The Future of Midlevel Blends

2009 could be a big year for midlevel ethanol blends. UL certified E85 fuel dispensers and blender pumps should be available by the first half of the year. In addition, Congress is expected to address tax legislation that limits fuel retailers' ability to claim credits for blender pumps distributing E85. Testing of midlevel blends will continue, and an E20 fuel waiver request could be submitted to the U.S. EPA before the end of the year.
By Erin Voegele | November 03, 2008
The nation's first ethanol blender pump was installed in Britton, S.D., in March 2006. Less than three years later, the American Coalition for Ethanol lists more than 80 retail stations that have installed the pumps. That list continues to grow.

More station owners are expressing interest in installing the fuel dispensers, driven in part by the rising demand for midlevel ethanol blends. The trend, which began in the Midwest, is beginning to gain traction in other areas of the country.

However, there are some important elements that must be addressed before widespread use of midlevel ethanol blends can be achieved. Most importantly, a midlevel blend must be approved by the U.S EPA for use in standard nonflexible fuel engines. This approval would significantly increase the market for ethanol-blended fuels. The lack of Underwriters Laboratory Inc. approved fuel dispensers is another issue that must be overcome before some retailers will consider installing E85 dispensers and blender pumps.

UL Certification
UL certification is one issue that should be resolved in 2009. Gilbarco Veeder-Root and Dresser Wayne have each submitted blender pumps for E85 UL certification. According to Scott Negley, Dresser Wayne's director of product management for North America, the equipment his company manufactures has already passed UL's required testing procedures for E85.

However, UL is requiring that a full fuel dispensing system be certified, which also includes the hose, nozzle, and other hardware elements that are attached, which Dresser Wayne doesn't manufacture. "Until you get a full set of components certified, we are not allowed to put a labela certification markon our dispenser because the system lacks certification," Negley says. Many of those items have been submitted by their respective manufacturers and are going through the testing process. According to Negley, hoses will likely be the last element to gain approval.

Gilbarco is expecting its dispenser to be approved by UL during the fourth quarter of 2008. In the meantime, the company is marketing the model it submitted to UL. According to Richard Browne, Gilbarco's vice president of North American marketing, many fire marshals have approved the model for installation even though it currently lacks UL certification. "Our flexible-fuel unit has special material coating and elastomers that will stand up to the aggressive/corrosive nature of high alcohol fuels," Browne says. "Every component in the dispenser that comes in contact with the fuel has been upgraded."

According to Browne and Negley, both companies are experiencing heightened interest in the fuel dispensers. Dresser Wayne has also designed a new piece of equipment that will be compliant with some state-specific regulations that have been enacted. "We are developing a blender [pump] that will allow blends from two hoses on one side of the dispenser," Negley says. Conventional fuels such as unleaded and E10 will be dispensed from one hose. Higher blends of ethanol, from E20 to E85, will be dispensed from the other. Negley says the new equipment is expected to be available in January 2009.

As UL-approved equipment becomes available, it is likely that each state will deal with previously installed E85 dispensers and blender pumps differently. Mark Buccelli, director of the Minnesota Weights and Measures Division, says the state is not going to require fuel dispensers already in operation to be replaced with a UL-approved dispenser. David Pfahler, director of South Dakota Weights and Measures, says the issue has not yet been addressed in South Dakota.

UL-certified dispensers are expected to spur growth in the availability of E85 and midlevel blends. "I know of a number of large companies that have expressed interest in installing E85 fueling systems," says Phillip Lampert, executive director of the National Ethanol Vehicle Coalition. "Given the risk management associated with not having a UL-approved dispenser, they have refrained from doing so."

Robert White, deputy director of the Ethanol Promotion and Information Council, says that before UL certification was pulled for E85 dispensers, a lot of big box retailers were considering installing E85 pumps. "When UL pulled their certification, that removed some of the comfort level that those big box retailers had with the product and the dispensing of the product," White says. When a UL certified pump becomes available, he expects those who have been sitting on the sidelines to jump back onboard. "On the E85 side, that could mean a lot of new stations almost as quickly as they can produce dispensers," he says.

Ron Lamberty, vice president of market development for ACE, agrees that the pending UL certification has caused some stagnation in retail installations. "If marketers are looking at putting in E85 right now, most of them figure the smart thing is to wait out the UL-approval process," he says. Since there is no history of reports or complaints of equipment failure, ACE would like to see a phase-in period established for UL-certified equipment.

