With the Energy Independence and Security Act signed into law by former President Bush at the end of 2007, the new aggressive renewable fuels standards (RFS) requires the petroleum industry to put 7.5 billion gallons of renewable fuel into the marketplace by 2012 and at least 36 billion gallons by 2022.
To achieve that ambitious goal, many are arguing that the E10 blend will have to be pushed above that ethanol percentage. In fact, the numbers prove just that.
“The RFS puts an 11 or 12 billion gallon requirement on the refiners to blend,” said Dan Gilligan, president of the Petroleum Marketers Association of America. “And because there aren’t enough gasoline gallons to blend them in, one of the solutions the ethanol industry has come up with is to go to an E15 blend to hit those 11 or 12 billion gallons.”
With the E10 legal maximum, the market would only be able to meet less than half of the 36 billion gallon mandate. Different voices in the industry are contributing ideas on how to meet this goal.
“EPA has suggested a different way…one of their options is to add 15 to 25,000 new E85 stations in the country,” said Gilligan.
“If anyone looks at the math of the RFS, they’ll know we need to do more than E10 and E85 (dispensers),” said Ron Lamberty of the American Coalition for Ethanol.
Regardless of the varying ideas on how to get to the mandate, groups like the PMAA and National Association of Convenience Stores (NACS) are deeply concerned about the lack of protection for petroleum retailers selling higher ethanol blends. One of the major problems facing these retailers is liability issues. The infrastructure of selling E10-plus fuels is particularly problematic, as none of the E85 dispensers have been officially certified by Underwriters Laboratories (UL). Local safety officials, or fire marshals, often require a UL certification for fuel retail storage/dispensing equipment.
There may be ways around the UL certification, such as some fire marshals accepting manufacture certification to prove the safety of the equipment. However, retailers also have to meet the requirements of insurance companies and could face financial liability issues if there proves to be any problems, such as a misfuel by someone with a car other than a flex-fuel vehicle (FFV) using E85.
Lamberty said he’s not worried about customers, ethanol product or equipment. He said if regular cars do fuel up using E15, 99 percent of the time it won’t matter. However, he is concerned about lawyers.
“I’m worried about an opportunistic lawyer…who decides to sue some folks,” said Lamberty. “That’s what you have to protect them (retailers) against.”
To address some of these issues, Growth Energy and 54 ethanol manufacturers submitted an application for a waiver of the prohibition of the introduction into commerce of certain fuels and fuel additives set forth in section 211 of the Clean Air Act.
The American Coalition for Ethanol has signed off on the waiver of mid-level ethanol blends to get more renewable fuels into the marketplace. Lamberty said ACE entered into the agreement because more needed to be done on the liability issues, but he wants to make it clear that it’s not a reflection that there’s something wrong with the higher ethanol blends, as some have suggested. Rather, ACE just wants to protect the retailers.
Also of concern is air quality issues associated with higher ethanol blends.
“A lot of big cities, where they have restricted air emissions limits, have said they will not approve E15 because it does increase the re-vapor pressure, and increase smog-forming ozone,” said Gilligan.
The E15 Waiver addresses this and is still under review, but it is clear that unless some changes are made, the nation will hit the E10 blend wall around 2013.
“There’s been an unbelievable focus by everyone in the government to address the issues of how effectively cars and light trucks will run on E15, that seems to be at the top of their list,” said Gilligan. “Further down on their list are concerns about infrastructure, so it’s been a hard pass for us to get regulators to focus time and attention on underground storage tanks, piping and dispensers and how they might perform with E15. So that’s going to be a challenge.”
Meanwhile, the financial benefits, both short and long term, to retailers who decide to go with higher-ethanol blends can payoff. The American Coalition for Ethanol has recently started the “Blend Your Own Ethanol” campaign to educate retailers on these perks. Lamberty said the program explains that marketers who put in the blending pumps can get tax credits for just selling E85. In fact, in some states it can be cheaper to put in an E85 pump than a regular pump with the tax credit, he said.
According to the campaign, blending your own gives petroleum retailers and customers an option if they want more ethanol than just E10, but less than E85.
“We want customers to have the option, whether it be E85 or E30,” Lamberty said. He likened it to the oil companies’ creation of the midgrade gasoline when they saw some customers filling up with some unleaded and a little of the premium. Plus, he added, if the mandate goes to E15 or E20 someday, retailers won’t have to go through the whole process of getting new dispensers again.
However, even though the blend wall is fast approaching, the infrastructure legality issues remain.
“Of course, many members of Congress, those predominantly from those in agriculture, farm states, would like to see EPA move more quickly on E15. So there is interest among members of Congress to find a way to resolve the retailer liability concerns,” said Gilligan. “They’re open-minded… and courteous and they’re concerned, but there’s a natural reluctance by members of Congress to get into liability and reducing any business liability.”
Recently, UL made an announcement about it supporting decisions made by local authorities to permit the sale of gasoline containing up to 15 percent ethanol through dispensers certified and listed under UL 87. But questions still remain on how that support affects, if at all, the liability retailers may face with selling E15 through non-certified equipment. It is so uncertain that in January NACS, along with several other groups, sent a letter to the EPA asking that the E-15 waiver be denied. The groups are requesting more test data on mid-level ethanol demonstrating that there would be no adverse effects on vehicles.
New Certification Path
UL said it was providing a new certification path for fuel dispensers for mid-level ethanol blends up to E25. But as some have pointed out, such as NACS vice president of government relations John Eichberger, the UL announced the certification process for E85 dispensers back in 2007 and yet there are no UL certified E85 dispensers to this day.
“Manufacturers have chosen or not chosen to submit products to us,” said John Drengenberg, Consumer Safety Director for Underwriters Laboratories.
However, even if some manufacturers, say Gilbarco, submitted their dispensers, the whole system needs to be submitted, including nozzles, the electric motor, etc. If all parts are not submitted, then it won’t receive the UL certification.
“It’s like a toaster, if a toaster has plastic, then we have to test the plastic,” Drengenberg said.
The safety tests performed on the dispensers, missing pieces or not, takes 16 weeks. UL exposes the system to the percentage of ethanol in question and perform a number of tests, such as corrosivity.
Drengenberg said even though the UL is not part of the government, they do work with the EPA and the DOE and they knew those organizations are starting to consider other things besides just E10 and E85 blends, which may have prompted the new certification path.
It was also recently announced that the UL supports the sale of a higher percentage of ethanol fuel through E10 dispensers. Drengenberg said the “science tells us that 15 percent ethanol is acceptable,” but that may not mean “E15” is acceptable. “Everyone in the industry knows E10 may not have 10 percent ethanol, it could be 8 percent.”
However, the move to higher ethanol blends might not come anytime soon. The EPA announced last December that they were officially delaying the decision on whether to raise the allowable percentage of ethanol in blended gasoline to 15 percent. They instead pushed it back to mid-2010, due to pending results on on-going tests of E-15 use in engines.