US refiners push one-year delay on E15 petition

Source: By Chris Knight, Argus Media • Posted: Sunday, January 22, 2023

Shell, Phillips 66 and Chevron are among the oil companies seeking at least a one-year delay, until 1 May 2024, for a fuel specification change in eight states intended to support continued year-round sales of 15pc ethanol gasoline (E15).

The delay request came in an industry-organized meeting last week with staff from the White House and the US Environmental Protection Agency (EPA), public documents show. If EPA soon approves a switch to lower-volatility gasoline blends in those states, refiners and fuel distributors say they need more than a few months for the changes needed to comply.

“EPA can provide much needed regulatory certainty by proposing a feasible timeframe to implement refinery and distribution changes that are necessary to supply a low-[Reid vapor pressure] gasoline in the Midwest,” according to an industry petition shared at the meeting.

Illinois, Iowa, Minnesota, Kansas, Wisconsin, Nebraska, North Dakota and South Dakota last year petitioned EPA to revoke waivers that let 10pc ethanol gasoline (E10) have a Reid vapor pressure that is 1 pound per square inch more than E15. Removing the waiver would allow E15 to be sold in those states in summer, without an emergency waiver, but would also require refiners to produce lower-volatility gasoline to continue selling compliant fuel.

Refiners in the US midcontinent and in the US Gulf Coast will need to make “infrastructure and operational changes” to be able to supply the new gasoline blends, which would include a regular grade and a premium grade, the industry petition said. Having two additional fuel grades will the PADD 2 petroleum district harder to supply and more vulnerable to market volatility, according to the petition from the trade group the American Petroleum Institute.

Valero, Flint Hills Resources, ExxonMobil and Magellan Midstream attended a separate meeting at the White House on 15 December that also requested a one-year delay. That meeting was held by the refinery group American Fuels & Petrochemical Manufacturers and focused in part on logistical issues.

“Pipeline companies may not have adequate infrastructure at most terminals to accommodate new grades of gasoline without investments in new storage and other infrastructure, which often requires at least 24 months to accomplish,” a petition shared at the 15 December meeting said.

US ethanol producers and corn growers have offered support for the fuel specification change at different meetings with White House officials. Last month they shared a study they commissioned from consulting firm ICF that said most refiners and terminals in the region should be able to switch to the lower-volatility fuel with “minimal changes,” likely by removing all butane from the region’s gasoline pool.

The ICF study acknowledged that refiners in the region could face challenges from storing and exporting the now-excess butane. Refineries that supply markets inside and outside the eight-state region could also face challenges from segregating the new low-volatility gasoline, the study said.

The White House began reviewing EPA’s response to the state petition on 5 December. EPA had a non-binding goal to propose its response to the state petition by last December and to finalize the agency’s response by March, according to a regulatory agenda released last week.