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Request From States for Removal of Gasoline Volatility Waiver Publication: Federal Register Agency: Environmental Protection Agency Byline: Michael S. Regan Date: 29 February 2024 Subjects: American Government  , The Environment, Petroleum
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[Federal Register Volume 89, Number 41 (Thursday, February 29, 2024)]
[Rules and Regulations]
[Pages 14760-14775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-04023]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 1090
[EPA-HQ-OAR-2022-0513; FRL-9845-02-OAR]
RIN 2060-AV73
Request From States for Removal of Gasoline Volatility Waiver
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: Pursuant to provisions specified by the Clean Air Act (CAA),
the Governors of Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio,
South Dakota, and Wisconsin submitted petitions requesting that EPA
remove the 1-pound per square inch (psi) Reid vapor pressure (RVP)
waiver for summer gasoline-ethanol blended fuels containing 10 percent
ethanol (E10). EPA is acting on those petitions by removing the 1-psi
waiver in those States effective April 28, 2025. This action also
finalizes regulatory amendments to implement the removal of the 1-psi
waiver for E10 in those States, as well as a regulatory process by
which a State may request to reinstate the 1-psi waiver. Finally,
consistent with a decision issued by the United States Court of Appeals
for the D.C. Circuit on July 2, 2021, this action removes regulations
that extended the 1-psi waiver to gasoline-ethanol blends between 10
and 15 percent ethanol (E15).
DATES: This rule is effective on April 29, 2024.
ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-OAR-2022-0513. All documents in the docket are listed on the
https://www.regulations.gov website. Although listed in the index, some
information is not publicly available, e.g., confidential business
information (CBI) or other information whose disclosure is restricted
by statute. Certain other material is not available on the internet and
will be publicly available only in hard copy form. Publicly available
docket materials are available electronically through https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: For questions regarding this action,
contact Lauren Michaels, Office of Transportation and Air Quality,
Compliance Division, Environmental Protection Agency, 2000 Traverwood
Drive, Ann Arbor, MI 48105; telephone number: (734) 214-4640; email
address: michaels.lauren@epa.gov.
SUPPLEMENTARY INFORMATION:
Does this action apply to me?
Entities potentially affected by this final rule are those involved
with the production, distribution, and sale of transportation fuels,
including gasoline and diesel fuel. Potentially affected categories
include:
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Examples of
Category NAICS \1\ code potentially affected
entities
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Industry..................... 211130 Natural gas liquids
extraction and
fractionation.
Industry..................... 221210 Natural gas
production and
distribution.
Industry..................... 324110 Petroleum refineries
(including
importers).
Industry..................... 325110 Butane and pentane
manufacturers.
Industry..................... 325193 Ethyl alcohol
manufacturing.
Industry..................... 325199 Manufacturers of
gasoline additives.
Industry..................... 424710 Petroleum bulk
stations and
terminals.
Industry..................... 424720 Petroleum and
petroleum products
wholesalers.
Industry..................... 447110, 447190 Fuel retailers.
Industry..................... 454310 Other fuel dealers.
Industry..................... 486910 Natural gas liquids
pipelines, refined
petroleum products
pipelines.
Industry..................... 493190 Other warehousing and
storage--bulk
petroleum storage.
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\1\ North American Industry Classification System (NAICS).
This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be affected by this
action. This table lists the types of entities that EPA is now aware
could potentially be affected by this action. Other types of entities
not listed in the table could also be affected. To determine whether
your entity would be affected by this action, you should carefully
examine the applicability criteria in 40 CFR part 1090. If you have any
questions regarding the applicability of this action to a particular
entity, consult the person listed in the FOR FURTHER INFORMATION
CONTACT section.
Table of Contents
I. Executive Summary
II. Volatility Control Background and History
III. Statutory Authority and Provisions To Remove the 1-psi Waiver
IV. Petitions for Removal of the 1-psi Waiver and Supporting
Documentation
A. Petition Background and History
B. Evaluation of Petitions for Removal of the 1-psi Waiver
V. Fuel System Impacts
A. Production
B. Distribution
C. Retail Operations
VI. Implementation and Effective Date
A. Statutory Provisions
B. Finding of Insufficient Supply for 2024 and Renewal of
Extension of Effective Date
VII. Cost and Price Impacts
VIII. Associated Regulatory Provisions
[[Page 14761]]
A. New Designation and Associated PTD Language
B. Regulatory Reinstatement Mechanism
IX. Removal of the 1-psi Waiver for E15
A. Background
B. Affected Provisions
X. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 14094: Modernizing Regulatory Review
B. Paperwork Reduction Act (PRA)
C. Regulatory Flexibility Act (RFA)
D. Unfunded Mandates Reform Act (UMRA)
E. Executive Order 13132: Federalism
F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
G. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
I. National Technology Transfer and Advancement Act (NTTAA) and
1 CFR Part 51
J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
K. Congressional Review Act (CRA)
I. Executive Summary
In this action, EPA is responding to petitions from eight State
Governors to remove the 1-psi (pound per square inch) waiver for
gasoline-ethanol blends containing 10 percent ethanol (E10). The
Governors made their requests pursuant to Clean Air Act (CAA) section
211(h)(5), which provides that EPA shall remove the 1-psi waiver by
regulation upon a demonstration by a Governor that the 1-psi waiver
increases emissions in their State.
After review of the modeling results presented by the Governors in
their petitions, on March 6, 2023, EPA proposed to remove the 1-psi
waiver with an effective date of April 28, 2024--and sought comment on
delaying the effective date to April 28, 2025--in the following eight
States: Illinois, Iowa, Nebraska, Minnesota, Missouri, Ohio, South
Dakota, and Wisconsin.\1\ On March 21, 2023, EPA held a public hearing
on the proposal, at which various perspectives on the proposed action
were presented, and subsequently many comments were submitted to EPA on
the proposed action. After the close of the public comment period, EPA
also received numerous petitions to delay the proposed effective date
of the removal of the 1-psi waiver.\2\ Following review of public
comments on the proposal and the extension petitions received, in this
action EPA is removing the 1-psi waiver and instead applying the 9.0
psi RVP (Reid Vapor Pressure) standard under CAA section 211(h)(1)
effective April 28, 2025, in the following eight States: Illinois,
Iowa, Nebraska, Minnesota, Missouri, Ohio, South Dakota, and Wisconsin.
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\1\ 88 FR 13758.
\2\ We refer to these petitions as ``extension petitions''
throughout this preamble.
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Throughout this document we discuss key comments provided by
stakeholders on the proposal and provide our response. Additional
detail is provided in the Response to Comments (RTC) document and
Technical Support Document (TSD) \3\ for this action.
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\3\ ``Request From States for Removal of Gasoline Volatility
Waiver: Technical Support Document and Cost Analysis,'' available in
the docket for this action.
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II. Volatility Control Background and History
EPA first took regulatory action to control the volatility of
gasoline in 1987.\4\ Because higher gasoline volatility leads to higher
evaporative emissions, EPA regulates the RVP--a measure of fuel
volatility--of gasoline during summer months in order to reduce
volatile organic compound (VOC) emissions that contribute to the
formation of smog (ground-level ozone).\5\ The volatility of fuel
depends on the refinery's decisions in formulating its gasoline.
Subsequent to EPA's actions, Congress enacted the CAA Amendments of
1990, which included statutory volatility provisions for summer
gasoline. These provisions largely codified EPA's regulatory approach,
including establishing a 9.0 psi RVP standard for gasoline volatility
in the summer.\6\ Because blending ethanol into gasoline increases the
volatility of the resulting fuel blend due to chemical differences
between ethanol and gasoline, Congress also codified a 1-psi waiver for
E10, allowing such blends to have a 1.0-psi higher RVP than otherwise
allowed for gasoline, consistent with EPA's prior regulatory
approach.\7\ This allowance only applies to gasoline-ethanol blends
containing between 9 and 10 percent ethanol, and does not extend to
gasoline-ethanol blends containing greater than 10 percent ethanol.\8\
The 1-psi waiver also does not apply to reformulated gasoline (RFG).
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\4\ See 52 FR 31274 (August 19, 1987); Subsequent regulatory
actions occurred in 1989 and 1990. 54 FR 11868 (March 22, 1989); 55
FR 23658 (June 11, 1990).
\5\ Gasoline must have volatility in the proper range to prevent
driveability, performance, and emissions problems. If the volatility
is too low, the gasoline will not ignite properly; if the volatility
is too high, the vehicle may experience vapor lock. Importantly for
this action, excessively high volatility also leads to increased
evaporative emissions from the vehicle. Vehicle evaporative emission
control systems are designed and certified on gasoline with a
volatility of 9.0 psi RVP. Higher volatility gasoline may overwhelm
the vehicle's evaporative control system, leading to a condition
described as ``breakthrough'' of the cannister and mostly
uncontrolled evaporative emissions.
\6\ CAA section 211(h)(1). CAA section 211(h)(1) requires EPA to
establish volatility requirements--that is, a restriction on RVP--
during the high ozone season. To implement these requirements, EPA
defines ``high ozone season'' or ``summer season'' at 40 CFR 1090.80
as ``the period from June 1 through September 15 for retailers and
wholesale purchaser consumers, and May 1 through September 15 for
all other persons, or an RVP control period specified in a state
implementation plan if it is longer.'' In general practice by
industry and for purposes of this preamble, the high ozone season is
referred to as the ``summer'' or ``summer season'' and gasoline
produced to be used during the high ozone season is called ``summer
gasoline.'' EPA's regulations do not impose any volatility
requirements on any type of blend of gasoline outside of the summer
season.
\7\ CAA section 211(h)(4).
\8\ The statutory 1-psi waiver is codified at 40 CFR
1090.215(a).
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At the time the provision was enacted, the 1-psi waiver applied to
a relatively small portion of the gasoline sold in the United States.
Today, however, almost all gasoline sold is E10, and thus the 1-psi
waiver increases the volatility of most gasoline.
On April 28, 2022, the Governors of Illinois, Iowa, Kansas,
Minnesota, Nebraska, North Dakota, South Dakota, and Wisconsin
submitted a petition for the removal of the 1-psi waiver for E10 in
their States beginning in the summer of 2023, pursuant to CAA section
211(h)(5).\9\ On June 10, 2022, the Governor of Ohio also submitted a
petition requesting the removal of the 1-psi waiver in that State.\10\
On July 21, 2022, the Governor of Kansas notified EPA that they were
rescinding their petition for removal of the 1-psi waiver in
Kansas.\11\ On October 13, 2022, the Governor of North Dakota notified
EPA that they were rescinding their petition for removal of the 1-psi
waiver in North Dakota.\12\ On December 21, 2022, the Governor of
Missouri submitted a petition requesting the removal of the 1-psi
waiver in that State.\13\ This action refers to the eight remaining
States of Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South
Dakota, and Wisconsin as the ``petitioning states.'' The petitions
included modeling results indicating reductions in VOCs, nitrogen
[[Page 14762]]
oxides (NOX), and carbon monoxide (CO).
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\9\ ``April 28, 2022 Letter from Eight States,'' available in
the docket for this action.
\10\ ``June 10, 2022 Letter from Ohio,'' available in the docket
for this action.
\11\ ``July 21, 2022 Letter from Kansas,'' available in the
docket for this action.
\12\ ``October 12, 2022 Letter from North Dakota,'' available in
the docket for this action.
\13\ ``December 21, 2022 Letter from Missouri,'' available in
the docket for this action.
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III. Statutory Authority and Provisions To Remove the 1-psi Waiver
This rulemaking modifies EPA's fuel quality regulations in 40 CFR
part 1090 to remove the 1-psi waiver that is applicable to fuel blends
containing gasoline and 10 percent ethanol for the petitioning States.
While we proposed to make such a change effective for the summer of
2024, after further careful consideration of comments and consultation
with various agencies we are instead finalizing removal of the 1-psi
waiver in these States beginning April 28, 2025.
CAA section 211(h)(1) requires EPA to ``promulgate regulations
making it unlawful . . . during the high ozone season . . . to sell . .
