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E15: Cracking the RVP Nut

New blend won’t qualify for One Pound Waiver, presenting huge hurdle
By Jeremy P. Greenhouse | October 18, 2011

When the U.S. EPA granted Clean Air Act fuel waivers allowing gasoline containing 10 to 15 percent by volume of ethanol (E15) for use in model year 2001 and newer light-duty motor vehicles, the agency included the following condition, as published in the Jan. 26, Federal Register:

“The final fuel must have a Reid Vapor Pressure not in excess of 9.0 psi [pounds per square inch] during the time period from May 1 to September 15.”

This succinct requirement presents the single largest barrier to the successful introduction of E15. The situation has left the ethanol industry scratching its collective head on how to proceed and, in the words of Monte Shaw, executive director of the Iowa Renewable Fuels Association, “Very frustrated.”

The Waiver Problem

The root of the problem is that E15, in spite of having almost identical physical characteristics to those of E10, does not qualify for a decades-old exemption for E10 from the Clean Air Act’s fuel volatility limitations. As gasoline evaporates, volatile organic compounds (VOCs) enter the atmosphere and contribute to ozone formation, a problem that is exacerbated by warmer air temperatures. To address this issue, EPA has promulgated regulations, under section 211(h) of the act, prohibiting the sale of gasoline with a Reid vapor pressure (RVP, a measure of volatility) that exceeds 9.0 psi in “volatility attainment areas” and 7.8 psi in “volatility non-attainment areas.” These standards apply to all persons from June 1 to Sept. 15 and from May 1 through Sept. 15 for all refiners, importers, distributors, resellers and carriers.

The act includes an important exception to these RVP limitations, providing that fuel containing “gasoline and 10 percent denatured anhydrous ethanol” can exceed the applicable RVP limitation by 1.0 psi. Congress passed this “One-Pound Waiver” in 1990 to accommodate the gasohol industry’s practice of “splash blending” 10 percent ethanol with conventional gasoline. When 10 percent ethanol is added to conventional 9.0-psi gasoline, the RVP of the mixture will rise to about 10 psi. Absent the One-Pound Waiver, gasohol would have required a base gasoline with a lower RVP—about 8.0 psi—to stay below the 9.0-psi statutory maximum. Producing a special low-RVP blendstock, the industry successfully argued, presented prohibitive expenses and logistical problems. 

EPA’s regulation implementing the One Pound Waiver is more specific than the statute, providing that the waiver applies only to blends containing “at least 9 percent and no more than 10 percent” ethanol—language that clearly excludes E15. Many have contended that it is illogical to treat E10 and E15 differently in this way because the primary policy reason for adopting the One Pound Waiver for E10—facilitating splash-blending with conventional gasoline—applies equally to E15. Moreover, as the accompanying graph demonstrates, E15’s RVP is essentially identical to that of E10 and should present no greater ozone concerns.

Nonetheless, the One Pound Waiver, as currently written, does not apply to E15, which presents a problem: the ethanol industry will be unable to blend E15 with conventional 9.0 psi gasoline in the summertime months, as it has done for decades with E10, because the resulting fuel’s RVP will be too high. Many hurdles remain for E15—health effects testing, fuel registration, updating standards, vehicle warranty issues, among others—but as far as “one big swipe that could control a lot of volume,” says Ron Lamberty, senior vice president of the American Coalition for Ethanol, the RVP issue is “probably the largest." 

No Easy Answers

There are various potential solutions to this problem, none of them easy. The seemingly obvious answer is to use a lower-RVP blendstock for E15. But many areas of the country do not have low-RVP blendstock readily available, and obtaining one presents challenges, including the logistics of separately shipping and storing a special blendstock for E15 and increased cost. According to EPA staff estimates in 2002, creating a blendstock for E15 with a 1.0-psi lower RVP would require removing approximately 1.5 percent of the gasoline, most likely in the form of butane, which would add about 0.4 cents per gallon.1 However, the main challenge, according to Shaw, is that refiners are unwilling to supply a lower RVP blendstock. “They've already told us here in Iowa they have no intention of doing that. They don't want to sell E15.” Refiners are not required by law to provide a lower-RVP blendstock for E15, and the oil industry has made no secret of its opposition to E15, repeatedly suing EPA in an attempt to overturn the E15 waivers. Plus, refiners appear to have a financial disincentive to facilitate E15, which, after all, contains 5 percent less petroleum than E10. And because the refining industry is highly consolidated, with only a handful of companies supplying any given terminal area, market forces alone are unlikely to compel refiners to supply a separate blendstock, explains Shaw: “[Local fuel purchasers] can only pull what is available at the terminal. The refiners are the customers of the terminal and the pipeline company, and the customers make the decision. It’s really up to the refiners what they do.”

