RFA, Others Seek Certainty and Consistency in EPA Treatment of Flex Fuel Vehicles

October 27, 2020

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(Renewable Fuels Association) In comments submitted today to the U.S. Environmental Protection Agency regarding emissions standard compliance calculations for Flex Fuel vehicles (FFVs), the Renewable Fuels Association supported the EPA’s new approach to maintaining some level of certainty for automakers in the absence of future guidance. At the same time, however, RFA called on the agency to provide a long-term floor and “more robust” E85 usage factors for future model years, given expected growth and the many benefits provided by ethanol flex fuels.

“Based on our discussion with automakers, it is clear that manufacturers will hesitate to invest in certain technologies, like FFVs, unless there is some assurance that those vehicles technologies will help enable CAFE and GHG standard compliance over multiple model years,” wrote Kelly Davis, RFA Vice President for Regulatory Affairs. “Fuel blenders and retailers also need multi-year certainty regarding the likely mix of light-duty vehicles so that they may appropriately direct their investments in wholesale and retail fuel infrastructure.”

Davis noted that restoring a more meaningful E85 usage factor for FFV production can help to level the CAFE/GHG playing field that currently favors battery electric, plug-in hybrid electric, fuel cell and compressed natural gas vehicles. “While we agree with EPA that automakers should be encouraged to produce vehicles that reduce petroleum consumption to improve energy security, save the U.S. money, and reduce climate change impacts, we believe incentives to stimulate the production of such vehicles should be constructed fairly and consistently.”

As part of its comments, RFA submitted an analysis comparing the number of E85 stations listed on the association’s crowd-sourced database (www.E85prices.com) to the number of E85 stations listed by the Alternative Fuels Data Center. The former lists just over 5,000 stations known to sell E85 today, while AFDC’s database only contains roughly 3,600. This is important because EPA relies on the overly conservative AFDC database to inform its projections of future E85 availability and station growth. RFA encouraged EPA to use the E85price.com database to inform its future analyses. READ MORE

Environmental Protection Agency Docket No. EPA-HQ-OAR-2020-0104; FRL–10012-26-OAR Re: E85 Flexible Fuel Vehicle Weighting Factor (F-factor) for Model Years 2021 and Later Vehicles (85 Fed. Reg. 52,590; August 26, 2020) (Renewable Fuels Association)

Ethanol Blog: Ethanol Groups Push EPA to Consider Future E85 Use in New Vehicles (DTN Progressive Farmer)

Growth Energy Urges EPA to Provide Immediate Credit to Automakers to Produce Flex-Fuel Vehicles (Growth Energy)

Comments on EPA “E85 Flexible Fuel Vehicle Weighting Factor (F-factor) for Model Years 2021 and Later Vehicles” - Docket ID No. EPA–HQ–OAR–2020–0104 (Growth Energy)

Ethanol Stakeholders Comment on FFV Standards (Energy.AgWired.com)

Ethanol groups urge EPA to increase F-factor for E85 FFVs (Ethanol Producer Magazine)

Re: Docket ID EPA-HQ-OAR-2020-0104 ... on behalf of the 25x’25 Alliance (Regulations.gov)

Comment submitted by Dean Drake, President, Defour Group, LLC (Regulations.gov)

Alliance for Automotive Innovation Comments on E85 Flexible Fuel Vehicle Weighting Factor (F-Factor) for Model Years 2021 and Later Vehicles Docket ID No. EPA-HQ-OAR-2020-0104 (Regulations.gov)

Comments from Alliance for Automotive Innovation Docket ID No. EPA-HQ-OAR-2020-0104 (Regulations.gov)

RFA Submits Comments To EPA On Flex Fuel Vehicles (WNAX)

Excerpt from Renewable Fuels Association: 1. RFA supports EPA’s adoption of an approach that ensures the F-factor does not default to zero in the absence of future F-factor guidance.

Historically, when EPA has failed to issue timely F-factor guidance for specific model years, the agency’s approach has been to let the F-factor revert to zero. In addition, EPA has historically neglected to finalize prospective F-factor guidance with enough lead time for planning and preparation by auto manufacturers. In one case, EPA’s F-factor guidance was issued well after vehicle production had already begun for that model year (EPA did not finalize the MY2019 F-factor until August 2019, long after decisions had already been made by automakers regarding
FFV model offerings and production volumes for MY2019). EPA’s historical approach to publishing F-factor guidance has created significant uncertainty and, ultimately, discouraged automakers from producing more FFVs.

