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EPA E15 Announcement | What to Expect in Iowa

 

EPA issued its final E15/RIN market modification rule on May 31, 2019 allowing the year-round sale of E15 and making minor changes to the Renewable Fuel Standard (RFS) Program's Renewable Identification Number (RIN) market. The final rule is found here and EPA’s Response to Comments can be found here. For FUELIowa members and RINAlliance clients blending with biofuels, the RIN market rule is only one portion of what EPA had proposed. It increases RIN market participants' disclosure obligations and EPA's market monitoring capabilities. The information will then be reviewed later to determine if more RIN reforms are needed. This is a big win for our members and clients as the original proposed rules on RINs would have been damaging to the blenders who handle RINs and for RINAlliance marketing these RINs.

Not much will change for Iowa marketers already offering E15. The rule waives the RVP exclusion that disallowed the sale of E15 in the summertime RVP period of June 1 through September 15 for retailers. E15 can now be legally sold in Iowa during EPA’s summer ozone season. The lack of a summertime RVP waiver for E15 was a major hurdle facing the widespread adoption of E15 but, the biggest hurdle remains, infrastructure compatibility.

Approximately 85% of all retail fuel sites in Iowa operate with a combination of tanks, dispensers, lines, pipe dope, and thread sealants that are either incompatible with E15 or compatibility cannot be proven.  Federal law requires a compatibility determination before placing a product into a UST system.  A compatibility determination is also a prerequisite to meeting another federal requirement, financial responsibility coverage (insurance), and therefore site owners that cannot meet compatibility requirements are prohibited from safely and legally offering E15.

Estimates show the average fuel retailer will spend $100,000 to modify existing dispensers* and lines to safely and legally dispense E15 and upwards of $500,000 (raise rebuilds could reach into the millions) to raise and rebuild an existing three tank site to safely and legally store and dispense E15. (*The statewide average number of dispensers/USTs per fueling site is 4.6 dispensers and 2.6 underground storage tanks – (PMMIC Insurance)) With these costs, it will be challenging for many owners and operators to upgrade facilities in order to legally offer E15. If offering it without meeting compatibility requirements, one would risk insurance coverage in the event of a leak or system component failure.

Blender Pumps

Blender pumps have become the primary conduit through which E15 is sold to consumers.  Traditionally, E85 and E10 are blended within the dispenser to create an E15 blend before dispensed into the supply tank of a motor vehicle.  Nothing in EPA’s final rule changes a retailers ability to continue selling E15 through a blender dispenser.  However, EPA states very clearly that the extension of the 1 psi waiver for E15 blends is only applicable to E15 created using denatured fuel ethanol and certified gasoline.  E85 created using natural gas liquids that is subsequently used to create E15 via a blender dispenser is not afforded relief by this rulemaking.  EPA states that E15 blends created under this scenario do not meet their deemed to comply requirements because the RVP of natural gas liquids can be as high as 15.0 psi and even a small amount of natural gas liquids could cause the gasoline portion of the blend to not comply with the applicable RVP limitations established under CAA sec. 211(h), which is required under CAA sec. 211(h)(4)(A) to be deemed in compliance.

Infrastructure Assistance

Today, retailers have the Iowa Renewable Fuels Infrastructure Program as a source of cost-share grant monies for E15 projects. $50,000 per site is available or 70 percent of the project cost, whichever is less. There is an application process to seek these grant funds administered by the Iowa Department of Agriculture. Contact FUELIowa for application details.

In the past, USDA awarded $5 million to Iowa through a program known as the Biofuel Infrastructure Partnership (BIP).  BIP funding was largely earmarked for one retailer. Growth Energy has a program called Prime the Pump, which has awarded much more than $5 million to Iowa retailers in order to drive E15 sales growth.

FUELIowa is pursuing additional state and federal resources to help all retailers upgrade existing infrastructure to systems compatible with E15. Competitive forces will continue to drive interest in E15 and higher blends of ethanol. Retailers deserve equal access to funding. Fuel marketers should be aware of the market forces in play.

State Incentives on E15

State policies in Iowa provide for up to 10-cents per gallon in refundable income tax credits for every gallon of E15 sold at retail June 1 through September 15. The incentive lowers to 3-cents the remaining months of the year. Earlier this year, state lawmakers considered lowering the Iowa excise tax on E15 by 6-cents per gallon below the tax on gasoline not blended with ethanol. The legislation passed out of committee, but did not advance.

Consumer Education

According to EPA, E15 is eligible to be used in 2001 and newer passenger and flex-fuel vehicles.  Approximately 80% of the nation’s vehicle fleets are covered under EPA’s directive. However, the owner manuals of many of these same consumer vehicles do not recommend the use of E15 in their engines and in instances involving warranties, may even prohibit it. Consumer education needs to be an important piece of E15’s growth to ensure that customers have the information they need to make an informed choice at the pump. Confusing consumers at the street and the pump is the inconsistent labeling of the fuel.  To help consumers make an informed choice, the fuel should be labeled E15 on the street sign and at the pump.  Calling it other names makes it difficult for the consumer and will lead to misfuelling. 

Federal Infrastructure







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