. or introduce into commerce gasoline with a Reid Vapor Pressure in
excess of 9.0 pounds per square inch (psi).'' For nonattainment areas,
CAA section 211(h)(1) also allows EPA to set a lower (i.e., more
stringent) RVP standard, as well as to define the term ``high ozone
season.'' CAA section 211(h)(4) provides in relevant part that ``[f]or
fuel blends containing gasoline and 10 percent denatured anhydrous
ethanol, the Reid vapor pressure limitation under this subsection shall
be one pound per square inch (psi) greater than the applicable Reid
vapor pressure limitations established under [section 211(h)(1)].'' CAA
section 211(h)(5), which was enacted as part of the Energy Policy Act
of 2005 (EPAct), provides in relevant part that ``[u]pon notification,
accompanied by supporting documentation, from the Governor of a State
that the [waiver in section 211(h)(4)], will increase emissions that
contribute to air pollution in any area of the State, the Administrator
shall, by regulation, apply, [the volatility limit under section
211(h)(1)].'' Thus, regulatory action under CAA section 211(h)(5) would
remove the 1-psi waiver for E10 and generally apply the RVP standard
under CAA section 211(h)(1).
Prior to the April 28, 2022 petition, no Governor had ever
submitted a petition under CAA section 211(h)(5) to EPA, and thus we
are interpreting this statutory provision for the first time in this
action. In this context, we find that the use of the prescriptive
statutory language ``shall'' provides limited, if any, discretion for
EPA to consider other issues such as economic impacts of removing the
1-psi waiver. Such impacts may instead be taken into consideration by a
Governor when deciding whether to submit a petition to EPA.\14\ Here,
EPA's role is only to evaluate the supporting documentation provided by
the Governors.\15\ If EPA concludes that the supporting documentation,
as required by the statute, demonstrates emissions increases with the
1-psi waiver in place, then CAA section 211(h)(5) requires EPA to
promulgate regulations to remove the 1-psi waiver as requested.
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\14\ Considerations like this were cited by the Governors of
Kansas and North Dakota in rescinding their petitions.
\15\ Legislative history suggests that the supporting
documentation need not be as stringent as that called for under CAA
section 211(c)(4)(C). See Senate Report 106-426 at 12 (September 28,
2000). Under CAA section 211(c)(4)(C) a state must make a
``necessity'' showing prior to EPA approval of a fuel measure into
the state implementation plan. The ``Guidance on Use of Opt-in to
RFG and Low RVP Requirements in Ozone SIPs,'' August 1997, gives
further guidance on factors EPA is likely to consider in making a
finding of ``necessity'' under CAA section 211(c)(4)(C).
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In response to the proposal, we received comments suggesting that
the Governors cannot meet the statutory criteria in CAA section
211(h)(5) because E10 is now the dominant fuel in the marketplace.
Commenters suggested that the statutory language that the 1-psi waiver
``will increase emissions'' cannot be satisfied, because any emissions
impacts from the 1-psi waiver have already occurred. We disagree with
the comment. CAA section 211(h)(5)(A)--which was promulgated in 2005--
requires EPA to remove the 1-psi waiver if it ``will increase emissions
that contribute to air pollution . . . during the high ozone season.''
The term ``will'' connotes consideration of emissions that are expected
in the future and as relevant here during the ``high ozone season.''
\16\ Further, as instructed in CAA section 211(h)(1), we have defined
``high ozone season'' as the period from ``June 1 through September 15
for retailers and [whole purchaser consumers], and May 1 through
September 15 for all other persons.'' \17\ We therefore read the phrase
as calling for the consideration of emissions that are expected in the
petitioning States during future high ozone seasons and conclude that
because the Governors have demonstrated that the 1-psi waiver will
increase VOC emissions during the high ozone season, the statutory
criteria for removal of the 1-psi waiver has been met. We further
address this comment in the RTC document.
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\16\ This reading is like, for example, our reading of ``will''
in CAA section 110(a)(2)(D)(i). (The term ``will'' in CAA section
110(a)(2)(D) means that State implementation plans are required to
eliminate the appropriate amounts of emissions that presently, or
that are expected in the future, contribute significantly to
nonattainment downwind. 63 FR 57375 (October 27, 1998)).
\17\ 40 CFR 1090.80.
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Additionally, as we posited in the proposal, we do not interpret
this provision as requiring a demonstration of a reduction in emissions
of all pollutants that contribute to air pollution in the petitioning
States, as advocated for by some commenters. Such a demonstration could
not have been contemplated by Congress, as lowering the volatility of
fuel was specifically the intent set out in CAA section 211(h)(1),
which calls for EPA to set RVP standards to address ``evaporative
emissions.'' As such, reducing the volatility of gasoline would be
expected to have differing impacts on emissions of different
pollutants.\18\ Further, Congress was silent on the air pollutants that
EPA should consider in responding to petitions for removal of the 1-psi
waiver. Specifically, under CAA section 211(h)(5), EPA is to remove the
1-psi waiver if it ``increase[s] emissions that contribute to air
pollution.'' This contrasts with, for example, CAA section
110(a)(2)(D)(i), which prohibits sources in a State from emitting ``any
air pollutant which will contribute significantly to nonattainment'' in
another State. Air pollution could result from a myriad of sources,
including listed hazardous air pollutants, criteria pollutants, and
greenhouse gases, and thus would appear to be a rather expansive term.
Reducing RVP, however, is a volatility control measure as explained
earlier in Section II. In short, CAA section 211(h)(1) requires EPA to
set RVP standards to address ``evaporative emissions.'' Additionally,
EPA has consistently explained that adding 10 percent ethanol to
gasoline causes roughly a 1.0 psi RVP increase in the blend's
volatility, which is the premise for the 1-psi waiver contained in CAA
section 211(h)(4) and the subject of this action.\19\ EPA is of the
view, therefore, that it is reasonable to consider ``air pollution''
emanating from emissions of such gasoline and thus, that it may be most
appropriate to evaluate the impact of the 1-psi waiver for E10 on VOC
emissions in addressing petitions to remove the 1-psi waiver under CAA
section 211(h)(5). We thus find that demonstration of increased VOC
emissions with the 1-psi waiver in place is sufficient to grant the
petitions for
[[Page 14763]]
removal of the waiver. Even were EPA to look at the modeled emissions
impacts on several other pollutants (e.g., CO and NOX),
those reductions, in addition to the reduction in VOCs, also satisfy
the requirements of the statute and justify granting the petitions.
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\18\ For an example of analysis and modeling of emission impacts
available at the time CAA section 211(h)(5) was enacted, see
``User's Guide to MOBILE6.1 and MOBILE6.2: Mobile Source Emission
Factor Model,'' EPA-420-R-02-028, October 2002.
\19\ See, e.g., 52 FR 31274 at 31292 (August 19, 1987).
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Further, EPA views the Motor Vehicle Emissions Simulator (MOVES) as
an appropriate tool for use in modeling the emission impacts required
by CAA section 211(h)(5). The MOVES runs performed by the petitioning
States compared emissions from motor vehicles and nonroad vehicles and
equipment with and without the 1-psi waiver for E10 in each State in
the summer. In the past, similar analyses have been used to support
prior EPA actions for Federal and State fuel programs.\20\
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\20\ For example, on June 7, 2017, EPA published a final rule to
relax the federal 7.8 psi RVP standard in the Nashville, TN area (82
FR 26354) and on March 12, 2021, EPA published two final rules that
removed approved regulations from the Kansas and Missouri SIPs that
required the sale of 7.0 psi RVP gasoline in the Kansas City, KS-MO
area (86 FR 14000 and 86 FR 14007).
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IV. Petitions for Removal of the 1-psi Waiver and Supporting
Documentation
A. Petition Background and History
During the fall of 2021, EPA received several letters from States
requesting that EPA engage in a dialogue about mechanisms to provide
parity between E10 and E15 with respect to gasoline volatility
standards.\21\ Specifically, the letters referred to CAA section
211(h)(5) and inquired about as to what type of ``supporting
documentation'' should accompany such a request. EPA organized and
participated in a series of meetings with representatives from various
Midwestern States that had expressed interest in removing the 1-psi
waiver. In those meetings, EPA indicated that MOVES modeling would be
an appropriate tool to use for this purpose given its ability to model
the emissions impacts of changes in gasoline volatility and given our
past reliance on MOVES modeling runs in similar contexts.
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\21\ See ``October 13, 2021 Letter from Kansas,'' and ``November
4, 2021 Letter from Seven States,'' available in the docket for this
action.
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On April 28, 2022, the Governors of Illinois, Iowa, Kansas,
Minnesota, Nebraska, North Dakota, South Dakota, and Wisconsin
submitted a joint petition to EPA for the removal of the 1-psi waiver
for E10 in their respective States. The petition specifically requested
the removal of the 1-psi waiver for E10 as a permanent solution for
providing year-round E15 in those States beginning in the summer of
2023. As accompanying documentation, the petition provided quantified
reductions in VOC, NOX, and CO emissions as a result of
removing the 1-psi waiver in each State based on MOVES modeling.
Subsequent to this submittal, the Governors of Kansas and North Dakota
rescinded their petitions to remove the 1-psi waiver for E10 in those
States.\22\ Therefore, we are not taking any action on the 1-psi waiver
for E10 in Kansas and North Dakota in this action.
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\22\ See ``July 21, 2022 Letter from Kansas,'' and ``October 12,
2022 Letter from North Dakota,'' available in the docket for this
action.
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On June 10, 2022, the Governor of Ohio also submitted a petition
requesting the removal of the 1-psi waiver for E10 beginning in the
summer of 2023. The petition provided quantified reductions in VOC,
NOX, and CO emissions in Ohio based on MOVES modeling.
On December 21, 2022, the Governor of Missouri also submitted a
petition requesting the removal of the 1-psi waiver for E10 beginning
in the summer of 2023. The petition provided quantified reductions in
VOC, NOX, and CO emissions in Missouri based on MOVES
modeling.
Subsequent to submission of the petitions, all petitioning States
except Missouri provided EPA with additional emissions modeling
documentation, including for particulate matter (PM) and benzene.\23\
The original data submitted showed a decrease in VOC, NOX,
and CO emissions with removal of the 1-psi waiver for E10, while the
additional data demonstrated an increase in PM for both nonroad and on-
road emissions with removal of the 1-psi waiver. The benzene results
demonstrated an increase in benzene on-road emissions and a decrease in
benzene nonroad emissions. While the additional data on modeled
emissions impacts on other pollutants may not be necessary to make the
statutory demonstration, it does provide additional information about
the potential emissions impacts of this action.
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\23\ See ``Emissions Impacts of the Elimination of the 1-psi RVP
Waiver for E10,'' May 9, 2022; and ``Emissions Impacts of the
Elimination of the 1-psi RVP Waiver for E10 in Ohio,'' June 10,
2022, available in the docket for this action. While we did not
receive additional information from Missouri about other pollutants
as we received from the other petitioning states, we anticipate
directionally similar trends as shown in the information from the
other states. RVP reduction is a volatility control measure and EPA
has consistently explained that adding 10 percent ethanol to
gasoline causes roughly a 1.0 psi RVP increase in the blend's
volatility. As EPA explained in its rulemakings to regulate
volatility of fuel that preceded enactment of CAA section 211(h),
evaporative hydrocarbon emissions are VOCs and contribute to the
formation of ozone in the atmosphere, particularly in the summer
months due to direct sunlight and high ambient temperatures. EPA
regulated the volatility of gasoline to control the emissions of
VOCs. Congress, in enacting CAA section 211(h), which largely
codified EPA's volatility regulations, thus also logically intended
to address VOCs by requiring volatility controls. It is therefore
reasonable and most appropriate to evaluate the impact of the 1-psi
volatility waiver for E10 on VOC emissions in addressing petitions
to remove the 1-psi waiver under CAA section 211(h)(5). See also 52
FR 31274 (August 19, 1987); 54 FR 11868 (March 22, 1989); and 55 FR
23658 (June 11, 1990).
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All the petitioning States requested removal of the 1-psi waiver in
all areas within their State where the limitation under CAA section
211(h)(4) applies. Therefore, the requests did not include areas within
the States where RFG is required because the 1-psi waiver does not
apply to RFG. The petitioning States also requested that the removal of
the 1-psi waiver should take effect for the 2023 high ozone season,
without further discussion. The States noted that rescinding the 1-psi
waiver for E10 would support year-round sales of E15.
