Refiners worry lack of E15 stations will cause RFS non-compliance

By Kris Bevill | May 04, 2012

As the ethanol industry prepares for the first gallons of E15 to enter the market for 2001 and newer vehicles, the American Petroleum Institute continues to stress the potential for compatibility issues with retail station infrastructure as it relates to the storage and sale of E15. During a May 3 conference call with reporters, Bob Greco, API downstream director, noted that API’s analysis of compatibility research conducted by government agencies concluded that about half of the existing equipment at the nation’s approximately 157,000 retail stations is not currently compatible with the fuel. Few stations may be willing to invest in the infrastructure modifications necessary to sell E15, inhibiting the fuel’s entry into the marketplace, he said.

API has legally challenged every step of the U.S. EPA’s approval of E15, claiming that more scientific research should be completed before it is allowed to be used in anything other than flex-fuel infrastructure and vehicles. But the group also admits that without widespread use of ethanol blends greater than E10, refiners may be unable to meet increasing renewable fuel standard (RFS) volume requirements, which will subject them to fines of up to $37,500 per day per violation. Therefore, API supports proposed legislation that would relieve regulatory requirements for retailers seeking to offer E15 using existing infrastructure.

The Domestic Fuels Protection Act of 2012 would allow the EPA to streamline its approval process to approve underground storage tanks and fuel dispensers for use with a number of fuels, including E15. Additionally, it would exempt retailers from liability in the case of consumer misfueling so long as the station complied with the EPA’s misfueling mitigation requirements. It would also prevent the retailer from being held responsible if consumer use of E15 voids the vehicle’s warranty. The bill was the subject of a recent House Energy and Commerce subcommittee hearing, during which representatives from the American Fuel & Petrochemical Manufacturers and the Renewable Fuels Association testified in favor of the legislation. 

During the hearing, however, AFPM President Charles Drevna also made it clear that his group only supports the legislation as a means to assist the petroleum industry in meeting RFS requirements, stating that the AFPM will support the bill “as long as the RFS remains the law of the land.” Greco noted during the call with reporters that API believes the RFS is becoming increasingly “unworkable” and said API believes E15 implementation will only provide short-term relief to the RFS volume constraints facing blenders.

Because there is no mandate requiring the sale of E15, it remains to be determined how quickly retailers across the nation will move to sell E15 once infrastructure compatibility issues are resolved. However, in some Midwest states, retail stations that have installed blender pumps are expected to begin offering E15 to customers driving 2001 and newer vehicles any day. Blender pumps are approved for use with any ethanol blend up to E85 and so are not constrained by the same compatibility issues facing owners of conventional retail dispensers. Consumer demand will likely ultimately dictate E15’s rate of expansion and the RFA noted that a recent poll found that the majority of Americans would use more ethanol if it were available. And because wholesale ethanol prices are currently about $1 less per gallon than gasoline E15 can be sold at a discount to lesser ethanol blends, making it even more attractive to consumers, the group said.

The USDA has been an outspoken supporter of increasing consumer access to renewable fuels through blender pumps and announced a goal in 2010 to assist with the installation of 10,000 blender pumps over the course of five years. The federal government has provided grant and loan programs to partially fund blender pump installations, but the expansion of blender pump locations has been most brisk in states offering additional financial support to assist in covering the hefty installation costs. Overall, however, widespread adoption of the pumps has been relatively slow. Ethanol industry group Growth Energy currently lists 305 blender pump locations nationwide, the vast majority of which are located in the Midwest. In a press release issued May 3, Secretary of Agriculture Tom Vilsack noted the government’s efforts to enable widespread use of E15 through blender pumps and urged the petroleum industry to assist in implementing E15 as part of President Barack Obama’s “all-of-the-above” energy strategy. He also noted the correlation between E15 availability and the ability for refiners to meet RFS mandates and expressed support for the policy’s end goal, which will require 36 billion gallons of renewable fuel to be blended into the nation’s fuel supply in 2022. “When we get to 36 billion gallons, that’s going to mean that we will be importing fewer barrels of oil,” Vilsack said in a statement. “That means that the wealth that we are currently transferring into those countries that don’t necessarily agree with us and are from an unstable part of the world can be redirected into creating rural opportunities and jobs.”