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American Petroleum Institute Argues for More Pervasive Ethanol Use at Lower Blend Ratios Instead of E85

13 October 2006

In a speech to the USDA/DOE Renewable Energy Conference, Red Cavaney, President and CEO of the American Petroleum Institute (API), argued for wider use of ethanol at lower blends of up to E10, rather than localized use of E85 in flex-fuel vehicles.

His remarks come at a time when politicians such as Senator Richard Lugar (R-IN) are arguing for aggressive programs that would make virtually every new car sold in the US a flex-fuel vehicle; ensure that at least 25% of filling stations in the US have E85 pumps; and dramatically expand ethanol production to levels up to 100 billion gallons per year by 2025 (earlier post). On the other side, organizations such as Consumer Report and Public Citizen are pointing to shortcomings in current E85 products and strategies.

Cavaney started out by asserting that more than 90% of motor fuels consumption will still be petroleum-based by 2030. (This is in conflict with the goal of the Department of Energy, which is seeking a 30% biofuels mix by then.)

Already, it is becoming clear that, going forward, the mix of our fuels will be more diverse. However, we feel a free market will determine the technologies and fuels that work best.

Some industry critics erroneously claim that our industry is “opposed to ethanol” and is doing all it can to discourage its use. Nothing could be further from the truth. Our companies are in the business of producing and supplying transportation fuels, with individual companies following differing strategies and approaches. There is a bright future for the full range of alternative sources.

Our companies have been working hard to markedly increase the ethanol content of the nation’s gasoline pool. Nearly half—46 percent, to be specific—of all gasoline now consumed in the US includes ethanol. Some 4.6 billion gallons of ethanol will be used this year—exceeding the RFS-required 4 billion gallons for 2006. In our view, ethanol is here to stay, and it is a very important part of our nation’s gasoline pool.

Cavaney then went on to argue that reliability in the introduction of a new type of fuel is key, stating that consumers’s first experiences with biofuels should “be a positive one”, and then went on to tackle E85.

We are concerned that some ethanol proponents are focused exclusively on E85 fuel. While the industry does not object to E85 in a free market, so long as it meets standardized technical specifications and is of reliable quality, a national emphasis on increasing ethanol volumes through E85 can prove unnecessarily expensive and risky. If we are to encourage more long-term use of ethanol, we need to avoid surprising consumers with unanticipated problems.

Recently, Consumer Reports put a 2007 US manufactured SUV FFV through an array of fuel economy, acceleration, and emissions tests, and interviewed more than 50 experts on ethanol fuel. Their findings were consistent with EPA’s annual reporting of FFVs running on E-85 compared with gasoline. FFVs operating on E-85 incur a 25-30 percent fuel mileage penalty. In short, their miles-per-gallon rating suffers a 25 percent reduction. Interested consumers need to be aware of these facts before they make their purchase decisions.

Looking at demand, more than 97 percent of cars on the road today are not designed to operate on E85, without risk of damage. We appreciate automakers’ efforts to produce more flex-fuel vehicles. However, given that the current useful life of new cars is in excess of 15 years, it will take decades for significant market penetration of these new flex-fuel vehicles to occur. In fact, EIA projects that FFVs will comprise 6.5 percent of the US light-duty vehicle fleet in 2025, compared with 2.6 percent today.

More than 90 percent of the 169,000 retail gasoline stations nationwide are owned or operated by independent entrepreneurs—typically small businessmen and women. They will decide whether or not to offer E85 to consumers, balancing customer demand with per-station investment and conversion costs that can range from $10,000 to as high as $200,000. This investment hurdle is a major concern to many, since most service station owners will insist on seeing demand aplenty before making this level of investment commitment.

We believe allowing market forces and consumer preferences to determine where and how ethanol is consumed is the most effective and least costly way to integrate ethanol into the nation’s transportation fuels pool.

Cavaney then went on to argue against state ethanol mandates.

Just as the patchwork approach of boutique fuels has made it much more difficult to deal with tight supplies and get fuel to where it is most needed, state ethanol mandates will have the same effect on both our industries. As you know, ethanol cannot be moved by pipeline and requires its own supply chain to serve consumers. That means a longer reaction time between when supply problems arise and when relief fuels can be sourced into the market under pressure. State ethanol mandates will significantly add to that reaction time. This development is bad for both the oil and ethanol industries, and particularly bad for US fuel consumers.

The uniform national RFS enacted last year is a much better alternative. It will integrate more ethanol into the nation’s gasoline pool at concentrations of up to the maximum permissible 10 percent per gallon. It can also be utilized in the entire US automotive fleet without vehicle modifications or fear of engine damage. And, E85 can grow in those locales and instances where it meets regulatory and marketplace demands.

The response from the NEVC was swift.

