Fight to lift US E15 sales restrictions creates strange bedfellows among oil, biofuel groups

Source: By Jasmin Melvin, S&P Global • Posted: Monday, November 28, 2022

In a rare move, oil, biofuel and farm groups are all on the same page, rallying together to champion swift action on legislation that would do away with a summertime ban on sales of a gasoline blend containing 15% ethanol.

Oil refiners and biofuel producers have oft been at odds over regulations setting the amount of renewable fuel that must be mixed with gasoline and diesel each year. But on the issue of E15, they were united in support of a legislative solution to inconsistent fuel volatility regulations that have created barriers to fuel marketers and retailers offering E15 to US drivers.

While E10, which contains 10% ethanol and 90% gasoline, is widely accepted and available from retailers across the country year-round, current law prohibits the sale of E15 in conventional gasoline markets, which make up about 70% of the US gasoline market, from June 1 to Sept. 15 due to Environmental Protection Agency restrictions on air pollution from gasoline.

“Though oil and biofuel groups have fought like cats and dogs over the years, they have a common goal of limiting uncertainty and curtailing litigation expenses,” Corey Lavinsky, global manager of biofuels analytics at S&P Global Commodity Insights, said Nov. 22. “Proposed legislation needs to overcome many hurdles before it becomes law. E15 use has expanded considerably in 2022, but laws restricting its use in the summer remain the status quo until new ones are passed.”

S&P Global expects US ethanol production to average 1 million b/d in 2022 and rise slightly to nearly 1.02 million b/d in 2023. Ethanol demand is seen increasing about 3% to 931,000 b/d in 2023 from an average of 904,000 b/d this year.

Legislative fix

In a Nov. 21 letter to congressional leaders, energy and agricultural trade groups asked for quick adoption of a legislative fix that would provide equal treatment nationwide to all conventional gasoline blends by making them subject to the same fuel volatility limit.

Current law offers a summertime waiver of Reid Vapor Pressure (RVP) volatility allowance requirements to biofuel blends containing 10% ethanol. The EPA in 2019 issued a rule extending that waiver to blends containing more than 10% ethanol, but the DC Circuit Court of Appeals last year vacated that regulation.

The letter sent to Senate Leaders Chuck Schumer, Democrat-New York, and Mitch McConnell, Republican-Kentucky, as well as House Speaker Nancy Pelosi, Democrat-California, and House Minority Leader Kevin McCarthy, Republican-California, supports legislation extending the one-psi RVP tolerance to gasoline blends containing 10% ethanol or more.

The groups argued against the current incongruent treatment in RVP tolerance, especially because E15 “is slightly less volatile than E10.”

Such a fix was included in the Lower Food and Fuel Costs Act, H.R. 7606, House Democrats’ response to soaring gasoline prices exacerbated by Russia’s invasion of Ukraine and inflation that has sent the price of food and other goods skyrocketing.

That bill passed the House of Representatives June 16 in a 221-204 vote that saw a dozen lawmakers cross the aisle as seven Republicans voted with the majority and five Democrats joined the rest of the GOP to vote against the bill.

Narrow margins in the Senate make passage of any bill a formidable task, even though the issues this measure addresses have not typically solely been decided down party lines, with lawmakers instead weighing farm versus oil interests.

With funding the government to avert a shutdown, passage of the National Defense Authorization Act, and a slew of other key issues on the jam-packed to-do list for the lame duck session, it is unclear whether E15 will make it onto the agenda as this Congress wraps up.

Margins will remain slim for the next Congress, with Democrats retaining control of the Senate while the House flips to Republican control.

State petitions

The trade groups also called for simultaneously nullifying petitions from Midwest states that sought to exercise their Clean Air Act authority to ensure E15 could permanently be sold within their borders year-round.

Those petitions seek to eliminate the one-psi RVP allowance for E10 in their states, an “approach [that] would essentially require the same gasoline blendstock to be used for the sale of E10 and E15 in these states, which could require adjustments in fuel supply logistics in those states,” the trade groups said in the letter.

They instead preferred to ensure uniformity across the US fuel supply chain, and pointed to federal legislation as offering more flexibility and in turn resulting “in more consistent outcomes than a state-by-state regulatory landscape.”

Signatories to the letter were the American Farm Bureau Federation, American Petroleum Institute, Association of Equipment Manufacturers, Growth Energy, National Association of Convenience Stores, National Association of Truckstop Operators, National Corn Growers Association, National Council of Farmer Cooperatives, National Farmers Union, National Sorghum Producers, Renewable Fuels Association and SIGMA, a fuel marketers association.

“Our groups have come together – for the first time ever – to support legislation that would resolve this issue once and for all,” they said in the letter. “In the absence of such legislation, we could see gasoline marketplace uncertainty and political disputes over E15 continue to resurface every summer.”

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