RFA discusses future impact of E15 rule

By Erin Voegele | June 03, 2019

The Renewable Fuels Association hosted a conference call on June 3 to discuss the expected impact of the U.S. EPA’s rule to allow year-round sales of E15 on the ethanol industry and fuel retail markets. The call also addressed expected legal challenges to the rule.

Geoff Cooper, president and CEO of the RFA, opened the call by thanking the EPA and Trump Administration for completing the E15 rule before the June 1 start of the summer driving season. He also discussed the years-long process of gaining approval for year-round E15 sales.

“This rule was really nine years in the making,” he said. “It was quite gratifying for us to see it finally cross the finish line last week, but just because the rulemaking process is wrapped up, that doesn’t mean our work on E15 is done.”  

During the call, Cooper discussed the expected impact of the rule, noting increases in E15 sales are expected to be relatively modest in the near-term, but expand significantly over the next few years.

He said the RFA currently expects 2019 E15 consumption to be in the range of 800 million gallons to 900 million gallons, conservatively. This is approximately double the volume of sales when compared to 2018.

“The larger impacts are going to be in the longer term,” he said, noting the rulemaking finally gives regulatory certainly to the fuel supply chain. As a result, more stations are expected to begin offering E15.

Neil Koehler, chairman of the RFA board and CEO of Pacific Ethanol, discussed the impact of the rule on the ethanol industry. Ultimately, he said the rule will give ethanol producers better access to the market. The Reid vapor pressure (RVP) barrier was an arbitrary obstacle for us getting into the market, he said, noting it’s a big deal to finally have the final rule in place.

“It’s about market access and consumer choice,” Koehler said, stressing the rule is not a mandate for E15. He said the economic benefits, lower cost, high-octane benefits and environmental attributes of E15 will help sell the fuel. “We just want the ability to be able to offer those fuels to the marketplace,” he said. “We feel very confident that with consumer choice and consumer awareness we will see some very solid, incremental growth in higher blends.”

Koehler stressed he doesn’t expect to see E15 take the market by storm. Rather, as consumers become aware of the fuel and its benefits, he said he believes the industry will see very steady, solid, incremental growth in demand.

Steve Walk, chief operations officer at Protec Fuel, addressed the impact of the rule on fuel retailers. He said E15 represents what consumers want in a fuel—a fuel that is cleaner, good for their cars and has great value.

Walk also stressed that stations offering E15 are not replacing one fuel option with another. Rather, they are simply giving consumers an option on the dispenser, year round, that is consistent. He called the E15 rule a big win for fuel businesses and stressed it will increase consumer choice.

Bryan Stockton, an attorney with Pillsbury Winthrop Shaw Pittman LLP, addressed the looming legal challenges to the rule.

“The rule will undoubtedly be subject to legal challenge,” he said, but stressed the rule seems to be capable of withstanding such a challenge.

“Three things to keep in mind,” Stockton said. “First, its well established law that an agency has the inherent authority reconsider, revise or repeal past regulations or interpretations so long as the change is not otherwise prohibited by law and the agency provides a reasoned explanation. EPA has an advantage in litigation as the agency’s interpretation merely needs to be a reasonable one, and doesn’t even need to be the best or the only interpretation. EPA here…has provided a detailed and thorough analysis. The courts typically defer to the agency, particularly in areas of their technical expertise.”

“Second, changed circumstances can provide a basis for such a reconsideration of regulation,” Stockton added. “Here EPA determined that its regulations related to volatility were out of date. When EPA first started regulating the volatility of gasoline in 1990, the maximum amount of ethanol content of gasoline was 10 percent. It had been that way since 1979. But, then in 2010 and 2011, EPA allowed E15 to enter commerce for 2001 and newer vehicles, subject to certain conditions. And, in addition, and just as importantly, EPA recently changed the vehicle emissions certification fuel from E0, or gasoline containing 0 percent ethanol, to E10, and vehicles are currently tested on E15 already for materials compatibility purposes.”

“Third, if previous cases are an indication, proponents may have a difficult time showing harm from the rule,” he said, noting there is a very high bar for those seeking an injunction to the rule.