The EPA has issued a final rule to allow the sale of E15 during the summer (May 1 through September 15). E15 is gasoline blended with up to 15% ethanol. The Agency’s action, which takes effect 30 days after the rule’s publication in the Federal Register, fulfills President Donald Trump’s October 2018 directive to the EPA to initiate rulemaking to allow the year-round sale of E15.
The rule also includes several modest reforms to the EPA’s Renewable Fuel Standard (RFS) compliance system applicable to renewable identification numbers (RINs). RINs are credits generated upon production of qualifying renewable fuel and ultimately used by obligated parties to demonstrate compliance with their renewable volume obligations. The president’s direction instructed the EPA to consider changes to the program to correct unfair manipulation of the RIN market.
The rule extends to E15 what is known as the Reid Vapor Pressure (RVP) waiver. RVP is a measure of gasoline’s evaporative emissions (or volatility). The Clean Air Act (CAA) restricts that volatility to 9.0 pounds per square inch (psi) during the summer. However, the Act also authorizes the Agency to apply a 1-psi RVP waiver that increases the volatility limit to 10.0 psi during the summer. Use of the waiver had been limited to E10.
According to the Agency, the E15 portion of the rule is a response to changes in the fuel pool and vehicle fleet that have occurred since the Agency promulgated the RVP regulations in 1990 when E10 was the highest available ethanol content in the gasoline marketplace. The EPA states:
“In this action, we are finalizing an interpretative rule which determines that E15 with an RVP of 9.0 psi is substantially similar (sub sim) to fuel used to certify Tier 3 light-duty vehicles (i.e., E10 at 9.0 psi RVP) under CAA sec. 211(f)(1). This new interpretation of sub sim would allow fuel manufacturers to introduce into commerce under CAA sec. 211(f)(1) E15 for use in [model year (MY)]2001 and newer light-duty motor vehicles because we find that E15 would have similar effects on the emissions (exhaust and evaporative), materials compatibility, and driveability [sic] when compared to Tier 3 E10 certification fuel when used in MY2001 and newer light-duty motor vehicles.”
Barriers to Growth
Also, says the EPA, the rule removes barriers that unnecessarily limit the potential growth in biofuel consumption; the same goal the Agency had in 1987 when it issued the original 1-psi waiver as markets were evolving.
“As is also clear from the text of the Energy Independence and Security Act of 2007, and the associated 36-billion-gallon mandate by 2022, that Congress intended to promote and accommodate expanded biofuel use and outlined greenhouse gas savings,” adds the Agency. “While this rule alone is not expected to increase the availability of E15, it removes one barrier to such an outcome.”
The RIN component of the rule is intended to enable the EPA to better understand price volatility and anticompetitive behavior in the RIN market. The EPA has heard from stakeholders that a small number of “sophisticated market participants control a large number of ‘surplus’ RINs that they hoard to drive up prices, at which point they can sell the RINs to realize a higher profit.”
In his directive, the president stated that the EPA should consider four potential reforms to the RIN regulations:
- Prohibit entities other than obligated parties from purchasing separated RINs.
- Require public disclosure when RIN holdings held by an individual actor exceed specified limits.
- Limit the length of time a nonobligated party can hold RINs.
- Require that the retirement of RINs for the purpose of compliance be made in real time.
In its proposal, the EPA introduced a fifth possible reform—impose new recordkeeping and reporting requirements to collect more comprehensive data on RIN market transactions and participants and hire a third party with market monitoring expertise to conduct market analysis.
Under the final rule, only two reforms have been promulgated:
- Require public disclosure when RIN holdings held by an individual actor exceed specified thresholds—this reform applies to only D6 or conventional biofuel (primarily corn ethanol) RINs.
- Require the reporting of additional price and affiliate data to the EPA.
The EPA explained that it is not certain that market manipulation is occurring to the extent stakeholders claim, if at all. The two reforms provide the EPA with the authority to acquire more information about the RIN market. Based on the data obtained, the Agency says it will further consider the remaining three RIN reforms proposed.