Relieving the Pressure

FROM THE DECEMBER ISSUE: There’s movement at last to obtain an RVP waiver for E15, but it might not come in time to make a difference next year.
By Susanne Retka Schill | November 21, 2018

The news came in mid-October: “We want to eliminate the intrusive rules that undermine your ability to earn a living, and we will protect the corn-based ethanol and biofuels that power our country,” President Donald Trump was quoted in an Oct. 11 White House fact sheet. It outlines his directive to the U.S. EPA to expand Reid vapor pressure (RVP) waivers to E15 and increase transparency in the RIN market.

Good news, indeed, but ethanol industry trade organizations voiced cautionary notes. “We’re going to be actively engaged and involved in the process,” says Geoff Cooper, president and CEO of the Renewable Fuels Association. “The announcement by President Trump is just the beginning of the process and it’s incumbent upon us to see this process through to a successful conclusion.”
“We’re extremely optimistic and certainly thanks go out to the president and all our congressional champions,” says Chris Bliley, Growth Energy’s vice president of regulatory affairs. “We do need to remain vigilant and make sure this gets done.”

“There’s a very tight window between today and June 1,” says Brian Jennings, CEO of the American Coalition for Ethanol. “The big-picture goal is for the proposed rule to be out for public comment and for EPA to wrap up a final rule prior to that June 1 date when low RVP season kicks back in.”

In a statement released Oct. 25, Jennings says EPA bureaucrats already appeared to be “slow-walking” the rule, and oil refiners were threatening to sue over the waiver.
The lack of an RVP waiver for E15 is a barrier the industry has been working to dismantle for many months. Many describe it as an outdated regulation that never anticipated blends higher than E10.
In response to summer ozone concerns, Congress amended the Clean Air Act in 1990, giving the U.S. EPA authority to regulate the evaporative emissions of gasoline, requiring an RVP limit of 9 pounds per square inch (psi) from June 1 to Sept. 15 to reduce ground-level ozone and smog in the summer. As straight fuels, both ethanol and gasoline have relatively low RVP. As they are blended, RVP increases until peaking at just under E10, at which point the RVP curve turns downward.

Most of the gasoline used in the U.S. today is E10, with an RVP of about 10 psi. The Clean Air Act provides a 1 psi waiver for fuel blends containing gasoline and 10 percent ethanol. In 1991, EPA interpreted that section of the act to limit the waiver to gasoline with 9 to 10 percent ethanol, because 10 percent was the maximum amount allowed in gasoline at the time. In 2011, EPA approved the use of E15 in vehicles model year 2001 and newer, but did not extend the E10 RVP waiver. E15’s RVP is actually better than E10’s, and its tailpipe emissions are lower than that of E10.

Critical Timeline
Getting the waiver updated to cover E15 has been far from simple. For a while, it was generally believed that EPA questioned whether it had the legal authority. Jennings reports that conversations with EPA indicate that’s not the case. “I’ve never had a conversation with a career bureaucrat at EPA that (included), ‘We don’t think the law allows us to do this,’ or, ‘We don’t agree with you that E15 has a better evaporative emissions profile than E10,’” Jennings says. “In other words, they agree with us on the legal authority and that E15 makes sense from an environmental standpoint. It’s simply that some of those forces in EPA have not wanted to do it, and no one has forced them until, hopefully, now.”

A week after the initial announcement, the administration released a timeline for regulatory actions, where it said EPA expects to publish the proposed rule in February. Once the rule is published, it will be open for public comment for 30 to 60 days, likely followed by a public hearing. The administration’s timeline shoots for a final rule to be published in May.

Meeting that timeline will be critical, if the RVP waiver for E15 is to take effect before the June 1 driving season arrives. “These rule makings can be complicated,” Cooper says. “They involve lots of stakeholders with lots of different opinions. Our work is just beginning for securing RVP parity for E15 and ensuring the president’s commitment to getting this done is seen through.” He expects the proposed rule to lay out a few options. “I think we’ll see a few different concepts on how to interpret different provisions of the statute,” he says. “We think there are some very defensible interpretations that would stand up to legal challenge.”

