The U.S. Environmental Protection Agency (EPA) is expected this week to raise the limit on how much ethanol can be blended with [image-nocss] gasoline to 15% from the current 10%, Christine Tezak, an analyst for Robert W. Baird & Co. Inc., a Milwaukee-based asset management fund, told the news agency.
Motorists may see little difference at the pumps, said a report by The Des Moines Register, because approval of E15 may be limited to 2007 model-year cars or newer. The majority of the nation's 270 million cars would still be restricted to the current 10% ethanol blend. So retailers would face difficult decisions about buying new dispensers and tanks for E15, especially when they would still need their current E10 pumps, said the report.
No such split of the market exists for the 10% blend currently dispensed by almost every U.S. gasoline retailer. About four of every five gallons of gasoline sold has the 10% ethanol blend. But if E15 is approved on a limited basis, gas stations must decide if they want to invest up to $25,000 for new tank and gasoline dispensing systems to accommodate the new fuel.
"I'm not going to put in an E15 pump even if they legalize it. It's too expensive. I'll just keep selling the 10% blend," Roz Jalali, owner of a Conoco station in West Des Moines, Iowa, told the newspaper.
Beyond expense, there are liability questions. While the E15 fuel dispensers have Underwriters Laboratories (UL) approval, other parts of the system, such as the hoses, tanks and compressors, do not.
Finally, if the EPA approves E15 only for 2007 model-year cars and newer, as is widely speculated, who would monitor the new E15 pumps to determine if the self-service pumping is legal?
"We might have to go back to full-service," Dawn Carlson, president of the Iowa Association of the Petroleum Marketers & Convenience Stores of Iowa, which represents most of the state's gasoline retailers, told the paper.
Various interest groups, ranging from automobile manufacturers to outboard-motor, lawn-mower and chainsaw makers, have quibbled with expansion of ethanol from the 10% blend to 15%.
Carlson said the petroleum dealers are not opposed in principle. "But there are so many unanswered questions that right now we cannot recommend to our members that they begin selling E15 if it is approved," Carlson said.
Kum & Go LC, which has 435 fuel-dispensing stores in 11 statse, has aggressively promoted the 85% ethanol blend (or E85) for flex-fuel vehicles. Randy Meyer, vice president of fuels for the West Des Moines, Iowa, company, expects relatively little to happen at the pumps until the legal and technical issues over E15 are sorted out. "We want to offer fuel choices to our customers," he said. "But a lot of decisions would have to be made if the federal decision is bifurcated among different vehicle groups."
"It's going to take time before the industry buys into it," Fadel Gheit, an analyst at Oppenheimer & Co., New York, told Bloomberg. "They're going to look at the potential financial impact if E15 causes damage to any automobiles."
Refiners could be sued if E15 damages cars because the government has not offered the companies liability protection, Ann Kohler, an analyst at Caris & Co., New York, told the news agency.
The EPA sets a base amount of biofuels that must be blended each year into U.S. fuel supplies, said the report.
The government has twice before delayed a decision on a March 2009 request to increase the maximum blend rate by a group co-chaired by Jeff Broin, CEO of Poet LLC, the largest U.S. ethanol producer.
The U.S. Department of Energy (DOE) has tested the fuel blend's use in cars from the model year 2007 forward. It is expected to complete further testing of E15 on 2001 to 2006 model-year cars in November, and the EPA may amend a decision to include those vehicles under the waiver, Tezak said.
"We would be hesitant to sell a fuel that does not have some sort of warranty protection or has been accepted by engine manufacturers or equipment manufacturers," Bill Day, a spokesperson for San Antonio, Texas-based Valero, told Bloomberg.
In addition to concerns about engine damage, U.S. refiners are biased against higher blends of ethanol because it encroaches on the amount of petroleum in gasoline, Mark Gilman, an oil and gas analyst at Benchmark & Co., New York, told the news agency.
Marathon, which has stakes in two ethanol plants, will be cautious about selling E15, said Shane Pochard, a spokesperson for the Houston-based company told Bloomberg.
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