B. Evaluation of Petitions for Removal of the 1-psi Waiver
The petitioning States provided technical documentation with their
petitions to demonstrate the reduction of emissions with the removal of
the 1-psi waiver as required by CAA section 211(h)(5) in the form of
MOVES modeling results.\24\ The results for each State were based on a
single day in July 2023, which is during the high ozone season.
Comparative results demonstrate the change in emissions from the
current 10.0 psi RVP standard to the alternative 9.0 psi RVP standard
as contemplated by the statute.\25\ A summary of the emissions impacts
of removing the 1-psi waiver for E10 for each State is provided in
Table V-1.\26\
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\24\ EPA developed MOVES to estimate air pollution emissions
from on-road and nonroad mobile sources.
\25\ Further information about the MOVES runs, including inputs
and nonroad data, is available in the docket for this action.
\26\ EPA's evaluation of the MOVES model input data and
assumptions, and results, can be found in the TSD.
[[Page 14764]]
Table V-1--Change of Mobile Source Emissions in 2023 MOVES3.01 Sources From 10.0 psi to 9.0 psi RVP
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Pollutant/precursor
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State VOCs CO NOX PM2.5 PM10 Benzene Toluene Ethylbenzene Xylene
(percent) (percent) (percent) (percent) (percent) (percent) (percent) (percent) (percent)
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Illinois........................................ -0.9 -0.19 -0.05 0.09 0.10 -0.2 -1.5 -0.9 -0.9
Iowa............................................ -1.8 -0.44 -0.09 0.14 0.15 -0.1 -3.3 -2.1 -2.1
Minnesota....................................... -2.7 -0.52 -0.09 0.15 0.16 -1.3 -4.2 -3.0 -3.1
Missouri........................................ -0.66 -0.41 -0.14 N/A N/A N/A N/A N/A N/A
Nebraska........................................ -2.6 -0.48 -0.09 0.17 0.18 -0.6 -4.4 -2.9 -3.0
Ohio............................................ -1.6 -0.45 -0.13 0.30 0.32 0.08 -2.8 -2.0 -2.0
South Dakota.................................... -2.9 -0.53 -0.06 0.08 0.08 -1.1 -4.8 -3.4 -3.3
Wisconsin....................................... -1.7 -0.44 -0.10 0.21 0.22 -0.3 -2.7 -1.8 -1.8
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As with the proposal, we have assessed the supporting documentation
provided by the petitioning States and find that the MOVES modeling
results submitted to EPA demonstrate a reduction in emissions of
multiple pollutants (e.g., VOCs, CO, and NOX) that
contribute to air pollution within each State upon removal of the 1-psi
waiver for E10, as required under CAA section 211(h)(5).\27\ We note
that the same documentation also shows an increase in emissions of
other pollutants such as PM. As discussed in Section III, we do not
interpret the statute as requiring reductions in all pollutants.
Documentation of air pollutant emissions reductions--particularly
VOCs--is sufficient. While some commenters suggested that EPA should
not focus on particular pollutants and ignore others, we instead
conclude that demonstration of a decrease in VOC emissions is
sufficient to satisfy the statutory requirements and justify granting
the petitions.
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\27\ Evaporative emissions from gasoline--specifically VOCs--are
precursors to the formation of tropospheric ozone and contribute to
the nation's ground-level ozone problem. NOX and CO can
also be ozone precursors. Exposure to ground level ozone can reduce
lung function (thereby aggravating asthma or other respiratory
conditions), increase susceptibility to respiratory infection, and
may contribute to premature death in people with heart and lung
disease.
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Therefore, based on the Governors' petitions and the supporting
documentation provided, we are removing the 1-psi waiver for E10 sold
in the petitioning States and, as required by CAA section 211(h)(5),
promulgating the 9.0 psi RVP standard contained in CAA section
211(h)(1) for the petitioning States. For the reasons discussed in
Section VIII., such a change will be effective on April 28, 2025, given
our determination of insufficient supply in 2023 and the renewal of
that extension for one year based on a determination of insufficient
supply in 2024.
V. Fuel System Impacts
In this section, we discuss the potential impacts of removing the
1-psi waiver in the petitioning States on the fuel production and
distribution system, including impacts that would potentially affect
gasoline refineries, pipelines, fuel terminals, retail outlets, and,
ultimately, consumers.\28\ Significant portions of this discussion were
provided in the proposal, and have now been updated based on additional
information provided from commenters and discussions with industry. We
received comment from ethanol interests suggesting that gasoline supply
concerns were overstated and manageable, even for 2023. We also
received comment and supporting analysis from refining and pipeline
stakeholders expressing concern over the gasoline supply and resulting
cost and price impacts in support of their requests to further delay
implementation of the 1-psi waiver removal, as well as additional
petitions requesting delay to 2025 or later. The discussion in this
section is not specific to a particular year or determination of
sufficiency of supply. Section VI provides our determination of
insufficient supply for 2024.
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\28\ Further detail on this topic is available in the TSD.
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In short, this action will require a lower-volatility conventional
gasoline before oxygenate blending (CBOB) \29\ to be produced by
refineries and distributed by pipelines and terminals, resulting in a
lower-volatility blended fuel ultimately sold at retail outlets in the
petitioning States.\30\
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\29\ Gasoline before oxygenate blending (BOB) means gasoline for
which a gasoline manufacturer has accounted for oxygenate (e.g.,
denatured fuel ethanol) added downstream. See 40 CFR 1090.90. BOB is
subject to all requirements and standards that apply to gasoline
under EPA's fuel quality regulations, and refineries typically
formulate their BOBs with the intent that it will be blended
downstream with ten percent ethanol content to maintain compliance
with EPA and industry specifications. Conventional BOB (CBOB) is BOB
produced or imported for areas outside of RFG areas otherwise known
as conventional areas.
\30\ Because the gasoline distribution system has been
configured to utilize 10 percent ethanol and optimized to utilize
the octane value of ethanol, we expect ethanol will be blended at
least at the same levels it is blended today. Thus, we anticipate
that E10 will continue to be the dominant form of gasoline supplied
to the region, but will now be blended into a lower-volatility
blendstock produced by refineries.
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We first note that volatility controls for gasoline differ across
various States and regions within States. Summer gasoline for use in
the continental U.S. must comply with either the Federal RVP standard
of 9.0 psi or the more stringent RVP standard of 7.8 psi, unless the
summer gasoline is either for use in an RFG covered area, is subject to
California's gasoline regulations, or EPA has waived preemption and
approved a State request to adopt a more stringent RVP standard into a
State Implementation Plan (SIP). Most of the U.S. utilizes
``conventional gasoline,'' for which the Federal RVP standard is 9.0
psi, with a 1.0 psi waiver for gasoline blended with 10 percent
ethanol. There are also areas that utilize conventional gasoline for
which the Federal RVP standard is 7.8 psi, and in such regions, the 1.0
psi waiver also applies for gasoline blended with 10 percent
ethanol.\31\ Several States have ``boutique'' low-RVP fuel programs or
SIP programs \32\ that allow the 1-psi waiver for gasoline blended with
10 percent ethanol.\33\ Some boutique fuel programs, or SIP-approved
fuel programs, however, disallow the 1-psi waiver for gasoline blended
with 10 percent ethanol and in those areas, such gasoline must meet the
applicable State RVP standard of either 9.0 psi, 7.8 psi, or 7.0
psi.\34\ Additionally, approximately 30 percent of the
[[Page 14765]]
gasoline sold in the U.S. is RFG, which must meet a 7.4 psi RVP
standard.\35\ The 1-psi waiver does not apply to RFG, and thus E10 that
is sold in RFG areas must meet the 7.4 psi RVP standard. This action
removes the 1-psi waiver only for conventional gasoline that is sold in
the petitioning States and does not apply to gasoline sold in RFG or
SIP program areas. However, due to the interconnected nature of
gasoline distribution, and the changes required for a new fuel type,
impacts on gasoline quality and supply are expected to extend beyond
the petitioning States, as further described below.
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\31\ 40 CFR 1090.215(a)(2) and (b)(1).
\32\ Of particular note for this action, seven counties in
southeast Michigan that border Ohio have an RVP standard of 7.0 psi
in the summer, with a 1-psi waiver for E10.
\33\ See https://www.epa.gov/gasoline-standards/state-fuels.
\34\ 40 CFR 1090.215(b)(3). See also https://www.epa.gov/gasoline-standards/state-fuels.
\35\ 40 CFR 1090.215(a)(3). The Chicago and St. Louis areas are
such RFG areas.
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Before discussing the various steps required to produce and
distribute the new lower-volatility gasoline,\36\ it is useful to
describe the gasoline fuel supply system that is interdependent on its
different parts to bring a fuel to market. The first step is fuel
production, in which refineries refine crude oil using various
processing units and then blend the various blendstocks together in
finished gasoline tanks. The next step is fuel distribution, in which
the gasoline in these tanks is transported through the fuel
distribution system to the final market, mostly by pipelines.\37\ These
pipelines transport a wide variety of fuels and other products (e.g.,
gasoline, diesel fuel, jet fuel, heating oil, petroleum blendstocks,
etc.), including an array of different grades and types of gasoline
(e.g., conventional gasoline, RFG, boutique fuels, and regular and
premium grades of each). Each grade and type of gasoline must be
segregated from other grades and types to preserve the physical
properties of each product. When a pipeline reaches a juncture where it
branches out to two different pipelines serving different gasoline
markets, a set of short-term storage tanks (``breakout tanks'') are
necessary to offload the fuel from the upstream pipeline to enable
scheduling the various fuels through the two downstream pipelines.
Pipeline systems often have many branches from upstream to downstream
pipelines to enable moving the fuel to the downstream markets, and
breakout tanks serve an important function in the fuel distribution
system. For example, there are approximately 110 breakout tank
locations within the petitioning States alone. Pipeline transportation
of gasoline to market also involves downstream product terminals and
bulk plants, which accumulate gasoline from pipelines and other bulk
distribution systems and distribute the gasoline to retail outlets via
tank trucks loaded at terminal racks. Each rack can load a premium
grade and regular grade gasoline, but some racks can load additional
grades and types of gasoline.
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\36\ We refer to this new lower-volatility gasoline as ``low-RVP
gasoline'' throughout this preamble.
\37\ If all gasoline in the country was required to shift to
low-RVP gasoline, the impacts would be limited to just refineries.
The rest of the fuel distribution system would merely distribute the
replacement low-RVP gasoline instead. However, since this action
only applies to the eight petitioning states, a new additional type
of gasoline is required for the distribution system to also handle.
---------------------------------------------------------------------------
To minimize other impacts and enable production and distribution of
low-RVP gasoline, refiners and fuel distributors will need time to make
capital investments to optimize the fuel production and distribution
system to replace the gasoline solely in the petitioning States with
low-RVP gasoline. Without capital investments, which can take two years
or more to complete, the limited availability of additional storage
tanks for the new low-RVP gasoline grades--particularly at pipeline
breakout tank locations, but also at refineries and downstream
terminals--may result in low-RVP gasoline being sold within both the
petitioning States and the immediately adjacent non-petitioning States.
This would increase the volume of low-RVP gasoline needed to be
produced and distributed to satisfy demand. Over time, we expect
refiners and fuel distributors to invest in and optimize the fuel
production and distribution system to more efficiently target low-RVP
gasoline solely to the petitioning States.
