Update on Ethanol Blend Issues

April 14, 2009 07:00 PM

via a special arrangement with Informa Economics, Inc.

CRS report gives detailed background on ethanol blend hike issues

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

The following edited information is based on a Congressional Research Service report, Intermediate-Level Blends of Ethanol in Gasoline, and the Ethanol “Blend Wall', by Brent Yacobucci:

-- Issue: On March 6, 2009 Growth Energy (on behalf of 52 US ethanol producers) applied to the Environmental Protection Agency (EPA) for a waiver from the current Clean Air Act limitation on ethanol content in gasoline. Currently, ethanol content is capped at 10 percent (E10) by volume; the application requests an increase in the maximum concentration to up to 15 percent (E15).

-- EPA action: Under the Energy Independence and Security Act (EISA, PL 110-140), the EPA Administrator must grant or deny the waiver request within 270 days of receipt (December 1, 2009). To grant the waiver, the petitioner must establish to EPA that the increased ethanol content will not “cause or contribute to a failure of any emission control device or system” to meet emissions standards. EPA must consider short- and long-term (fill useful life) effects on evaporative and exhaust emissions from various vehicles and engines, including cars, light trucks, and non-road engines. Other factors affecting consideration of the blend include vehicle and engine warranties and the effects on infrastructure.

Before being amended by EISA, the language in Section 211(f)(4) stated that “if the Administrator has not acted to grant or deny an application under this paragraph within 180 days of receipt of such application, the waiver authorized by this paragraph shall be treated as granted.” The amended section does not now specify the status of a waiver request if EPA neither grants nor denies the request within 270 days.

A question raised is whether EPA can grant a partial waiver. For example, some contend that is is possible for EPA to quickly grant a waiver to allow E12 or E13, and take more time to review Growth Energy's application for up to E15. USDA Secretary Tom Vilsack has supported this strategy. It is unclear whether EPA has authority to grant a partial waiver under the Clean Air Act, although EPA does have the authority to determine that E12 or E13 is “substantially similar” to gasoline.

-- Blend wall: The “blend wall” is the upper limit to the total amount of ethanol that can be blended into US gasoline. Currently, gasoline content is limited to 10 percent by volume, and in 2008 gasoline consumption was around 140 billion gallons. Therefore, the current blend wall is roughly 14 to 15 billion gallons of ethanol that could be blended into gasoline. Under the Renewable Fuel Standard, gasoline blenders are likely to hit a limit of ethanol use in the next few years. A limit of 10 percent ethanol means that ethanol for gasoline blending (not including E85) likely cannot exceed 15 billion gallons per year. This “blend wall” is the maximum possible volume of ethanol that can be blended into US motor gasoline. It is likely that the actual limit is lower since older fuel tanks and pumps at some retail stations may not be equipped to handle ethanol-blended fuel. Because of this blend wall, there is interest, notably among ethanol producers, in increasing the allowable concentration of ethanol in gasoline. While EPA's possible approval of the waiver request would address one component of the blend wall, the other impediments – vehicle and engine warranties and distribution infrastructure – would likely still need to be addressed before ethanol use in gasoline were taken beyond 10 percent.

-- Approval of new fuels and fuel additives: For a blend of gasoline and gasoline additives to be approved under Section 211(f)(1)(A) of the Clean Air Act, it must be “substantially similar” to unleaded gasoline. EPA has defined “gasoline” to have an upper limit of 2.7 percent oxygen content (by weight), effectively limiting the ethanol concentration to roughly 7.5 percent (by volume). However, Section 211(f)(4) of the Clean Air Act allows manufacturers of fuels and fuel additives to apply for a waiver from the “substantially similar” requirements if they can prove that the use of the fuel or additive will not “cause or contribute to” a vehicle not meeting applicable emissions standards over its useful life.

EPA has twice granted waivers for 10 percent ethanol under Section 211(f). The first was granted in 1978 to Gas Plus, Inc. for blends of ethanol up to 10 percent. The second was in 1982 to Synco 76 Fuel Corp. for a blend of 10 percent ethanol plus a proprietary additive. To allow the use of E15 or E20, EPA would need to revise its definition of “substantially similar” to allow a higher oxygen content, or a manufacturer would need to petition EPA for a waiver under Section 211(f).