“We’ve had lots of discussions with EPA,” Bliley says. “The entire industry has presented some of the best arguments for how they can do this legally. We expect them to lay out their process of how they can do it under the law, and in the most defensible way possible. And, we certainly expect our opponents in the oil industry to come out and attack.” A legal challenge could, of course, delay implementation, even if EPA meets the tight timeline.

Demand Growth Potential
Predictions vary on how quickly RVP parity for E15 will translate into significant ethanol demand. Jennings predicts hundreds of millions of gallons in the short term, but cautions, “We shouldn’t oversell it, because half of the retailers are under some sort of contract restriction—a branding or supply agreement with an oil company that limits the choices they have.” Predictions of 5 billion to 7 billion gallons in the long term, however, are fair, he says, although it will take time.

“Certainly E15 year-round will stimulate demand,” Cooper says. “How much a demand boost we get in the near term remains in question. We’re not going to go from 1,400 stations selling E15 today to half the market tomorrow. It’s going to take time. But this is an action that has to be taken in order to expand the marketplace.” The scale of the gasoline market is huge, he points out, with 250 million light duty vehicles and 140,000 gas stations, adding that it took 30 years for E10 to grow from a niche product available in a few states to 90 percent of the marketplace in 2009.

Bliley points with optimism to undecided independent retailers. “This is a clear signal to the market that a retailer will be able to sell E15 year-round without having to change the labels. Honestly, we’ve had retailers on the sideline waiting for that to happen. We expect 1.5 billion gallons over the next five years once E15 year-round comes into being.” 

Retailer Response
Immediate responses indicate that growth will come. Within a week of the administration’s directive to EPA on the waiver, two large retailers announced E15 expansions. Casey’s General Store, a Midwest convenience store chain, will expand its offering of E15 to more than 500 of its locations over the next few years. Casey’s first offered E15 in April 2017, at 17 sites in Illinois, Iowa and Kansas. And Cumberland Farms, a Massachusetts-based chain in the Northeast, announced it will begin offering E15 at more than 120 of its stores.

Since starting with its stores in North Carolina in 2015, Pennsylvania-headquartered Sheetz now has 240 locations offering E15, or about 40 percent of its stores in six states. With four seasons of relabeling dispensers for the summer driving season under its belt, Mike Lorenz, executive vice president of petroleum supply, says it was never a smooth transition. “Not only was there a cost to relabeling dispensers twice a year, but the confusion caused with consumers hasn’t changed.” The chain would see an increase in sales until June 1 that dropped off when the labels changed to say FFVs only. “Then it’s very difficult coming out of the summer driving season to get those sales back.”

“I think giving E15 a level playing field with all the other grades of gasoline is huge,” he says. “The conversation trying to explain this to the consumer is more than difficult. It’s the only grade of gasoline that has this restriction.” Early on, Sheetz developed an educational brochure on E15, but Lorenz says the gasoline transaction is low-engagement—people want to get their gas and be on their way. “They don’t want an education about gasoline, let alone about RVP and waivers.” The typical nickel a gallon discount for E15 (branded Unleaded88 at Sheetz) compared to regular 87 speaks more loudly.

Growth Energy has launched a nationwide campaign to market E15 as Unleaded88. The name was chosen following years of research, focus groups and interviews with consumers at the pumps. It allows brand recognition and reduces confusion, according to Growth Energy. It starts with about 20 large retailers and, with the E15 waiver, hopefully spreads to many smaller ones.

Lorenz says fixing the year-round availability issue is going to encourage many retailers who have stood on the sidelines, seeing the opportunity, but not willing to hassle with the summer labeling changes. “We’re extremely excited and applaud President Trump for seeing the true value in getting this antiquated regulation fixed for American drivers, corn farmers and ethanol producers. It’s a huge benefit.”

Author: Susanne Retka Schill
Freelance journalist