A. Production
Refiners will need to make modifications to their refinery
operations to supply low-RVP gasoline. There are 11 petroleum
refineries located within the petitioning States; that number increases
to 40 when refineries located in States that border the petitioning
States are included. Further, additional refineries outside of the
immediate region may also modify their operations to provide low-RVP
gasoline, as some of the gasoline supply for the petitioning States
also historically comes from refineries located further west, east, and
south, such as refineries in the Gulf Coast.\38\ For example, gasoline
sold in Iowa is often produced by refineries located in Texas and
distributed via pipeline. Therefore, this action could result in
changes in refinery operations both within and outside of the
petitioning States and extend to refineries in the Gulf Coast. Prior to
the implementation of this rule, most refineries producing gasoline for
use in the petitioning States produce a CBOB with an RVP of 9.0 psi
during the summer season, with the 1-psi waiver allowing the final
gasoline-ethanol blend to meet an RVP standard of 10.0 psi when 10
percent ethanol is added to the CBOB downstream. With the removal of
the 1-psi waiver and to enable the final gasoline-ethanol blend to
comply with the resulting 9.0 psi RVP standard, refineries that choose
to continue producing CBOB for use within the petitioning States will
need to make changes to their operations to reduce the volatility of
the CBOB distributed to these States to ~8.0 psi.\39\ For most
refineries operating within and near the petitioning States, removal of
the 1-psi waiver will likely result in the refinery choosing to only
produce low-RVP CBOB. Refineries operating outside the petitioning
States will choose to either produce only low-RVP CBOB for distribution
to the petitioning and adjacent States, continue to produce only the
current ~9.0 psi RVP CBOB for distribution to areas outside the
petitioning States, or both. The limited availability of existing
blending/storage tanks at a refinery to handle both gasoline types may
prevent the refinery from producing both blendstocks without further
capital investment.\40\ One commenter submitted a survey with data from
refiners in and around petitioning States, which provided information
regarding what refiners may have to do to meet the 9.0 psi RVP standard
and is further discussed below.\41\ Nevertheless, at this time, we
cannot predict which of the refineries that currently produce fuel for
use in the petitioning States will choose to produce low-RVP CBOB for
use in the petitioning States and potentially the
[[Page 14766]]
surrounding States. Unlike a nationwide change to the RVP of CBOB, the
regional nature of this action means that not all refineries must
adjust their refining processes to reduce the RVP of their CBOB. While
it is highly likely that refineries that supply gasoline only to the
petitioning States will adjust their refinery processes to reduce the
RVP of their CBOB, these refineries could choose to avoid the necessary
investments and provide 9.0 psi RVP CBOB to non-petitioning States
instead if they are able to reach those markets.
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\38\ According to the Energy Information Administration (EIA),
64 million barrels of gasoline were shipped from Petroleum
Administration for Defense District (PADD) 3 (Gulf Coast) into PADD
2 (Midwest), which corresponds to about 8 percent of the volume of
gasoline consumed in PADD 2. EIA, ``Petroleum & Other Liquids;
Movements by Pipeline, Tanker, Barge and Rail between PAD Districts;
PADD 3 to PADD 2,'' https://www.eia.gov/dnav/pet/pet_move_ptb_dc_R20-R30_mbbl_m.htm.
\39\ We refer to this new lower-volatility CBOB as ``low-RVP
CBOB'' throughout this preamble.
\40\ Certain areas within the petitioning states and other
states already have more stringent RVP standards during the summer.
Gasoline that refineries produce for these areas would be unaffected
by this final rule. Refineries that produce 6.8 psi RVP CBOB for 7.8
psi RVP areas, or 6.4 psi RVP RBOB for RFG areas, could expand
production of these gasoline types for use in the petitioning states
rather than create a new gasoline type at 8.0 psi RVP. This may
reduce distribution cost complexity, but in exchange increase
refinery production cost and lower gasoline production volume.
\41\ Comment submitted by the American Fuel and Petrochemical
Manufacturers (AFPM), Docket Item No. EPA-HQ-OAR-2022-0513-0077.
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Throughout the year, refineries must adjust the volatility of their
gasoline--typically lowering the volatility of the gasoline in the
summer and increasing the volatility in the winter by adjusting the
quantity of light hydrocarbons in their gasoline. Refineries typically
control gasoline volatility by adjusting the amount of butane in
gasoline, but sometimes they need to also modify the amount of pentane
or natural gas liquids (NGLs). Refineries providing fuel to the
petitioning States will have to modify their summer gasoline production
operations and potentially add capital equipment to accommodate the 9.0
psi RVP standard. A refinery's ability to adapt to the 9.0 psi RVP
standard and the time that it takes to do so depends on the refinery's
structure, operations, and the mix of crude oil types that it
processes.\42\
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\42\ Further discussion of the changes we expect from refineries
associated with removal of the 1-psi waiver is available in the TSD.
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In addition to contributing to gasoline's volatility, butane also
contributes to gasoline's octane and volume. Thus, when removing
butane, refineries must also make other changes to replace the lost
octane to keep the gasoline consistent and in compliance with EPA
regulations and industry specifications. Refineries could produce more
alkylate or reformate, which are two high octane gasoline blendstocks,
to make up the lost octane. We estimate that the amount of butane that
would have to be removed to produce a gasoline 1-psi lower in RVP
amounts to about two volume percent of the volume of gasoline. However,
comments from the refining industry described how at least some
refineries would need to not only remove butane, but some less-volatile
hydrocarbons as well (e.g., light straight run naphtha (LSR) or NGLs).
Since LSR and NGLs are less volatile than butane, refineries would need
to remove significantly more of those hydrocarbons to realize the same
1-psi reduction in RVP, perhaps up to 10 volume percent. Such a change
would have a smaller reduction in octane, however. Removing butane and
these other light hydrocarbons from the summer gasoline sold in the
petitioning States would reduce the supply of gasoline in those States.
Regardless of how a refinery is modified to reduce the RVP of its
gasoline, it will result in additional output of the removed butane or
other light hydrocarbons. If excess onsite butane storage capacity is
available, the refinery has the option of saving excess butane on-site
for use in winter gasoline production, which would minimize the cost
impact of producing low-RVP CBOB. However, if excess butane storage is
not available, the refinery would then need to store it offsite (e.g.,
in caverns), sell it, or export it. This may require additional butane
railcars and refinery upgrades for handling railcars to transport the
butane. Refineries may also utilize some portion of the butane as a
feedstock to their alkylation unit. In the near term, the large influx
of excess butane may exceed the existing storage capacity, transport
capacity, amount desired in the markets, or alkylation unit capacity.
Without an outlet for the excess butane, this could then limit the
refinery's ability to produce low-RVP CBOB, further reducing the supply
of low-RVP gasoline. If a refinery is removing LSR or NGLs from its
gasoline, these gasoline blendstocks could be sold to another refinery
that could blend them into its gasoline, but the purchasing refinery
would then need to remove butane to compensate for the RVP impact of
the LSR or NGLs. This gasoline blendstock switching would help to
offset the volume reductions associated with producing low-RVP CBOB.
Given the high demand for gasoline in the summer months, refineries
often begin producing summer gasoline for storage well ahead of the
upcoming high ozone season. This process can begin as early as December
of the year prior to the applicable high ozone season, and thus storage
of a differing volatility of fuel could impact the refinery's ability
to utilize the fuel the next summer without further modification.
B. Distribution
As discussed above, removal of the 1-psi waiver will require
refineries that distribute gasoline to the petitioning States to
produce low-RVP CBOB. There are three primary groups within the
distribution chain that will be impacted: refineries, pipelines (with
their breakout terminals), and downstream product terminals.
1. Refinery Distribution
Most refineries have an onsite terminal with numerous product
storage tanks wherein they accumulate and store the range of products
that they produce prior to placing the products into the distribution
system. Once a refinery accumulates a sufficient volume of a gasoline
type and confirms that it meets the applicable gasoline specifications,
the refinery then schedules the shipment of that batch of gasoline to
downstream markets. Shipment can occur via an onsite product terminal
analogous to that discussed in Section V.B.3 where trucks load product
and deliver to retail outlets. However, most gasoline produced by
refineries is loaded onto product pipelines for delivery to downstream
product terminals. In some cases, refineries also distribute product by
rail or barge. For those refineries that distribute most or all of
their gasoline to the petitioning States, removal of the 1-psi waiver
will have little impact on their distribution operations. They can
switch over their existing product tanks to hold only low-RVP CBOB.
Instead of transitioning from winter CBOB RVP levels (up to 15 psi) to
a 9.0 psi RVP CBOB in the summer, they would instead transition to low-
RVP CBOB. However, refineries that produce gasoline for both
petitioning and non-petitioning States will likely need additional
tanks, pipes, manifolds, and control systems to store the additional
grades of gasoline. The time needed to plan, design, permit, and
construct additional tankage is typically on the order of two or more
years. Until this can be accomplished, a refinery that lacks the
additional tankage will likely need to shift all its production to low-
RVP CBOB. However, this can be avoided if unused systems already exist
or other products are discontinued.\43\ The market may go through a
``sorting out'' process, wherein some refineries shift their historic
markets, with some changing to producing only low-RVP CBOB and others
continuing to produce only 9.0 psi RVP CBOB. This could result in some
low-RVP CBOB flowing in from outside the petitioning States (e.g., from
Gulf Coast refineries). Due to tankage and logistical limitations, some
refineries serving both markets may initially shift all their
production to low-RVP CBOB. This would result in low-RVP CBOB being
distributed to the surrounding States, which would ease gasoline supply
availability concerns,
[[Page 14767]]
but at the same time add to the overall reduction of gasoline supply
due to butane and other light hydrocarbon removal. Terminals servicing
low-RVP CBOB outside the petitioning States that have butane blending
facilities could purchase some of the excess butane being removed by
refineries and inject it into their CBOB to bring the fuel up to 9.0
psi RVP since the gasoline in their area would not require the low-RVP
fuel.
---------------------------------------------------------------------------
\43\ Alternatively, some refineries may shift all premium grade
fuel to low-RVP CBOB, while producing both 9.0 psi and low-RVP CBOBs
for regular grade fuel.
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For those refineries that have excess tankage or invest in new
tankage to allow the production of both 9.0 psi and low-RVP CBOB, they
would also need to adjust their operations and schedules for loading
gasoline blendstock onto pipelines, barges, or rail to split their
production into separate product streams. These logistical changes
would initially take some period of time in order to occur smoothly and
safely, but should streamline over time.
2. Pipelines and Pipeline Breakout Terminals
Most fuel in the U.S. flows from refineries to consumer markets via
pipeline systems. As described in the TSD, there are several pipeline
systems serving the petitioning States, the vast majority of which
serve both petitioning and non-petitioning States. Consequently, the
addition of the low-RVP CBOB in the petitioning States will require
significant changes in the operations of the pipeline systems. What is
currently one large conventional fuel market distributing primarily 9.0
psi RVP CBOB will also need to distribute the new low-RVP CBOB. There
will thus be a period where the pipeline systems go through a planning
and optimization process to assess what gasoline type must be supplied
to the pipeline to comply with the new fuel requirement. If a pipeline
primarily serving the petitioning States is only equipped with breakout
tanks compatible with a single gasoline type, the pipeline company will
likely mandate that refiners solely provide that gasoline type.
Decisions from refineries on whether they will supply low-RVP CBOB, and
at what volumes, will be necessary to inform the planning and
optimization process by pipeline systems. All of this can have impacts
on gasoline supply not only to the petitioning States, but also to the
surrounding States in the short term. Having the wrong fuel types in
the wrong volume can result in an inability for the pipeline to move
fuel in and out of tankage as needed, which, in turn, can result in
significant supply disruption not only for the gasoline type in
question, but also for all the fuels shipped on the pipeline. For the
longer term, due to the market splitting into different types, some
areas in the petitioning States may lose access to available markets of
supply, which may then lead to more frequent shortfalls in supply
during times of disruption (e.g., refinery fire, pipeline outage,
hurricane, etc.).
Some pipeline companies operate a fungible distribution system.
This allows them to collect a standard type of gasoline from refineries
into their system, ``transport'' the barrels virtually, and draw out
identical barrels at their destination. The barrels delivered are not
actually the purchased barrels from the refinery, but rather the same
product from a different refinery meeting the same product
specifications. An additional type of gasoline would disrupt their
ability to function as efficiently using the fungible system. This
increases the complexity associated with ensuring products can be
distributed to locations in the timeframe needed to ensure supply to
the market.
The most significant impact on pipeline operations caused by the
removal of the 1-psi waiver, however, will be on pipeline breakout
tankage operations. Breakout tankage is required at junctions where
pipelines connect with other pipelines that have differing schedules
and flow rates. Thus, the pipelines typically need tankage to store
every grade and type of product distributed on the pipeline, with the
size and configuration of the tankage matched to the product and
pipeline batch sizes. If new regular and premium grades of low-RVP CBOB
need to be shipped on the pipeline, then it may require the addition of
new tankage at these breakout tank facilities. The planning,
permitting, and construction of such additional tankage would require
two or more years and is likely to be an issue at many breakout tankage
facilities both inside and outside the petitioning States. Until this
additional breakout tankage can be brought into service, an impacted
pipeline serving the petitioning States may be restricted to solely
distributing either 9.0 psi or low-RVP CBOB, limiting gasoline supply
to either the petitioning States or the surrounding States, and in turn
restricting what the refineries shipping on the pipeline are able to
produce if the pipeline restrictions do not allow for the distribution
of a particular type of gasoline. Some pipelines may opt to carry one
fuel type and some the other, limiting the product offerings at the
various downstream product terminals. As with the refineries, it may be
that due to tankage and logistical limitations, pipelines currently
serving both petitioning and non-petitioning States will have to
initially shift all the gasoline they carry to low-RVP CBOB, which is
fungible in both markets. This will result in low-RVP CBOB being
supplied in the surrounding States and additional reduction in supply
of gasoline due to the necessary removal of butane and other light
hydrocarbons. Pipelines would have the option to blend in butane during
gasoline transport to the States with the 1-psi waiver that are located
at the end of the pipeline systems (e.g., North Dakota and Michigan).