Thus, RFA strongly supports EPA’s new approach of keeping the 0.14 F-factor in place beyond MY2020 in the absence of new guidance, rather than allowing the F-factor to revert to zero.

This approach should help provide confidence and longer-term certainty to auto manufacturers and other affected stakeholders. However, as discussed in the following section, this approach can only deliver the intended longer-term certainty if automakers are confident EPA will not adopt an F-factor below 0.14 for MY2021 and later model years.

2. To ensure automakers receive the long-term certainty intended by EPA, the agency should clarify that 0.14 will serve as the floor for the F-factor through at least MY2025.

Automakers will continue to make decisions regarding future vehicle model offerings and production volumes based, in large part, on how and whether those vehicles help them achieve compliance with future CAFE and GHG standards.

Based on our discussion with automakers, it is clear that manufacturers will hesitate to invest in certain technologies, like FFVs, unless there is some assurance that those vehicles technologies will help enable CAFE and GHG standard compliance over multiple model years. Fuel blenders and retailers also need multi-year certainty regarding the likely mix of light-duty vehicles so that they may appropriately direct their investments in wholesale and retail fuel infrastructure.

Thus, while we support EPA’s decision to keep the MY2020 F-factor in place in the absence of new guidance, the possibly that EPA could issue new guidance with a lower F-factor for MY2021 (or later model years) means automakers and the fuel market still are not being provided the long-term certainty they seek with regard to FFVs.

For this reason, RFA believes that EPA should, through subsequent guidance, clarify that 0.14 is the floor for the F-factor through MY2025, and new guidance will only be issued if it increases the F-factor (as we believe is justified by alternative data sources and methodologies). This would provide investment certainty and assurance to automakers, fuel producers, and retailers that the F-factor will be stable or higher over the next five years.

3. Alternative data sources and analytical approaches suggest EPA’s view of future E85 consumption is overly conservative and based on disputable assumptions.

In the current notice, EPA seeks comment on its draft methodology for determining the F-factor for MY2021 and later model years. The agency’s methodology and data sources are outlined in a technical memorandum to the docket. As described below, data deficiencies have resulted in the gross underestimation of E85 consumption by EPA in the past, and those same deficiencies are present in EPA’s technical memo. Analyses shared with EPA by RFA and others support an F-factor of 0.2 or higher, and we again encourage EPA to consider that data and information when contemplating new F-factor guidance for MY2021 and beyond.

As stated in the technical memorandum to the docket, EPA’s derivation of the F-factor hinges on three primary data inputs: 1) the projected amount of E85 and gasoline consumption by FFVs in future calendar years; 2) the population of FFVs in a given model year; and 3) the number of vehicle miles traveled for a given year of a model year vehicle’s life. RFA offers the following comments on the first two of these three data inputs.

a. Projected amount of E85 and gasoline consumption by FFVs in future calendar years

EPA’s technical memorandum states that the amount of projected E85 consumption is the most important variable in calculating the F-factor. However, as both EPA and the Energy Information Administration (EIA) have acknowledged, there are no quality data available on actual nationwide consumption of E85 and other flex fuels.1

In addition, EPA’s memo recognizes that EIA’s data on E85 production has shortcomings that limit its usefulness.
Thus, there are no dependable nationwide data available to help inform EPA’s projections of future E85 consumption. The absence of reliable data sources on nationwide E85 consumption means EPA’s draft F-factor methodology does not meet the agency’s existing data and information quality standards, which are designed to “…ensure that the Agency’s environmental decisions are supported by data of known and documented quality.”2

In the absence of a nationwide data set, EPA has historically attempted to estimate nationwide consumption by extrapolating monthly or quarterly E85 sales data from just a handful of states.

The Agency uses state-level E85 sales and station count data to derive an estimate of average sales volumes per station. EPA then multiplies that per-station volume by the number of E85 stations nationwide, as reported by the DOE’s Alternative Fuels Data Center (AFDC). For 2018, this methodology resulted in a nationwide E85 sales estimate of 306 million gallons.

