Reaching the E15 Summit

Getting the waiver was easy, compared to the work required to fulfill requirements for E15 implementation
By Kris Bevill | December 12, 2011

If introducing E15 to the marketplace were a mountain climb, receiving the fuel waiver from the U.S. EPA would be the equivalent of reaching the summit of K2, the second highest mountain in the world. The climb was steep and wrought with challenges, but with perseverance and the right tools, the peak was reachable. The move to E15 was initiated by Growth Energy, which filed the waiver petition with the EPA in March 2009. The industry believed it had the scientific backing to support the use of higher ethanol blends in all vehicles and said allowing higher blends into the market would create jobs, lessen dependence on foreign oil and improve the environment through reduced greenhouse gas emissions. The EPA proceeded to require thorough testing of the fuel through the U.S. DOE and after nearly two years of testing and analysis, the agency agreed that E15 would be an acceptable fuel for vehicle model years 2001 and newer.

Many thought the fuel waiver approval represented the end of a long battle to introduce higher ethanol blends to consumers and hailed the approval as a victory for the ethanol industry. It was clearly a victory, but looming in the distance was the even greater challenge of clearing the regulatory hurdles necessary to bring the fuel to market. EPA Assistant Administrator Gina McCarthy warned of these challenges after issuing the initial partial approval for vehicle model years 2007 and newer in October 2010. “This decision was a step in the direction of allowing more renewable fuels into the market,” she said. “It is by no means an assurance that that will happen quickly and that is by no means the EPA’s job.”

As the past year has shown, for industry representatives working on the task, bringing E15 to the market represents the regulatory effort of scaling Mount Everest. There may never be another climb this high again, because once E15 clears the regulatory hurdles the basis will be set for higher blends in the future. But in order to lay that initial groundwork for E15, the industry must meet or beat a host of requirements and, in some cases, essentially rewrite fuel regulations. Industry experts anticipated some of these issues and began preparing for them before the EPA issued the first of its two-part partial waiver approval over a year ago in October. Proposed policy changes, certification reversals and other issues have proven to be the equivalent of formidable mountain weather, forcing unanticipated detours and delays in the climb toward E15 implementation. The challenges are many, but they are not insurmountable. Those working to overcome them say they can see the summit through the clouds and believe they might reach the E15 summit by mid-2012.

Petroleum and its history of destruction can be blamed for current regulations. Because petroleum has such devastating impacts on the environment when it is spilled or otherwise released, increasingly strict regulations have been put in place over time in attempts to counter its negative effects. And because petroleum has been the only fuel consumed in the U.S., regulations for more environmentally friendly fuels do not exist. There are no exceptions. “The regulations are already written so you have to try to shoehorn a biofuel into a petroleum-type of equation,” says Kristy Moore, vice president of technical services at the Renewable Fuels Association.

Moore and other industry representatives have been working on regulatory issues regarding E15 for more than a year. Their to-do list is long and complicated. Included on that list: completing fuel registration with the EPA, acquiring an extension of a waiver for Reid Vapor Pressure regulations, ensuring that dispensing and storage equipment complies with fire code specifications, and addressing possible concerns related to automaker warranties. Some of these items have been easier to complete than others.

Registration
The Clean Air Act requires all fuel manufacturers and fuel additive manufacturers to register their products with the EPA administrator before making them commercially available. E15 falls under the fuel additive category, which requires manufacturers to supply the EPA with information related to the chemical composition of the additive or to disclose the chemical process of manufacture. The manufacturer is also required to supply the description of an analytical technique that can be used to detect the presence of the additive in fuel and must submit all test data and other information required prior to the registration process. The EPA also requires all detergents used in gasoline to be certified. The certification process has been completed and the fuel registration process is expected to be complete by the end of this year, according to Moore.

Equipment Compliance
Local fire marshals and weights and measures divisions have the responsibility of certifying that fuel storage and dispensing equipment is compatible with targeted fuel blends, but approval of the equipment by Underwriters Laboratories Inc., a nonprofit product safety organization, can be used by those authorities to easily certify the equipment. In 2009, UL approved the use of fuel blended with up to 15 percent ethanol in legacy equipment, but stated that because E15 can contain a concentration of ethanol higher than 15 percent, more testing would be required before it could approve E15 for use in storage and dispensing equipment. Later, UL indicated that it would provide a favorable guidance for E15 in legacy equipment, but rescinded that favorable decision in late 2010 after U.S. DOE-funded testing indicated potential issues with sealing materials on fuel dispensers containing 17 percent ethanol. Fortunately, the remedy was determined to be low in cost. Retrofit kits worth about $500 could take care of the issue, according to the DOE’s National Renewable Energy Laboratory, and make it possible for the equipment to pass UL certification for blends up to E25.

