How the oil sector came to embrace E15 gasoline after years of opposition

Source: By James Osborne, Houston Chronicle • Posted: Monday, December 5, 2022

Congress is about to lose its authority over the nation’s biofuel programs unless it can bridge the gap between farm, oil and environmental interests.

Congress is about to lose its authority over the nation’s biofuel programs unless it can bridge the gap between farm, oil and environmental interests. Jeff Wheeler, MBR / TNS

WASHINGTON — When a bipartisan group of Midwestern senators introduced legislation this week allowing the nationwide sale of gasoline with higher concentrations of ethanol, they found an unusual partner in the American Petroleum Institute.

Corn-based ethanol is a competitor to gasoline, and the oil industry’s largest lobbying group had long opposed efforts to expand sales of the fuel known as E15, which contains 15 percent ethanol as opposed to the 10 percent in standard gasoline.

But the calculus shifted in recent months after a group of Midwestern governors moved earlier this year to open up year round sales of E15 in their states and increase demand for corn produced by their farmers. But those moves could also create a patchwork of fuel standards that would complicate the business of refining fuel.

Over the last several months, representatives from the oil sector began meeting with their counterparts in the ethanol industry to discuss a solution, said Geoff Cooper, president of the Renewable Fuels Association, which represents ethanol producers in the Midwest.

“The thinking was we can continue to butt heads every summer or we can find a path forward that works for everyone,” Cooper said. “It really boils down to the simple fact that uncertainty and shifting regulations and emergency waivers and all this ad hoc management, none of that is good for anyone.”

In 2019 former President Donald Trump ordered the EPA to loosen federal environmental standards, allowing the sale of E15 year round. That ended a longstanding policy that banned sale of the fuel in summer months when air pollution levels are higher, limiting widespread adoption of the fuel. Only two years later, the Court of Appeals in Washington, D.C., ruled it was not within presidential authority to do so.

Now oil and ethanol companies want to see that policy written into law. On Tuesday, 12 Midwestern senators, Democrats and Republicans alike, introduced a bill making the change, with a statement in support from the American Petroleum Institute.

“This bipartisan legislation strengthens the reliability of the fuel supply chain and ensures American consumers have access to the fuels they depend on every day,” said Will Hupman, vice president of downsteam policy at the institute. “We urge Congress to recognize the broad and diverse support that this bill has already received and work expeditiously to pass it into law.”

American Fuel and Petrochemical Manufacturers said it was still reviewing the legislation. The trade group, which represents refining and petrochemical interests, sued to block the Trump administration’s change in E-15 policy in 2019.

Were Congress to approve the bill, it is likely to contribute to a longstanding decline in gasoline demand, which has slipped with the adoption of fuel-efficient cars and now electric vehicles. U.S. gasoline sales averaged 8.6 million barrels a day for the four weeks before Nov. 25, down 7 percent from the same period in 2017, according to the Department of Energy.

The shift in attitude within the oil sector comes as biofuels becomes an increasingly large part of their business, and companies seek to take advantage of subsidies for low-carbon fuels in states such as California and Oregon.

Companies including San Antonio-based Valero and Houston-based Phillips 66 have converted oil refineries to renewable diesel, which is made mostly from vegetable oil. By 2025 renewable fuel output is expected to double in the United States to 238,000 barrels a day, according to analysis by the research firm Energy Intelligence.

And oil companies’ obligation to blend biofuels into the fuel supply under the federal Renewable Fuel Standard is also increasing, as the Biden administration eliminates exemptions for small refineries.

In 2020, the last year of the Trump administration, those exemptions added up to 2.5 billion gallons of ethanol, about 17 percent of the ethanol the fuel industry is required to blend, said Cooper, the ethanol lobbyist.

“It feels like we’re making progress on some issues we’ve been working on a really long time,” he said. “We’re not yet singing kumbayah (with the oil industry), but at least were sitting around the same camp fire.”