However, as demonstrated in Appendix A, roughly 1,400 stations known to sell E85 today are missing from the AFDC E85 station count, leading to an inappropriately low EPA estimate of nationwide E85 sales. RFA’s comprehensive database of E85 locations (available at e85prices.com) shows 5,084 stations selling E85 today compared to just 3,605 shown by AFDC.

To illustrate the discrepancies between AFDC’s station count, and the actual number of stations offering E85, RFA asked two leading E85 retailers—Pearson Fuels and Sheetz—to provide us their list of verified E85 stations, as of October 2020. Of the 207 Pearson stations currently offering E85, AFDC was missing 70 from its database (34%). Of the 294 Sheetz stations currently offering E85, AFDC’s database was missing 65 (or 22%). This example strongly suggests that EPA should use other data sources for estimating the current and projected number of stations offering E85. Given that EPA has relied upon e85prices.com for other analyses3, we believe the agency should rely upon our station database, rather than AFDC, for its assumptions on E85 station counts.

More accurate E85 station count data are crucial to deriving a more reliable projections and estimates of nationwide E85 consumption, as EPA itself suggests that the “…primary driver of increases in E85 volumes is currently the number of retail stations capable of offering E85 and choosing to do so.” In addition, many of the E85 stations used for extrapolation in EPA’s most recent analysis are located in sparsely populated rural areas, meaning the E85 sales volumes from these stations are not likely to accurately represent average station sales volumes nationwide.

EPA’s technical memorandum also relies on E85 consumption projections from EIA’s 2020 Annual Energy Outlook (AEO). For all the reasons previously explained by RFA and other stakeholders (see, for example, comments from Fuel Freedom Foundation), we continue to believe EPA’s use of the 2020 AEO is inappropriate for development of E85 consumption projections.

Chief among the 2020 AEO’s flaws is its assumption that future Renewable Fuel Standard (RFS) volumes will be lowered due to small refinery exemptions (SREs) granted by EPA. A recent ruling by the U.S. Court of Appeals for the Tenth Circuit in Renewable Fuels Association v. EPA overturned several illegally granted SREs and set a precedent that is expected to severely limit or eliminate SREs going forward.4 Accordingly, EPA’s projections of total ethanol consumption should assume that RFS volumes are no longer eroded by SREs, as they were in 2016-2018.

Given EPA’s own admissions that quality data are lacking to confidentially project future “real world” E85 consumption, it would be most reasonable to err on the side of supporting more robust production of FFVs. As discussed in the last section of these comments, FFVs advance the public policy objectives of reducing emissions, enhancing national energy security, and boosting rural economies.

b. Population of FFVs in a given model year

A second critical factor in developing future F-factors is the projected population of FFVs. Again, EPA relies primarily on AEO2020 for projections of the FFV population. However, the irony here is that the actual future population of FFVs will depend, in large part, on the F-factor value that is available in the near term to automakers for CAFE and GHG standard compliance calculations.

EIA’s projected sales of FFVs appear insensitive to importance of the F-factor. A low F-factor would discourage automakers from producing more FFVs, reducing the overall population of FFVs over time. In turn, the smaller projected population of FFVs could lead to lower projected E85 consumption and a lower calculated F-factor, creating a downward spiral for FFV production. This scenario underscores the importance of EPA finalizing guidance that sets a long-term floor for the F-factor through MY2025.

4. EPA must also consider the policy justifications for adopting an F-factor of 0.2 or higher

In addition to reconsidering its data sources and methodological approaches, EPA should also take into account the multiple public policy justifications for adopting F-factors for future model years of 0.2 or higher. While the 2017-2025 CAFE/GHG rules adopted a requirement that FFV manufacturers demonstrate “actual usage” of alternative fuel in the vehicle, they also highlighted the need for automakers to pursue technologies that “[r]educ[e] petroleum consumption to improve energy security”, “save the U.S. money” and “[r]educe climate change impacts.” 5

E85 and other flex fuels:

• significantly reduce emissions of greenhouse gases and criteria pollutants, improving the environment and human health;
• save consumers money at the pump;
• displace gasoline made from imported petroleum, improving national security; and
• support increased demand for U.S. agricultural crops, boosting farm income and rural economies.