Fuel pump manufacturers and the ethanol industry were caught off-guard by the UL’s reversal on E15 equipment compliance. The ethanol industry considers UL’s decision to be subjective and points to E85 as an example of UL’s sometimes unsubstantiated decisions. “In 16 years of E85, there has been no leak or failure as a result of E85 being in that equipment,” said one industry representative. Despite that history, UL set certain specifications for E85 equipment, which ethanol representatives say slowed retailers’ implementation of the fuel. In the case of E15, fuel dispenser manufacturers have decided to warranty their products for E15 despite UL’s guidance, but the UL’s decision still makes it difficult for local officials to certify the equipment. “It’s not a problem that we can’t overcome, but it’s an additional layer that adds time and obviously slows down the number of folks who might have additionally jumped at the opportunity for E15,” Robert White, director of market development for the RFA.

RVP
The most complicated technical aspect of E15 implementation is the issue surrounding Reid vapor pressure (RVP) requirements. RVP is a common measure for gasoline volatility, which defines a fuel’s evaporation characteristics. The EPA regulates the RVP of gasoline in summer months to reduce the evaporative emissions, which are known to contribute to ground-level ozone. The EPA currently allows fuel blends containing 9 to 10 percent ethanol to exceed the 9.0 psi RVP by 1 pound from June 1 to Sept. 15. However, the agency decided not to grant the same waiver for E15, which means refineries will not be able to use the same gasoline blendstock for E15 in some parts of the country. This creates major issues for both refiners and the ethanol industry. Refineries would need to install separate tanks for storing E10 and E15 blendstocks during the summer months, which would reduce the potential for refineries to use both blends. Essentially, this could mean that E15 production would be virtually nonexistent for half of the year. Petroleum and ethanol industry groups vehemently opposed the EPA’s decision regarding RVP requirements for E15, citing evidence that suggests vapor pressure in ethanol blends tops out at 10 percent ethanol volume. In a comment filed with the EPA prior to its final rule, Growth Energy stated that imposing restrictive requirements on E15 is technically and legally unsupportive and would create unnecessary challenges for those introducing E15 to the marketplace. “It does not make sense for Congress to allow a 1.0 psi waiver for E10 but not E15,” the National Petrochemical and Refiners Association said in a comment filed with the EPA. “This would be very disruptive and would have the practical impact of further balkanizing gasoline markets by creating a new boutique fuel.”

The EPA refused to relent despite the evidence submitted by refiners and ethanol groups, however, and said its partial approval of E15 was based on the condition that the fuel not exceed 9.0 psi RVP in the summer months. The agency further indicated that it may consider repealing its RVP waiver for E10 in future rulemakings. Repealing that waiver would solve the issue of separate blendstock requirements for refiners, however, if the EPA were to propose that elimination now, it would be several years before the change could be implemented. Therefore, efforts are ongoing to evaluate whether there are specific blendstocks that can be used to produce E15 in those summer months.

Vehicle Warranties
Auto groups and retail gasoline station groups have repeatedly expressed concern over the lack of mention of E15 in vehicle warranties and said that because of this, consumers would be liable for any potential damage to their vehicle if they use E15. Vehicle manufacturers’ voiced the same concern when E10 was introduced into the market and, while “gasohol” was blamed for some engine problems in the late 1970s to early 1980s, there are no reported cases of litigation during which warranty claims were denied as a result of E10 usage. James Pray, chair of the environmental law practice group at Brown Winick, says that this history provides some support for E15 use because the rate of increase in ethanol content is not that great.

In the event of a warranty issue, the responsibility falls to the warranty issuer to prove that ethanol, specifically E15, was the cause of the problem. Pray says that in order for a car dealer to use E15 as a reason to deny a warranty claim, an expert must be able to testify “to a reasonable degree of scientific certainty” that there is no other plausible cause. The expert must also be able to explain how the additional 5 percent of ethanol caused the problem. Additionally, the manufacturer would then have to admit it used parts in the production of the vehicle that are not ethanol compatible, even though ethanol has been widely used as a fuel additive for three decades, he says.

