By Timothy J. Rudnicki, Esq

As we approach the end of the 2017 RVP season for E15, we’re getting some suggestions from various quarters that RVP relief may be at hand.  Well yes, September 16 is almost here.  If, however, the suggestion is that the EPA and/or President Trump is prepared to make some authentic regulatory change, then let’s see the amendment or executive order. 

Quite frankly, I really wonder how the EPA could square a change with the RVP standard after it released the proposed RVO numbers just a few weeks ago.  The connection between the RVP and proposed RVO rule rests not with an explicit reference to RVP but rather the Agency’s tortured reasoning and clinging to the blendwall fiction so as to rationalize its perverted analysis of the market barriers to higher levels of biofuel use.

Here is what the EPA states in the Federal Register at 34231:

We continue to believe that the constraints associated with the E10 blendwall do not represent a firm barrier that cannot be crossed. Rather, the E10 blendwall marks the transition from relatively straightforward and easily achievable increases in ethanol consumption as E10 to those increases in ethanol consumption as E15 and E85 that are more challenging to achieve. However, we also recognize that the market is not unlimited in its ability to respond to the standards we set. This is true both for expanded use of ethanol and for non-ethanol renewable fuels. The fuels marketplace in the United States is large, diverse, and complex, made up of many different players with different, and often competing, interests. Substantial growth in the renewable fuel volumes beyond current levels will require action by many different parts of the fuel market, and a constraint in any one part of the market can act to limit the growth in renewable fuel supply.

Well, for sake of argument, let’s accept this faulty or incomplete premise for why E15 has yet to be the new regular fuel across Minnesota. The EPA tells us the fuels marketplace is complex, there are numerous actors with competing interests and that a barrier in one part of the market (e.g., the petroleum industry which has failed to make its own investment in infrastructure to make E15 available to consumers) can limit the growth in, for instance, E15. While the EPA analysis may have accurately identified some elements which are or could be constraints to greater use of biofuels, the EPA fails to state the most obvious reason for the 25 percent market shortfall in E15 sales at this point in time: the Reid Vapor Pressure (RVP) Standard.

In June, the first month of the RVP season, E15 sales in Minnesota fell 58 percent. Thanks to the outstanding field work being done by MBA’s fuel retail/wholesale supply chain marketing specialist, we have learned that some stations have even lost from 76 percent to 97 percent of their E15 sales. On our social media platforms, station managers have complained how their customers are confused by the RVP rule. And, based on our observations over the last few years, following the RVP season, it can take as long as 45 to 60 days for retailers to reach the same volume of E15 sales they had prior to the RVP season.

So, if the EPA really wants to know about a market constraint, look no further than the RVP. And unlike the other ambiguous problems the EPA identified above, the EPA actually has the authority to fix the RVP mess.

Meanwhile, until we see an RVP announcement (or any interest in addressing it) from the EPA, we will continue to explore new avenues for removing the RVP market constraint before the 2018 RVP season is here. Toward that end, while MBA continues to monitor and engage with stakeholders, where possible, on either a regional or nationwide basis, MBA is also taking an alternate pathway toward a possible solution.

MBA is preparing to launch a new campaign that calls for direct engagement with state regulators in other parts of the United States as well as with key state agencies in Minnesota to craft a pilot project. While the elements of the project remain fluid, we are exploring ways to leverage E15 to either halt the rise in PM2.5 or use E15 in an attainment zone where zip code zone air quality monitoring can be used to obtain real world data about the effects of E15 use during the summer. Our theory of the case is either E15 will have no adverse effect or the ozone level will drop.

Meanwhile, we hit a major milestone this month on Combined Heat & Power (CHP) issues. CHP and similar energy efficiency technology can produce the heat and some of the electricity used by an ethanol plant to produce biofuels. The enhanced energy efficiency from CHP is good for the environment and biofuel producers because the already favorable carbon index for ethanol gets even better.

MBA is working to obtain some tax credits to help stimulate the use of CHP. This effort also dovetails with various economic and environmental policies in Minnesota. Toward this end, MBA succeeded in crossing the first major threshold: bringing together a coalition of disparate interests to begin educating lawmakers about the role of CHP in stimulating economic growth, improving environmental quality and helping businesses meet corporate sustainability goals. Although much more work remains to be done, this project is indeed moving in the proper direction.

As always, I look forward to hearing from you.