinery exemptions (SREs) are not the explicit subject of this rulemaking or today?s hearing, we feel compelled to remind EPA that continued abuse of the SRE program would significantly undermine the ethanol market expansion intended to result from finally allowing year-round sales of E15. In other words, continued SREs threaten to derail the central objective of the rulemaking under consideration today.

Already, more than 2.6 billion gallons of RFS demand have been erased from 2016 and 2017 obligations, and consequently, our industry in 2018 saw the first annual decrease in domestic ethanol consumption in 20 years. As EPA considers the 39 pending requests for 2018 small refiner exemptions, we strongly urge the Agency to exercise more restraint, and assure that any supposed ?economic harm? is truly related to RFS obligations. We urge you to deny requests that are clearly not warranted and reallocate any volume that is waived?as directed by the statute. Frankly, if EPA uses RIN prices as a measure for ?economic harm,? the Agency should not be granting any 2018 waivers?5as RIN prices were at a five-year low and traded for less than a dime at certain points during the year.

Severability

Finally, we continue to believe it is very important that the Agency sever the RVP and RIN reform provisions into two rulemaking efforts in the event it appears from the comments submitted that the RIN reform provisions might jeopardize or complicate promulgation of the RVP measures before May 31. The two disparate pieces of this rulemaking have different time constraints, separate legal authorities and objectives, wholly distinct policy justifications, and different economic impacts. Accordingly, even if EPA decides not to sever the RVP and RIN reform provisions in two separate rules, we ask that EPA clarify in the final rule that any RIN reform provisions are severable from the E15 RVP parity provisions, in the event either or both sets of provisions are challenged judicially.?

Cooper also made additional comments prior to the testimony in which he said the number of waivers granted by EPA under Pruitt and Wheeler has destroyed the market for Renewable Identification Numbers (RINs) and the incentives for the blending of ethanol.

Cooper said we need to see the EPA make some changes and back its promises.

Growth Energy CEO Emily Skor also testified at the public hearing. Skor says the effects of the waivers and the market destruction has put ethanol plants under incredible strain. Plants which support their rural communities.

This battle is far from over, as we will probably see challenges from the oil industry as soon as the rule is finalized. Also, the battle over RIN reforms may get ugly as well.