Some industry groups maintain the threat of class action lawsuits in the case of widespread misfueling or warranty issues, but Pray says the likelihood of a class action suit is small. “Class action lawsuits are expensive to prosecute and generally seek targets of opportunity where the potential recovery is high, the cost of defending the case is prohibitive for the defendant and the risk of losing is low,” he says. “Given the track record in these cases, it is highly unlikely that class action law firms will sense much opportunity to file lawsuits challenging the use of E15.”

State-Specific Fuel Specs
Each state has the authority to set its own fuel specifications. Many states adopt guidelines set in the National Institute of Standards and Technology handbook for engine fuel quality, which restricts the ethanol content of gasoline to 10 percent in all vehicles. The RFA has submitted a request to eliminate that wording, but other issues related to fuel specifications also need to be resolved. States also require a fuel’s octane to be certified and existing standards do not address octane levels for fuels containing more than 10 percent ethanol. Research is being conducted to explore the octane levels of higher ethanol blends. Some industry members believe that the higher octane level of ethanol could be utilized to improve vehicle performance, but details from an ASTM investigation as well as other independent testing was not publicly available by late November.

Consumer and Retailer Confidence
While all of the regulatory work is being done to make E15 ready for legal sale, a simultaneous effort is being made by industry members to ensure that consumers will be friendly to the fuel once it hits the market. Anti-ethanol groups have been quick to spread unsubstantiated information related to the use of E15, suggesting that it will ruin engines, increase emissions, and, in the case of small engines such as chainsaws, could even cause bodily harm to the user. Despite the immediate negative messaging from deep-pocketed groups, White says consumers aren’t likely to pay much attention until the fuel becomes available. By then, the ethanol industry hopes to have an extensive outreach program in place to educate consumers on proper use and benefits of E15. The RFA and other ethanol stakeholders as well as other industry groups, including the small engine manufacturers, have agreed to participate in an education outreach coalition which will address consumer concerns and requirements. As part of this, the RFA is launching a website—www.e15.org—devoted to providing consumers with relevant information.

Interestingly, the sunset of ethanol subsidies at the end of 2011 could also help the E15 education efforts. The tax credit programs have been used by anti-ethanol groups as a means to support blaming ethanol for higher food prices in the past. Beginning in 2012, they won’t have that option. “It will provide a fresh start because having no subsidies removes the possibility to blame ethanol for those things,” White says.

Efforts are also being undertaken to educate retailers on the benefits of providing E15 to their customers. The Blend Your Own Ethanol campaign is periodically hosting webinars to discuss retailers’ concerns and provide them with information regarding equipment and funding for upgrades. As White points out, blender pumps provide a way for retailers to offer E15 without having to carry out expensive infrastructure overhauls. “All you need is a $20,000 blender pump, not a six figure upgrade,” he says.

Rolling it Out
As the storm of regulatory hurdles begins to subside, the actual introduction of E15 is likely to be a gradual one, beginning with ethanol-friendly Midwest states such as Iowa, Minnesota and Illinois. The ethanol industry is working directly with various stakeholders in those states, including corn growers’ groups and petroleum marketers associations, to implement the new fuel in a fashion that is acceptable to consumers and leaves no room for misinterpretation. One of the things the industry learned through the implementation of E10 that they don’t wish to repeat is leaving the opportunity for pushback and negativity from anti-ethanol groups, Moore says. She and others believe they have made progress in this area and have worked hard to include all stakeholders in the process.

Looking ahead to the implementation of even higher blends, which will be necessary in order to meet the increasing volume requirements of the renewable fuel standard, the regulatory efforts undertaken to introduce E15 will provide a solid basis to make the next step up a little easier. “We’ve taken good notes and we know what to do now,” Moore says, adding that the experience of increasing the nation’s fuel blend is only starting to become a clear reality to her. “We’ve been working on this issue for about 18 months now and I’m actually now starting to get nervous because I can see it. We’re going to cross through a couple of big barriers soon and retailers will be able to start offering E15. It’s game time.” 

Author: Kris Bevill
Associate Editor, Ethanol Producer Magazine
(701) 540-6846
kbevill@bbiinternational.com