Higher-ethanol access growing, but not enough: EPA

OREANDA-NEWS. June 09, 2016. Government and industry investment in new equipment will dramatically increase access to higher-ethanol blends but not fast enough to raise mandates to use the fuel next year, according to the Environmental Protection Agency (EPA).

Grants supporting the installation of pumps and tanks able to dispense a 15pc-ethanol gasoline blend called E15 will help drop a significant barrier to spreading a fuel biofuel producers hope will spur a fresh wave of new market share.

But the fuel still faces legal and practical hurdles keeping regulators from assuming a looming surge in consumption, the EPA said.

Ethanol producers insist the agency has undersold the US' ability to consume greater volumes of their fuel. The companies says the EPA slashed penalties that would compel the fuels industry to offer it in blending mandates it has proposed refiners, importers and other companies must meet in 2017.

A hearing on the new proposed renewable volume obligations under the Renewable Fuel Standard begins tomorrow in Kansas City, Kansas.

The chief US gasoline blend, a 10pc ethanol blend called E10, achieved natural saturation as a replacement for the banned petroleum fuel additive MTBE and for its easy use. The petroleum industry's need for a US-approved oxygenate helped spur its spread. Ease of adoption — drivers could use the mix in most existing vehicles without fretting about voiding warranties — further cemented its hold. High ethanol blends called E85 met a more sluggish response as they require special dispensers and vehicle fuel systems, and struggled to compete amid cheap crude prices.

Car manufacturers have begun approving more new vehicles to use E15, but retailers have little incentive to invest in equipment needed to offer the fuel.

Refiners largely divested their ownership of retail stations over the past decade, and so stores have no direct obligation to sell biofuels under federal mandates. Though E15 can work in new vehicles, it requires potentially costly investments by stores to legally dispense the fuel through properly certified equipment. And the EPA has bemoaned fuel distributors who keep credits or cost savings created by blending more ethanol instead of passing those savings on to retailers and customers to entice consumption.

There were more than 124,000 retail stores selling fuel in 2014, according to the National Association of Convenience Stores, but only about 200 sell E15, according to the EPA. The US Department of Agriculture's Biofuels Infrastructure Partnership (BIP), which is helping pay for equipment, could spread E15 to up to 1,700 stations by 2017. The BIP program attracted \\$210mn in 21 states for blending pump and fuel tank installation. Texas, Florida and Illinois receive the largest outlays, funding a combined 348 stations to add almost 2,100 pumps.

Ethanol trade group Renewable Fuels Association estimates more than 2,000 stations will add higher-ethanol blends over the next 12 to 18 months through a combination of BIP and other industry and local initiatives. Growth Energy, another ethanol trade association, estimates 4,400 pumps will be installed.

That was encouraging for the future consumption of the fuel, the agency said in outlining its proposed blending mandates for 2017. The US could consume 20mn bl of E15 if the fuel accounted for half of the total sales of those stations. But new blender pumps still do not solve a legal hurdle stymieing E15 sales during the peak gasoline demand months.

The fuel lacks a federal waiver of certain air quality standards between 1 June and 15 September. E10, the now-ubiquitous blend that eased compliance for the early years of the RFS, has carried a waiver allowing use since 1992. Biofuels groups have tried but so far failed to persuade the agency and legislators to extend that waiver to E15.

"If EPA would simply treat E15 the same as E10 during the summer volatility season ... the number of stations offering E15 would exponentially increase," the RFA said.