On August 7, 2023, the states of Iowa and Nebraska filed a lawsuit against the Environmental Protection Agency (“EPA”) to challenge the agency’s failure to act on a 2022 petition to allow the year-round sale of high-ethanol gasoline known as E15. The petition was submitted to EPA by Iowa, Nebraska, and five other corn-producing states who claim that E15 is both cheaper and produces fewer emissions than gasoline with ten percent ethanol, known as E10, which is available year-round. In their recent lawsuit, Iowa and Nebraska claim that by failing to act on the petition within 90 days, EPA violated its mandatory duties under the Clean Air Act (“CAA”).
The CAA was initially enacted in 1963 with the overall purpose of “protect[ing] and enhance[ing] the quality of the Nation’s air resources” in order to promote public health and welfare. 42 U.S.C. § 7401(b). To achieve that purpose, the CAA employees a variety of different schemes for regulating air pollutants, including the regulation of fuel and fuel additives. Specifically, the CAA prohibits the sale of gasoline with a Reid Vapor Pressure (“RVP”) greater than 9.0 pounds per square inch (“psi”) during the high ozone season, which lasts from May 1 to September 15. 40 C.F.R. § 1090.80. RVP measures the volatility, or evaporation characteristics, of gasoline. EPA began regulating RVP in 1987 due to the fact that higher gasoline volatility results in higher evaporative emissions of gasoline. EPA’s RVP regulations are intended to reduce emissions that contribute to ground-level ozone, otherwise known as smog.
In 1990, Congress amended the CAA to codify EPA’s regulatory establishment of a 9.0 psi RVP standard for gasoline volatility in the summer high-ozone season. Gasoline with an RVP of higher than 9.0 psi may not legally be sold during that time unless permitted by a waiver.
In 2005, Congress once again amended the CAA to include an ethanol waiver which allows fuels that include ten percent ethanol, E10, to have a higher RVP during the high-ozone season. Specifically, Congress granted E10 a 1-psi volatility waiver which allows blends that have a 10 psi RVP to be sold. The waiver does not apply to E15. When Congress initially granted this waiver, E10 made up on a small portion of the gasoline sold in the United States, while E15 comprised only a negligible share of the national gasoline market. Today, almost all gasoline sold in is E10, meaning that the 2005 waiver now applies to almost all gasoline.
When Congress amended the CAA in 2005 to allow the sale of E10 at 10 psi RVP, it included a provision permitting states to apply for a waiver from the E10 exemption if applying it would “increase emissions that contribute to air pollution in any area of the State[.]” 42 U.S.C. § 7545(h)(5). In other words, the CAA allows states to seek the ability to prohibit the sale of E10 at 10 psi RVP during the high-ozone season if allowing the sale would increase air pollution within the state. Once a state has submitted the request and supporting documentation, EPA is directed to issue regulations only allowing gasoline with a limit of 9.0 psi RVP to be sold in that state regardless of the time of year. 42 U.S.C. § 7545(h)(5)(A). EPA must establish such regulations within 90 days of receiving the state’s request, and those regulations must go into effect either on the first day of the high-ozone season, or one year after the request is submitted, whichever comes later. 42 U.S.C. § 7545(h)(5)(B), (C).
Although E15 is not subject to the same waiver as E10, over the last several years EPA has issued a series of emergency waivers allowing the year-round sale of E15 in various jurisdictions. EPA has cited the war in Ukraine and the resulting disruption of gasoline supply lines as a factor in issuing the emergency exemptions. Now, several states are seeking to make the year-round sale of E15 permanent.
On April 28, 2022, the states of Iowa, Nebraska, Illinois, Kansas, Minnesota, North Dakota, and South Dakota submitted a letter to EPA requesting an exemption from the waiver allowing the sale of E10 at 10 psi RVP during the high-ozone season. Specifically, the states requested that EPA adopt a regulation requiring a 9.0 psi RVP limitation for all fuel blends sold within those states. This was the first time such a request had ever been submitted. In their letter, the states cited evidence showing that eliminating the E10 waiver would improve air quality by reducing air emissions from onroad and nonroad vehicles.
While EPA acknowledged that it had received the request from the states, it did not issue a proposed rule to exempt the states from the E10 waiver until March 6, 2023, well after the ninety-day window mandated by the CAA. In the proposed rule, EPA found that states would be exempt from the E10 waiver starting on April 28, 2024, two years after the states’ initial request was submitted. The comment period for the proposed rule closed on April 20, 2023. A final rule has yet to be issued.
Iowa and Nebraska filed suit against EPA, claiming that its delays violate the plain text of the CAA. In their complaint, the plaintiff states highlight the mandatory deadlines that the CAA imposes on EPA when a state submits a request for exemption from the E10 waiver. According to the plaintiff states, their request should have gone into effect on the first day of the high-ozone season, which began on May 1, 2022. At the very least, the plaintiff states claim that EPA should have issued its proposed rule by July 27, 2022, which would have been 90 days after the states submitted their initial request. Finally, the plaintiff states note that EPA has yet to issue a final rule granting the states’ request. Therefore, the states are asking the court to direct EPA to adopt a final rule granting the states’ request to be exempted from the E10 waiver by no later than six months before the first day of the 2024 high-ozone season.
Should the court rule in favor of the plaintiff states, it is likely that next year those states will no longer allow the sale of E10 at 10.0 psi RVP during the high-ozone period. It is also likely that E15 will be more readily available in those states. Increased sales of E15 would likely be beneficial to corn producers, particularly for corn producers in Iowa where over half of their corn is used to produce biofuels. However, EPA has noted that the change could result in higher fuel prices and decreased supply. Additionally, while it is currently unclear whether other states will follow Iowa and Nebraska in requesting exemptions from the E10 waiver, Ohio and Missouri have already submitted their own exemption requests. It is possible that other states will follow.
To read the complaint in State of Iowa v. Regan, click here.
To read EPA’s proposed rule, click here.
To read the text of the CAA, click here.
For more National Agricultural Law Center resources on biofuels and the CAA, click here.