Roadblock to Higher Blends

Source: By Matt Thompson, Ethanol Producer Magazine • Posted: Thursday, January 23, 2020

 The U.S. EPA’s move to allow the year-round sale of E15 is an important stepping stone toward the ethanol industry’s goal of making mid-level blends a more mainstream choice for drivers.

And while it’s been celebrated as a major achievement, there are some limitations to the rule. Specifically, the rule limits blends higher than 15 percent ethanol, says the Urban Air Initiative and a group of ethanol advocates who have challenged that portion of the rule in court. “We believe that there’s nothing more important to the growth of our industry than to have the ability to sell mid-level blends,” says Dave VanderGriend, president of UAI. “I’m specifically talking about blends like E20, E25, E30, any of those type of blends is what the fine print of this rule is going to severely limit moving forward.”

VanderGriend told Ethanol Producer Magazine in August, when the petition was filed, that the organization supports the provision that allows the year-round sale of E15, but “EPA is notorious for slipping in little comments here and there that, I would say, create ambiguity around some of the nuances of this rule.”

The Fine Print
The language in the E15 rulemaking under fire seeks to block the use of fuels with blends between 16 and 50 percent ethanol from being considered substantially similar to certification fuel. “According to the 1990 Clean Air Act, you have to have a product that is similar to the products used in certification fuel, and if you do, you can use varying amounts,” VanderGriend says. “We believe, according to the law, you’re allowed to blend more ethanol under the substantially similar rule, and this rule looks to block that ability.”

Trevor Hinz, director at UAI, says, “They used the sub-sim argument to approve E15 and if they would have used the same argument and same data to approve E15, there’s no reason they shouldn’t have approved E20. So our perspective is, ‘If E15 was OK using the same interpretation and data, why didn’t you approve E20?’”

In addition to limiting blends higher of 16 to 50 percent ethanol, UAI says the rule places burdens on fuel retailers using blender pumps to dispense mid-level blends. They say the rule classifies those retailers as fuel manufacturers or refiners. So UAI has submitted a petition for review to EPA. “Essentially the E15 RVP rule now considers blender pump operators who are selling anything above E15 and less than E85 fuel manufacturers or refiners and subject to the same administrative requirements that a refiner would be subject to,” Hinz says. “We’re simply saying that’s contrary to EPA’s authority. It’s arbitrary, capricious and abuse of discretion or otherwise not in accordance with the law, so we’ve asked EPA to go back and reconsider that.”

Despite the issues that could arise for retailers who are selling mid-level blends, Hinz says UAI says only two small retailers have signed the petition: Jump Start and Jackson Express. Both declined to comment for this article. “I think we’re the only ones in the industry that has brought this aspect of the RVP rule to light and I guess we don’t have as loud a megaphone as other industry stakeholders have,” Hinz says.

Hinz says some people think EPA will interpret the rule differently from how UAI has. “That’s fair,” he says. “However, our concern is, we don’t feel EPA always has our industry’s best interests in mind, and if they have the opportunity to interpret something that prohibits our industry from growing, there’s a likelihood that they’re going to use that at some point in the future and that gives us cause for pause and honestly gives us a lot of heartburn. … Our point of view is that as long as the current rule is written as it is, EPA has capped the ethanol industry at E15. Simply hoping the EPA interprets the rule in a favorable way for ethanol is not a risk we are willing to take.”

Hinz says retailers who are using blender pumps and selling blends higher than E15 should continue to sell their fuel. “I wouldn’t change any direction at this point,” he says. “We’re certainly continuing to encourage our retail operators to sell mid-level blends and having great success. In many of our stations, E30 is outselling E10. So it’s proving that, if given the chance, consumers will purchase high-quality, low-carbon mid-level blends.”

Education for retailers, however, is important, Hinz says. “We would be more than happy to talk to any blender pump retailer. We can make our attorneys available to talk to them, so they can understand the language that gives us concern in the rule. So that would be my first recommendation, to educate themselves on what the issue is.”