The good policymaking principles of fairness and equity also support a more robust F-factor than is currently in place. Under the current CAFE/GHG program, EPA created an “incentive multiplier” for all battery electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), fuel cell vehicles (FCVs) and compressed natural gas vehicles (CNGVs) sold in model year 2017-2021. In addition, EPA entirely ignored the upstream (well-to-tank “lifecycle”) emissions impacts of electricity production and set the emissions value for EVs at 0 grams of CO2/mile. EPA further provided generous “utility factors” (analogous to the F-factor for FFVs) to dual-fueled CNGVs and PHEVs, assuming those vehicles will be fueled with the lower-GHG alternative fuel most of
the time.

While we agree with EPA that automakers should be encouraged to produce vehicles that “[r]educ[e] petroleum consumption to improve energy security”, “save the U.S. money” and “[r]educe climate change impacts,” we believe incentives to stimulate the production of such vehicles should be constructed fairly and consistently.6

* * * * *

RFA is fully committed to collaborating with EPA and other industry stakeholders to help support the development of data and analytical approaches for determining an appropriate Ffactor for MY2021 and beyond.

Thank you for the opportunity to comment.

Sincerely,
Kelly Davis
VP Regulatory Affairs

1 See, for example, Preliminary estimate of E85 consumption in 2018; EPA Air Docket EPA-HQ-OAR-2019-0136; June 26, 2019. (“There are currently no comprehensive data sources on the amount of E85 sold in the United States. In a previous memorandum we discussed available data sources and methods for deriving E85 volume estimates. In that memorandum we indicated that data provided by the Energy Information Administration (EIA) cannot be used to derive nationwide, annual E85 volume estimates, since it excludes E85 produced at small blending facilities and E85 blended with reformulated gasoline at terminals.”)

2 https://www.epa.gov/quality/about-epas-quality-system

3 See Preliminary estimate of E85 consumption in 2016, EPA Air Docket EPA-HQ-OAR-2017-0091, July 5, 2017; and Updated correlation of E85 sales volumes with E85 price discount, EPA Air Docket EPA-HQ-OAR-2016-0004, November 18, 2016

4 https://www.ca10.uscourts.gov/opinions/18/18-9533.pdf

5 76 Fed. Reg. 75164-75165

6 76 Fed. Reg. 75164-75165 READ MORE

Excerpt from DTN Progressive Farmer: Growth Energy Senior Vice President of Regulatory Affairs Chris Bliley, said in comments the agency has to account for a growing E85 market.

"Recent trends in government and private investment in biofuels infrastructure and updated data on E85 availability all lead to growth in higher biofuel blends," he said. "EPA should seize on that data to provide appropriate, immediate credit to automakers to continue to produce flex-fuel vehicles to run on these higher biofuel blends."

In Growth Energy's written comments, the group provided a detailed analysis on the benefits of an updated F factor, noting any upward revision should take immediate effect so it continues to accelerate automaker investment and innovation. READ MORE

Excerpt from Growth Energy's Public Comments: EPA Must Not Rely on Historical Data to set the F-factor but should review several factors which lend to a F-factor of 0.2

The F-factor is intended to consider the lifetime use of E85 in the FFV, so relying on historical data to set the F-factor is not appropriate. EPA must consider several important factors all of which lend to a higher F-factor of 0.2. These include inconsistent administration of federal policy, flaws in EPA’s E85 estimate methodology, state low carbon fuel standards, and data on the growth of higher ethanol blends, federal investment in higher blend infrastructure, and
necessary improvement in federal data on stations carrying higher ethanol blends.

Inconsistent Implementation of the Renewable Fuel Standard (RFS) and its impact on the AEO2020

Relative to federal policy, EPA must consider its own inconsistent implementation of the Renewable Fuel Standard (RFS) that is meant to require increased blending of renewable fuels into our transportation fuel supply.

EPA has repeatedly misused its various waiver authorities to undercut the demand for renewable fuel. Growth Energy and our members still await EPA’s resolution of the 500 million gallons that were awarded by DC Circuit for improper use of waiver authority for the 2014-2016 RVOs. Additionally, we’ve seen more than 4 billion gallons of demand lost due to misuse of small refinery exemptions. Given that EPA must restore this 500MG and apply the recent 10th
Circuit Decision to limit misuse of small refinery exemptions, EPA cannot base its F-factor decisions on its own past shortcomings in applying the RFS appropriately. Unfortunately, the AEO2020 relies on a flawed methodology that incorporates now-illegal small refinery exemptions and fails to recognize the required, implied conventional 15 billion gallons of renewable fuel under the RFS. The RFS, if properly implemented will promote investment in infrastructure as well as retail and consumer discounts for higher blends which would all point to significant growth in E85 used in FFVs.