This would provide a market for some of the excess butane from
refineries producing low-RVP CBOB and could reduce consumer costs in
the border States by blending up to 9.0 psi RVP CBOB. It could also
allow more low-RVP CBOB to be produced if there are constraints in the
markets for butane. However, like refineries, many pipeline and
terminal facilities do not currently have the existing infrastructure
to utilize butane blending. Additional tankage and equipment may be
needed to maximize the potential of this opportunity.
3. Product Terminals
The potential impact of the removal of the 1-psi waiver on product
terminals varies depending on whether the terminals provide gasoline
only to the petitioning States, or to non-petitioning States as well.
Those terminals that only provide gasoline to the petitioning States
will be little impacted, as they will simply take delivery of
replacement grades of low-RVP CBOB beginning in the spring leading into
the summer season. They will not have to contend with adding additional
fuel grades and types and the tankage and logistics associated with
them. This will most likely not be the case for terminals that serve
areas both within and outside the petitioning States. If such terminals
do not have sufficient onsite tankage capacity to handle the additional
regular and premium grades of low-RVP CBOB, then they will need to
either add the tankage or choose to serve one market or the other. The
decision to serve a particular market or fuel type may also be dictated
by a fuel marketer on the retail side. Both options could have gasoline
supply, cost, and price impacts both within the petitioning States and
in the surrounding areas the terminals serve. Approximately 75 such
terminals are located close to the borders (i.e., 30 miles) between
petitioning States and
[[Page 14768]]
non-petitioning States.\44\ These terminals are more likely to provide
gasoline to both petitioning and non-petitioning States and will need
to change their gasoline distribution patterns if they lack extra
tankage to handle the additional low-RVP CBOB grades. Since terminals
can serve gasoline markets up to 200 miles away, the number of
terminals impacted could be significantly greater. If limitations in
the fuel distribution system cause low-RVP CBOB to be sold in a
significant portion of the surrounding States to improve fungibility of
gasoline near the petitioning States, the potential impact on terminals
will be reduced.
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\44\ EIA, U.S. Energy Atlas--Oil and Natural Gas Maps, https://www.eia.gov/maps.
---------------------------------------------------------------------------
Regardless of whether a terminal serves only the petitioning
States, or also non-petitioning States, all terminals will be impacted
to some degree by a somewhat more challenging transition in the spring
from winter to summer fuel due to the removal of the 1-psi waiver,
particularly in the first year. While this transition occurs every year
as the terminals blend down the volatility of the CBOB they have in
storage from the higher RVP of winter CBOB to the lower RVP of summer
CBOB, the change of having to blend down an additional 1.0 psi to
accommodate low-RVP CBOB instead of 9.0 psi RVP CBOB will require some
additional time and incur additional cost. In order to achieve the
volatility of low-RVP CBOB, pipelines and terminals will likely need to
blend down their winter CBOB with a summer CBOB that has an RVP as low
as 6.0 psi during this transition period. Additionally, terminals will
likely take steps to ensure their tanks are drained as low as possible
prior to receiving a low-RVP CBOB to ensure the finished gasoline will
comply with the 9.0 psi RVP standard, which could result in additional
delays before the low-RVP CBOB begins moving to markets. This will
likely occur more frequently at terminals located within and near the
border of the petitioning States.
4. Tank Trucks
Moving gasoline to market also involves tank trucks that deliver
the gasoline to retail outlets. For terminals located within the
petitioning States, their operations should be little impacted by the
removal of the 1-psi waiver; they will simply pick up a different type
of gasoline from the product terminal than they did before and can
transport it to market, even outside the petitioning States if the
terminal normally covers the area. However, depending on the changes in
product offering at the terminals, there may still be considerable
stress on their operations. If some refineries, pipelines, or terminals
limit their product offering to either 9.0 psi or low-RVP CBOB,
especially in the near term, then the tank trucks would need to shift
their operations accordingly. In some cases where there is a loss of
fuel fungibility, this is expected to increase the distances traveled,
which may in turn require the purchase of additional tank trucks and
hiring of additional drivers. As with the rest of the fuel distribution
system, this can all be accomplished, but will take some time for the
market to respond and optimize around the new norms.
C. Retail Operations
The removal of the 1-psi waiver and resulting transition from 10.0
psi RVP gasoline to 9.0 psi RVP gasoline received from the terminal
should be minor for retail outlets--they will simply take delivery of
the lower-volatility gasoline from the terminal. The most noticeable
effects will be seen at retail outlets near the borders of States
maintaining the 1-psi waiver, as the cost of 9.0 psi RVP gasoline
within the petitioning States is likely to be higher than that of 10.0
psi RVP gasoline across the border in non-petitioning States. Retailers
within the petitioning States may have to charge higher prices to
recoup this cost, which could result in consumers preferentially
choosing to refill at stations across the border when possible.\45\
Retail operations located near State lines on the border of petitioning
and non-petitioning States may have issues scheduling gasoline
shipments to their retail outlets if tank trucks are shipping their
gasoline from terminals located further away and if there is an initial
shortage of tank truck operators, particularly at the beginning of the
transition to the new 9.0 psi RVP gasoline. As with the rest of the
distribution system, this can all be accomplished, but will take some
time for the market to respond and optimize around the new norms.
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\45\ This phenomenon is observed today in SIP and RFG areas.
---------------------------------------------------------------------------
VI. Implementation and Effective Date
A. Statutory Provisions
Under CAA section 211(h)(5)(C), the regulations removing the 1-psi
waiver shall take effect on the later of: (1) The first day of the
first high ozone season for the area that begins after the date of
receipt of the notification; or (2) 1 year after the date of receipt of
the notification. The high ozone season is defined in EPA's regulations
as ``June 1 through September 15 for retailers and [wholesale purchaser
consumers (WPCs)], and May 1 through September 15 for all other
persons,'' which includes gasoline distribution terminals.\46\
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\46\ 40 CFR 1090.80. We note that given the current definition
of ``high ozone season,'' the later date will always be one year
after receipt of the request from a Governor.
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In applying this provision for the petition dated April 28, 2022,
the later date is April 28, 2023. Therefore, the earliest date on which
the removal of the 1-psi waiver for Illinois, Iowa, Nebraska,
Minnesota, South Dakota, and Wisconsin could have been effective was
April 28, 2023. This date would have been in advance of the high ozone
season beginning May 1, 2023. For the petition from Ohio, dated June
10, 2022, the later date is June 10, 2023. This would have placed the
effective date within the 2023 high ozone season (i.e., 10 days after
the beginning of the high ozone season for retailers and WPCs, and 41
days after the beginning of the high ozone season for all other
parties). Finally, for the petition from Missouri, dated December 21,
2022, the later date is December 21, 2023.\47\ This would have placed
the effective date after the 2023 high ozone season.
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\47\ We recognize that the Missouri petition requested that the
removal take effect for the 2023 high ozone season. However, such an
effective date was not permissible under CAA section 211(h)(5)(C).
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Further, under CAA section 211(h)(5)(C), the effective date can be
extended if EPA, on its own motion or on petition from any person,
after consultation with the Secretary of Energy, determines there would
be an insufficient supply of gasoline in a State that has requested the
removal of the 1-psi waiver for E10.\48\ Section 211(h)(5)(C) further
provides that the effective date can be extended for not more than one
year, and that EPA may renew the extension for two additional periods,
each of which shall not exceed one year.
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\48\ CAA section 211(h)(5)(C)(ii).
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As described above, EPA is allowed to extend the effective date of
the removal of the 1-psi waiver upon a finding of ``insufficient supply
of gasoline in the [petitioning] state'' that would result from ``the
promulgation of the regulations [to remove the 1-psi waiver].'' \49\
``Insufficient supply of gasoline'' is not defined in the statute, and
thus EPA is interpreting and applying the phrase in a manner that is
consistent with the structure of the statute, historical application of
similar
[[Page 14769]]
or related provisions, and congressional intent. We interpret
``insufficient supply of gasoline'' to require a demonstration that
gasoline supply disruptions would result from removal of the 1-psi
waiver, such that the necessary quantities of gasoline may not be
available in the States at the time they are required. It is
particularly appropriate in this case to consider the possibility of
supply disruptions because this action calls for a different type of
gasoline to be physically produced and transported to and within the
petitioning States. CAA section 211(h)(5) also indicates that our
analysis of ``insufficient supply'' should be ``in the State''
petitioning for the removal of the 1-psi waiver. That is, if there was
insufficient supply only in a single State, we could extend the
effective date for that State only. This contrasts with CAA section
211(c)(4)(C)(iii)(I), which calls for consideration of supply
constraints in ``the smallest geographic area.'' Therefore, our
analysis properly considers any state-specific factors, and examines
the supply in the State.
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\49\ CAA section 211(h)(5)(C).
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In considering the likelihood of supply disruptions, we look to the
entire production and distribution chain, from the refineries where
gasoline is produced, through distribution systems such as pipelines
and trucking, and ultimately to the retail outlets. This reading is
also similar to EPA's interpretation of other provisions in CAA section
211 that call for consideration of constraints on fuel supply when EPA
is acting on petitions within the fuels program. For instance, CAA
section 211(k)(6)(A)(ii) allows EPA, after consultation with the
Department of Energy, to extend the effective date for a State that has
petitioned to opt into the RFG program for a period that is up to one
year from the date of receipt of the petition upon a finding of
insufficient domestic capacity to produce RFG. A related provision in
CAA section 211(k)(6)(B)(iii) allows EPA to extend the effective date
for areas within the ozone transport region established under CAA
section 184 that opt into RFG, upon a finding of insufficient capacity
to supply RFG. Like the phrase ``insufficient supply of gasoline'' in
CAA section 211(h)(5)(C), the statute does not define either
``insufficient domestic capacity'' or ``insufficient capacity to supply
RFG.'' But in acting on petitions to opt into the RFG program, EPA has
explained that setting the effective date allows EPA to consider any
sudden and unexpected increases in the demand for RFG on the local
supply and distribution system that is caused by an opt-in.\50\
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\50\ 62 FR 30261, 30263 (June 3, 1997) (``Section 211(k)(6)(A)
of the Act gives the Administrator discretion to `establish an
effective date * * * as he deems appropriate* * *.' EPA interprets
this provision to mean that it has broad discretion to consider any
factors reasonably relevant to the timing of the effective date.
This would include factors that affect industry and the potential
opt-in area. The factors that affect industry could include
productive capacity and capability, other markets for RFG, oxygenate
supply, cost, lead time, supply logistics for the area, potential
price spikes, and potential disruption to business.'')
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EPA's reading of ``adequate supply'' in CAA section
211(c)(4)(C)(ii) comports with our interpretation of CAA section
211(h)(5)(C) given that Congress intended for EPA to act in certain
unique emergency circumstances to relieve supply disruptions within the
``motor fuel distribution system.'' \51\ And while ``motor fuel
distribution system'' is not defined in the statute, EPA's historical
practice in granting waivers under CAA section 211(c)(4)(C)(ii) has
been to consider all stages of the gasoline production and distribution
system within States that are experiencing emergency circumstances.
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\51\ CAA section 211(c)(4)(C)(iii)(V).