"When the major pump manufacturers submitted pumps to the UL for testing, they submitted blender pumps," Lamberty says. "I think that's a good sign. I think they recognize that this is the wave of the future." Although not all retailers installing the UL approved E85 fuel dispensers will offer midlevel ethanol blends right now, having the equipment installed should ease the transition into midlevel blends in the event one is approved by the U.S. EPA for use in standard nonflexible fuel engines.

Blending Tax Credits
Lamberty and Lampert also agree that the industry must address income tax legislation enacted under the Energy Policy Act of 2005 that prevents retailers installing ethanol blender pumps from claiming a 30 percent tax credit that is available to those who install dedicated E85 fuel dispensers.

"We are leading the effort to ensure that blender pumps receive the benefits of the federal income tax credit," Lampert says. "The way that credit has been interpreted by the Internal Revenue Service marginalizes the value of the credit for blender pumps." For blender pumps to really make a positive impact on the industry, the federal income tax credit needs to apply to them, he says.

Lamberty says Gilbarco has been working on getting legislation passed that would increase the credit to 50 percent of the installation cost and apply it to blender pumps. "Frankly, right now, if all we did was get the 30 percent to apply to any pump that sells E85, I think there is the potential for much faster growth," Lamberty says. He adds that by including blender pumps, the government may also end up covering less of the total expenditure because it is often cheaper to install a blender pump than to break ground installing a new tank, hose and pipe for a dedicated E85 pump. Lampert says he expects the issue to be considered during the next congressional session in January 2009.

Midlevel Testing Grounds
In October, DOE's National Renewable Energy Laboratory and Oak Ridge National Laboratory released a preliminary report on midlevel blends testing. The results included data from testing E15 and E20 on 13 vehicles and 28 small nonroad engines. The report showed that most regulated emissions were within the normal test variations.

The report provided results available to date from the first stages of a large overall test program, which was initiated by the DOE in 2007 to evaluate the potential impacts of intermediate ethanol blends on a variety of engine types. The broad test program is intended to evaluate the effects of E15 and E20 on tailpipe and evaporative emissions, catalyst and engine durability, vehicle drivability, engine operability, and vehicle and engine materials.

"The DOE along with NREL and ORNL have approximately 20-plus projects either underway or in the planning stages, all related to different aspects of intermediate blends," says Steve Przesmitzki, NREL's senior project leader. "This [report] is just a first look. Things look promising, but it is a first look. It is not conclusive evidence that E20 or E30 will work."
Przesmitzki estimates that testing will continue until 2010 or 2011. He expects a report on vehicle drivability to be released in 2009, as well as a first look at materials compatibility testing results. A project testing more than 30 different fuels on more than 20 different vehicles is also planned. "From what I've been told, it's one of the biggest vehicle tailpipe emissions projects for research that EPA has ever undertaken, and they are doing it jointly with the DOE," he says.

Waiver Request
According to Ralph Groschen, Minnesota Department of Agriculture's senior market specialist, there are five different areas of data EPA requires along with a waiver request. These data sets include drivability, materials compatibility, emissions, durability and health effects. The research projects being undertaken by the DOE should help provide this data.

"We are feeling very good that federal government and other agencies that deal with these testing and things are sinking a lot of time and effort into this," Groschen says. "Those are the kinds of data and materials that we need to answer the broad range of questions."

In 2005, Minnesota passed a law that replaces the state's current E10 mandate with E20 by 2013. Under the law, the mandate will take effect unless 20 percent of the state's vehicle fuel already consists of ethanol by 2010. Groschen says the implementation also depends on EPA certification of a fuel containing 20 percent ethanol. "The particular time when it's determined whether or not the law will be implemented is Aug. 31, 2010," Groschen says. If EPA has not approved a waiver for E20 by this time, the law expires.

"The implementation of our law depends on national certification of E20," Groschen says. "So, we've bitten off a pretty big chunk here. Thank goodness there are other people who want to see some progress in this area." Under current regulation, the EPA must respond to a fuel waiver application within 180 days of receipt. To ensure the application is considered in time for the 2010 deadline, it must be submitted in 2009 or early 2010.

"EPA expects the industry to file the application," Groschen says. "We hope to be a part of that application to show support, but they're likely the ones that are going to be filing it." Groschen says he hopes to see a waiver request submitted to the EPA, but that will likely depend on the status of the midlevel blends testing. He also expects the application process to be impacted by world events. "There are times when, if the political will is there nationally, things happen," he says.

Erin Voegele is an Ethanol Producer Magazine staff writer. Reach her at evoegele@bbiinternational.com or (701) 373-8040.