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Thursday, January 6, 2011

Intermediate-Level Blends of Ethanol in Gasoline, and the Ethanol “Blend Wall”

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

On March 6, 2009, Growth Energy (on behalf of 52 U.S. ethanol producers) applied to the Environmental Protection Agency (EPA) for a waiver from the Clean Air Act (CAA) limitation on ethanol content in gasoline. Ethanol content in gasoline for all uses had been capped at 10% (E10); the application requested an increase in the maximum concentration to 15% (E15). A broad waiver would allow the use of more ethanol in gasoline than is currently permitted.

On October 13, 2010, EPA issued a partial waiver for the use of E15 in model year (MY) 2007 and later passenger cars and light trucks. The agency also announced that it could expand the waiver to MY2001-2006 cars and light trucks after it receives final testing data from the Department of Energy (DOE). At the same time, EPA denied the waiver request for the use of E15 in MY2000 and older vehicles, and in motorcycles, heavy trucks, and non-road applications, citing a lack of sufficient data to alleviate concerns about potential emissions increases from these engines. Concerned about potential damage by E15 to equipment not designed for its use, a group of vehicle and engine manufacturers has challenged the partial waiver in court.

The 10% limitation leads to an upper bound of roughly 15 billion gallons of ethanol in all U.S. gasoline. This “blend wall” will likely limit the fuel industry’s ability to meet an Energy Independence and Security Act (EISA, P.L. 110-140) requirement to use increasing amounts of renewable fuels (including ethanol) in transportation. To meet the high volumes mandated by EISA, EPA recognized in a November 2009 letter to Growth Energy that “it is clear that ethanol will need to be blended into gasoline at levels greater than the current limit of 10 percent.” The partial waiver for newer vehicles—roughly one-third of the cars and light trucks on the road in 2011—will allow the use of more ethanol going forward, assuming other conditions are met. Expanding the waiver to MY2001 and later would cover an additional one-third of vehicles.

To receive a 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 is to consider short- and long-term effects on evaporative and exhaust emissions from various vehicles and engines, including cars, light trucks, and non-road engines.

In addition to the emissions concerns, other factors affecting consideration of the blend wall include vehicle and engine warranties and the effects on infrastructure. Currently, no automaker warrants its vehicles to use gasoline with higher than 10% ethanol. Small engine manufacturers similarly limit the allowable level of ethanol. In addition, most gasoline distribution systems (e.g., gas pumps) are designed to dispense up to E10. While some of these systems may be able to operate effectively on E15 or higher, their warranties/certifications would likely need to be modified. Further, many current state laws prohibit the use of blends higher than E10. Questions have been raised whether fuel suppliers would even be willing to sell E15 alongside E10.

As EPA’s waiver only applies to newer vehicles, a key question is how fuel pumps might be labeled to keep owners from using E15 in older vehicles and other equipment. Along with the waiver decision, EPA proposed new pump labeling rules to indicate which gasoline pumps dispense E15. The comment period for the proposal runs through January 3, 2011. EPA also sought comment (through December 17, 2010) on how to update guidance for underground storage tank (UST) owners, who must demonstrate compatibility of UST components with E15 before they may sell the fuel. Further, for EPA to allow the sale of E15, a fuel supplier still needs to register E15 with EPA and submit health effects testing for EPA to review.

Date of Report: December 30, 2010
Number of Pages: 16
Order Number: R40445
Price: $29.95

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