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No Waiver? No Sense.

The ethanol industry sees one-pound waiver for E15 as a no-brainer. This in-depth feature on the industry goal of changing the policy on Reid vapor pressure appears in the March print edition of Ethanol Producer Magazine.
By Ann Bailey | February 14, 2017

Perplexed about why E15 does not get a one-pound waiver?

That’s a sign you clearly understand the issue, says Monte Shaw, Iowa Renewable Fuels Association executive director. People who ask questions are seeking logical explanations for why E15 does not get the one-pound waiver and there just aren’t any, Shaw says. “The situation doesn’t make sense. When I try to explain it to people, I’ll go through it step by step and then they’ll look at me, confusedly, and say ‘Huh?’ and then I’ll say ‘Exactly, you’ve got it.’” 

Congress amended the Clean Air Act in 1990 to allow blends of ethanol to get a one-pound waiver to accommodate for 10 percent ethanol being “splash blended” with gasoline. When 10 percent ethanol is added to 9.0 psi gasoline, the Reid vapor pressure (RVP) of the mixture rises to near 10 pounds per square inch (psi). As gasoline evaporates, volatile organic compounds enter the atmosphere and contribute to ozone formation, a problem that is exacerbated by warmer air temperatures. Without the one-pound waiver, gasohol, as the fuel was called then, would have required a base gasoline with an RVP of about 1 percent lower to stay below the 9.0 psi allowable maximum for air quality. The ethanol industry successfully argued that producing a special low-RVP blendstock would be costly and cause logistical problems.

“It was a well-intentioned rule and they (Congress) never thought the day would come when there would be a higher blend than 10 percent,” says Mike O’Brien, Growth Energy vice president of market development.

But that day did arrive and, as the ethanol industry sees it, it only makes sense that E15, which has lower evaporative emissions than E10, should be granted the one-pound waiver. However, the U.S. EPA regulation implementing the one-pound waiver applies it only to fuel blends of gasoline with 10 percent ethanol. In an enclosure to a Dec. 22, 2016, letter EPA sent to several Midwest governors, the agency says the one-pound waiver applies only to E10: “The revised statutory language in section 211(h)(4) specifically provides for a 1psi waiver exclusively for fuel blends of gasoline and 10 percent ethanol...,” a sentence of the letter reads.

The EPA added the word “exclusively” to the sentence, notes Brian Jennings, American Coalition for Ethanol executive vice president. “That’s their interpretation of the statute. That’s where the disagreement is between the ethanol industry and EPA. They think that authority is exclusive to E10. We argue they have the authority to apply it to grant the one-pound waiver to E15.”

Seasonality Issue
Because E15 does not get the one-pound waiver, it cannot be sold during the RVP season which runs from June 1 to Sept. 15.  “During that time, they limit the volatility of gasoline to reduce evaporative emissions which can lead to ground-level ozone—smog,” Shaw says. “Currently for conventional gasoline areas, the limit is lower. That is, generally along the East and West coasts, some of the larger cities have cleaner-burning gasoline.” E10 was given the one-pound waiver because, when ethanol is added to gasoline at low concentrations, the volatility is increased typically by less than one pound, although it varies by gasoline blendstock, Shaw says. “[Congress said] we want to get ethanol into the fuel supply, we don’t want to complicate it by making you have special gasoline to use ethanol and special storage tanks and distribution.” 

The ethanol industry argues E15 burns cleaner than E10 and thus is better for the environment, so not granting E15 a waiver defies logic. “There are additional tail pipe emissions with E10 versus E15. Therefore, there will be less evaporative emissions with E15. Yet, you can’t sell E15. By not giving the E15 the one-pound waiver, and having consumers buy E10, you’re increasing emissions,” Shaw says. While E10, which has much fewer emissions than E0, is a great fuel, it is not as clean as E15, he says.  “That’s the frustration, with all of the science, all of the environmental benefits, all of the attributes of the fuel—everything EPA should be looking at—granting the E15 the one-pound waiver is a no brainer.”

Jennings concurs. “By narrowly interpreting the statute the way EPA does, they are actually preventing a fuel that has fewer evaporative emissions from being used in most of the country during the summer months, which is a huge problem” he says. “We have had legal opinions written that suggest EPA is narrowly interpreting that statute, and that, indeed, that statute gives it authority to extend that one-pound waiver to any blend of ethanol that’s approved for use, which would include E15.”

Being prevented from selling E15 during the summer months is not only costly to the environment, it has a negative economic impact on the ethanol industry and on consumers, Shaw says. “We lose a ton of sales in the summer when those sales are restricted to flex-fuel vehicles We have large retailers right here in Iowa—and I’m sure it’s not just Iowa—who have told us ‘We like E15 but we don’t want to monkey with the summer-winter thing confusing our consumers. When I can sell it year-around, I’ll do it.”

The RVP season also is challenging for retailers who do sell E15, says O’Brien. “They do a great job of getting the sales going, everything is going great. Then they have to do something different come summertime and, in the fall, they have to revamp to ramp up the sales again.”

Besides causing logistical challenges for retailers and resulting in reduced sales during the summer, the RVP season also hurts consumers, O’Brien says. “Just about all of the retailers we work with are selling E15 at a 3- to 10-cent discount versus unleaded 87. The consumer is losing because in the summertime, when the price of gas tends to go up, the lowest price grade of gasoline is not available to them. Everybody feels that RVP impact across the board.”

Seeking Solutions
After “going around and around” with the EPA and getting nowhere, the legislative route appears to be the best one to take to get changes made to the rule, O’Brien says. “The long and short of it is, after a couple of years of debating it with EPA, with the help of several senators and congressmen, we started the legislative process to give the one-pound waiver to higher blends of ethanol, including E15. There are governors supporting it with letters. There are retailers supporting the change as well, including NACS (the association for convenience stores and fuel retailers).”

The Iowa Renewable Fuels Association encourages the legislative approach, Shaw says, with a cautionary note. “You also have to be careful how a bill would go through Congress and what might get attached to the bill. The easiest thing would be for our EPA to admit they have the regulatory authority.”

Jennings is hopeful for a change in interpretation. “I think under a new administration, we have opportunity to perhaps have the political appointees at EPA interpret that provision differently,” he says. “We think we have a very genuine opportunity, under the Trump administration, to get a new look at this, to get them to interpret this a little more broadly than we have in the past. We intend to work on that.”

The Iowa Renewable Fuels Association will continue to address RVP,  Shaw says. “What we have to do is take a deep breath and step back and look at the markets, the implications. For retailers selling E15 today, they have to lose a vast majority of those sales for three and a half months in the summer because of lack of RVP parity.”

Author: Ann Bailey
Associate Editor: Ethanol Producer Magazine
701-738-4976
abailey@bbiinternational.com