Big push is on to produce E85, but is there a market to use it?

The biofuel business is booming, with the building of production facilities in high gear. But some are now wondering whether U.S. motorists will be able to use all that will be produced.

At the current construction pace, within the next few years the production capacity will close in on the limit of how much ethanol can be used as a 10-percent additive, called E10, in gasoline, The Des Moines Register reported.

The industry is counting on boosting the sales of a higher blend of ethanol, E85, a fuel that is 85 percent ethanol and 15 percent gasoline, and is looking for Congress to help increase its availability and use. One bill introduced by Sen. Barack Obama, D.-Ill., would create a new tax credit to cut the price of E85.

Another bill, The Biofuels Security Act of 2007, sponsored by Senators Tom Harkin, D-Iowa, and Richard Lugar, R-Ind., would force oil companies to add E85 pumps and require automakers to step up production of alternative-fuel vehicles.

But finding an E85 pump will continue to be difficult, The Register pointed out in its
Jan. 16 article. Wal-Mart and other major retailers won't offer the fuel until mid-2008, at the earliest, the newspaper reported.

The latest efforts to legislate increases in E85 production and distribution are opposed by the National Petrochemical & Refiners Association. The Biofuels Security Act would increase the renewable fuels standard to 30 billion gallons in 2020 and 60 billion gallons in 2030. The bill would also require that the major oil companies carry E85 at half of their service stations by 2017.

NPRA Executive Vice President Charles T. Drevna said in a Jan. 5 statement:

“Ethanol from corn is not economic or energy efficient. It has lower energy content than gasoline, has ozone emission problems, especially in warmer weather, and poses transportation and logistical issues. Already, recent reports have indicated that projected ethanol demand is likely to create unacceptable food price increases for those in society least able to afford it: the poor.

“Ethanol is not without its strong points, of course,” Drevna said.

“Besides extending the fuel supply, ethanol increases octane, has dilution benefits that help meet RFG specifications and limits CO emissions. Clearly, U.S. refiners will continue to rely on ethanol as a vital gasoline blendstock. But while NPRA members are among the largest users of ethanol, we believe allowing the market to operate is the best way to address consumer needs at reasonable prices.

“Currently, about 700 service stations – mostly in the Midwest – provide E85,” Drevna noted. “This volume accounts for less than 1 percent of the total ethanol volume used in the nation’s fuel supply.”

Drevna also argued that no infrastructure has been built to store, transport and/or sell E85, and he said studies of the impact of E85 are rare.

Iowa, the nation's No. 1 maker of ethanol, has staked a big slice of its economic future in the industry's growth.

"It's a little worrisome that the industry might be overbuilding to their own detriment," Ron Litterer of Greene, Iowa, a leader of the National Corn Growers Association, told The Register. Litterer is an investor in the Midwest Grain Processors ethanol plant at Lakota, Iowa.

The nation now uses about 140 billion gallons of gasoline per year, and if all of it contained 10 percent ethanol, refiners would need 14 billion gallons of ethanol, according to The Register.

The industry's production capacity will reach 11.4 billion gallons per year once existing construction projects are completed. And numerous additional plants are being planned around the country, including four projects announced last week by agribusiness giant Cargill Inc.

"The time when ethanol will saturate the blend (E10) market is on the horizon, and the industry is looking forward to new market opportunities such as E85," Ron Miller, president of Aventine Renewable Energy LLC, said in testimony to the Senate Agriculture Committee last week.

The limit on the market for ethanol as a 10-percent gasoline additive is less than 14 billion gallons because of geographic constraints and other issues, said Drevna, the executive vice president of NPRA.

The National Ethanol Vehicle Coalition puts the number of stations selling E85 at about 1,000 – about 300 more than the NPRA’s estimate, but still a fraction of the nation’s 170,000 service stations, said the National Ethanol Vehicle Coalition.

A federal tax credit of up to $30,000 was enacted to help defray the cost of converting stations to sell the fuel.

But the opening of new stations was slowed considerably by the decision of Underwriters Laboratories last year to suspend its certification of E85 service-station dispensers. UL, an independent organization that certifies the safety of everything from toasters to gasoline pumps, has decided to develop standards for certifying the pumps but first will have to research the impact of alcohol fuel on pump parts.

Wal-Mart and other major retailers have put off installing E85 pumps at their filling stations until UL finishes the certification process, likely in the second quarter of 2008, said Phil Lampert, executive director of the NEVC.

The research hasn't even started yet because UL officials have not decided where or how it should be conducted. In high concentrations, alcohol can corrode some types of metal, such as aluminum, and damage conventional rubber fittings and hoses. E85-compatible pumps are manufactured or retrofitted with different materials.

"We are certainly interested in getting that (research) going so that down the road we can initiate testing of dispensers," said John Drengenberg, UL's consumer affairs manager.

A group of 37 state governors, including outgoing Iowa Gov. Tom Vilsack, asked Congress last week to take steps to increase the availability of E85 and the number of motor vehicles that can use it. The governors called for providing financial incentives to automobile manufacturers to equip vehicles to run on E85. About 8 percent of the nation's cars and trucks can now run on the fuel.

Even where the fuel is available, getting motorists to buy it can be a challenge because of the sharply reduced mileage.

"We're going to continue with incentives to produce, but we need incentives to use" ethanol, said Jon Doggett, a lobbyist for the National Corn Growers Association.