Trying to Blend In

E15, higher grades of ethanol fight for a right to exist at the pump.

By  Erik J. Martin, CSP Correspondent

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Uncle Sam’s Take

Congress passed the second Renewable Fuels Standard (RFS) in 2007, requiring annual production of 15 billion gallons of ethanol by 2015 and at least 36 billion gallons of qualified renewable fuels that will need to be blended into the fuel sup­ply by 2022.

According to NACS, however, fore­casts suggest that only 15% of the auto­mobiles running in 2022 will be able to use such fuel, and $22 billion would be needed for retailers to upgrade their dispensers and tank systems to carry the higher ethanol blend.

To help lessen these transitional costs, NACS is urging Congress to approve leg­islation it helped introduce last March: the Domestic Fuels Protection Act and the Domestic Fuels Act (H.R. 4345 and S. 2264, respectively). If enacted, these two measures would offer legal protection for retailers and specify compliance with all applicable federal, state and local laws regarding compatibility if their equipment complies with the required EPA guidelines. As a result, retailers who sell a new fuel such as E15 can save tens of thousands of dollars otherwise spent on unneces­sary equipment replacement and be safe­guarded from legal liability for misfueling if they abide by the labeling requirements.

Additionally, the Coalition for E85 is pressing Congress to approve E85 as an alternative fuel, for which it would be given a special tax credit enjoyed by natu­ral gas, propane and hydrogen. VEETC made E85 ineligible for the alternative-fuel tax credit, but now that VEETC is gone, coalition spokesman Phil Lampert believes the tax code should be modified to include E85.

Eichberger says he and groups such as Coalition for E85 “are frustrated in Washington,” particularly by the “blend wall”—the tipping point when the mar­ket will not be able to increase blending ethanol into gasoline—which is created by RFS-mandated volumes for cellulosic ethanol (made from sources such as algae) and renewable fuels.

“The problem is that the RFS imple­mentation schedule over the next two years is 15 billion gallons that have to be blended,” says Eichberger. “If you put 10% ethanol into every gallon of gaso­line we sell, you’re only marketing 13.4 billion gallons of ethanol. So even if we start marketing E15 broadly, it will buy us maybe a year or two before we hit the next blend wall.”

Indeed, based on Energy Information Administration pro­jections, E85 and E10 will satisfy only as much as 56% of the RFS-mandated volumes in 2035. The remainder must come from other alternative fuels that have yet to hit the market.

Gilligan predicts that when Congress returns to session in 2013, there will be a move to reform the RFS to make it fit better with the demand for gas, “which I believe will be flat for the next 20 years,” he says.

“You can’t keep increasing the volume of ethanol that you put into gasoline, because you’re simply not selling as much gas.”

Lampert says that, despite the Coalition for E85’s best efforts to sway lawmakers on Capitol Hill, given the political season and lack of any type of coordination or facilitation of public policy, favorable E85 legislation probably doesn’t have a chance of passing until after the presidential election.

Speaking of which, President Obama’s and Mitt Romney’s respective stances on ethanol are interesting to compare. The Obama administration has demonstrated strong support for the ethanol industry, and ethanol production has been given top priority by his Department of Agriculture. The administration has offered farm subsidies and farm loans for corn growers, tax credits for ethanol producers and tariffs on overseas ethanol. Also, in 2011 the USDA supported the rollout of 10,000 ethanol flex-fuel pumps across the country.

Romney backs ethanol and has said in the past that he sup­ports federal subsidies to help get the ethanol industry on its feet, but he has criticized long-term government subsidies for ethanol. Before VEETC expired, Romney suggested he wanted to see a more gradual decrease in the VEETC tax credit rather than the sudden expiration that did occur.

Worthy Investment for Some

Aside from an unclear and inadequate U.S. energy policy, many experts say the single biggest impediment to wider adoption of higher-grade ethanol fuels is insufficient infrastructure.

“There are 700,000 gas pumps in America, yet probably less than 1,000 have been certified for anything over E10,” says Gilligan. “The average net profit of a convenience store is about $38,000 a year. Are they going to spend $150,000 or more to put in a new tank and dispenser for [higher ethanol blends]? It doesn’t make a lot of sense unless government subsidies are available, and most governments face big deficits.”

Despite those numbers, Lampert counters that retailers should consider adding higher ethanol blends to their pumps.

“For E15, 2001 and newer vehicles comprise about 65% of all vehicles on the road today, while E85 vehicles comprise 4%, giving you a market of 69% of vehicles that are compatible,” says Lampert. “Retailers that don’t offer that increased blend are losing that potential market. If you’ve already made the investment [in E85], maintain it and continue to look for more opportunities to further add it.”

For c-stores that want to take the plunge into higher-grade ethanol, Eichberger recommends a forward-thinking approach.

“Ask yourself: How can I design my station to be as flexible as possible so costs can be as low as possible?” he says. “That means purchasing highly compatible equipment that’s tested and certified for as many ethanol products as possible, and that will prevent you from digging up your concrete again [for a new tank].”


E15 Facts

  • On April 2, 2012, EPA approved E15 as a registered fuel.
  • E15 is now allowed in all autos man­ufactured since 2001. That’s 239 million cars on the road today, which consume 75% of all fuel in the United States.
  • In July, a Zarco 66 gas station in Law­rence, Kan., became the nation’s first retailer to sell E15.
  • 100,000 stations operate on a two-tank system that makes it cost-prohibi­tive to incorporate E15.
  • A full transition to E15 will reduce greenhouse-gas emissions by an addi­tional 8 million tons per year—compa­rable to removing more than 1.35 million vehicles off the road

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