Will the ethanol industry’s hurricane lobbying pay off?

Source: By John Siciliano, Washington Examiner • Posted: Monday, September 11, 2017

It’s too soon to tell if the ethanol industry’s plan to leverage the federal hurricane response to rush higher blends of ethanol into market actually worked, although the Trump administration’s emergency fuel policies did act in its favor.

Shortly after Harvey made landfall last month, the Renewable Fuels Association, representing the ethanol industry, began pressing Environmental Protection Agency Administrator Scott Pruitt for a nationwide fuel waiver that would allow the mid-level ethanol blend, or E15, to serve as a sort of hurricane relief fuel for consumers suffering from high gasoline prices.

The alcohol fuel derived from corn is typically cheaper than straight gasoline when bought on the commodity markets, and the industry argues that is reason enough for EPA to waive the restrictions amid the hurricane crisis.

Fifteen percent ethanol fuel is prohibited from being blended in the summer months due to its high fuel volatility, or Reid Vapor Pressure. But 10 percent ethanol blends that comprise most of the nation’s gasoline supply don’t have that restriction because of a special RVP waiver that was never extended by EPA to 15 percent blends.

The ethanol industry has looked to Congress to make the tweak that would open a year-round market for the fuel, but that process is increasingly uncertain. But with hurricanes come federal fuel waivers, and why not a waiver for E15?

“In this time of stress on our fuel supply system, why wouldn’t we remove a barrier that would allow E15 to be sold less than two weeks before the allowable date of Sept. 15,” said Paige Anderson, director of government relations at the Association for Convenience and Petroleum Retailing, representing gasoline station owners and convenience store chains that sell fuel.

But as far as the hurricane lobbying affecting the market place with more E15, “it’s really too soon to tell,” she said.

Pruitt issued a 38-state gasoline waiver Aug. 31 that stays in effect until the middle of the month. It’s helpful to the ethanol industry, but there are some significant catches.

The fuel waiver is primarily targeted at lessening the burden on gasoline producers by waiving fuel emission standards in order to quickly facilitate moving the fuel to market amid the supply disruptions from Harvey, and now Hurricane Irma.

But in a letter to the governors announcing the waiver, Pruitt lays out a caveat that may have botched the E15 rollout ahead of the winter fuel-blending season, when it is typically allowed.

“The sale of gasoline containing up to 15 percent ethanol (E15) must continue to comply with federal rules, which are designed to minimize the potential for E15 being used in vehicles that are not designed to use this fuel,” the letter read.

To the layman that may not mean much, but for an industry attempting to move more ethanol into the market faster, it is nearly the entire kit and caboodle.

Ahead of the waiver being issued, Bob Dinneen, president and CEO of the Renewable Fuels Association, sent a detailed letter thanking Pruitt for issuing a smaller 13-state waiver one day earlier that relaxed the summer blending restrictions for all gasoline and inadvertently helped E15.

The letter also asked that Pruitt waive EPA’s requirements for E15 labeling that would prove prohibitive to get more low-cost ethanol into the market.

“We believe the waiver has the potential to provide much-needed relief to consumers in these areas facing gasoline supply shortages and price spikes,” Dinneen’s letter read.

“However, the full potential of the waiver to provide emergency relief can only be realized if EPA relaxes certain additional regulatory requirements related to the sale of E15,” the letter added. “Retailers’ ability to utilize E15 immediately will require confirmation from EPA that certain regulatory requirements will not become obstacles to the sale of E15 blends during this period.”

The mid-level ethanol fuel is allowed to be used only in certain vehicle model years, or risk engine damage. Therefore, the agency requires fuel retailers that sell E15 to post specific labels and warnings called Misfueling Mitigation Plans that essentially sequesters the fuel from others sold at the pump. The plans must be approved by EPA before a retailer can sell the fuel, and that can take weeks.

Pruitt has not sought to address those concerns. The agency updated its 38-state fuel waiver for Hurricane Irma last week, extending it until Sept. 26. But it would not impact ethanol sales any differently.

In the end, the hurricane-ethanol push may have only helped to underscore an even greater need for Congress to address the issue. But the path for a bill introduced this year by Republican Sen. Deb Fischer of Nebraska is uncertain.

The bill would direct EPA to make the technical updates required to allow E15 to be blended and sold in gasoline all year, not just in the winter.

“I believe lawmakers supporting the one pound waiver for E15 are exploring multiple legislative vehicles to attach this bill,” said Anderson, whose group supports the legislation.

But there are no hearings slated on the bill, according to the office of Sen. John Barrasso, R-Wyo., the chairman of the Environment and Public Works Committee, with direct oversight over EPA and fuel policy.

Sen. Jim Inhofe, R-Okla., a top ethanol opponent and former committee chairman, vowed to block the bill from ever passing the Senate.

But that hasn’t stopped Dinneen’s group from looking for a new opening for the legislation. “RFA continues to support any and all efforts to achieve RVP parity for E15 and higher level blends,” the group said in a statement.

“We support a surgically-focused legislative solution, such as the bill offered by Sen. Deb Fischer (R-Neb.), but also believe EPA has the authority to resolve this issue administratively,” the group said in a statement.

That means the industry will also be placing more pressure on Pruitt to directly change the fuel emission rules that restrict E15 fuels.

“The RVP barrier remains the single largest impediment to rapid expansion of E15 in the marketplace.”