To have the President and CEO of the American Petroleum Institute making such a big deal of such an infant industry is gratifying and unexpected. The members of the American Petroleum Institute, which made a combined $38 billion in profits last year, may wish to consider investing more of that money in renewable energy such as E85 rather than simply trying to poke more holes in pristine portions of the Gulf of Mexico or Arctic National Wildlife Refuge.

—Curtis Donaldson, Chairman of the National Ethanol Vehicle Coalition

The clash is predictable (a GM executive not at all happy with the oil industry’s approach to E85 noted that if someone were trying to take away 85% of his product that he’d resist that too), but also comes at a time when other organizations such as Consumer Reports and Public Citizen are focusing on the current downsides of E85.

Public Citizen in particular is taking Ford to task over what the organization asserts are misleading claims about its flex-fuel vehicles.

Ford is misleading consumers into thinking they are buying efficient and environmentally friendly cars, while taking advantage of a perverse system that rewards car makers for building vehicles that do just the opposite. Ford’s flex-fuel vehicle is grossly misnamed; it isn’t flexible and doesn’t run on alternative fuel.

—Public Citizen President Joan Claybrook

Public Citizen, which has for some time maintained to the NHTSA [National Highway Traffic Safety Administration] that the effect of the FFV loophole is to lower the average fuel economy of the overall vehicle fleet, has filed a complaint with the agency against Ford.

Public Citizen maintains that Ford has misled the public about the capabilities of some of its flex-fuel vehicles (2003 to 2005 Taurus and Mercury Sable FFVs) and that the company has thereby escaped as much as $135 million in fines for failing to comply with federal fuel economy standards.

October 13, 2006 in Ethanol | Permalink | Comments (14) | TrackBack (0)

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They're all right -- and peversely, all wrong.

Cavaney correctly points out that by including a smidge more ethanol in every gallon of gasoline, you'll have a much larger base of customers. End result: more ethanol served, which is a good thing in the short run (less dependance on foreign oil, if you believe as I do that corn based ethanol is slightly more oil-efficient than gasoline) and in the long run (advancements in ethanol technology will make amount of oil needed per mile decrease, which is good for carbon footprint, peak oil, etc).


Donaldson correctly notices that without pushing toward E85, without getting over that "hump", ethanol is useless if the price of a barrel of oil stays as low as it is now -- there simply won't be a political push to require more of it, and there won't be industrial investment in research.


This, however, always makes me laugh:
Just as the patchwork approach of boutique fuels has made it much more difficult to deal with tight supplies and get fuel to where it is most needed, state ethanol mandates will have the same effect on both our industries.
They complain about different standards. The irony is that if they met the more stringent standards even in places where it wasn't required, they wouldn't have the supply problems. It's not differing standards that create their dillema, it's their inability to optimize correctly: they try to do as little as possible, and as soon as anything changes, they're caught unprepared.

Wow! In a twisted way, it's somewhat satisfying seeing big oil poke holes in the holy grail of E85 that GM/Ford/Chrysler are chasing together with a few midwestern politicians.

Wow2! Curtis Donaldson, Chairman of the National Ethanol Vehicle Coalition defending ANWR- I bet if they could grow corn in Alaska, he'd help fund an ethanol refinery plant without an enviro impact study there, too!

States cant mandate independent retailers to voluntarily upgrade their facilities to higher cost ethanol. These "state mandates" have a hollow ring, to me. There is no way to implement them. Especially when the general public starts to understand the lower power desity, in other words, lower mpg of E85 over regular petro gasoline, which is somewhere around 70-80% of regular gas. E10 would make more sense, nationwide, than E85. Every gasoline engine currently running can use E10. Its not just for cars. And no problems transporting E85 due to its penchants for absorbing water, and the corresponding pipeline corrosion problems.

The corn/ethanol groups should concentrate on trying to supply ethanol for E10 nationwide, and work to making the remainder of their feedstock into bio-butanol, which has none of the drawbacks of ethanol, and can be used as a direct replacement, or in any percentage of a mix from 0-100%, with regular gasoline.

Yes, and the same thing can be said for Biodiesel. It's better to have the whole nation using a low blend like B5 (which several automakers have already certified as being OK), than to have all these different blends, which requires multiple pumps, and some of which have cold weather problems, etc.
(And I believe from an emissions standpoint, it's better also to have everyone use B5 than have 5 % of vehicles using B100).
And over time, the B5 can become B10, etc... as production ramps up and people realize it's won't harm their cars.

In Europe, virtually all on-road vehicle fuel - both gasoline and diesel - sold already contains a biofuel fraction low enough not to interfere with the fuel systems of any vehicle sold in the past 25 years or so. EU members states are achieving their mutual commitment to a 5.75% biofuel market share by 2020 by simply changing the fuel definition by law. There is no need to set up a new distribution infrastructure nor to market a new fuel grade - companies are currently spending those Euros on promoting premiumm diesel containing xTL, msotly derived from natural gas.

