Governor’s ethanol ‘victory’ will result in higher fuel costs for Iowans

by Jared Strong, Iowa Capital Dispatch

A federal rule change requested by Iowa Gov. Kim Reynolds will result in a fuel cost increase of 2 to 12 cents per gallon for ethanol blends, according to the U.S. Environmental Protection Agency.

The agency approved a new rule this week that will eliminate an environmental waiver for E10 in several states. The gasoline blend contains about 10% ethanol and is by far the most common fuel for vehicles in the United States.

That change — set to take effect in 2025 — will force fuel refineries to reduce the volatility of gasoline stocks that are used to make the ethanol blends for Iowa and, as a result, will allow E15 blends to be sold during summer months without a waiver.

It was requested by Reynolds and the governors of seven other Midwestern states in 2022, after federal authorities failed to permanently extend the waiver that has long been given to E10 to E15, a gasoline blend that is 15% ethanol and has a similar volatility to E10.

The volatility rules are meant to reduce air pollution in the summer months, when warmer temperatures increase the risk of fuel vaporization.

Iowa is the country’s leading producer of ethanol, and more than half of the state’s corn crop is used to make it. State lawmakers have sought to expand its use as a fuel for vehicles.

“After continuous delays by the EPA to allow year-round sales of E15 fuel, consumers across the country can finally look forward to lower-cost, cleaner-burning year-round E15 in 2025,” Reynolds said in a prepared statement on Thursday in reaction to the EPA’s new rule.

She and other state officials also castigated the EPA for delaying its implementation of the rule change and insinuated it resulted in higher costs for drivers.

The costs for the fuels vary, but E15 is often more than 20 cents per gallon cheaper than E10. However, it is not recommended for vehicles that were manufactured before 2001 and results in less fuel economy.

“Today’s victory is a win for families and farmers across the state,” Iowa Attorney General Brenna Bird said Friday. She had filed a lawsuit to force the EPA to act on Reynolds’ request. “While the EPA dragged its feet, we fought back. Now, amid a time of soaring inflation, Iowans will have the financial relief they deserve when they head to the gas pump.”

But the EPA justified its delay because the change will require updates at the refineries that might lead to supply shortages if it was implemented sooner, which would likely result in increased fuel costs. And it said those updates, even when delayed to 2025, might result in a fuel cost increase of up to 12 cents per gallon in the states that requested the change — and also in neighboring states — that would reduce over time.

A Reynolds’ spokesperson declined to comment on the EPA’s cost-increase estimates.

But Monte Shaw, executive director of the Iowa Renewable Fuels Association, which advocates for the ethanol industry, said those estimates are inflated and there won’t be a noticeable difference in fuel prices as a result of the rule change.

“Their claim that this is going to jack up gas prices in a notable way is, we think, completely nuts,” Shaw said.

He estimated the cost to the refineries might be up to 2 cents per gallon, and that the additional cost would not be passed along to consumers.

Shaw blames the refineries for the extra costs because of their resistance to extending the E10 waiver to E15. That is what the EPA did in 2019, but the action was overturned in 2021 by a lawsuit filed by the American Fuel & Petrochemical Manufacturers Association, a trade group that represents fuel suppliers.

The EPA has issued emergency waivers for summertime E15 sales in each year since and is expected to do so again this year before the new rule takes effect for 2025.

Shaw said the easiest path forward is for federal lawmakers to give a permanent waiver to E15, which would eliminate the need for refineries to adjust the gasoline that is used for the ethanol blends. Either way, he predicted that the year-round sales of E15 will lead to it becoming the dominant fuel that is sold in Iowa.

The other states that joined Iowa in requesting an elimination of the E10 waiver included Illinois, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin.

Senior reporter Jared Strong has written about Iowans and the important issues that affect them for more than 15 years, previously for the Carroll Times Herald and the Des Moines Register.

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