WASHINGTON -- The U.S. Environmental Protection Agency (EPA) announced yesterday that it expects to make a final determination in mid-2010 regarding whether to increase the allowable ethanol content in fuel.
In a letter sent to Growth Energy, a biofuels industry association representing more than 50 ethanol producers, that had asked the EPA to grant a waiver that would allow for the use of up to 15% of ethanol in gasoline, the agency said that while not all tests have been completed, the results of two tests indicate that engines in newer cars likely can handle an ethanol blend higher [image-nocss] than the current 10% limit. The agency will decide whether to raise the blending limit when more testing data is available.
The EPA also announced that it has begun the process to craft the labeling requirements that will be necessary if the blending limit is raised.
In March 2009, Growth Energy requested a waiver to allow for the use of up to 15% ethanol in gasoline, an increase of five percentage points. Under the Clean Air Act, the EPA was required to respond to the waiver request by December 1. The EPA has been evaluating the group's request and has received a broad range of public comments as part of the administrative rulemaking process.
The EPA and the U.S. Department of Energy also undertook a number of studies to determine whether cars could handle higher ethanol blends. Testing has been proceeding as quickly as possible given the available testing facilities, the EPA said.
Click hereto read the full text of the letter.
The American Petroleum Institute (API) issued a statement on the EPA's decision: "EPA made a sound decision in deciding to wait until it has the scientific data and durability tests completed before increasing the allowable ethanol content in fuel. Thorough vehicle and engine studies that develop robust, scientifically supported data are needed to ensure that adverse impacts, such as engine damage, are avoided. API is actively supporting the studies that are currently underway. API is concerned that EPA seems willing to consider a waiver of only part of the vehicle fleet (2001 and newer vehicles). While ethanol and other renewable fuels doand should continue toplay an important role in helping to meet our nation's energy demand, it's important that the short- and long-term impacts of increasing the amount of ethanol blended into motor fuels be evaluated on the full vehicle fleet before a waiver decision is made."
Whatever the outcome, the decision is sure to rankle some industry lobbies that have been sharply divided over the issue of putting more corn in the nation's gasoline tanks, said The St. Louis Post-Dispatch. A broad coalition of interests, including automobile and engine manufacturers, food and livestock industries, oil companies and environmental advocates, urged the EPA to deny Growth Energy's request.
The ethanol industry, still recovering from a shakeout that left several of its largest producers scrambling for bankruptcy protection, has lobbied vigorously for the change, arguing that its near-term future rests with the EPA's decision, said the report.
A 2007 federal law mandated the use of 36 billion gallons of ethanol by 2022, including 15 billion gallons this year. But finding a use for all of the ethanol that's supposed to be produced hasn't been so easy.
Most gasoline sold in the U.S. already contains 10% ethanol. And demand for E85, a purer ethanol blend that can be used only in so-called Flex Fuel vehicles, has been slow to develop. Nationwide, there are 202 ethanol plants capable of making 13.4 billion gallons of fuel, according to the Washington-based Renewable Fuels Association. Another 1.4 million gallons of ethanol capacity is under construction.
That means production capacity is quickly approaching volumes equal to 10% of the nation's annual gasoline demanda reason the ethanol industry sees a significant barrier to additional expansion unless the current blend limit is raised.
"In order for the industry to regain its legs and be a long-term, sustainable industry, you have to have some expansion of the market potential," Gene Millard, chairman of ethanol producer Golden Triangle Energy LLC, Craig, Mo., told the newspaper.
In its application with the EPA, Growth Energy argues that increasing the ethanol content in gasoline would be good for America. It would create an additional 6 billion gallons of annual demand, thousands of new jobs and limit dependence on foreign oil, the group said.
Ethanol producers also contend it will provide a catalyst for investment in emerging companies that are developing biofuels from materials other than corn, such as grass and algae.
If the EPA does not act immediately to approve E15, the group is seeking approval of a 12% or 13% blend while additional research is conducted.
The campaign by ethanol producers and corn growers has reignited debate over the impact of ethanol on food prices and whether the fuel delivers the environmental benefits that its supporters claim, the report said.
Opponents also argued that higher-level ethanol blends could damage millions of lawn mowers and other vehicles and equipment because of the corrosive nature of the fuel. Grocers, meanwhile, said policies that lead to increased corn ethanol use will lead to higher corn prices and, ultimately, higher prices for meat and dairy productsan argument that the ethanol industry and corn growers dispute.
Even if the EPA approves higher concentration of ethanol in gasoline, it will not likely mean much for fuel demand outside of the Corn Belt, Rick Kment, an analyst at DTN, a commodities research firm based in Omaha, Neb., told the paper.
"We will see a significant amount of blending in the ethanol-rich states," he said. "But that's just a small piece of the pie compared to the population dense areas of the east and west coasts. Long term, we're going to have to have more locally produced ethanol, and that's going to depend on alternative [feedstock] sources."
That was the hope of the 2007 federal mandate. But wide-scale commercialization of advanced biofuels, such as cellulosic ethanol from agricultural waste and algae-based fuels, remains at least a few years away. That puts the onus on corn-based ethanol to keep the biofuels industry growing, the report said.
Pavel Molchanov, a Raymond James analyst in Houston, is skeptical that can happen. In a November 2 report cited by the Post-Dispatch, he said the economics of the corn ethanol business suggest the industry's best days are behind it, no matter the EPA's decision.
"Finito, kaput. sayonara," he said. "However you say it, we think there is no denying the fact that America's corn ethanol industry is finished."
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