Letter on final volumes for 2014 RFS

Following a recent briefing regarding the delay in finalising the ethanol mandate, American Petroleum Institute Downstream Group Director, Bob Greco has written to US Environmental Protection Agency Administrator Gina McCarthy. Below are key extracts discussing the final volumes for the 2014 RFS.

‘API continues to urge the US EPA to promulgate RFS requirements that reflect the realities of the ethanol blendwall. The RFS volume standards for 2014 must protect US consumers and be based on sound science, considering all vehicle, fuel and infrastructure issues. EPA should resist pressure to increase the volumes beyond the ethanol blendwall and should act now to finalise the 2014 RFS regulations. The continuing delays are unacceptable, fundamentally unfair, and show a continued disregard for congressionally mandated deadlines.’

Ethanol consumption is limited by vehicle and refuelling infrastructure compatibility

‘Vehicle and refuelling infrastructure compatibility constraints are a fundamental dilemma with the RFS, and create a practical limit to the amount of ethanol that can be consumed in E85, E15 or intermediate ethanol blends. The investment decisions necessary to address these issues are made by independent retail gasoline station owners and operators, automakers, and ultimately the driving public. The cost to install retail infrastructure that can handle ethanol flex fuel can be significant. The National Association of Convenience Stores estimated that the cost could be upwards of US$ 200 000 for an individual store owner who operates two underground storage tanks and four dispensers; and in 2012, the average single convenience store reported approximately US$ 48 000 pre tax profits. Over 95% of all retail gasoline stations are independently owned and operated, not by the RFS obligated parties. These independent franchisees ultimately choose the brand they wish to carry and the products they wish to offer. This market reality contradicts the incorrect assertion that refiners are in some way responsible for the lack of retail E85 pumps and infrastructure. In fact, data on E85 pump availability show that 1500 retail stations branded by API member companies offer E85 and, DOE data shows that virtually every major refiner has branded retail stations offering E85. Yet, only about, 2400 retail stations offer E85, which is about 1.5% of the total retail station count.’

‘The overwhelming majority of vehicles have not been certified or warranted for ethanol blends above 10 vol%, and every automaker has declined to extend warranty coverage if its legacy vehicles are operated on E15. E15 is only compatible with flexible fuelled vehicles and some newer model year cars specifically designed to accommodate E15. E85 is only compatible with flexible fuelled vehicles. Together, ethanol blends exceeding 10 vol% are only compatible with approximately 8 – 9% of vehicles on the road. Tests conducted by the Coordinating Research Council showed that ethanol concentrations in gasoline that exceed 10% can lead to engine and fuel system damage. In addition, as much as half of the retail gasoline infrastructure may not be compatible with ethanol blends above 10%.’

The RFS mandate must allow for consumer demand for E0, clear gasoline

‘In the 2014 RFS standards proposal, EPA requested information to determine the demand for gasoline with no ethanol, and the appropriateness of incorporating the latter into the final standards. Our industry provided the requested data in comments on the proposal, and we noted that, according to EIA data, about 97% of gasoline currently supplied is E10. EPA should set final ethanol standards sufficiently below 9.7% to allow consumers who demand E0 for boats, small engines, etc. to continue having access to this product. Contrary to assertions by some, gasoline used in boats and other non-highway uses is subject to the RFS requirements, and these consumers have expressed particular concern with the impact of ethanol on their engines, in part due to the fact these engines remain in storage for long periods of time. While this known demand for E0 is only about 3.4% of the gasoline supply, it vastly exceeds the volume of E85 demand which accounts for a mere 0.15% of total gasoline supply. As such, shifts in E0 consumption will have a far greater impact on the ethanol blendwall than shifts in demand for E85. This relationship further illustrates the need for EPA to finalise standards with an adequate buffer below the ethanol blendwall.’

Diesel deficit dilemma

‘An analysis by NERA Economic Consulting shows that as the ethanol blendwall is hit, obligated parties will exhaust all compliance options, and individual companies acting independently could be forced to reduce their RIN obligation by reducing the supply of transportation fuel. As a result of decreased domestic fuel supplies and large increases in transportation fuel costs in NERA’s analysis, our economy experiences widespread harm. It is important to note that NERA’s estimates of economic harm are driven largely by the impact of the ethanol blendwall on the diesel markets.’

Conclusion

‘EPA has taken an important first step by proposing to exercise its waiver authority, which is necessary to provide a clear signal to the market for 2014 and beyond that EPA will take appropriate action to avert the ethanol blendwall and its potential ramifications on US consumers, domestic product supply, availability, and the economy. The 2014 Final Rule is once again being issued very late and will once again be applied retroactively. We urge the agency to take these considerations into account and finalise the 2014 RFS standards now so that ethanol volumes remain below 9.7% of EIA’s projected gasoline demand.’

Edited from letter by Claira Lloyd

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/19062014/api_letter_to_epa_2014_rfs_levels/