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EPA Finalizes E15 Rule


EPA beat the clock in finalizing year-round E15 on Friday, one day ahead of the beginning of the summer driving season. The agency announced a final rule that also takes a much softer approach on reforms to the biofuel credits market than what was originally proposed.

The rule lifts the restriction placed on year-round sales of E15 through the summer months in some regions of the country. Those restrictions have been in place from June 1 to Sept. 15.

EPA Assistant Administrator for Air and Radiation Bill Wehrum said in a briefing on Friday the agency believes the rule is legally defensible and will expand the market for ethanol in the long run.

“It will happen over time,” he said. “We believe pretty quickly, as new stations built will be able to sell E15.”

The American Petroleum Institute indicated in the weeks leading up to the final rule that it would file a lawsuit, although EPA is not mandating the sale of E15.

A spokesman for API told DTN it does not have a timeline for expected legal action.

The final rule grants a waiver of the 1-pound Reid vapor pressure restriction on E15. Wehrum said when EPA originally developed the RVP waiver program, E10 was the dominant ethanol blend in the market.

“Things have changed,” Wehrum said. “We’re at a point that we need to go above E10. It has been very difficult in practice to market E15.”

While the E15 announcement was welcome news to ethanol producers and farmers, concern continues to linger about the long-term viability of the Renewable Fuel Standard if EPA continues to grant 30 to 40 small-refinery waivers on an annual basis. There are just 48 refineries in the country categorized as small.

So far, the agency has granted waivers in the past few years totaling more than 2.61 billion ethanol equivalent gallons. There is concern the waivers are cutting ethanol demand.

When asked about EPA’s approach to waivers, Wehrum said Friday’s announcement had no connection.

“We categorically deny we’re granting waivers to facilities that are not deserving,” he said.

News reports in recent years, however, show refineries that produce 75,000 or fewer barrels per day that received waivers are owned by some of the largest, most profitable oil companies in the world.

INDUSTRY REACTION

American Farm Bureau Federation President Zippy Duvall said the EPA’s announcement Friday is timely.

“After years of declining farm income, opening up markets to additional fuel choices for consumers helps create new demand that farmers desperately need,” he said in a statement.

“While we applaud today’s announcement to allow year-round E15 sales, we look forward to working with the Environmental Protection Agency to address the harm caused by the small-refinery exemptions, which have negatively impacted demand for our homegrown renewable fuels.”

Renewable Fuels Association President and CEO Geoff Cooper said ethanol producers and farmers continue to face “daunting” challenges including small-refinery waivers.

“We are cognizant, however, that the promise of today’s E15 announcement could be undermined if EPA continues its unprecedented assault on the RFS with indiscriminate small-refinery hardship waivers,” he said in a statement. “Against the intent of Congress, EPA has been granting RFS exemptions to refiners without requiring them to demonstrate their claimed ‘hardship’ is somehow connected to the RFS. The demand destruction caused by EPA’s waivers must end.”

Iowa Renewable Fuels Association Executive Director Monte Shaw said he believes the rule will hold up in court.

“The petroleum industry has tried everything to stop this day from coming,” he said. “It’s no surprise they don’t want to compete with E15, which is lower cost, cleaner and higher octane.”

Poet CEO Jeff Broin said allowing year-round E15 sales has the potential to create a large market.

“Nationwide adoption of E15 will drive the production of 7 billion gallons of biofuels, creating an additional demand for 2 billion bushels of corn each year, and unlocking new domestic demand for homegrown fuels at a critical time for America’s farmers,” he said.

Sen. Charles Grassley, R-Iowa, said it was important for President Donald Trump to keep his promises.

“It will be a boon to the rural economy in Iowa, especially considering continued trade uncertainty,” Grassley said in a statement. “This decision is a commonsense step to allowing consumers to make their own decision about what kind of fuel they want to choose at the pump.”

Sen. Tammy Duckworth, D-Ill., said in a statement she continues to be concerned the Trump administration is doing little to cut back on the number of small-refinery waivers granted.

“I remain deeply concerned that this rule will do little to help our farmers if the Trump administration continues to lie to the American people and abuse small-refinery exemptions,” she said in a statement.

American Coalition for Ethanol CEO Brian Jennings said waivers offset the benefits of expanded E15 markets.

“The net effect of E15 year-round with 2.61 billion gallons worth of SREs that aren’t reallocated, means we’re still in the hole when it comes to ethanol demand through the RFS,” he said.

National Farmers Union President Roger Johnson said EPA should take steps to continue to expand ethanol.

“While family farmers contend with slumping commodity prices and an overwhelming corn glut, it is of the utmost importance that we continue to implement policies that address both problems.

“Now EPA should take full advantage of all the benefits higher-level ethanol blends offer by expanding the use of E30 fuel, which is consistent with the statute and this country’s energy policy.”

BIOFUEL CREDITS REFORM

In the proposed rule, the EPA explored the possibility of five different reforms to the Renewable Identification Numbers, or RIN, market in response to concerns about potential market manipulation.

Obligated parties to the RFS, including refiners and others, are allowed to buy RINs or blend biofuels to comply with the law.

Wehrum said it has not taken all of the possible reforms off the table as of yet.

“First, we wanted to do no harm,” he said. “We’ve looked at the market very closely. So far, we’ve not found clear evidence that there is any market manipulation. We think it is prudent to move in this direction.”

EPA will require obligated parties to the Renewable Fuel Standard to publicly disclose when their separated D6 (corn ethanol) RIN holdings exceed certain thresholds. In addition, EPA is setting reporting and record-keeping requirements to help the agency enhance its market monitoring capabilities.

Eliminated from the proposed rule are reforms related to RIN retirement compliance, who can purchase RINs and limits on how long non-obligated parties can hold D6 RINs.

Frank Maisano, a senior principal at Bracewell LLP who represents refining interests, said the RIN reform does little to address refiners’ concerns about the market.

“This transparency alone is not enough,” he said. “If the RINs train is capable of running you over, seeing it run you over is cold comfort.”

In a joint statement, NATSO, the national association representing truck stops and travel plazas; the National Association of Convenience Stores; and the Society of Independent Gasoline Marketers of America said the reforms are welcomed.

“We are still analyzing the rule, but at first glance, we are pleased that EPA appears to have hit the sweet spot here by reasonably enhancing disclosure requirements without altering market participants’ behavior,” they said.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

Source: Todd Neeley, DTN

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