E15 fans nervous as shutdown puts pressure on deadline

Source: By Marc Heller, E&E News reporter • Posted: Wednesday, January 23, 2019

Acting EPA Administrator Andrew Wheeler’s promise to make higher-ethanol fuel available this summer hasn’t convinced industry advocates that the agency will deliver.

Wheeler told a Senate committee last week that the partial federal government shutdown hasn’t thrown off the schedule — yet — and the result has been a new round of lobbying by both sides of the debate over biofuel mandates.

The ethanol industry urged EPA to make its job easier by separating two parts of the forthcoming regulations on E15 fuel, which is 15 percent ethanol and not generally available in summer. EPA should concentrate on the E15 regulations, while splitting off proposed changes to the system of renewable fuel credits that’s unpopular with small petroleum refiners, the Renewable Fuels Association said.

“Finalizing the year-round E15 rulemaking no later than May 31 will take a Herculean effort,” wrote RFA President and CEO Geoff Cooper in a letter to Wheeler on Friday. “Therefore, we respectfully request that EPA bifurcate the rulemaking into two separate actions, moving forward immediately on the year-round E15 provisions and considering RIN [renewable identification number] reform in a subsequent and secondary action.”

Petroleum companies continue to fight for reforms to renewable fuel credits, a critical element of the federal renewable fuel standard that refiners say is too costly. Refiners buy the credits in order to show compliance with the RFS, if they don’t actually blend ethanol.

To leave those changes out would break a promise President Trump made to look out for the interests of small refiners as well as ethanol companies and the farmers who supply them, said Scott Segal, a partner at Bracewell LLP, which represents energy companies.

“In the past, EPA has been instructed by the president to formulate a package that includes elements that both address a perceived need for higher ethanol blends and the real need to insulate refining assets from the unintended consequences of RFS implementation and the market it has spawned,” Segal told E&E News.

EPA hasn’t indicated whether it would consider taking up the two issues separately, and Wheeler didn’t address the subject last week at his confirmation hearing with the Environment and Public Works Committee.

Asked by Sen. Mike Rounds (R-S.D.) whether EPA can still meet the summer E15 goal despite the partial shutdown, Wheeler said, “As of today, yes” (Greenwire, Jan. 16).

But Wheeler stopped short of a guarantee, adding that work on the proposal has stopped during the impasse and “we may be slightly delayed” in having a proposal ready for public release in February. Final regulations would have to be in place by May 31 to allow summer sales, which are restricted by ozone-related rules.

While the two industries keep pressure on, lawmakers are taking positions on opposite ends of the debate.

Sen. Joni Ernst (R-Iowa) told E&E News she’s sympathetic to the challenge EPA faces with the shutdown but expects Wheeler to bring furloughed workers back in to finish the E15 regulations if necessary.

“I understand this is a very difficult situation,” Ernst said. “He does not have all of his workers in place right now because of the shutdown. I think we’ve put a lot on his shoulders, but we’re going to hold them firm to that commitment.”

Iowa, the political center of the ethanol industry, is the nation’s top producer of corn, the main feedstock for ethanol. Nationally, ethanol consumed more than 5.5 billion bushels of corn in 2017, out of a total of 14.6 billion bushels harvested, according to the Department of Agriculture.

On the flip side, Sen. Jim Inhofe (R-Okla.) made a case at the hearing for fuel that doesn’t have any ethanol at all — called E0 — and said EPA regulations should take into account climbing demand for that fuel, as well.

“There’s a growing concern that the administration is only listening to one side of the argument,” said Inhofe, who has pushed for eliminating the RFS. That side, Inhofe added, doesn’t reflect “the real world.”

A spokeswoman for Inhofe noted a letter from Magellan Midstream Partners, an Oklahoma company that owns petroleum pipelines and fuel storage and distribution facilities, to EPA last year. In that letter, sent in response to the agency’s proposed renewable fuel volumes, the company said EPA greatly underestimates demand for E0.

Magellan alone distributes three times as much E0 in 24 states as EPA estimated for the nation as a whole in 2016 and 2017, said the company’s vice president for government and media affairs, Bruce Heine, in the letter. The company distributes fuel of all types, including renewables, and doesn’t favor one versus another, he said.

On the other end of the ethanol scale, demand for 85 percent ethanol fuel, or E85, is growing, according to a study by the Department of Agricultural and Consumer Economics at the University of Illinois. That’s true despite other trends such as falling renewable fuel credit prices that should have the opposite effect, said Scott Irwin, an agricultural economist who writes the department’s farmdoc daily blog.

Irwin said another government program — the Department of Agriculture’s blender infrastructure program announced under the Obama administration — was likely responsible for increased E85 use. The number of gas stations offering E85 grew 7 percent in 2017 and an additional 9 percent in 2018, Irwin wrote, citing information from the Department of Energy’s Alternative Fuels Data Center.