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In contrast, the phrase ``insufficient supply of gasoline'' differs
from other sub-provisions of CAA section 211 allowing for waivers of
applicable requirements as well as implementation delays that use
language such as ``inadequate domestic supply.'' \52\ The D.C. Circuit
has provided guidance on the meaning of ``inadequate domestic supply''
in CAA section 211(o)(7)(A)(ii), finding that EPA may properly consider
``supply side factors--such as production and import capacity,'' but
not downstream effects.\53\ The court, in viewing the statutory scheme
of the RFS program, further specified that the supply of renewable fuel
to refiners, blenders, and importers properly considers the factors
necessary to get renewable fuel to refiners, blenders, and importers,
but not to market actors ``downstream from refiners, importers, and
blenders.'' We find that the analysis under CAA section 211(h)(5)
extends to include market actors downstream from refiners, importers,
and blenders, as the gasoline distribution system is a key component to
the availability of gasoline in the State.\54\ The analysis properly
considers production factors, as well as the distribution of fuel from
the refinery, through the distribution chain (including pipelines and
terminals) to the ultimate endpoint of the gasoline distribution
chain--the retail outlet. Further, CAA section 211(h)(5) explicitly
contemplates the ``supply of gasoline in the State.''
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\52\ CAA sections 211(m)(3)(C) and (o)(7)(A)(ii).
\53\ Americans for Clean Energy v. EPA, 864 F.3d 691, 710
(2017).
\54\ CAA section 211(h)(5)(C) explicitly contemplates the
``supply of gasoline in the State.''
---------------------------------------------------------------------------
Finally, we note that consideration of the effective date for this
action properly considers supply to the ultimate consumer given the
statutory language ``in the State.'' Therefore, our analysis of
``insufficient supply of gasoline'' properly considers all stages of
the gasoline production and distribution system, from the refinery to
the retail outlet.
B. Finding of Insufficient Supply for 2024 and Renewal of Extension of
Effective Date
CAA section 211(h)(5)(C)(ii)(I) requires a determination of
insufficient supply of gasoline in order to extend the effective date
of the removal of the 1-psi waiver. We determined that a 2023
implementation date would result in insufficient supply of gasoline and
proposed an effective date of April 28, 2024, for removal of the 1-psi
waiver in all petitioning States.\55\ We also sought comment on
renewing the extension of the effective date for removal of the 1-psi
waiver for an additional year (i.e., until the summer of 2025).\56\ We
received comments for and against the proposed effective date.
Commenters against the proposed dates argued that we could still
implement the rule for the 2023 summer season, despite the mere two
weeks between the end of the comment period and the beginning of the
2023 summer season for terminals and refiners. Commenters in support of
the proposed delay argued that a 2023 effective date would be either
``impractical'' or ``impossible.''
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\55\ At proposal, we further explained that the effective date
for Ohio, would have been within the 2023 high ozone season (i.e.,
10 days after the beginning of the high ozone season for retailers
and WPCs, and 41 days after the beginning of the high ozone season
for all other parties), while the effective date for Missouri would
have been December 21, 2023, or after the 2023 high ozone season. 88
FR 13762 (March 6, 2023).
\56\ 88 FR 13767 (March 6, 2023).
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Further, in response to and after the proposal, we received
petitions from numerous stakeholders requesting a delay of the proposed
effective date until either 2025 or 2026. These stakeholders posited
that the extension of the effective date would be supported by the
Administrator's finding of insufficient supply of gasoline pursuant to
CAA section 211(h)(5)(C)(ii)(I).\57\
[[Page 14770]]
After consideration of comments and extension petitions, EPA is acting
on its own motion to renew the extension of the proposed effective date
for an additional year from April 28, 2024, to April 28, 2025. In sum,
the circumstances that justified a finding of insufficient supply of
gasoline and extension of the effective date for 2023 have not
attenuated. Additionally, we have consulted with the Department of
Energy, consistent with the CAA section 211(h)(5)(C)(ii)(I). We are not
acting on petitions that requested a 2026 effective date, and these
petitions remain pending. In this section we discuss our finding that
there would be an insufficient supply of gasoline in 2024.
---------------------------------------------------------------------------
\57\ Petition from Magellan (September 16, 2022); Petition from
API (September 23, 2022); Petition from Flint Hills Resources
(September 29, 2022); Petition from Phillips 66 (September 29,
2022); Petition from AFPM and other parties (October 14, 2022);
Petition from HF Sinclair (October 17, 2022); Petition from Magellan
(August 19, 2023); Petition from Kevin Stitt, Governor of Oklahoma
(August 25, 2023); Petition from API (September 29, 2023); Petition
from AFPM (September 29, 2023); Petition from Sarah Huckabee
Sanders, Governor of Arkansas (October 9, 2023); Petition from
Superior Refining (October 13, 2023); Petition from Phillips 66
(October 18, 2023); Petition from CountryMark (October 25, 2023);
Petition from Yesway (November 1, 2023); Petition from HF Sinclair
(November 15, 2023).
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At proposal, we provided the rationale for our determination of
insufficient supply for 2023; we assessed the following three supply
constraints: (1) Low gasoline inventories; (2) The limited time
available for coordination between various parties to make the
necessary physical changes to the gasoline production and distribution
infrastructure; and (3) The physical loss of supply necessary to
produce low-RVP CBOB. We determined that these constraints would likely
have led to supply disruptions in the petitioning States in 2023.\58\
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\58\ Our detailed finding of insufficient supply for 2023 can be
found at 88 FR 13767 (March 6, 2023).
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We have now assessed gasoline supply impacts associated with an
effective date in 2024 and updated our analyses of these supply
constraints.\59\ As discussed further in detail below and in the TSD,
our updated analyses found: (1) Continued low gasoline inventories in
PADD 2; (2) The limited time available after the promulgation of this
action for coordination between various parties to make the necessary
physical changes to the gasoline production and distribution
infrastructure; and (3) Greater reduction in supply as a result of the
removal of the 1-psi waiver than estimated at the time of the proposal.
We also considered the following: (1) The lack of sufficient time to
make the capital investments and physical changes to refineries and the
fuel distribution system; and (2) Less flexibility within the fuel
distribution system than had been anticipated to adequately mitigate
the supply reduction until such time as the capital and physical
changes can be made. We are therefore renewing the extension of the
delay of the effective date for an additional year to April 28, 2025.
---------------------------------------------------------------------------
\59\ EPA also received several petitions for further delay
beyond 2024. See Petition from Magellan (August 25, 2023); Petition
from Kevin Stitt, Governor of Oklahoma (August 25, 2023); Petition
from API (September 29, 2023); Petition from AFPM (September 29,
2023); Petition from Sarah Huckabee Sanders, Governor of Arkansas
(October 9, 2023); Petition from Superior Refining (October 13,
2023); Petition from Phillips 66 (October 18, 2023); Petition from
CountryMark (October 25, 2023); Petition from Yesway (November 1,
2023); Petition from HF Sinclair (November 15, 2023).
---------------------------------------------------------------------------
Since proposal, we have conducted an updated analysis to quantify
the reduction in gasoline supply that would result from the removal of
the 1-psi waiver. At proposal, we estimated the reduction in supply as
20 thousand barrels per day (kbpd) based on the removal of light
hydrocarbons--mostly butane--to reduce the volatility of CBOB.\60\ In
response to our proposal, AFPM commissioned a study of supply
reductions that quantified the reduction in gasoline supply at 88-120
kbpd.\61\ We also conducted a series of meetings with refiners
regarding the supply impacts associated with the removal of the 1-psi
waiver in the petitioning States.\62\ As further described in the TSD,
based on our discussions with refiners and our review of the comments,
we now estimate that gasoline production by refineries supplying
gasoline to the petitioning States would likely decrease by 30-80 kbpd
as a result of the transition to low-RVP CBOB. Our estimate increased
from the proposal primarily because a significant number of refineries
that choose to produce low-RVP CBOB will need to reduce other less-
volatile hydrocarbons (e.g., NGLs), which will have a larger impact on
gasoline supply. On average, refineries producing low-RVP CBOB are
estimated to produce 3-4 percent less gasoline compared to producing
9.0 psi RVP CBOB, particularly when removal of the 1-psi waiver is
first implemented. We acknowledge that the possibility of drawing down
gasoline inventories, increasing gasoline supply from other regions
(e.g., Gulf Coast), and reblending some higher-volatility gasoline
blendstocks at terminals in non-petitioning States could mitigate the
supply reduction to some extent. However, we believe that these
mitigating actions would fall far short of offsetting the projected
supply reductions for the 2024 summer season.
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\60\ ``Technical Support Document for the Proposed Removal of
the 1-psi Waiver,'' available in the docket for this action.
\61\ Baker and O'Brien, ``Midwest States Gasoline RVP--1 psi
Waiver Study, Report for American Fuel and Petrochemical
Manufacturers,'' February 24, 2023. Submitted as part of comments
from AFPM, Docket Item No. EPA-HQ-OAR-2022-0513-0077.
\62\ Memorandum to the Docket: Meeting Log for Requests from
States to Remove the Gasoline Volatility Waiver.
---------------------------------------------------------------------------
Further, at proposal we noted that while the gasoline inventories
in PADD 2 (the affected region) was low, we believed that it would
likely return closer to historic levels due to the previously shut-down
Midwest refineries returning to operation. However, even though these
refineries have since come back online--increasing gasoline production
in the region--the gasoline inventories in PADD 2 \63\ have continued
to be at levels of concern.\64\ Furthermore, we have been made aware of
the fact that refiners have had a heavy maintenance season at their
refineries in the fall of 2023 and are planning a heavy maintenance
season for the first quarter of 2024. This means that gasoline
production capacity will be taken offline for several months at a key
time during the winter season when gasoline inventories are typically
replenished prior to the next summer season.\65\ Additionally, gasoline
demand is still expected to increase. EIA estimates that national
gasoline demand will increase by 60 kbpd in 2024 compared to 2023,
further straining gasoline inventories and supply.\66\ Thus, we
anticipate that gasoline inventories in PADD 2 will not recover
sufficiently by the 2024 summer season to alleviate the estimated loss
of gasoline supply that would occur when low-RVP CBOB is produced.
Further, due to a separate and unrelated regulatory action, the
prohibition on sale of conventional gasoline in the Denver metropolitan
area began on November 7, 2023. This means that
[[Page 14771]]
gasoline sold in that area must comply with a 7.4 psi RVP requirement
beginning with the 2024 summer season.\67\ This is expected to cause an
additional 5-10 kbpd reduction in gasoline supply in the same 2024
summer season. Although Denver is not in a petitioning State, some
gasoline is currently supplied to this region from refineries that also
produce gasoline for the petitioning States, resulting in additional
strain on gasoline supply in the region.
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\63\ Low gasoline inventories in PADD 2 were an additional bases
for the emergency fuel waivers issued under CAA section
211(c)(4)(C)(ii)(I) during the summer of 2023. See Letter from EPA
Administrator to Governors, ``May 1, 2023, E15 Reid Vapor Pressure
Fuel Waiver,'' April 28, 2023 (``The Midwest region--the region that
has the most ability to increase supply with blending an increased
percentage of ethanol--has gasoline stocks below the five-year
seasonal average for this time of year.'').
\64\ Based on our discussions with EIA, gasoline supply begins
to be a concern when gasoline inventories drop below the 5-year
minimum for any particular PADD.
\65\ Bloomberg News, ``Nearly 2.5 Million Barrels a Day of US
Refining Capacity to Shut for Fall Maintenance,'' October 2, 2023,
https://www.bnnbloomberg.ca/nearly-2-5-million-barrels-a-day-of-us-refining-capacity-to-shut-for-fall-maintenance-1.1979186.
\66\ EIA, Annual Energy Outlook (AEO) 2023, Table 11, https://www.eia.gov/outlooks/aeo. AEO 2023 also estimates that gasoline
demand will decrease by 140 kbpd in 2025 relative to 2024.
\67\ 87 FR 60926, 60932-33 (October 7, 2022).
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As also described in Section V and the TSD, capital investments
will be necessary for some refiners and fuel distributors to
accommodate a transition to low-RVP CBOB in the petitioning States.
This includes investments for the storage of additional gasoline types
and grades, storage of excess butane and LSR, and associated measures
for piping, pumping, and spill containment. We also anticipate that
refineries would need to debottleneck debutanizers and octane-producing
units to enable the production of low-RVP CBOB.\68\ These capital
investments typically require time to come online. For example,
projects to debottleneck existing refinery units typically require 2-
2.5 years to engineer, design, purchase, permit and install. Under an
assumption that refiners and fuel distributors could have begun the
planning process for debottlenecking a refinery unit or installing a
gasoline storage tank after the first State filed its petition in April
2022, or after EPA proposed to remove the 1-psi waiver in the
petitioning States in early 2023, there would be insufficient time
prior to the summer of 2024 to complete the desired capital additions.