Concerns about EPA’s Estimates of Annual E85 Volumes

We have several concerns about EPA’s methodology on EPA’s estimates of E85 volumes. We are concerned about the miscount of stations selling higher ethanol blends as well as the misapplication of an average volume per station from six states across the nation.

Federal Data on Stations selling higher ethanol blends should be improved

Growth Energy is continually updating its database of retailers selling higher ethanol blends such as E15 and E85. Working with our retail partners who collectively have more than 10,000 retail locations and sell more than 13 percent of the nation’s gasoline, we receive monthly updates of their stations selling higher ethanol blends. Additionally, we constantly add retail stations learned through press releases, news articles, and consumer and retailer word of mouth.

Gathering this data, we provide a station update monthly to relevant stakeholders and policymakers. We also provide these monthly updates to GasBuddy for use in their crowdsourced app. Their app helps millions of consumers find stations and fuel. We also perform an annual audit of our data reaching out to the major retail brands selling E15 and E85, getting their updated lists, and cross-referencing it with our database – removing stations that no longer sell the fuel and adding stations that may not be in our database.

In examining data on E85 stations from the Alternative Fuel Data Center (AFDC), there seem to be numerous instances where AFDC has failed to include stations offering E85 on its list of total E85 stations. For example, regarding Sheetz, one of the largest independent retailers on the east coast, we have been provided data showing 294 stations that sell E85, while AFDC data only shows 229. Additionally, data from Pearson Fuels in California shows 207 stations selling
E85 in California, while AFDC data shows only 137 stations. We understand that keeping a database up to date in real time presents challenges; however, it is critically important to these policy decisions. These station counts are used for modeling used in the AEO which in turn has been used to calculate the F-factor. We would gladly offer to continue to share our data and expertise with AFDC so that they have the latest information on higher ethanol blend availability.

Additional Concerns about EPA’s E85 Estimates

Beyond the concern about station undercount in both of EPA’s methodologies, we have additional concerns about EPA’s projection of the E85 sales volumes in 6 states in Methodology 1 should be representative of sales across the nation. Using historical data from only 6 states is not complete enough to project an adequate F-factor. As pointed out in a recent Edgeworth Economics analysis1, EPA provides no justification for its use of these 6 states and its per station average and highlights that California has seen E85 use grow at a rate of 30 percent compounded annually over the past five years. Further analysis of EIA data by Scott Irwin at the University of Illinois found that E85 use per pump in 2018 was 28,551 gallons, more than double the average per pump between 2007 and 2015.2

These increasing pump volumes and growing availability of E85 as we’ll highlight further highlight why EPA’s methodology is flawed.

As further highlighted in the Edgeworth analysis, there are additional flaws in EPA’s Methodology 2. Again, the undercount of stations that sell higher ethanol blends continues to be a concern. Additionally, EPA uses outdated data that is 4 to 10 years old and presents an inadequate historical perspective on E85 pricing and discounts. These discounts are undercut by the inconsistent administration of the RFS.

State Low-Carbon Policies Continue to Drive Use of Higher Blends

California and Oregon both have implemented low-carbon fuel standards which incentivize the use of E85. AS outlined previously, California’s expanded E85 use is largely based on the foundation of the state’s low carbon fuel standard (LCFS). Because of ethanol’s low-carbon value, we would anticipate that E85 use would only continue to grow. Similarly, Oregon’s Clean Fuel Standard (CFS) incents the use of low-carbon fuels like ethanol. Other states are
considering similar low carbon policies with Colorado’s GHG Pollution Roadmap and LCFS feasibility study and the northeastern states looking at the Transportation Climate Initiative (TCI).

All these policies continue to push for the expanded use of lower carbon fuels like higher ethanol blends like E85.

...