-- What studies or data must accompany a Section 211(f) waiver request? According to EPA, there are no specific guidelines for what data must accompany a waiver application. However, a submission must include data on both evaporative and exhaust emissions. According to EPA, the application must include an assessment of the health effects of the fuel (e.g., inhalation exposure studies), and should also include data assessing the durability of vehicles and vehicle parts using the fuels. These include assessments of the compatibility of the new fuel (or blend level) with engine materials, and the effects on operability and performance. Because gasoline is also used in other engines (lawnmowers, boats, etc.), the long-term effects on emissions and engine durability for these engines must also be studied, according to EPA.

-- Timelines of studies: Preliminary research has been completed or is ongoing on many of the previously detailed requirements. Much of the preliminary research has been conducted by or for the state of Minnesota, which has a state law requiring the use of E10 across the state. Assuming E20 is approved as a motor fuel, the state will mandate its use starting in 2013. In a presentation to EPA's Clean Air Act Advisory Committee's Mobile Sources Technical Review Committee, representatives of Chrysler and Honda said much of the comprehensive research will not be completed before the end of 2009. Similar research must be completed for non-road engines. However, their timeline shows that the planning for that research was still incomplete.

-- Are there other means to approve higher blends other than succession Section 211 waiver request, such as executive order or other administrative action? The provisions of Section 211 are explicit, and there seem to be few options outside of the Section 211(f)(4) waiver process for E15 or other intermediate blends to be approved. While there may be no administrative action that could permit the use of E15 other than an EPA waiver or a determination that E15 is “substantially similar” to gasoline, there are potential legislative options. These include:

* amending the Clean Air Act to explicitly allow the use of E15 (or some other level of ethanol);
* amending the Clean Air Act to provide expedited approval of higher levels of previously approved fuel additives; and
* mandating the production and sale of flexible fuel vehicles (since intermediate blends between E85 and E0 – straight gasoline with no ethanol – are already approved for use in these vehicles), and promoting (or mandating) the use of E85 fuel.

-- Growth Energy's waiver application: In their application, Growth Energy cites a Department of Energy (DOE) study that found a statistically significantly decrease in carbon monoxide emissions using E15, and a marginally significant decrease in non-methane hydrocarbon emissions. The same study also found a statistically significant increase in acetaldehyde emissions, and a marginally significant increase in formaldehyde emissions – both regulated as toxic air pollutants under Sections 202 and 211 of the Clean Air Act. However, the fact that emissions increased using the fuel is not enough for EPA to deny the waiver: EPA would need to prove that that increase in emissions is enough to cause the vehicle or engine to fall out of compliance with emissions standards. Growth Energy asserts that the DOE study and other studies have found that the use of E15 results in emissions within applicable limits.

-- Other issues: EPA approval is not the only hurdle in enabling the use of intermediate-level ethanol blends. A key non-vehicle issue is whether existing infrastructure can support ethanol blends above E10. Like automobiles, most existing gasoline tanks and pumps are designed and certified to handle up to E10. Even if the fuel is approved by EPA for use in motor vehicles, presumably fuel suppliers would be unwilling to sell the fuel unless they are confident that it will not damage their existing systems or lead to liability issues in the future. Otherwise, it seems doubtful that fuel suppliers would voluntarily upgrade their systems to handle the new fuel. (Underwriters Laboratories (UL), an independent testing and certification company recently announced guidance supporting the use of ethanol blends up to a maximum of 15 percent in existing fuel pumps currently certified to dispense E10. However, according to the same announcement, UL stated that “under normal business conditions, E10 at the dispense can vary from about seven to 13 percent ethanol.” Assuming a similar variance would exist for E15, it is likely that under normal conditions, ethanol concentrations would exceed the 15 percent limit. Therefore, a higher maximum level, perhaps 18 percent, would be necessary to allow those pumps to be certified to deliver E15.)

Besides fuel supply concerns, for vehicle and machine owners to accept the new fuel, engine and auto manufacturers would likely need to convince their customers that both new and existing equipment would not be damaged by using the new fuel, and that its use would not void vehicle and equipment warranties. This may be especially difficult for small-engine manufacturers and users who are currently concerned about the effects on their engines from E10, let alone higher blends of ethanol.

Comments: Another very good and helpful CRS publication, which clearly identifies the complexities of this issue.

Meanwhile, Renewable Fuels Association (RFA) President Bob Dinneen on Tuesday said he expects the Environmental Protection Agency (EPA) will issue a notice “within days” to begin collecting public comment on a petition to increase maximum blend percent for ethanol beyond the current 10 percent maximum for non-flex fuel vehicles. "I absolutely believe that when all the science is in, the efficacy of using greater than 10 percent blends will be validated," Dinneen told reporters at an Energy Information Administration summer energy outlook conference, according to Reuters.

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


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