Key Takeaways
President Biden is allowing E15, gasoline with 15 percent ethanol, to be sold in the Midwest year-around as requested by Midwest governors to provide a larger market for their corn and ethanol production.
The start date for implementation is April 2025, a year later than proposed by EPA because localizing the change to the Midwest could cause gas price spikes elsewhere in the country.
The delay is a political decision, as it puts off the impacts until after the election while allowing the president to argue he is bending to the Governors’ demands.
Oil refiners and biofuels producers prefer for E15 to be approved nationwide to avoid logistic supply problems and price deviations.
The Biden Administration approved a request from Midwestern governors allowing expanded sales of gasoline with higher blends of ethanol in their states, starting in 2025. The government currently restricts sales of E15 gasoline, or gasoline with 15 percent ethanol, to during summer months due to concerns over smog. Most gasoline sold across the country is blended with 10 percent ethanol. The year-round approval for E15 with a 2025 start date is one year later than proposed. The Environmental Protection Agency (EPA) sent a final rule on the proposal to the White House in December with an effective date of April 28, 2024. But, the administration pushed the effective date to April 28, 2025 for fear that the change could cause gas price spikes in other states during an election year. Ethanol production consumes about 40 percent of the nation’s corn crop, so higher sales of ethanol would likely mean greater profits for corn farmers.
Background
In 2022, the governors of Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin made the request for year-round E15 sales, arguing the change could help lower pump prices by boosting fuel volumes. Growth Energy, a bioenergy trade association, estimates the higher blend of ethanol will reduce the cost of gasoline by 15 cents a gallon compared to the cost of the 10 percent ethanol blend, while other estimates have a lower cost impact. While E15 is cheaper on average than gasoline, it is less energy efficient, lowering mileage and requiring drivers to buy more fuel. The governors also argued that the environmental impacts of ethanol production and use have been overstated. Those states grow the bulk of the U.S. corn crop and produce much of the nation’s ethanol.
Some oil refiners, however, argue that allowing E15 in select states as opposed to nationwide could prompt localized fuel price spikes and supply issues, complicating fuel supply logistics and raising the risk of spot shortages. Ethanol producers would also prefer a nationwide legislative fix to allow for expanded E15 sales versus the regional approach. About 2,300 U.S. gas stations—around 1.5 percent of the country’s 145,000 or so fueling stations—sell E15 gas. The remaining 98.5 percent of gas stations may not have the proper equipment to safely store E15 at this time.
The delay to 2025 enables President Biden to put off potential price spikes stemming from the decision until after the 2024 U.S. presidential election in November. Two of the Midwest states, Wisconsin and Minnesota, are battleground states in this year’s election.
According to the EPA, “By extending the implementation date, this final action reduces the risk of gasoline supply issues this summer and the price impacts that could have come with 2024 implementation.” The EPA said it delayed implementation of the new rule because of concerns there was not enough supply to meet demand this summer. The EPA did not comment on whether it would issue a temporary waiver enabling E15 sales this summer.
The biofuels industry and some politicians argue that ethanol helps farmers, reduces prices at the pump and lessens greenhouse gas releases because the fuel burns more cleanly than pure gasoline. However, others argue that increased ethanol production can increase carbon emissions because it results in more corn production, leading to increased use of fertilizer and greater releases of nitrates. Environmentalists claim that synthetic and natural fertilizers also are a leading source of water pollution.
Oil refiners are required to blend some ethanol into gasoline under a pair of laws, passed in 2005 and 2007, known as the Renewable Fuels Program, intended to lower the use of oil and greenhouse gas emissions and reduce dependency on foreign oil by mandating increased levels of ethanol in the nation’s fuel mix every year. However, since passage of the 2007 law, the mandate has been met with criticism that it has contributed to increased fuel prices and has done little to lower greenhouse gas emissions. Moreover, the combination of horizontal drilling and hydraulic fracturing turned the United States into the world’s largest producer of oil and natural gas and led to net energy independence in 2019 under President Trump.
Conclusion
President Biden is agreeing to allow E15 to be sold in the Midwest year-around, as requested by Midwest governors in 2022, to provide a larger market for their corn farmers and ethanol producers. But, the start date for implementation is in April 2025, a year later than proposed by EPA, because Biden fears that localizing this change to the Midwest could cause gas price spikes elsewhere in the country, which would be hard to explain during an election year. The delay is a political decision, as it puts off the impacts until after the election while allowing the president to argue he is bending to the Governors’ demands. Two of the Midwest states are battleground states. Oil refiners and biofuels producers prefer for E15 to be approved nationwide to avoid logistic supply problems and price deviations. While legislation has been proposed to that effect, none has been passed so far.