Investment in Higher Blend Infrastructure

Relative to higher blend infrastructure, underground tanks are 20 to 30-year assets while fuel dispensers are 10 to 12-year assets. Retailers and others make these types of investment specifically with long-term growth of higher blends in mind. The U.S. Department of Agriculture (USDA) alone has invested more than $200 million in conjunction with the nation’s leading independent retailers for specific programs to promote infrastructure for higher biofuel blends including E15 and E85. In 2013, the USDA injected nearly $100 million to invest in nearly 5000 dispensers at more than 1400 stations with its Biofuels Infrastructure Program (BIP)3. More recently, the USDA announced an additional $100 million for the Higher Blend Infrastructure Incentive Program (HBIIP), $86 million which is specifically marked for higher ethanol blends.

Under the recent HBIIP program, Growth Energy and its retail partners have secured nearly $30 million for 290 sites that sell more than 400 million gallons of fuel per year to install higher ethanol blends.4 USDA has chosen this investment to drive growth for higher blends furthering growth in the agricultural feedstocks like corn and sorghum that are used as feedstocks for biofuel production. The government’s investment in infrastructure for higher biofuel blends furthers the argument for projecting growth in E85 volumes into the future and should be included in EPA’s F-factor considerations.

Data Supports an upward revision of the F-factor to 0.20

As we’ve outlined, there are several inconsistencies with EPA’s estimates of E85 use and the modeling in AEO 2020. However, we believe when the flaws in AEO 2020 are addressed and policymakers consider the projected growth in E85 stations and uptake, EPA will be justified in establishing a F-factor of 0.20 for model year 2021 moving forward. Growth Energy strongly supports such a conclusion.

In summary, Growth Energy recommends EPA take the following actions:
• Maintain a F-factor of 0.14 until it takes action for an upward revision
• Provide, through immediately issued guidance, 5 years of F-factor continuity and an additional 3-year safe-harbor for automakers for automaker certainty
• Administer the RFS appropriately by applying the 10th Circuit decision to limit small refinery exemptions
• Work with Growth Energy, its retail partners, and the AFDC to appropriately update station data for higher ethanol blends that should be increased to reflect the higher number of stations currently offering E85.
• Using highlighted data and correcting for flaws, provide an updated F-factor of 0.2 for model year 2021 and thereafter

Thank you in advance for your consideration.

Sincerely,

Christopher P. Bliley
Senior Vice President of Regulatory Affairs
Growth Energy

1 “Evaluation of EPA’s Estimates of Annual E85 Volumes”, Edgeworth Economics, October 23, 2020. Attached.

2 “What’s Behind Rising E85 Use?” farmdoc daily, v. 9, n. 13, January 14, 2019, Scott Irwin, available at https://farmdocdaily.illinois.edu/2019/01/whats-behind-rising-e85-use.html.

3 USDA Release: https://www.fsa.usda.gov/programs-and-services/energy-programs/bip/index

4 Growth Energy Release: https://growthenergy.org/2020/10/08/growth-energy-celebrates-new-grants-for-retailexpansion-of-biofuel-blends/

Excerpt from Ethanol Producer Magazine: ACE said it supports and F-factor of at least 0.2 for MY 2021 and later vehicles and encourages the EPA to consider new, forward-looking data which indicate E85 use will significantly rise in the future. “Until such time EPA establishes a 0.20 or greater F-factor, ACE strongly encourages the agency to maintain the 0.14 F-factor, so the value does not default to zero,” wrote Brian Jennings, CEO of Ace. “We believe there are several reasons to support a minimum 0.20 F-factor going forward, including the fact that more stations sell E85 than assumed by EPA and the U.S. Department of Energy, the number of stations will significantly increase thanks to nearly half a billion dollars of infrastructure investment, and volumes of E85 will rise as station owners utilize carbon credit and renewable identification number (RIN) value to price the fuel at retail.” READ MORE

Excerpt from 25 x25: 25x’25 thanks EPA once again for its solicitation for input. It reiterates that EPA must raise Ffactor to 0.20, permanently eliminate the “default to zero” policy, grant a 5-year advance notice and 3 years of
production safe harbor to automakers before F-factor reductions, and support E85 growth by incorporating data
sources and models that reflect – rather than E85 use artificially depressed by past market barriers – the
potential of E85 as a rapidly growing, made in America fuel for the future. READ MORE

Excerpt from Defour Group: Defour Group LLC appreciate the opportunity to comment on EPA's request for input in "E85 Flexible Fuel Vehicle Weighting Factor (F-Factor) for Model Years 2021 and Later Vehicles." The F-Factor is the basis for a credit to automakers for producing flex-fuel vehicles (FFVs) in the CAFE and GHG programs. A higher F-Factor provides more automaker credit, and thus more incentive for automakers to manufacture ethanol-using FFVs. We therefore laud EPA's support for greater regulatory certainty in its F-Factor determination and encourage the agency to adopt a higher F-Factor (of 0.20 or higher) in its next F-Factor guidance.

