E15 runs head-on into market reality

Posted on Written by Reagan Haynes

e15-1Issue booted back to Congress as EPA finds massive opposition and an unattainable standard

The Environmental Protection Agency’s hands are tied when it comes to E15. So says the National Marine Manufacturers Association, arguing that the EPA has punted the issue back to Congress because it is incapable of meeting mandates outlined in the Renewable Fuel Standard and does not have the authority to change them.

A recent EPA proposal that sought to raise the level of ethanol in the fuel supply was overwhelmingly rejected during its public comment period, prompting the agency to turn to Congress for help on meeting the mandate. “The EPA’s hands are truly tied,” says NMMA lobbyist John McKnight. “They have a mandate from Congress, so this is what they have to do. Under the RFS, we’re supposed to have 36 billion gallons of ethanol in the fuel supply by 2022, which, based on projections, is technically unfeasible.”

The EPA proposal would have made E15 more widely available in an effort to meet the requirement that the agency increase the amount of ethanol in the fuel supply. “We just went to a meeting with the EPA … and they said, ‘We have received an overwhelming number of negative comments against our proposal,’ ” McKnight says. “Even the state of California, which has a big influence on the EPA’s decisions, said, ‘Don’t change from E10 to E15.’ Now the EPA is taking the football and punting back to Congress and saying, ‘Our hands are tied now unless you do something.’ ”

When the standard was amended in 2007, it was written with the assumption that fuel consumption would increase, McKnight says. But two things happened. New corporate average fuel economy (CAFE) standards have required cars to become more efficient, McKnight says. “Also, there was a recession,” he adds. “We’re seeing for the first time since the Industrial Revolution a decline in fuel usage in this country.”

The decline means that to hit the static requirement of 36 billion gallons of ethanol in the fuel supply, the EPA would have to increase the amount of ethanol “astronomically,” to about E30 or E40, McKnight says.

“That’s the problem,” says NMMA regulatory and legal affairs director Nicole Vasilaros. “The mandate is so hard-lined that it doesn’t accommodate the realities in the marketplace, so the EPA needs to go back to Congress” to find out how they want to address the problem.

Reform legislation

Several bills are pending in the House and Senate to reform or repeal the standard. U.S. Rep. Bob Goodlatte, R-Va., is spearheading a bipartisan bill to eliminate the standard and cap the amount of ethanol that can be blended into the fuel supply. “The RFS debate is no longer just a debate about fuel or food,” Goodlatte said when he announced the bill in April. “It is also a debate about jobs, small business, economic growth and freedom.”

The mandate has triggered a “domino effect that is hurting American consumers, energy producers, livestock producers, food manufacturers and retailers,” Goodlatte says. “Extreme drought last summer and record corn prices made it clear that the RFS is not working.”

e15-2A bipartisan bill introduced this summer in the Senate also seeks to repeal the standard. Sens. John Barrasso, R-Wyo., Mark Pryor, D-Ark., and Pat Toomey, R-Pa., introduced The Renewable Fuel Standard Repeal Act. Barrasso says the standard is “broken in its entirety.” Toomey calls it “ill-advised and unsustainable.”

“The biofuel use requirements have a negative effect on our economy,” Toomey said when he announced the bill in June. “Not only does the mandate likely harm our car engines, it drives up farmers’ and ranchers’ costs and causes increased prices in almost everything we buy in the grocery store. Current rules require refiners to blend increasing amounts of biofuels, especially corn ethanol, into the nation’s gasoline supply. The result is that corn prices have shot up, and this is troubling for Pennsylvania livestock farmers, who devote about half their operating costs to feed. I have heard firsthand from many constituents just how damaging this policy has been. And it is particularly harmful to lower-income families, who spend a greater percentage of their paycheck on groceries.”

