The U.S. midcontinent fuel market is again poised to enter a spring driving season fraught with uncertainty over the future of 15pc ethanol gasoline (E15), which boosts demand for higher-cost, lower Reid vapor pressure (RVP) gasoline.
Production of E15 requires blending with more costly, lower-RVP fuel because E15 does not qualify for the 1psi Clean Air Act waiver available for E10 production, a waiver that allows blenders to use less costly, higher-RVP fuel.
On 17 March last year, non-waiver gasoline ballooned to a 19¢/USG premium against waiver fuel, as Oneok subsidiary Magellan Midstream Partners added storage for the boutique grade non-waiver fuel and market participants wondered whether the U.S. Environmental Protection Agency (EPA) would intervene. From 17 March to 1 May, traders bought non-waiver gasoline for 10¢/USG more than in past years, before the EPA issued emergency waivers and closed the gap between the grades.
Ahead of the 2026 driving season, the situation is much the same. Market participants are uncertain whether non-waiver grades will return, or whether there will be an act of Congress or additional EPA waivers to resolve any price discrepancies.
Eight U.S. states — Illinois, Iowa, Minnesota, Missouri, Nebraska, South Dakota, Wisconsin, and Ohio — requested to opt out of the 1psi waiver in 2022, a rule that was approved in 2024 and then briefly implemented in 2025, although Ohio and South Dakota deferred implementation.
The states requested to opt out of the 1psi waiver to secure access to year-round E15, which otherwise cannot be produced during summer because of volatility limits. The waiver allows for E10 to be produced at 10 RVP while E15 without the waiver needs to be blended to 9 RVP.
EPA issued emergency waivers on 1 May 2025 that allowed for E15 to be made with 9 RVP gasoline. This marked the fourth consecutive year that the EPA had issued such waivers to eliminate the need for the non-waiver specification.
When waiver/non-waiver gasoline was active from 17 March to 1 May last year, Magellan pipeline V grade suboctane non-waiver gasoline in the southern midcontinent, also known as Group Three, traded at an average 10.35¢/USG premium to waiver gasoline, or about 5pc higher. Conventional 91 gasoline A grade on the same pipeline averaged a 10.43¢/USG spread, or a 4.2pc premium.
Chicago, in contrast, had most of its non-waiver trade focused on the West Shore/Badger system, which runs through Wisconsin and Illinois, while the Buckeye Complex trading hub in Indiana remained on waiver product.
The West Shore/Badger pipeline system non-waiver CBOB averaged a 4.32¢/USG premium to Buckeye Complex's waiver CBOB, a difference of 2.1pc.
Those spreads could be even wider this year, depending on the approach of the regional pipelines and the overall availability of non-waiver product.
Participants in the U.S. midcontinent market have expressed uncertainty about the possibility of non-waiver returning.
The American Petroleum Institute (API) along with ethanol groups and fuel retailers have publicly endorsed a bill that would allow year-round E15 and curb small refiners' ability to seek exemptions from biofuel blend quotas.
A provision for extending the 1-psi waiver to E15 was included in a funding bill in December 2024, but it ultimately did not make it into law.
Since then, the year-round E15 issue has become entangled with small refiner exemptions with API advocating for the year-round E15 bill with the caveat that the process for gaining exemptions for small refiners become more stringent. API is also seeking to avoid having larger refiners compensate for blending exemptions granted smaller refiners.
Barring an act of Congress or more EPA emergency waivers, the U.S. midcontinent is poised to enter another summer driving season that includes both waiver and non-waiver product.