Setting the F-Factor is not a simple technical exercise but rather requires long-term stable forecasts as well as a recognition of the interactive nature of the F-Factor, FFV production and the demand for E85 fuel. The level of the F-Factor not only reflects the volume of E85 fuel used by a future FFV but also influences what that volume might be. Also there are many other factors that could impact E85 usage in the decades that the FFV is in use.

Historically, EPA has deferred to the Energy Information Administration (EIA) and its Annual Energy Outlook analysis for forecasts of future E85 use. In the future, EPA should calculate an F-Factor anticipates E85's growth potential under a variety of policy options.

Toward that end, the Defour Group recommends that:

The 0.14 F-Factor remain in place until revised and not subject to the default to zero approach used in the past.

Based on the work done by the Alliance of Automobile Manufacturers and others, consider a revised F-Factor of at least 0.20 for 2021 and later model years as a replacement for the 0.14 F-Factor as a means of encouraging the production of more FFVs and increasing the substitution of fossil fuels with biofuels.

Because of the significant impact changes in the F-Factor have on automotive manufacturers' future plans, always give manufacturers five years lead time to comply with any downward revision of the F-Factor. Recognize that historical data and frequently changing forecasts are of very limited use in predicting decades into the future. READ MORE

Excerpt from Alliance for Automotive Innovation: While the unprecedented investment by our members into vehicle
electrification has recently been highlighted, our members also foresee that advanced combustion technologies will continue to be the technology of choice for many of our customers for years to come.

Given the timespan over which combustion technology will continue to be sought by new car shoppers, and the years that those vehicles will remain in the field, low carbon fuels are becoming an increasingly important technology pathway to help achieve carbon reductions while obstacles for electrified vehicles are resolved and the market continues to grow. The goal of Auto Innovators is to ensure that our comments and recommendations help set a positive policy foundation that values the potential of low carbon fuels in contributing toward our shared climate goals.

Achieving our climate goals requires regulators to recognize and incentivize all carbon-reducing technologies. Vehicles and fuels are a system and low carbon liquid fuels, e.g. E85,2 are a CO2-reducing technology that can complement other technologies like electrification. The Agency should look for measures that acknowledge both vehicles and fuels.

FFVs, in combination with E85 fuel use, are a proven technology to cost-effectively achieve real-world petroleum and GHG reductions. FFVs are approved by original equipment manufacturers (OEMs) to utilize blends of ethanol and gasoline that range from 0-85 percent ethanol and are likewise certified to meet emissions standards on this range of fuel blends. The F-factor represents the percentage of time FFVs use ethanol flex fuel (e.g. E85) versus gasoline on average over the lifetime of an FFV.3

The corporate average fuel economy (CAFE) and GHG vehicle regulatory programs rely upon this F-factor to determine the CO2 and fuel economy compliance values for FFVs. Thus, the F-factor influences automakers’ technology decisions based on the value that EPA recognizes and attributes to FFVs.4

Auto Innovators appreciates EPA extending the F-factor of 0.14 for MYs 2016–2018 to MY 2019, and MY 2020 and beyond without defaulting to zero. Providing an F-factor of 0.14 instead of allowing the F-factor to default to zero continues recognition of the benefits of FFVs. However, for manufacturers to have confidence that the F-factor will not be lowered in future model years, EPA should provide adequate lead time in advance of any F-factor reduction.

Significant lead time is necessary for increased FFV volume.

EPA has improved the value proposition for FFVs by not allowing the F-factor to default to zero, but manufacturers still face the risk of EPA reducing the F-factor without significant notice. Given that MY 2021 is currently underway and MY 2022 will begin in less than three months, manufacturers will need significant lead time if they are going to adjust their product lineup to increase FFVs.

