EPA E15 Decision

The EPA decision on the E15 waiver came as no surprise this week.  The EPA ruled that E15 gasoline blends were okay for 2007 and later year model vehicles in the US.  As we have stated numerous times in previous reports, a bifurcated market will not work.  For example, The National Association of Convenience Stores (NACS) told its members to exercise extreme caution on whether to sell E15 gasoline.  The NACS represents convenience stores and the petroleum retailing industry that sells an estimated 80% of the motor fuels in the US.  The NACS’s key issues with the EPA waiver is that it does not address the liability of using dispensing equipment not specifically certified to handle ethanol blends in excess of E10 and the liability exposure for engine damage and Clean Air Act emission violations caused by misfueling vehicles, even with appropriate labeling in place.  An excellent study commissioned by the American Petroleum Institute that we referenced several weeks ago sums up all the other regulatory barriers that must be dealt with before E15 can enter commerce officially.  Here is the link to that study: http://www.jordan-associates.com/Sierra%20Repor%20on%20E15%20Reg%20Hurdles_080410.pdf

The huge sticking point that is evident in the proposed rulemaking is that the 1.0 psi RVP waiver granted for E10 cannot be extended to E15 by agency rulemaking.  In 40 CFR 80.27, the law limits the waiver to gasoline containing between 9%-10% ethanol with no exception.  It can only be changed with an act of Congress.  In this week’s proposed rulemaking (here is the link - http://www.jordan-associates.com/e15-labeling-nprm.pdf), the EPA is proposing that E15-blended gasoline will not  be granted this RVP waiver, forcing the blendstock that 15% ethanol is blended with to have a reduced vapor pressure and allowing the finished blend to meet summertime gasoline RVP without a waiver.  This means a refiner will be required to produce both an E10 blendstock and an E15 blendstock.  The rulemaking goes through an elaborate process to prevent comingling of E10 blendstock with E15 blendstock in order not to violate the RVP waiver language.  It is absurd to think the gasoline industry is going to go through these contortions to deliver E15 to the consumer.  There is no economic incentive for a refiner to produce a more expensive blendstock to accommodate E15.  In our opinion, these rules are completely unworkable, and it is going to take an act of Congress (hopefully with more input from industry) to clean up this mess.