EPRINC urges relaxed ethanol requirements

Sept. 1, 2017
Relaxation of ethanol requirements for gasoline sold in the US would help relieve pressure on fuel supplies and costs to consumers caused by Hurricane Harvey, according to the Energy Policy Research Foundation Inc.

Relaxation of ethanol requirements for gasoline sold in the US would help relieve pressure on fuel supplies and costs to consumers caused by Hurricane Harvey, according to the Energy Policy Research Foundation Inc.

The Washington, DC, think tank urged the Environmental Protection Agency on Aug. 31 to relax volume mandates under the Renewable Fuel Standard (RFS) “to maximize flexibility and distribution of fuels throughout the entire supply chain.”

EPRINC noted the agency already had waived gasoline volatility standards to facilitate fuel movement in a system hobbled by the closure of refineries and constriction of pipeline transport.

While the volatility waivers might create opportunities for sales of gasoline with elevated ethanol concentrations—such as 15% vs. the normal 10%—some areas might suffer ethanol shortages because of logistical constraints.

Refiners and importers with renewable volume obligations (RVOs) and unable to access ethanol from grain, the main renewable fuel, would face financial penalties if they sold gasoline with little or none of the additive, EPRINC said.

“Obligated parties” under the renewable fuel program must buy credits called renewable identification numbers (RINs) to the extent they cannot meet annually assigned RVOs by physically blending ethanol.

Disruption from the storm might discourage some obligated parties from selling gasoline beyond their ability to meet their RVOs or force many of them to buy RINs, elevating competition and raising RIN prices.

RIN values also might rise if fuel demand declines and volumetric requirements stay at levels set against gasoline and diesel demand forecasts made before Hurricane Harvey.

“Waivers for the RVO need not be an open-ended reduction in RVOs for obligated parties,” EPRINC told EPA. “Instead, EPA could reduce the annual RVO (announced in advance) for 2017 by some estimated obligation tied to the expected length for full recovery of the production and distribution system.”

The group said the announcement should come early in the relief effort.

“EPA could announce that the RVO is being reduced for 2017 by the equivalent of 60 days, a reduction of approximately 15-20% of volumetric mandates,” it said, adding the renewable-fuel obligation needs to be lowered for all of 2017.

“This would add flexibility to the distribution system, reduce financial liabilities for obligated parties, and limit rising (RFS) costs for consumers.”