Government

EPA approves year-round sale of E15 ethanol

Many stations would need upgrades to sell the fuel

E15 pump next to an E85 pump at a Kum & Go on Mount Vernon Road SE in Cedar Rapids on Friday. (Jim Slosiarek/The Gazette)
E15 pump next to an E85 pump at a Kum & Go on Mount Vernon Road SE in Cedar Rapids on Friday. (Jim Slosiarek/The Gazette)

The U.S. Environmental Protection Agency has granted the year-round sale of a higher blend of ethanol, marking what biofuels and agriculture representatives call a major win for Iowa — the nation’s leader in ethanol production.

But while Friday’s EPA decision to end the summer ban on the sale of E15 — a fuel blend of 15 percent ethanol and 85 percent gasoline often marketed at the pump as Unleaded 88 — comes one day before the start of summer driving season, the effects are expected to be gradual.

What’s more, some fuel retailers could have to shell out big bucks before they can even offer E15 at the pump.

“We might not be talking about a game changer for ethanol and corn prices on day one, or maybe even year one, but it will help,” said Monte Shaw, Iowa Renewable Fuels Association executive director. “I don’t want to mislead people and say in a couple of years we’ll have another seven billion gallons of ethanol demand because of E15 — it will take longer than that — but we will see an uptick in demand right away.”

Iowa ethanol plants produced a record-breaking 4.35 billion gallons in 2018. That accounted for about 27 percent of the total U.S. production last year.

The elimination of the ban on E15 summertime sales — first promised in October by President Donald Trump — prompted praise from Iowa lawmakers on both sides of the aisle, including Republican Gov. Kim Reynolds and U.S. Senators Chuck Grassley and Joni Ernst, as well as Democrat House members Dave Loebsack and Abby Finkenauer.

Industry officials anticipate year-round E15 sales to boost the growth of compatible pumps across the state.

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E15 is available at more than 180 refueling sites in Iowa, according to the Iowa Renewable Fuels Association.

Ariel Rubin, communications director with Kum & Go, said the chain has installed E15 pumps at 148 stores. Nearly 240 store locations offer E85, she noted.

“We continue to add E15 and E85 to every new store that we build,” Rubin said, adding that the year-round sale of E15 should expedite the growth of compatible fuel pumps.

Dawn Carlson, president and chief executive officer of FUELIowa, a trade organization that represents the fuels industry, said the EPA’s announcement was great news for the industry. But she added that many retail fuel locations will need to undergo extensive infrastructure upgrades before they can sell the fuel.

Most existing E15 retailers received state grants geared toward expanding those sales, while private groups have provided more than $5 million to larger retail chains in Iowa for E15 infrastructure upgrades, Carlson said.

All told, Carlson said 85 percent of all retail fuel sites in Iowa — largely located in more rural areas — are incompatible with E15 or cannot prove compatibility, meaning they are prohibited from legally offering the fuel.

It could cost as much as $100,000 to modify a retail fuel site to properly dispense E15 and another $500,000 to raise and rebuild an existing three-tank system — the typical number of tanks at a gas station — to allow for safe and legal E15 storage, she added.

What’s more, Iowa offers up to 10 cents per gallon in refundable income tax credits to E15 retailers, which gives existing E15 retailers a leg up.

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“For Iowa small-business owners competing against someone selling E15, the change will be immediate,” Carlson said. “In this industry, street prices drive sales. The short-term impact of year-round E15 will hinge on whether the 10-cent advantage will put competing businesses who cannot sell E15 out of business.

“The long term impacts remain to be seen.”

Another unknown in the discussion are the customers — whether they will fully embrace E15 as the infrastructure expands.

The EPA also on Friday announced reforms to the Renewable Fuel Standard in an effort to add transparency to the Renewable Identification Number, or RIN, credits process.

Oil refiners — with a capacity of fewer than 75,000 barrels per day — are required to blend an amount of biofuels into their fuel or purchase RINs as a substitute.

New rules aim to make the RIN process more transparent.

Despite some uncertainty in the overall impact of year-round E15 sales, Friday’s EPA announcement was met with praise in Iowa.

“This means stronger markets for farm families across Iowa who have been struggling with ongoing low commodity prices and trade tensions. It also creates operational efficiencies for fuel marketers and instills confidence in the renewable fuels market, which spurs investments in infrastructure,” Iowa Secretary of Agriculture Mike Naig said in a Friday news release.

Officials in the petroleum industry, however, have said they would sue the EPA if year-round E15 sales were allowed.

“The statutory language leaves no question that the EPA lacks authority to extend the E10 volatility waiver to E15. Finalizing this aspect of the proposed rule would clearly be unlawful, and we strongly oppose it,” Chet Thompson, president and chief executive officer of the American Fuel and Petrochemical Manufacturers, said in an April 30 statement.

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The Iowa Renewable Fuels Association’s Shaw said he will not be surprised if a lawsuit is filed in the near future, but he said he is confident in the new rules.

“The key for this rule is not just that it approves year-round E15, but that it does so based on the best science and legal precedents that will survive the Big Oil onslaught in court,” Shaw said in a Friday news release.

• Comments: (319) 398-8309; mitchell.schmidt@thegazette.com

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