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US EPA issues emergency fuel waiver to allow summertime E15 fuel sales


Waiver to allow 'small' increase in ethanol demand: S&P Global

Waiver is not a 'silver bullet' for gas prices: White House

Ethanol groups want to see action toward a permanent fix

  • Author
  • Jasmin Melvin
  • Editor
  • Richard Rubin
  • Commodity
  • Agriculture Energy Transition Natural Gas Oil Metals Petrochemicals

The US Environmental Protection Agency April 29 issued an emergency fuel waiver to allow summertime sales of a gasoline blend containing 15% ethanol, making good on President Joe Biden's promise to ensure nationwide access to the fuel as part of efforts to ease pain at the pump.

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Without the waiver, a summertime halt in sales of that fuel across two-thirds of the country was imminent. May 1 marks the day terminal operators would have otherwise been barred from selling E15, while June 1 would have been the cutoff for retail stations in conventional gasoline markets.

The waiver covers a 20-day period, the maximum statutory limit, but the EPA said it would issue new waivers as long as "the extreme and unusual fuel supply circumstances" created by Russia's invasion of Ukraine persist.

Crude oil futures rallied this week on reports that Germany had dropped its opposition to imposing an embargo on Russian oil imports. With expectations that the EU will adopt a phased-in ban on Russian oil by the end of next week, NYMEX June WTI fell by 67 cents April 29 to settle at $104.69/b, while ICE June Brent rose $1.75 to settle at $109.34/b.

With crude being the largest factor impacting US gasoline prices, US drivers, on average, spent $4.11/gal at the pump the week ended April 25, with West Coast drivers paying an average $5.08/gal, according to the Energy Information Administration.

Greater overall gasoline consumption, greater availability of E15 and E15 selling at a discount to E10 at the pump will lead to an uptick in E15 sales this summer, but the additional ethanol volumes allowed by the waiver are expected to "be relatively small, roughly 25 million to 30 million gallons," said Corey Lavinsky, global manager of biofuels analytics at S&P Global Commodity Insights.

Further, while the White House estimates US consumers can save 10 cents/gal by using E15, the sightly lower energy content of the blend may mean drivers have to fill up more often.

As such, the E15 waiver may initially do more to bolster political goodwill in farm states than it does to boost fuel supply or ease pump prices, as infrastructure for higher-ethanol blends remains limited to about 2,300 stations centered in the Midwest.

White House Press Secretary Jen Psaki acknowledged that this is not "a silver bullet."

The 10-cent/gal savings "to the president and to us felt like a reason to do it, and because without taking this step for the waiver, it basically would just be an option of additional supply that is a little bit less expensive that wouldn't be available in these 2,000 gas stations," Psaki told reporters April 29. "It's just a step that we felt would help ease the burden for Americans who go to those gas stations."

Temporary fix

Nonetheless, biofuel advocates cheered the quick and decisive action by the EPA.

"Extending the fuel supply with larger volumes of lower-cost, lower-carbon ethanol makes perfect sense, and we thank the Biden administration for turning to America's farm fields for help instead of Saudi Arabia's oil fields," Renewable Fuels Association President and CEO Geoff Cooper said.

Growth Energy CEO Emily Skor said the temporary waiver "buys time for policymakers to implement a permanent fix, and it's vital that this administration and leaders in Congress work swiftly to restore year-round access to E15 in the years ahead."

The summertime sales ban impacts about 80% of the roughly 2,300 existing E15 retail locations. It does not impede year-round E15 sales in reformulated gasoline markets, representing about 30% of the US gasoline market.

Biofuel and farm groups contend that the summertime barrier to sales has deterred some retailers from offering E15 and threatens to devastate the market expansion of homegrown biofuels if it is not resolved.

While E10, which contains 10% ethanol and 90% gasoline, is widely accepted and available from retailers across the country year-round, E15 cannot be sold in conventional gasoline markets from June 1 to Sept. 15 due to EPA restrictions on air pollution from gasoline.

That blackout period was lifted by the Trump administration, but the DC Circuit Court of Appeals last year vacated the 2019 EPA rule that extended a summertime waiver of Reid Vapor Pressure requirements to biofuel blends containing more than 10% ethanol (American Fuel & Petrochemical Manufacturers v. EPA, 19-1124).

Governors from eight Midwest states April 28 notified the EPA that they intended to exercise their Clean Air Act authority to ensure E15 could permanently be sold in their states year-round.

Legal standing

However, not everyone is on board with how the federal government is going about increasing use of biofuels as the views of the renewable fuel lobby continue to butt heads with those in the refining community.

The Fueling American Jobs Coalition has said that without action to lower biofuel blending requirements proposed for 2022, the E15 waiver would cause consumers to "pay more at the pump, without appreciably increasing ethanol consumption,"

The group of independent refiners, fuel retailers and union workers asserted that the E15 waiver would likely be overturned in court. It argued that such a waiver can only be granted when natural disasters create physical supply shortages, not "under the pretense of high fuel prices," as they say the administration has done.

Yet, the EPA believes it is standing on firm legal ground as it declared a fuel supply emergency based on the geopolitical conflict ensuing in Ukraine.

The agency said that it has been monitoring market supply disruptions caused by the conflict, and in consultation with the Department of Energy, determined there were "extreme and unusual fuel supply circumstances" that warranted waiving certain fuel requirements to help ensure adequate gasoline supplies.

The agency added that its research has shown no adverse air quality impacts from summer E15 use.

"Regardless of whether the waiver is legally justified, it will almost certainly allow for the sale of E15 during the entire summer of 2022, due to the nature of the US legal system where a lawsuit challenging the waiver will likely take years to resolve," Lavinsky said.