EPA Continues the E15 Push

by Brian McGraw on June 13, 2011

in Blog, Features

Post image for EPA Continues the E15 Push

Reuters is reporting that the White House has given its seal of approval to the EPA’s proposed label for E15 (85% gasoline, 15% ethanol). The picture above is of an earlier draft label, no actual images are public yet (to my knowledge) of what the final image ended up being. I suspect the label will be quite similar though it will change 2007MY to 2001MY.

Despite cheers from the ethanol industry, its not clear where the path goes from here. The EPA has suggested that E15 could be sold across the country by September, but a number of gasoline stations are in opposition. Here is a letter (.pdf) sent to Lisa Jackson from the National Association of Convenience Stores (NACS) and the Society of Independent Gasoline Marketers of America (SIGMA), whom together represent roughly 80% of retail fuel sales in the United States. In it they write:

Fourth, and perhaps most significantly, once E15 becomes legal for use in MY 2001 and newer vehicles, it is far from certain that owners of such vehicles will choose to refuel with E15  rather than less than or equal to E10. Unlike prior fuel transitions (i.e., leaded to unleaded gasoline and low sulfur to ultra-low sulfur diesel fuel), no vehicle is required to run on fuel containing more than 10 percent ethanol.  Consequently, demand for this product is purely subject to the voluntary decision making process of individual consumers. Indeed, as noted above, the fact that higher ethanol blends get fewer miles to the gallon makes it reasonable to assume many consumers will refrain from utilizing their prerogative to purchase E15. In addition, because automobile owner’s manuals (with the exception of those issued for flexible fuel vehicles) do not endorse the use of fuel containing greater than 10 percent ethanol, consumer acceptance of the new fuel may be even further limited. Consequently, retailers will obviously want to accommodate the segment of the market that does not wish to purchase fuel with greater than 10 percent ethanol.

Their reasoning basically consists of the fact that its not clear that there is any demand for E15, relying on evidence from very low E85 sales. On a per gallon basis, ethanol is currently cheaper than gasoline, but more expensive once you consider the lower miles per gallon. There’s no real incentive for consumers to buy this stuff (its more expensive on a per mile basis), or for gasoline retailers — a business with very low profit margins — to spend upwards of $200,000 on new pumps and storage tanks for E15.

There is a mandate to sell ethanol, though the “mandate” is enforced at the EPA’s discretion and consists of fines on petroleum refiners for not producing enough of it. To EPA’s credit, they have effectively removed the cellulosic ethanol mandates year after year as no one has been able and willing to produce any. So if retail fuel stations aren’t installing E15 pumps, I suspect that oil refiners will not be punished for failing to produce any E15 if they cannot sell it.

Almost every industry out there is wary of this proposal except for the ethanol industry. Auto manufacturer’s are wary of the effect E15 has on engines, retail fuel stations are wary of storing E15 and liability from misfuels, the marine industry doesn’t think ethanol works well in boats, etc. Unfortunately, despite their pledge to only listen to the science, the Obama administration is continuing to push to give the ethanol industry everything under the sun.

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