The Biden administration is moving forward with a fuel policy change demanded by Midwestern governors who hope it will encourage gas stations to sell higher-ethanol E15 gasoline and offer it year-round.
Under the Environmental Protection Agency’s proposal presented Wednesday, the change would begin in the 2024 summer driving season, with effects extending throughout the fuel supply chain, from refineries to service stations
While the EPA’s move is a positive for ethanol advocates on the one hand, it’s also a blow to supporters who called for action this summer. But refiners and pipeline operators argued they needed time to adapt, including adding equipment to produce, store and distribute a new, less volatile gasoline blend for the region.
The EPA action will take effect in April 2024, said Ben Hengst, deputy director of the EPA’s Office of Transportation and Air Quality, during a speech at the National Ethanol Conference of the industry
Some governors in corn-producing Midwestern states had asked the EPA last year to stop giving conventional E10 gasoline a partial exemption from volatility limits meant to curb air pollution. This would put E10 and E15 on the same regulatory footing in their states and potentially encourage more sales of the higher ethanol variety. Under the Clean Air Act, the EPA has no leeway to deny the governors’ request outright, though the agency can delay it in one-year increments.
In response to governors’ requests, the EPA is proposing to eliminate the E10 exemption in Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin.
To meet EPA requirements, refineries would have to produce crude, unblended gasoline that is less volatile, essentially creating a fuel specifically for the affected Midwestern states. Refiners argued that meeting this year was unfeasible, especially when gasoline production began in the summer.
But biofuel producers decried the delay, with Geoff Cooper, executive director of the Renewable Fuels Association, saying the industry is “frustrated and disappointed that the agency is proposing to kick off the can until 2024.”
If the Biden administration had responded quickly to the governors’ request last year, the market would have had “more than enough time to adjust and prepare for implementation this summer,” Cooper said. “But instead, under pressure from the oil industry, the White House ignored a legal deadline, sat on the proposal for months, and governors slowly acted in good faith to ensure that consumers had the ability to choose lower cost E15. all year round.”
Refiners and industry analysts say the change risks isolating Midwest fuel supplies from the rest of the country. Fully contained pipeline systems in the Midwest and refineries that primarily serve the region would generally switch to the new specification, but refiners in the region would likely have to find new markets for butane and other cheap, volatile hydrocarbons that lower the cost of gasoline
“A new blend of gasoline in the Midwest summer for 2024 and beyond would cost more to produce and distribute, reduce global supply and cause unnecessary harm to consumers,” said Patrick Kelly, senior director of fuels and policy of vehicles from the American Association of Fuel and Petrochemical Manufacturers. . “The push to ban the current blend of summer gasoline and replace it with a boutique blend will impose significant costs on the fuel supply chain and consumers in the Midwest.”
The Biden administration already moved to exempt E15 from summer volatility requirements last year, allowing it to be sold in an attempt to lower gasoline prices. However, the broader E10 shift could have uneven effects on prices at the pump.
The analysis commissioned by a refining trade group projects up to 12 cents more per gallon in added costs for the industry to manufacture and distribute the new fuel. Biofuel boosters say the change would encourage more gas stations to offer cheaper E15 year-round, and last year it cost nearly $1 a gallon less than conventional E10 in some areas.
