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Wednesday, July 20, 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. 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. EPA deferred a decision on MY2001-MY2006 cars and light trucks until January 2011, when the agency expanded the waiver for those vehicles after analyzing final testing data from the Department of Energy (DOE). 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.

Of key concern before the waiver decision was made is the fact that a 10% limitation on ethanol content 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 MY2001 and later vehicles—roughly two-thirds 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.

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. 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., retail pumps and tanks) 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 be willing to sell E15 alongside or in lieu of 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 rules, including pump labeling, to prevent misfueling of E15 in vehicles not approved for its use. EPA finalized those rules in June 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 would still need to register E15 with EPA and submit health effects testing for EPA to review—a process that had not been started as of late June 2011.

Date of Report: July 1, 2011
Number of Pages: 17
Order Number: R40445
Price: $29.95

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