In May, Sens. Bob Corker, R-Tenn., and Joe Manchin, D-W.Va., introduced a bill to “fix unintended consequences” of the renewable fuels mandate. “It’s become obvious that the Renewable Fuel Standard is having some unintended consequences,” Corker said when the bill was introduced. “This bill is a common-sense step toward potentially mitigating gasoline price increases the RFS may contribute to in the near future. Because its mandated biofuel volumes are too high, the RFS is also unintentionally incentivizing ethanol imports. Our bill helps to correct that problem by more properly aligning mandated levels with what we produce domestically.”

There are other bills pending, all seeking to address the issues in various ways, McKnight says. The NMMA has joined a large coalition of other groups, including petroleum, environmental and food organizations, to support any bill that seeks to change or repeal the standard.

In the courts

In June the U.S. Supreme Court denied a petition alleging that the EPA overstepped its authority by allowing E15 into the overall supply despite prohibiting its use in marine and other engines. The NMMA is part of a coalition composed of fuel, manufacturing and food groups that had brought the case to the nation’s highest court in hopes of getting the EPA’s waiver allowing E15 into the marketplace overturned.

That decision is leading the NMMA to join other groups in revisiting a court case aimed at protecting consumers from unwittingly filling tanks with E15, because the fuel has been shown to be harmful to many engines, Vasilaros says. The case alleges that the EPA has not done enough to prevent “misfueling,” or having E15 mistakenly land somewhere, such as in a boat, where it can harm the engine.

The EPA’s current mitigation plan consists largely of small signs labeling pumps and a 5-gallon minimum to ensure no E15 left in a fuel hose unwittingly gets into an engine it could harm. A survey last year found that 35 percent — six of 17 — of the registered sellers of E15 are not labeling the higher-ethanol gas at the pump.

The survey also found that several service stations selling E15 were not registered as required by the standard, which calls for an overall reduction in the fuel supply through the use of biofuels. The sellers are in Iowa, Kansas and South Dakota. The survey, performed by the RFG Survey Association, did not name the retailers that weren’t in compliance.

Testing alternatives

The NMMA is also joining with such groups as the American Boat & Yacht Council and the engine manufacturer BRP (Evinrude) to seek alternatives to E15 through Department of Energy-funded research. The department released a 2011 report on engines using E15 that revealed performance issues such as stalling, corrosion leading to oil or fuel leaks, increased emissions, and damaged valves, rubber fuel lines and gaskets. The results reinforced the marine industry’s position that E15 is not a suitable fuel for boat engines. The groups are continuing initial testing on isobutanol in the hope it will become a promising alternative to E15.

“When we got involved in this three years ago, we didn’t want to be an industry that just says no. We wanted to be industry that says, ‘No, but here’s a solution,’ ” McKnight says.

Tests showed that ethanol in concentrations higher than 10 percent caused “catastrophic engine failure,” says NMMA legislative counsel Jeff Gabriel. Tests on other engines, such as those on snow blowers and lawnmowers, showed similar findings, McKnight says. “There’s a whole range of engines out there that do not run with increased oxygen in the chamber.”

e15-3The key to increasing momentum against E15 comes from having a third party, the National Academy of Sciences, conduct independent testing, McKnight says.

The NMMA, ABYC and engine manufacturers are following up on preliminary laboratory investigations that indicate a combination of three fuels, including 8 percent isobutanol, 5 percent ethanol and 87 percent gasoline, can achieve larger quantities of biofuel while inhibiting the negative effects of ethanol. “This is cutting-edge research. No one’s ever done this before,” McKnight says. “So far, the best way I can describe it is we’ve seen no durability issues to date. If the head on the engine was starting to wobble a little bit, I’d say, ‘Uh oh, we’ve got a problem,’ but we don’t see technical issues at this point.”

Gabriel says it’s important to continue shining a spotlight on the ethanol issue. “In the strategic waiver process, there’s wiggle room, so there’s concern that with everything Congress has to deal with coming up in the fall — mostly the next round of fiscal cliff fights — there’s concern that Congress will take its eye off the ball,” he says.

Congress seems geographically split on ethanol instead of along party lines, so Vasilaros hopes the matter will gain traction. “Hopefully ours is an issue they can get behind,” she says.

This article originally appeared in the October 2013 issue.

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