Considering these difficulties associated with obtaining a low-RVP blendstock for E15, another approach is to convince EPA to amend its rules to extend the One-Pound Waiver to E15 (and remove the RVP condition from the E15 Waivers). This would eliminate the need for a separate low-RVP blendstock for E15. There is a reasonable argument that the statutory One Pound Waiver—which applies to blends containing “gasoline and 10 percent denatured  anhydrous ethanol”—can be interpreted to mean at least 10 percent ethanol. Accordingly, EPA could, consistent with the statute, amend its One Pound Waiver regulation to apply to E15. Unfortunately, EPA has soundly rejected this argument. In the preamble to its July 25 final rule on E15 misfueling mitigation, EPA explained in detail why it believes the Clean Air Act does not authorize extending the One Pound Waiver to E15. To challenge this decision would require formal legal action, which, given the deferential standard of review a court would apply to EPA’s interpretation, would be an uphill battle.

Another potential solution is to bypass EPA and convince Congress to amend the Clean Air Act and make the One Pound Waiver expressly applicable to E15. As explained above, there are compelling arguments that the One Pound Waiver should apply to E15 as well as E10. But, obtaining a statutory amendment is difficult at the best of times, and even more so here, given the highly polarized political climate and the fact that the amendment would likely be controversial, opposed by the same groups that opposed the E15 waivers.

A less controversial approach is to ask Congress to eliminate the One Pound Waiver altogether such that both E10 and E15 could be blended with a single low-RVP blendstock. With the RFS2 in place, eliminating the One Pound Waiver is unlikely to significantly impact sales of E10, and an amendment repealing, rather than extending, the One Pound Waiver would be an “easier sell” from an environmental perspective since it would result in fewer emissions of VOCs. The specter of increased gas prices associated with producing a lower-RVP blendstock for E10 and E15, however, would still likely be enough to scare off legislators, particularly in the midst of a recession. The industry could seek to eliminate the One Pound Waiver on a state-by-state basis—the act allows individual states to opt out of the One Pound Waiver, as Maine, New York, Pennsylvania and Texas have done through EPA-approved state implementation plans—but this piecemeal approach would be time-consuming, with myriad political hurdles.

Finding a Way Forward

If the industry has to live with the RVP limitation on E15, this alone will not prohibit the sale of E15. Retailers can still sell E15 blended with conventional gasoline for general use between October and May, and year-round for flex-fuel vehicles. In the summer months, it may be possible (albeit with added cost) to ship a lower-RVP blendstock from parts of the country where it is available via a “virtual pipeline.” In areas of the country using reformulated gasoline (RFG)—which accounts for 30 percent of gasoline sold in the U.S.—separate blendstocks should not be necessary since the RFG performance standards do not grant ethanol an RVP waiver. And in time, market forces may persuade refiners to make a lower-RVP blendstock more readily available.

Unfortunately, for E15 to be effective, for it to make any significant impact on the blend wall (which by many accounts has already been reached), it needs to be widely available as soon as possible. “The quick ability to get retailers to offer consumers E15 is vital to the near-term viability of the ethanol industry,” Shaw says. The more limitations, expenses or logistics, the longer retailers will take to jump on board. In spite of the challenges, however, Shaw remains “very optimistic about the future of E15. The only question is whether we can ramp it up quickly.” Finding a quick, creative solution to the problem presented by the E15 RVP limitation would go a long way toward making this happen. 

Author: Jeremy P. Greenhouse
Attorney, Greenhouse & Gram LLC
(612) 623-2390
jgreenhouse@greenhousegram.com

1) 148 Cong. Rec. 9, S485 (2002), citing a draft EPA staff report, Supply Analysis of S. 950—The Reformulated Fuels Act of 2001.

 

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