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RVP Waiver for E15

 

The decision to extend Reid Vapor Pressure (RVP) relief to E15 (defined as E11-E15) has been a politically charged topic since the Environmental Protection Agency approved the ethanol industry’s petition to approve E15 as a gasoline under the Clean Air Act. As retailers have adopted E15 into their product slate, obtaining summertime RVP relief for E15 has been identified by ethanol industry advocates as a priority. Ethanol industry advocates believe that the lack of a waiver for E15 serves as a major impediment to the widespread adoption of E15 and the growth of ethanol within the context of the Federal Renewable Fuel Standard and they are probably right.

RVP is a generic term and is used as a common measure of a gasoline’s volatility. EPA regulates the vapor pressure of gasoline sold at retail stations during what they define as the summer ozone season from June 1 – September 15. Regulatory requirements for gasoline refiners begin on May 1. EPA regulates vapor pressure during its summer ozone season to reduce evaporative emissions from gasoline that contribute to ground-level ozone and diminish the effects of ozone related health problems. Ground-level ozone is often associated with smog. Smog is formed by a reaction between sunlight and emissions from a vehicles exhaust system; power plants; factories; gasoline vapors, and other chemicals.

Existing RVP regulations were put in place in 1992, long before E15 was being considered as a gasoline offering by fuel retailers. In general, EPA regulates RVP on a state by state basis during the summer ozone season. During the summer ozone season, the RVP of gasoline may not exceed 9.0psi or 7.8psi depending on the state, county, or defined area. In an area where the more stringent 7.8psi standard is applied, the area has likely failed to meet National Ambient Air Quality Standards (NAAQS). These areas are commonly referred to as “non-attainment” areas within the context of air quality standards. In order to relax the RVP requirements in non-attainment areas, these areas must come back into attainment with applicable air quality standards and submit a maintenance plan demonstrating continued attainment of the ozone NAAQS with less stringent RVP standards in place.

Fortunately for Iowa, our entire state is in attainment status with NAAQS requirements and the entire state is regulated with the less stringent 9.0psi gasoline standard during the summer ozone season. Our neighbors in Minnesota, South Dakota, and Nebraska all have the same 9.0psi standard. In Kansas, all but two counties are regulated at the less stringent 9.0psi standard. Johnson and Wyandotte Counties which encompass the greater Kansas City metro area are governed by a 7.0psi standard. In Missouri, the counties of Clay, Jackson, and Platte are governed by a 7.0psi standard. These counties also represent the Kansas City metro area on the Missouri side of the border.

Illinois, Wisconsin, and Missouri all have areas requiring reformulated gasoline (RFG). The primary cities subject to EPA’s RFG requirements are Chicago, St. Louis, and Milwaukee. Cities and counties adjacent to, or even located in the predominant downwind direction of the cities listed above may also find themselves subject to the stringent RFG requirements for gasoline products supplied in their areas.

The requirements placed on gasoline RVP by the EPA are important in the E15 waiver debate because the requirements influence how gasoline refiners in the United States refine and distribute their gasoline products. Refiners manufacture gasoline to meet the 9.0psi, 7.8psi, and RFG standards at a rate sufficient to meet the various product demand in the markets they supply. Like most products that are produced in bulk for resale, there is a cost associated to the manufacturer for the creation of custom products. Within the context of the three types of gasoline listed above, 9.0psi gasoline is the predominant gasoline refined and distributed in the United States. Low-RVP gasoline and reformulated gasoline would fall into the custom product category and therefore have traditionally come with an added cost to the refiner which is passed down through the chain of sale and ultimately paid by the consumer.

Low-RVP gasoline and reformulated gasoline are commonly referred to as boutique fuels by the petroleum industry. Due to the added costs associated with these products and the distribution challenges (9.0psi gasoline, 7.8psi gasoline, and RFG cannot be co-mingled) faced by refiners, pipelines, and terminal operators, the petroleum industry advocates against the creation of government regulations creating more boutique fuels.

Understanding how the Clean Air Act regulations governing RVP and administered by the EPA affect gasoline refiners is important to understand within the context of the E15 waiver debate. The ethanol industry has long stated its belief that the petroleum industry is intentionally restricting E15’s market access by limiting the availability of low-RVP gasolines suitable for blending E15 during EPA’s summer ozone season. While the statement makes for a good headline in the news, it’s false and intentionally misleading with its sole purpose being to rile up the public.

E15 faces restrictions on its sale during the summer ozone season because the addition of ethanol to gasoline boosts the RVP of the finished gasoline product. The addition of 10% ethanol to a gallon of gasoline increases the RVP of the finished product by approximately 1.0psi. In a state such as Iowa where 9.0psi gasoline is supplied, that means a finished gallon of E10 has an RVP of approximately 10.0psi. This is where the E15 waiver debate heats up. EPA provides a 1.0psi RVP allowance (commonly referred to as a waiver) for gasoline containing ethanol at 9 to 10 volume percent. E15 receives no such relief despite having a slightly lower RVP when compared to an E10 blend.