However, based on discussions with refiners, pipeline operators, and
terminal operators, as well as public comments, many of the needed
capital investments were not initiated in 2022 due in part to: (1) The
uncertainty created by several States rescinding their petitions during
2022; (2) The emergency fuel waivers under CAA section
211(c)(4)(C)(ii)(I) extending the 1-psi RVP waiver to E15 during the
2023 summer season; \69\ and (3) Potential congressional action that
would extend the 1-psi waiver to E15 nationwide.\70\ Without initiation
in 2022, many of the necessary capital investments are unlikely to be
completed by the summer of 2024.
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\68\ Capital grassroots projects typically require 3-4 years to
engineer, design, purchase, permit and install. Smaller projects
that can ``debottleneck'' individual refinery units (e.g., replacing
a furnace, heat exchanger, or reactor) typically require 2-2.5 years
to complete, while much smaller projects (e.g., replacing a valve or
pump or adding or increasing the size of piping) may be designed and
completed in a year or less. These types of capital investments can
help a refinery produce additional low-RVP CBOB. Shell, ``Thriving
in the new reality: Refinery revamp projects FAQ; Shell Catalysts
and Technologies,'' https://www.shell.com/business-customers/catalysts-technologies/resources-library/refinery-revamp-faq.html.
\69\ From April 28, 2023, to August 28, 2023, EPA issued a
waiver under CAA section 211(c)(4)(C)(ii)(I) that facilitated E15
sales during the summer of 2023.
\70\ See, e.g., comments from Magellan (Docket Item No. EPA-HQ-
OAR-2022-0513-0042), API (Docket Item No. EPA-HQ-OAR-2022-0513-
0056), and HF Sinclair (Docket Item No. EPA-HQ-OAR-2022-0513-0076).
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In addition, supplying the new low-RVP CBOB will require
coordinated investments, planning, and actions between refineries,
pipelines and other fuel distribution companies, terminals, and retail
outlets. Typically, this coordination occurs before winter to provide
the fuel production and distribution system a chance to make the proper
preparations; we are now past the point in the calendar when such
coordination typically occurs. We are also entering into the timeframe
when most refineries have already started producing summer gasoline. As
such, refineries will not have sufficient and appropriate notice to
begin modifying their fuel supply for the summer of 2024.
Finally, we assumed at proposal that flexibility within the fuel
production and distribution system could allow refiners and fuel
distributors to mitigate the projected 2024 summer season supply
reduction until such time as capital and physical changes could be
completed. However, based on subsequent comment and analysis, we now
believe that the existing flexibility would not be sufficient,
particularly in light of the larger anticipated supply reduction and
lingering low gasoline inventories in PADD 2.
For the above-mentioned reasons, supported by additional detail and
analysis in the TSD, we are making a determination that there will be
an insufficient supply of gasoline in the petitioning States in the
2024 summer season and, therefore, are renewing the extension of the
effective date of the removal of the 1-psi waiver by an additional year
to April 28, 2025.\71\
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\71\ Discussion of the supply circumstances in the summer of
2025 is available in TSD Section 7.
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VII. Cost and Price Impacts
There are associated costs with the changes to the refining and
gasoline distribution systems described in Sections V and VI. Part of
the costs will be incurred by the refining sector, while another
portion will be incurred by the gasoline distribution system. Gasoline
refining costs will increase due to several factors, the largest
portion of which is the lost opportunity cost for refiners having to
sell the removed light hydrocarbon material at lower market prices
instead of blending this material into high value summer gasoline. To
the extent that refiners and distributers install capital equipment,
there are also additional capital and associated operating costs that
will need to be recouped over time. These costs will be passed along to
consumers in the petitioning and surrounding States in the form of
higher gasoline prices.
With respect to consumer fuel prices, while fuel prices generally
reflect fuel costs in the competitive gasoline market, this may not be
the case when removal of the 1-psi waiver is first implemented, as
gasoline supply will be reduced and not yet recovered. Due to the
reduced supply, there will likely be a reduction in PADD 2 gasoline
inventories, which could further increase gasoline prices. Due to the
challenges that some refiners may have in producing low-RVP CBOB and
the associated impacts on gasoline inventories, fuel prices will likely
exceed fuel costs because the marginal cost producer will set the fuel
price. This will likely affect gasoline prices in both petitioning and
non-petitioning States and result in higher gasoline prices at the pump
for consumers. The potential cost and price impacts due to the removal
of the 1-psi waiver are discussed in more detail in the TSD.
As discussed above, under the relevant CAA provisions, upon
receiving a petition from a State Governor that is accompanied by a
successful demonstration of emissions increases as a result of the 1-
psi waiver, EPA is required to remove the 1-psi waiver in the areas
requested by the Governor. In deciding whether to grant the petition,
the statute does not provide EPA with the authority to consider fuel
cost or price impacts and we assume that any fuel cost or price impacts
to consumers were taken into consideration by the Governors of the
petitioning States in submitting their petitions. Therefore, regardless
of the magnitude of the impact of this action on fuel costs or prices,
EPA has not considered them in this action.
VIII. Associated Regulatory Provisions
In the NPRM, we proposed changes to the fuel quality regulations at
40 CFR part 1090 to implement the removal of the 1-psi waiver in the
petitioning States. Specifically, we proposed to include new
designation and associated product transfer document (PTD) language
requirements and a regulatory
[[Page 14772]]
mechanism for States to request the reinstatement of the 1-psi waiver
under CAA section 211(h)(5). We are finalizing these changes as
proposed, and we respond to comments received on the proposed
regulatory changes in the RTC document.
A. New Designation and Associated PTD Language
We are finalizing as proposed a new designation and associated PTD
language for summer CBOB in States where the 1-psi waiver for E10 has
been removed under CAA section 211(h)(5).\72\ Designations and PTD
language requirements help ensure that batches of fuel are distributed
and used in a manner consistent with EPA's fuel quality requirements.
Without proper designation, summer gasolines with different
volatilities intended for use in different areas may get commingled in
a fungible system, causing the introduction and use of non-compliant
gasoline in areas that require lower-volatility fuels in the summer.
Similarly, PTD language serves to ensure that parties in the fuel
distribution chain are aware of the designation of the fuel and
accompanying Federal requirements for the distribution and use of the
fuel. Because we are finalizing requirements for a new type of summer
CBOB in this action, we need to create a new designation and
accompanying PTD language to ensure that the new CBOB is distributed
and used consistent with the RVP requirements.
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\72\ The designation and PTD language requirements for gasoline
are located at 40 CFR 1090.1010 and 1090.1110, respectively.
---------------------------------------------------------------------------
In this action, we are requiring gasoline manufacturers to
designate summer CBOB for use in States where we have removed the 1-psi
waiver as ``Low-RVP Summer CBOB.'' We are also finalizing as proposed
related changes to the PTD language requirements so that gasoline
manufacturers that produce Low-RVP Summer CBOB can accurately and
consistently describe the fuel designation. All other designation and
PTD provisions will still apply (e.g., those designations related to
the blending of ethanol). We believe this approach is the most
straight-forward method for updating the designation and PTD
requirements for Low-RVP Summer CBOB.
B. Regulatory Reinstatement Mechanism
We are finalizing as proposed a regulatory mechanism for States to
request the reinstatement of the 1-psi waiver under CAA section
211(h)(5). This regulatory mechanism will be available for the
petitioning States, as well as any other State for which EPA removes
the 1-psi waiver under CAA section 211(h)(5) in the future. The
regulations provide all States with criteria under which such a request
could be made and granted. We modeled the regulatory mechanism for
reinstatement of the 1-psi waiver on the regulations in 40 CFR 1090.295
that allow for the removal of 7.8 psi RVP standard.\73\ Under the
reinstatement mechanism, we are requiring that the State only has to
request the reinstatement of the 1-psi waiver in order for EPA to
reinstate it; however, if the State has relied on the 1-psi waiver
removal in a SIP, either pending or approved, EPA, in consultation with
the State, must determine if such a SIP must be revised. If a revision
is necessary, the State must revise the SIP and EPA must approve the
revision prior to the effective date of the reinstatement of the 1-psi
waiver. Such requests must include a requested effective date, and any
such effective date must be at least 90 days after EPA's written
notification to the State that their request has been approved.
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\73\ We are not reopening the regulations associated with
removal of a federal 7.8 psi low-RVP program in a given area (40 CFR
1090.295) or the regulations that allow states to opt-out of the
federal RFG program (40 CFR 1090.290).
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IX. Removal of the 1-psi Waiver for E15
This action also amends 40 CFR part 1090 to reflect the 2021 court
decision in American Fuel and Petrochemical Manufacturers (AFPM) v.
EPA, 3 F.4th 373 (D.C. Cir. 2021), vacating the 1-psi volatility waiver
for E15 in 40 CFR 1090.215(b)(2). The Administrative Procedure Act, 5
U.S.C. 553(b)(3)(B), provides that, when an agency for good cause finds
that notice and public procedures are impracticable, unnecessary, or
contrary to the public interest, the agency may issue a rule without
providing notice and an opportunity for public comment. EPA has
determined that there is good cause for amending these provisions
without prior proposal and opportunity for public comment because the
correction of 40 CFR part 1090 is a ministerial act to effectuate the
court order and public notice and comment is unnecessary and would
serve no useful purpose. Modification of the regulations to eliminate
the 1-psi waiver for E15 at 40 CFR 1090.215(b)(2) has no legal effect
beyond fulfilling the court's vacatur in AFPM v. EPA and is ministerial
in nature. The court issued its mandate on September 17, 2021, at which
point the vacatur became effective.
A. Background
In June 2019, EPA finalized a rule modifying volatility regulations
for gasoline-ethanol blends containing more than 10 and up to 15
percent ethanol to provide a 1-psi RVP volatility ``waiver.'' The rule
was challenged in the D.C. Circuit by AFPM and other groups in June
2019. The court issued its decision on July 2, 2021, vacating the
volatility rule, and subsequently issued the mandate for its decision
on September 17, 2021.
This action updates our regulations to reflect the court's vacatur
of the volatility rule. Subsequent to the promulgation of the
volatility rule and the corresponding regulations at 40 CFR 80.27, in
December 2020, EPA finalized its fuels regulatory streamlining effort
and transposed the regulations, with minor changes, to 40 CFR
1090.215.\74\ We are now making the necessary amendments to the
regulations at 40 CFR 1090.215 to be consistent with the court's
vacatur.
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\74\ 85 FR 78412 (December 4, 2020).
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We are also clarifying the status of the ``substantially similar''
determination for gasoline made in the same action. Because the 2019
interpretative rule \75\ was promulgated solely for the purpose of
providing the 1-psi waiver to E15, and because the court vacated the
entire volatility rule, the 2019 interpretative rule is rescinded.\76\
Thus, the only ``substantially similar'' determinations for gasoline
are: (1) The 1991 interpretative rule,\77\ and (2) The 2008
interpretative rule.\78\
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\75\ 84 FR 26980 (June 10, 2019).
\76\ See 84 FR 26980, 26983 (June 10, 2019) (``In sum, all
actions we are taking today constitute a single, cohesive effort,
and as such we do not intend for any of these individual actions to
be severable'').
\77\ 56 FR 5352 (February 11, 1991).
\78\ 73 FR 22277 (April 25, 2008).
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Finally, in the same rulemaking action, EPA promulgated regulations
related to the RFS credit or ``RIN'' market.\79\ These regulations were
not challenged, were severable from the action to extend the 1-psi
waiver to E15, and remain in place. EPA is noting this for
informational purposes only; we are not reopening these RFS regulations
here.
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\79\ 84 FR 26980 (June 10, 2019).
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B. Affected Provisions
This final rule amends the fuel quality regulations at 40 CFR part
1090, subparts C and R, to remove the 1-psi waiver for E15 contained in
40 CFR 1090.215(b)(2) and 1090.1720(e) by replacing the phrases ``15
volume percent'' and ``15 percent'' with ``10 volume percent'' and ``10
percent,''
[[Page 14773]]
respectively. As explained above, removal of the 1-psi waiver for E15
corrects the CFR to conform to the court's order in AFPM v. EPA, has no
legal effect beyond fulfilling the court's vacatur, and is ministerial
in nature. The court issued the mandate for its decision on September
17, 2021, at which point the vacatur became effective.