This suggests that the total market share of ethanol and biodiesel could rise much faster if the political will to simply mandate low blends existed. Trouble is, the oil majors are not at all keen on shrinking the market share of their primary moneyspinner, crude oil. Moreover, ethanol produced in the Midwest cannot easily be transported in pipelines to the major markets along the coast.

However, the main reason for the continued push for E85 appears to be that the carmakers are in cahoots with Midwestern politicians. It was they who put the E85 loophole in CAFE, which would presumably be scrapped if low blends were ever mandated nationwide.

Sorry, typo. The EU target for biofuel market share is 5.75% by 2010, not 2020.

Big Oil feeling threatened by ethanol? Don't make me laugh! In 2005, the US produced 4 billion gal of ethanol from 14% of its corn harvest. After factoring in ethanol's low energy content, that's enough to replace ~1% of US oil demand! Coming in 2010, what? 2%? So Big Oil is not exactly shaking in its boots.

Nor is cellulosic ethanol all it is cranked up to be. One company may have a solution? That reeks of desperation. Ditto for the new wonderkid on the block, biobutanol.

Why is it so hard to understand that the CARRIER fuel we use (Ethanol! No, biodiesel! No, biobutanol!) is not all that significant? It is the PRIMARY fuel that's important. We are not necessarily trying to replace gasoline and diesel. We are trying to replace OIL. One candidate: BIOMASS. Obviously not FOOD (condolences to corn ethanol). WASTE BIOMASS. Like waste paper, which currently make up 40% of what arrives at US landfills.

So, let's take the ~1 billion tons of waste biomass a year that's apparently available, and convert it into good old gasoline and diesel, using known technology and avoid all these pointless debates on the virtues of fuels that may or (more likely) may not ever make it onto the big stage...

This is exactly what I have been saying. E85 is a waste, far better to promote E5 everywhere than have E85 in just a few spots.

Amusing to see such large industries fighitng each other. At current modest levels of ethanol production this is a decent argument. However, if cellulosic ethanol takes off and works from waste feedstocks, suddenly there could be enough ethanol that E10 doesn't use it all up, and higher blends start making sense. I do think the 85% blend was chosen arbitrarily for maximum benefit to corn growers, not for reasonable usefulness to vehicle owners. I would rather see a mandate that all gasoline-engine cars be able to use gradually increasing levels of ethanol - maybe 20% in 2010, 30% in 2012, etc. Of course biobutanol could potentially make this all moot.

The criticism of much lower MPG on E85 continues to be appropriate, IMHO. I find the claims that many FFVs don't actually run acceptably on E85 to be very ominous.

Studies have should that most cars on the road with modern electronic fuel injection systems can run 20-30% ethanol without any problems. That is not covered by the warranty of course, but it still works. There is no evidence of any modern vehicle having ethanol corrosion problems.

The 85% blend of ethanol to gasoline was chosen to allow cold starting. Vehicles that run 100% ethanol need special cold starting hardware.. a small amount of gasoline helps in cold weather. E85 is actually blended to E70 in the winter, at least for some northern states.

The petroleum industry realizes that E85 has the best chance of *replacing* petroleum, that is why they are against it. This *exact* same group (API) has fought against ethanol in the past and it is no surprise they seek to keep it "limited" now. As long as our fuel is still 90% petroleum, they can remain in control of this vital market.

Every car made should be FFV. Since it only costs the car maker a few hundred dollars extra per unit, it should be law. That way, if we want to go above E10 in the future, the newer cars replacing the older cars can use it. Now we have 87, 89 and 91 octane. Few, if any, car makers specify 89 octane. We could have two grades, E10 and E85.

Many cars from atleast the late 90s can use E10.

You guys make me laugh. Talk to Brazil about how impossible it is to move your entire fuel infrastructure to E85.

And before you come back with your pat "not enough corn in the world to replace 10% of our gasoline consumption" argument, please tell me that you don't actually believe that ethanol manufacturing is a static industry. Every day I read another article about improvements in efficiency at new ethanol plants either in production or under construction.

AROD,
You are kidding, right? Turning food into fuel is so stupid, only uncle Sam could see it as a solution. Of course, knowing how gullible the retarded old uncle is, the ag lobby is quick to exploit any sitution to its maximum potential benefit.

Wanna talk about Brazil? Here are some factoids of interest:
1. Oil consumption in Brazil is 4.2 barrels per person per year. In the U.S., oil consumption is 27 barrels per person per year, 6.4 times as much per person as Brazil's.
2. Each year the U.S. produces 11 barrels per person, compared to 3.35 barrels per person for Brazil.
3. In other words, the US produces ~40% of the oil it consumes. Brazil produces ~80%.

So Brazil's energy independence is more related to a high percentage of internal oil production than to the magic of ethanol.

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