Beyond creating undue burden for retailers using blender pumps, Hinz says the issue also raises concern with the amount of money spent installing the pumps through programs like the U.S. Department of Agriculture’s infrastructure development grants. “If EPA prevails and is able to use this language to cap the industry at E15, from our perspective, that’s a huge hit to the return on investment for those blender pumps,” he says.

Other Voices
South Dakota Farmers Union has also signed onto the petition and supports the lawsuit. Doug Sombke, president of SDFU, says although his group represents growers, the issue is broader than just supporting the corn growers. “Why would you make such a rule? EPA is supposed to clean things for us and make things better for us environmentally and for our health. And this just doesn’t do that. It stops it at E15, which we know isn’t high enough to remove all the poison that’s in gasoline.”

Sombke says there hasn’t been much discussion within the industry about the restrictions on higher blends, as the industry waits for the agency to take action. “I think that they’re just waiting for action to be taken by EPA and the lawsuit, so I think that’s why,” he says. The Renewable Fuels Association and The American Coalition for Ethanol declined to comment for this article. Growth Energy did not respond to requests for comment before print.

Hinz says waiting is the next step for both the blender pump issue and the restrictions on mid-level blends. “Regarding the petition for reconsideration, EPA has acknowledged they are considering our request; we do not know when the EPA will render their decision,” he says. “Regarding the petitions for judicial review filed in the U.S. Court of Appeals, we are awaiting the court to issue a briefing schedule. Once a schedule is set, we will finalize and submit to the court our arguments.”

The restrictions on higher blends is also important for Glacial Lakes Energy in South Dakota. GLE is another of the petitioners, and the company has been a vocal advocate for using E30 in nonflex fuel vehicles via its E30 Challenge. Jim Seurer, CEO of GLE, along with other ethanol advocates, said in a recent letter to South Dakota Gov. Kristi Noem, “The importance of the GLE E30 Challenge is that multiple studies show E30 blends work in all standard light-duty vehicles (‘legacy vehicles’) on the road today. … Unless EPA reverses course and recognizes that E30 blends can be legally sold and used in legacy vehicles, our companies and other E30 supporters will challenge EPA’s indefensible misinterpretation in the courts.” Seurer adds that, unless EPA accepts comments regarding E30, he expects a legal challenge to be filed when the SAFE Rule is finalized.

Sombke says the SAFE rule also will be crucial. “We’re actually looking forward to when they bring out the SAFE rule and we’re going to really stand strong on that issue, and I think that’s where we really win,” he says. “This [mid-level blend restriction] would be a setback, there’s no doubt about it, but where we really win would be in the SAFE rule.”

Sombke also applauds both Noem’s and GLE’s efforts in promoting E30 blends. “Gov. Noem has really stepped up to the plate and taken this all on, along with Gov. [Tim] Walz of Minnesota,” he says. “We’ve encouraged other states to do the same thing, and I think that as Gov. Noem and Gov. Walz go forward, they’ll get more interest.”

No Threat to Year-Round E15
VanderGriend says filing the lawsuit and the petition weren’t meant to undermine the year-round sale of E15 but was an offensive—rather than defensive—strategy. “If we don’t take this step, you can’t take it back. You can’t do it later,” he says. “This is the only strategy to really force EPA to clarify the rule around blender pumps and higher blends of ethanol. Are they going to try and limit that? This is the only way we see today to bring this to the surface; to force the dialogue in the discussion with EPA about mid-level blends.”

Hinz says although their actions raise concerns with portions of the rule to allow the sale of E15 year-round, they’re supportive of the decision to grant the RVP waiver to E15, and their actions shouldn’t impact the summertime sale of the fuel. “Our attorneys have assured us there’s almost zero chance that EPA would remand the rule because of our issues with the language in two or three places,” he says.

VanderGriend agrees. “This is not a petition that harms the E15 rule in any way, shape or form. It really says, ‘EPA, you didn’t go far enough. Your testing for E15 also included E20, so why limit it to E15?’”