X. Statutory and Executive Order Reviews
Additional information about these statutes and Executive Orders
can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.
A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 14094: Modernizing Regulatory Review
This action is a ``significant regulatory action,'' as defined
under section 3(f)(1) of Executive Order 12866, as amended by Executive
Order 14094. Accordingly, EPA submitted this action to the Office of
Management and Budget (OMB) for Executive Order 12866 review.
Documentation of any changes made in response to the Executive Order
12866 review is available in the docket. EPA prepared an analysis of
the potential costs and benefits associated with this action. This
analysis is presented in the TSD, available in the docket for this
action.
B. Paperwork Reduction Act (PRA)
This action does not impose any new information collection burden
under the PRA. OMB has previously approved the information collection
activities contained in the existing regulations and has assigned OMB
control number 2060-0731. This action removes the 1-psi waiver in eight
States. It does not alter practices used by the existing recordkeeping
and reporting requirements, nor does it change the number or type of
respondents and the manner in which they satisfy the fuel designation
and PTD requirements.
C. Regulatory Flexibility Act (RFA)
I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. The
small entities subject to the requirements of this action are small
refiners (which are defined at 13 CFR 121.201) that produce or
distribute gasoline in Illinois, Iowa, Minnesota, Missouri, Nebraska,
Ohio, South Dakota, or Wisconsin. This action removes the 1-psi waiver
for E10 in these States. EPA is not aware of any small refiner that
operates in these States. However, EPA is aware of at least one small
refiner that distributes a portion of the gasoline it produces to some
of the petitioning States, and thus will be affected this action.
Therefore, to evaluate the impacts of this action on small entities, we
have conducted a screening analysis to assess whether we should make a
finding that this action will not have a significant economic impact on
a substantial number of small entities.\80\ Currently available
information shows that the impact on small entities from implementation
of this rule will not be significant. As discussed in Section VII and
the TSD, we expect that refiners, including small refiners, will be
able to recover the cost associated with the removal of the 1-psi
waiver through higher gasoline prices in the petitioning and
surrounding States. Even if we were to assume that the cost of
producing low-RVP CBOB was not recovered by refiners, a cost-to-sales
ratio test shows that the costs to small refiners of the removal of the
1-psi waiver are far less than 1 percent of the value of their sales.
Furthermore, the removal of the 1-psi waiver in these States does not
substantively alter the regulatory requirements on parties that make
and distribute gasoline. We have therefore concluded that this action
will not have any significant adverse economic impact on directly
regulated small entities.
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\80\ See TSD Section 8.
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D. Unfunded Mandates Reform Act (UMRA)
This action does not contain an unfunded mandate of $100 million or
more as described in UMRA, 2 U.S.C. 1531-1538, and does not
significantly or uniquely affect small governments. This action
implements mandates specifically and explicitly set forth in CAA
section 211(h)(5) and we believe that this action represents the least
costly, most cost-effective approach to achieve the statutory
requirements.
E. Executive Order 13132: Federalism
This action does not have federalism implications. It will not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government.
F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
This action does not have Tribal implications as specified in
Executive Order 13175. This action will be implemented at the State
level and would affect gasoline refiners, blenders, marketers,
distributors, and importers. Tribal governments would be affected only
to the extent they produce, purchase, and use gasoline. Thus, Executive
Order 13175 does not apply to this action.
G. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks
EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that EPA has reason to believe may disproportionately affect children,
per the definition of ``covered regulatory action'' in section 2-202 of
the Executive Order. Therefore, this action is not subject to Executive
Order 13045 because it implements specific standards established by
Congress in statutes.
H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy. This action removes the 1-psi waiver
for eight States. As discussed in Section V, it will require changes to
the production and distribution of gasoline, which is expected to have
some short- and long-term impacts on gasoline supply and cost in the
affected areas, but we believe the market will be able to accommodate
the change without any significant disruption.
I. National Technology Transfer and Advancement Act (NTTAA) and 1 CFR
Part 51
This action does not involve technical standards.
J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations
EPA believes that the human health and environmental conditions
that exist prior to this action do not result in disproportionate and
adverse effects on communities with environmental justice concerns.
Numerous studies have found that environmental hazards such as air
pollution are more prevalent in areas where people of color and low-
income populations represent a higher fraction of the population
compared to the general population. In addition, there is ample
evidence that people who reside in close proximity to major roadways
are disproportionately represented by
[[Page 14774]]
people of color and people with low income.
EPA believes that this action is not likely to result in new
disproportionate and adverse effects on communities with environmental
justice concerns. This is because any emissions impacts of this action
are small. As described in Section IV.B, MOVES modeling performed by
the States in support of their petitions demonstrated a reduction in
VOCs, CO, and NOX, as well as potential increases in
emissions of pollutants such as PM. This action is being implemented at
the request of the Governors of the petitioning States and EPA lacks
discretion to deny such requests as described in Section III.
EPA additionally identified and addressed EJ concerns by providing
the relevant emissions information in this rulemaking action and
providing an opportunity for public comment on this rule. We received
no comments related to EJ concerns.
The information supporting this Executive Order review is contained
in this preamble and the ``Evaluation of MOVES Modeling and Results,''
available in the docket for this action.
K. Congressional Review Act (CRA)
This action is subject to the CRA, and the EPA will submit a rule
report to each House of the Congress and to the Comptroller General of
the United States. This action meets the criteria set forth in 5 U.S.C.
804(2).
List of Subjects in 40 CFR Part 1090
Environmental protection, Administrative practice and procedure,
Air pollution control, Fuel additives, Gasoline, Petroleum, Renewable
fuel.
Michael S. Regan,
Administrator.
For the reasons set forth in the preamble, EPA amends 40 CFR part
1090 as follows:
PART 1090--REGULATION OF FUELS, FUEL ADDITIVES, AND REGULATED
BLENDSTOCKS
0
1. The authority citation for part 1090 continues to read as follows:
Authority: 42 U.S.C. 7414, 7521, 7522-7525, 7541, 7542, 7543,
7545, 7547, 7550, and 7601.
Subpart C--Gasoline Standards
0
2. Amend Sec. 1090.215 by:
0
a. In paragraph (b)(2), removing the text ``than 15'' and adding in its
place the text ``than 10''; and
0
b. Revising paragraph (b)(3).
The revision reads as follows:
Sec. 1090.215 Gasoline RVP Standards.
* * * * *
(b) * * *
(3)(i) RFG and SIP-controlled gasoline that does not allow for the
ethanol 1.0 psi waiver does not qualify for the special regulatory
treatment specified in paragraph (b)(1) of this section.
(ii) Gasoline subject to the 9.0 psi maximum RVP per-gallon
standard in paragraph (a)(1) of this section in the following areas is
excluded from the special regulatory treatment specified in paragraph
(b)(1) of this section:
Table 2 to Paragraph (b)(3)(ii)--Areas Excluded From the Ethanol 1.0 psi
Waiver
------------------------------------------------------------------------
State Counties Effective date
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Illinois........................ All.......... April 28, 2025.
Iowa............................ All.......... April 28, 2025.
Minnesota....................... All.......... April 28, 2025.
Missouri........................ All.......... April 28, 2025.
Nebraska........................ All.......... April 28, 2025.
Ohio............................ All.......... April 28, 2025.
South Dakota.................... All.......... April 28, 2025.
Wisconsin....................... All.......... April 28, 2025.
------------------------------------------------------------------------
* * * * *
0
3. Add Sec. 1090.297 to read as follows:
Sec. 1090.297 Procedures for reinstating the 1.0 psi RVP allowance
for E10.
(a) EPA may approve a request from a State asking to reinstate the
ethanol 1.0 psi waiver specified in Sec. 1090.215(b)(1) for any area
(or portion of an area) specified in Sec. 1090.215(b)(3)(ii) if it
meets the requirements of paragraph (b) of this section. If EPA
approves such a request, an effective date will be set as specified in
paragraph (c) of this section. EPA will notify the State in writing of
EPA's action on the request and the effective date of the reinstatement
upon approval of the request.
(b) The request must be signed by the Governor of the State, or the
Governor's authorized representative, and must include all the
following:
(1) A geographic description of each area (or portion of such area)
that is covered by the request.
(2) A description of all the means in which emissions reduction
from the removal of the ethanol 1.0 psi waiver are relied upon in any
approved SIP or in any submitted SIP that has not yet been approved by
EPA, if applicable.
(3) For any area covered by the request where emissions reductions
from the removal of the ethanol 1.0 psi waiver are relied upon as
specified in paragraph (b)(2) of this section, the request must include
the following information:
(i) Identify whether the State is withdrawing any submitted SIP
that has not yet been approved.
(ii)(A) Identify whether the State intends to submit a SIP revision
to any approved SIP or any submitted SIP that has not yet been
approved, which relies on emissions reductions from the removal of the
ethanol 1.0 psi waiver, and describe any control measures that the
State plans to submit to EPA for approval to replace the emissions
reductions from the removal of the ethanol 1.0 psi waiver.
(B) A description of the State's plans and schedule for adopting
and submitting any revision to any approved SIP or any submitted SIP
that has not yet been approved.
(iii) If the State is not withdrawing any submitted SIP that has
not yet been approved and does not intend to submit a revision to any
approved SIP or any submitted SIP that has not yet been approved,
describe why no revision is necessary.
(4) A requested effective date of the reinstatement of the ethanol
1.0 psi waiver.
(5) The Governor of a State, or the Governor's authorized
representative, must submit additional information needed to administer
the reinstatement of the ethanol 1.0 psi waiver upon request by EPA.
(c)(1) Except as specified in paragraph (c)(2) of this section, EPA
will set an effective date of the reinstatement of the ethanol 1.0 psi
waiver as requested by the Governor, or the Governor's authorized
representative, but no less than 90 days from EPA's written
notification to the State approving the reinstatement request.
(2) Where emissions reductions from the removal of the ethanol 1.0
psi waiver are included in an approved SIP or any submitted SIP that
has not yet been approved, EPA will set an effective date of the
reinstatement of the ethanol 1.0 psi waiver as requested by the
Governor, or the Governor's authorized representative, but no less than
90 days from the effective date of EPA approval of the SIP revision
that removes the emissions reductions from the ethanol 1.0 psi waiver,
and, if necessary, provides emissions reductions to make up for those
from the ethanol 1.0 psi waiver reinstatement.
(d) EPA will publish a document in the Federal Register announcing
the approval of any ethanol 1.0 psi waiver reinstatement request and
its effective date.
(e) Upon the effective date for the reinstatement of the ethanol
1.0 psi waiver in a subject area (or portion of a subject area)
included in an approved
[[Page 14775]]
request, the ethanol 1.0 psi waiver will apply in such subject area.
Subpart K--Batch Certification and Designation
0
4. Amend Sec. 1090.1010 by redesignating paragraph (a)(2)(iii) as
(a)(2)(iv) and adding a new paragraph (a)(2)(iii) to read as follows:
Sec. 1090.1010 Designation requirements for gasoline and regulated
blendstocks.
(a) * * *
(2) * * *
(iii) If the CBOB is excluded from the special regulatory treatment
for ethanol under Sec. 1090.215(b)(3)(ii), Low-RVP Summer CBOB.
* * * * *
Subpart L--Product Transfer Documents
0
5. Amend Sec. 1090.1110 by redesignating paragraph (b)(2)(i)(C) as
(b)(2)(i)(D) and adding a new paragraph (b)(2)(i)(C) to read as
follows:
Sec. 1090.1110 PTD requirements for gasoline, gasoline additives, and
gasoline regulated blendstocks.
* * * * *
(b) * * *
(2) * * *
(i) * * *
(C) ``Low-RVP CBOB. This product does not meet the requirements for
summer reformulated gasoline.''
* * * * *
Subpart R--Compliance and Enforcement Provisions
Sec. 1090.1720 [Amended]
0
6. Amend Sec. 1090.1720, in paragraphs (e) introductory text and
(e)(2), by removing the text ``15 percent'' and adding in its place the
text ``10 percent''.
[FR Doc. 2024-04023 Filed 2-28-24; 8:45 am]
BILLING CODE 6560-50-P