Before rebutting some of the specific claims, it is important to recap how we will reach the blendwall. In 2007, the Energy Independence and Security Act (EISA) expanded the amount of biofuels U.S. refiners and importers were required to blend into fuel in the coming years. At that time, the energy landscape was entirely different than what we are confronting today. Here is actual and projected motor gasoline consumption for the years 2008-2025 according to the EIA’s Annual Energy Outlooks from 2006 to 2013.
Unfortunately, the projection of gasoline demand that the Energy Information Administration (EIA) made back in 2007 (and which partly formed the rationale for legislating significantly expanded RFS volumes) was wildly inaccurate. This is not to slam EIA, understandably, at that time they were unable to predict the severe economic downturn we would face over the next 5+ years, and unable to foresee the strides made by auto manufacturers in producing more fuel efficient vehicles. But it should serve as a cautionary tale for government mandating new fuels based on predictions of future markets, because while markets are fluid and dynamic, government interventions are often rigid and based on dated information. Had demand grown as anticipated, it may have been possible to meet the RFS volume requirements without blending more than 10% ethanol in every gallon of gasoline sold. Instead, a significantly reduced pool of gasoline is required to absorb a significantly increased volume of ethanol, which brought the situation to a head. Realizing this, the EPA provided a “partial waiver,” allowing E15 to be sold in the market. Unfortunately, they did not perform the right testing to determine how the fuel would interact with engines, fuel systems or storage and dispensing infrastructure.
The RFA post claims that there is sufficient ethanol supply and ethanol production capacity to meet the RFS volume requirements, and that RINs were not intended to “allow oil companies to avoid blending physical gallons of renewable fuel.” But this completely misses the point. Regardless of how much ethanol could be produced, compliance hinges on the ability to blend the ethanol into gasoline. According to Coordinating Research Council (CRC) studies on engines and fuel systems, blending above the 10% level could lead to engine valve and valve seat damage, seizure of the fuel pump, and inaccurate readings on your dashboard (i.e. check engine lights, fuel gauge, etc.) among other problems, forcing the refiner to choose between blending a higher volume of ethanol into the fuel, which leads to the aforementioned engine, fuel system and infrastructure problems, or risk being unable to meet their RIN obligations.
The post also claims that Congress’ intent with the RFS was to transform and diversify the fuel market and that oil companies are frustrating that purpose by refusing to invest in infrastructure that would allow the sale of E15 and E85 fuel blends. However, oil companies own only 3% of all retail fuel stations, while small independent owner/operators own 58% of the 156,000 gas stations nationwide, meaning that even if E15 were appropriate for use in all vehicles (which it is not), oil companies are not in a position to invest in infrastructure to dispense it to consumers. Meanwhile, many of the independent gas station owners clearly choose not to invest in E85 infrastructure and dispensing equipment, presumably because of a lack of consumer demand. The cost to upgrade retail equipment to store and sell E15 and the issues associated with selling it are likely factors in why E15 is not being marketed by more stations.
Another claim made by RFA is that oil companies “choose” to purchase detached RINs, rather than blending ethanol to meet their obligations under the RFS. RINs are not simply created as “detached.” What RFA fails to mention is that ethanol RINs can only be “detached” after the physical gallons of ethanol are purchased by a refiner and/or blended into gasoline for sale. The RINs are then submitted by the refiner at the end of the compliance period to EPA. The simple fact is that ethanol is already being blended at 10% into nearly every gallon of gasoline, the maximum level that can be used in all vehicles without experiencing problems. Later in the post, RFA acknowledges that it would be possible to meet the RFS with physical gallons of ethanol in 2013 only if a portion of the fuel supply was E15, but Congress’s intent was not to subject a portion of U.S. consumers to a potentially problematic product, it was to reduce the need to import oil from unfriendly countries overseas. Fortunately, due to significantly larger crude deposits in the U.S. than were believed to exist at the time, we can provide domestic fuel without putting consumers at risk.
The post goes on to make a number of claims about how many vehicles are currently on the road, and will be on the road in the near future, that are capable of handling higher blends of ethanol, including MY2013 vehicles warranted for E15 and Flex Fuel Vehicles (FFV) capable of handling blends up to E85. The bottom line is that while E85 has been available for years, as the EIAreports, consumption of ethanol in gasoline blends with more than 51 percent ethanol by volume (E85) accounted for less than one-tenth of one percent of total ethanol produced for motor fuels in 2012. This is likely because of the significantly reduced fuel economy that a driver would experience using E85. E85 has up to approximately 26% less energy content than gasoline, meaning that a driver would have to fill up an FFV as much as 35% more often when using E85 to achieve the same distance when fueling with gasoline. According to AAA data, the day RFA posted this blog, gasoline cost $3.71/gallon, to get the same amount of miles out of E85, a consumer would have paid up to $4.32/gallon on the same day.
As API Vice President of Policy Analysis, Kyle Isakower, testified at EPA’s March 8 RFS hearing, API “members’ primary concern is with the ethanol blendwall. There are serious compatibility issues with vehicle and retail infrastructure with gasoline blends above 10%. Yet, EPA continues to apply aspirational criteria to set the annual standards.” Rather than issuing press releases and drafting blog posts making spurious allegations against the oil industry, we would like to see RFA come to the table and join other industry, environmental, farm, food and world hunger groups to scrap the current unworkable RFS and work to formulate a real solution.