The answer to the question of why E10 receives a 1.0psi allowance during the summer ozone season and E15 does not has been allusive. If the regulation of RVP as it relates to a gasoline ethanol blend’s contribution to ground level ozone is truly important to diminishing ozone related health problems, we should all be questioning the merits of the 1.0psi allowance for E10 blends. The more logical reason why E10 is allowed a 1.0psi allowance during the summer ozone season is that E10 makes up approximately 90% of the gasoline sold in the United States. Without the 1.0psi allowance for E10 the entire gasoline distribution chain from refiners to end-use consumers would feel the effects in the form of increased gasoline prices and quite likely a lack of supply until the entire chain of sale could turn over their inventory to accommodate a new base gasoline product meeting all applicable regulatory standards.

But that still doesn’t answer the question of why E15 was not afforded a 1.0psi allowance when it received approval from the EPA for sale to 2001 and newer passenger vehicles? Was it an oversight by ethanol industry advocates while they were petitioning the EPA to approve E15 as a gasoline? Although that scenario seems unlikely it’s a question that needs an answer to understand how we’ve arrived at a place where E15 can only be sold in most jurisdictions for 8.5 months out of a year.

Recently, the E15 waiver debate has centered around whether it is Congress, the EPA, or both that possess the legal authority to issue a nationwide RVP waiver for E15. In a recent Senate Environment and Public Works Committee hearing, EPA Administrator Scott Pruitt was asked by Senator Joni Ernst, R-Iowa, to provide the Senate committee with an update on where the EPA stands in its effort to investigate his agency’s authority to issue a nationwide RVP waiver for E15. EPA Administrator Pruitt responded that the agency’s review of its authority is not a policy issue. He said the agency is reviewing its legal authority to issue a waiver of the type necessary to accommodate the sale of E15 nationally during EPA’s summer ozone season.

With EPA’s summer ozone season approaching fast, the timing of EPA’s review of its legal authority to issue a national waiver is critical. Refiners begin their transition from winter blend gasoline to summer blend gasoline in preparation for their summer regulatory control period beginning May 1. Simultaneously, retailers must begin transitioning the gasoline stored in their tanks to meet the gasoline RVP requirements for their facilities which begins June 1. Hopefully, the EPA has enough attorneys on-staff to review and define their agency’s legal authority.

If the details surrounding EPA’s review of its own legal authority to issue a national RVP waiver for E15 seem a little silly to you, you are not alone. I’m going to step out on a limb and wager a guess that somewhere within this debate the pros and cons that are associated with a policy decision are being weighed. The irony associated with EPA reviewing its legal authority to issue a national RVP waiver for E15 is thick. Consider the fact that the EPA isn’t even currently enforcing existing gasoline RVP requirements during its summer ozone season. Retailers nationwide are selling E15 during the summer months with an RVP that exceeds EPA’s summer ozone season limits and EPA knows it. As part of EPA’s registration process for E15, EPA requires E15 retailers to participate in a gasoline survey program where the retailers’ gasoline products are sampled and tested. Those tests, which include tests to determine a gasoline’s RVP, are shared directly with EPA. During the summer zone season last year, more than 20 E15 samples were tested for RVP by state of Iowa and all exceeded the 9.0psi limit applicable to E15.

If EPA’s review of its legal authority determines that it is not the correct entity to review issuing a national waiver, presumably the issue becomes one for the United States Congress. Regardless of which entity ultimately determines that it has the appropriate authority to review a national RVP waiver for E15, they need to act fast to ensure that business owners operating in the retail petroleum industry are operating on a level playing field. As it stands today, the business entities willing to take advantage of EPA’s inaction relative to its enforcement of its summer ozone season requirements on E15 are being provided a market advantage against their competitors waiting for clarification from EPA on this issue. That’s something that simply shouldn’t happen.

Ethanol has proven to be a great product. It serves as a low-cost additive that provides octane enhancement to the supply of gasoline products sold in the United States and petroleum marketers nationally sell A LOT of it. With the federal RFS dictating our national fuel policy, both the ethanol industry and the petroleum industry need a swift resolution to this issue so that they can move forward in meeting the demands placed on them by the RFS.

Regardless of whether EPA or the United States Congress determines that it has the authority to review and issue a national RVP waiver for E15, that decision should not be based on policy nor used as a bargaining chip in another matter. The criteria used by EPA or Congress to extend a 1.0psi waiver for E15 during the summer ozone season should be decided solely on the issue of whether or not extending a waiver to include E15 will increase evaporative emissions from gasoline that contribute to ground level ozone and ultimately increase the effects of ozone related health problems.

Fuel Federal

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