How EPA’s new rule affects the Midwest fuel market

The Environmental Protection Agency (EPA) has recently announced its final rule to eliminate the 1.0 psi Reid vapor pressure (RVP) waiver for summertime gasoline blended with 10% ethanol (E10) in eight Midwestern states, starting from 2025. The RVP waiver was granted by Congress in 1990 to allow E10 to exceed the regulatory limit for fuel volatility during the summer months, when higher temperatures increase evaporative emissions and contribute to air pollution. The EPA’s decision was based on the petitions from the governors of Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin, who sought to remove the RVP waiver for E10 in order to enable year-round sales of gasoline blended with 15% ethanol (E15), which is currently prohibited in the summer due to its higher RVP.

The EPA’s rule has been met with strong opposition from the American Fuel & Petrochemical Manufacturers (AFPM), the leading trade association representing the makers of the fuels and petrochemicals in the U.S. AFPM argues that the elimination of the RVP waiver for E10 will impose major costs and supply disruptions on the Midwest’s fuel market and consumers, as it will require a new grade of gasoline to be manufactured and supplied to the region. AFPM estimates that the RVP change will reduce overall supply, increase costs and make the region more vulnerable to supply disruptions, ranging from $500-$800 million per year, and potentially higher if unforeseen interruptions occur. AFPM also claims that the EPA’s rule is too late for 2024 implementation and even 2025 would be problematic, as refiners start making the switch to summer production very early in the year and need a reasonable transition to produce summer gas according to a different specification.

The EPA’s rule is intended to provide a permanent solution to enable year-round E15 sales in the Midwest, which is expected to benefit the ethanol industry and its proponents, who have long advocated for the expansion of the renewable fuel market. The EPA claims that the rule will increase the use of renewable fuels, reduce greenhouse gas emissions, enhance energy security, and provide lower cost fuel options for consumers. The EPA also asserts that the rule will not adversely affect air quality, as the RVP limit for E15 will remain at 9.0 psi, the same as for E10, and that the rule will not create a significant impact on the availability or price of gasoline in the affected states.

The table below summarizes the main differences between the current and the new rule for the RVP waiver for summertime gasoline in the Midwest:

Current rule New rule
E10 is allowed to exceed the RVP limit by 1.0 psi during the summer months in the Midwest E10 is not allowed to exceed the RVP limit by 1.0 psi during the summer months in the Midwest
E15 is prohibited from being sold during the summer months in the Midwest E15 is allowed to be sold year-round in the Midwest
E10 and E15 have the same RVP limit of 10.0 psi during the summer months in the Midwest E10 and E15 have the same RVP limit of 9.0 psi during the summer months in the Midwest
Only one grade of gasoline is required to be produced and supplied to the Midwest during the summer months Two grades of gasoline are required to be produced and supplied to the Midwest during the summer months: one for E10 and one for E15

The EPA’s rule will take effect in 2025, unless it is challenged or overturned by legal or legislative actions. The rule will affect the fuel market and consumers in the Midwest, as well as the ethanol industry and its stakeholders. The rule will also have implications for the national fuel supply and demand, as the Midwest is a major producer and consumer of gasoline and ethanol in the U.S.

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