Manufacturer product plans are developed years in advance and model years begin a full calendar year ahead of time (e.g. MY 2022 can begin as early as January 2, 2021); therefore, it is imperative that there is a stable F-factor. Auto Innovators recommends that EPA provide at least five years’ advance notice for any downward adjustment to the F-factor, and that EPA allow automakers to use the F-factor for at least three years of production for a model that commences production within that five-year window. The three-year safe harbor allows manufacturers to recoup some of the additional cost that comes with designing and manufacturing FFVs. The chart below provides an example of how
the proposed timing would work.

...

As is noted in EPA’s technical memorandum,5 AEO2020 projects lower FFV sales than AEO2019; however, an established F-factor could certainly alter those projections. Manufacturers respond to regulatory certainty, and a higher F-factor may result in additional FFV model offerings in future model years. An F-factor with sufficient lead time could increase the number of FFV model offerings, which would be expected to translate into greater market penetration and E85 demand. For these reasons, EPA should not rely on historical data for its projections, but instead look to several
factors that may impact FFV production and E85 usage in the future, including F-factor certainty and potential increase above 0.14 if supported by data.

Low carbon fuel standards drive increased renewable fuels.
Low carbon fuel standards will continue to increase renewable fuel availability. California and Oregon have low carbon fuel standards already in place, and several states (Washington, New York, Minnesota, and Colorado) have launched investigations and some proposed legislation for similar programs. In addition to these low carbon fuel standards, the Northeast and Mid-Atlantic states are investigating a transportation cap-and-invest program, the Transportation & Climate Initiative. These programs will lead to increased usage of low carbon and renewable fuels, such as E85. This is another reason that EPA should continue past practices of applying the methodology of projections instead of
historical data for developing F-factors in the future.

Conclusion
A wide range of vehicle and fuel technologies will be needed to achieve significant GHG reductions from the transportation sector going forward, and FFVs can be part of the solution.

Regulatory certainty is imperative as automakers develop product plans; therefore, an F-factor with adequate lead time is necessary for manufacturers to have confidence in their decisions. This regulatory certainty will provide manufacturers with the confidence they need, and potentially increase FFV production and sales. In addition to regulatory certainty, low carbon fuel standards, which continue to be investigated throughout the country, will play a role in E85 usage.

Auto Innovators appreciates EPA’s guidance extending the F-factor of 0.14 for MY 2016–2018 to MY 2019, and MY 2020 and beyond without defaulting to zero. However, for the reasons laid out above, manufacturers need to have confidence that the F-factor will not be reduced without significant notice. Auto Innovators recommends that EPA provide a five-year lead time for any downward adjustment to F-factor and a three-year safe harbor for the start of production of an FFV within that fiveyear window.

If you have any questions on these comments, please contact Dan Bowerson, Director of Energy & Environment at the Alliance for Automotive Innovation, 248-357-4717.

1 Formed in 2020, the Alliance for Automotive Innovation is the singular, authoritative and respected voice of the automotive industry. Focused on creating a safe and transformative path for sustainable industry growth, the Alliance for Automotive Innovation represents the manufacturers producing nearly 99 percent of cars and light trucks sold in the U.S. The organization, a combination of the Association of Global Automakers and the Alliance of Automobile Manufacturers, is directly involved in regulatory and policy matters impacting the light-duty vehicle market across the country. Members include motor vehicle manufacturers, original equipment suppliers, technology and other automotive-related companies and trade associations. The Alliance for Automotive Innovation is headquartered in Washington, DC, with offices in Detroit, MI and Sacramento, CA. For more information, visit our website http://www.autosinnovate.org.

2 U.S. Department of Energy, Alternative Fuels Data Center, https:/afdc.energy.gov/fuels/ethanol_e85.html

3 See Letter of Byron J. Bunker, Director of Compliance Division, Office of Transportation and Air Quality, U.S.
Environmental Protection Agency, “E85 Flexible Fuel Vehicle Weighting Factor for Model Year 2016-2018 Vehicles,”
(November 12, 2014) at https://iaspub.epa.gov/otaqpub/display_file.jsp?docid=33581&flag=1 (hereafter “EPA’s 2014 Ffactor Guidance,” at p. 1, 4.

4 See 40 C.F.R. § 600.510-12(c)(2)(v) (regarding CAFE) and (j)(2)(vi) (regarding vehicle GHG compliance).

5 https://www.epa.gov/sites/production/files/2020-08/documents/f-factor-technical-memo-fy20-determination-2020-08-18.pdf