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RFS REFORM

BACKGROUND

In November 2018, the EPA finalized its 2019 biofuel volumes for the RFS which maintained the current 15-billion-gallon ethanol mandate.  Because the existing RFS ethanol blending mandates have already pushed E10, a blend of 10 percent ethanol and 90 percent gasoline, into virtually every gasoline market in the country, any significant increase in the ethanol blending standard will force refiners to move to E15 blends unless gasoline demand rises to offset new blending mandates.

UST COMPATIBILITY CONCERNS WITH E15

The demonstration that a UST system is compatible with greater than E10 plus blends is difficult, if not impossible, for most retailers and is a major impediment to dispensing and to the storage of E15.  A UST system is made up of approximately 60 components, all of which need to be either UL listed, or manufacturer certified as compatible with the product to be stored and delivered. Federal, state, and local laws and regulations, national and international fire codes, as well as all commercial insurance policies, require the use of UL certified storage and dispensing equipment or a specific demonstration that the UST and dispenser system is compatible, such as a manufacturer acknowledgement. Dispensing ethanol blends higher than 10 percent with non-certified equipment exposes retailers to legal liability for non-compliance with federal and state UST regulations and state fire codes and will subject them to significant civil penalties and possible closures.  

Compatibility of the UST components such as pipe dope and sealants with E10 plus blends of ethanol is a significant problem. Typically, components other than the tank itself (piping, joints, connectors, gaskets, dispensers) are the source of most UST leaks. While the owner/operator is not required to demonstrate compatibility for pipe dope, it is still required to be compatible.

The following Q&A is on the EPA website (https://www.epa.gov/ust/underground-storage-tank-ust-technical-compendium-about-2015-ust-regulations#compatibility):

Question: Is pipe dope typically compatible with ethanol blends greater than E10? (Added: September 2018)

Answer: As of 2018, pipe dope that is compatible with ethanol blends higher than E10 is available, but much of the pipe dope on the market is not. Higher-ethanol compatible pipe dope was available beginning around 2007. Despite that, UST systems installed then and since to store lower levels of ethanol, such as E0 or E10, probably have pipe dope compatible only with lower levels of ethanol. Storing greater than 10 percent ethanol in those UST systems means the pipe dope is incompatible. Because higher-ethanol compatible pipe dope is more expensive, pipe dope compatible only with lower levels of ethanol to be stored in those UST systems may have been used, rather than higher-ethanol compatible pipe dope.

Retrofit Costs for E15 Compatible Equipment

The cost to petroleum marketers for UST system retrofit would be enormous.  PMAA estimates that the average cost to replace the UST system at a retail gasoline station to sell E10 plus blends is likely over $100,000 per site.  Such compliance costs would be staggering for small business retailers and would undoubtedly force many, particularly those in rural areas, to close. It is important to note that even if the equipment is compatible, modifications to existing UST systems and dispensers will be needed at many locations to accommodate the sale of E15.

Misfueling Concerns

Although the EPA has approved E15 for use in 2001 and newer vehicles, only a few auto manufacturers have just recently certified E15 for use in newer cars.

RFS REFORM EFFORTS

Small Refinery Exemptions

Recently, the Trump Administration used its waiver authority under the RFS to exempt several small refiners from their renewable volume obligations (RVOs) which has dampened ethanol renewable identification numbers (RINs) values. The EPA has the authority to grant exemptions from the program to refineries with a capacity under 75,000 barrels per day if the company can demonstrate financial hardship.  Over thirty exemptions have already been granted. According to the ethanol industry, this has effectively reduced the corn ethanol mandate from 15 billion to 13.8 billion gallons. In other words, for E15 to become a viable “new fuel” in the marketplace, the ethanol industry needs the 15-billion-gallon ethanol mandate to stay intact which maintains RIN values.

E15 Waiver

PMAA opposes the Administration’s proposed rule to allow the sale of E15 year-round.  Currently, E15 may only be sold during the winter driving season because it can’t meet federal summertime Reid Vapor Pressure (RVP) requirements for evaporative emissions.  PMAA has expressed significant procedural and policy concerns with respect to changing the RFS in a way that benefits only one of the many stakeholders affected by the decision to sell E15 year-round. On the procedural front, PMAA said that section 211 (h)(4) of the Clean Air Act specifically limits the one-pound summertime RVP waiver to gasoline blends containing 10 percent volume ethanol. Therefore, any change to expand the RVP waiver to E15 blends can only be made by Congress and not the EPA who lacks the statutory authority to do so.

The Food and Fuel Consumer Protection Act – PMAA Supports

PMAA supports legislation introduced this week by Rep. Bill Flores (R-TX), Peter Welch (D-VT), Rep. Steve Womack (R-AR) and Rep. Jim Costa (D-CA) known as “The Food and Fuel Consumer Protection Act,” which would set the maximum volume of ethanol blends into the nation’s fuel supply at 9.7 percent of projected gasoline demand as determined by the Energy Information Administration (EIA). When the RVO mandates were established by Congress in the 2007 and 2009 energy bills, gasoline demand was expected to increase far more than it has which led the country to the current blend wall dilemma. Were it not for the outdated assumptions, the problem would not exist (see graph below).  The problems that the RFS has created can be mitigated by adopting legislation to reduce the corn ethanol mandate.

E15 BRANDING/LABELING

Current E15 branding and labeling on price signs and dispensers using brands such as “unleaded plus,” “unleaded 88,” and “eblend,” can be confusing to consumers purchasing fuel. Further, the ethanol industry has recently begun an effort to use “unleaded 88” as a unified brand for E15.  PMAA’s concern is that while EPA requires an E15 warning label on the dispenser, these labels are only available once the consumer is at the dispenser and not always obvious to the consumer. Brand names such as “unleaded 88” do not provide any indication as to the ethanol content or the presence of ethanol in the fuel.  PMAA’s proposal simply asks the ethanol industry to be transparent about the fuel being advertised and sold and not let price alone drive a consumer’s decision by adding the term E15 to any brand name such as “unleaded 88 E15.”

“THE ASK” (Committees: House Energy and Commerce; Senate Environment and Public Works; All lawmakers)

  • Continue to remind lawmakers that UST system compatibility issues with E10 plus blends exist and urge lawmakers to support H.R. 2540, “The Food and Fuel Consumer Protection Act” that will protect motorists and allow all petroleum marketers to compete on a level playing field.

PMAA STAFF CONTACT:  Rob Underwood