On December 19, 2007, President Bush signed into law the Energy Independence and Security Act (H.R. 6), establishing a requirement that at least 36 billion gallons of renewable fuel be used in the marketplace by 2022.
The new law dramatically increased the previous renewable fuels standards (RFS) from a goal of 7.5 billion gallons by 2012. Of the 36 billion gallons mandated, the bill requires various mandates for fuels that meet certain criteria, including their ability to reduce lifecycle greenhouse gas emissions by a certain percent — 50 percent for advanced biofuels and 60 percent for cellulosic fuels. The program essentially caps corn-derived ethanol to no more than 15 billion of the required 36 billion gallons.
The legislation does require a frequent analysis by the administration to determine if supplies are sufficient to satisfy the annual increase in mandated volumes. If there appears to be a problem complying with the mandate, the administration is authorized to amend the levels to accommodate the projected shortfall.
Currently, the motor fuels market uses ethanol in two primary concentrations: E10 (10 percent ethanol, 90 percent gasoline), suitable for all gasoline-engineered vehicles; and E85 (70 to 85 percent ethanol, 30 to 15 percent gasoline), suitable only for flexible fuel vehicles (FFVs). As mandated in the RFS, biomass-based diesel is expected to contribute limited volume to the overall RFS, so ethanol likely bears the brunt of the volume. But whether corn-derived or cellulosic, ethanol has its limits. Experts call the difficulty in meeting the RFS mandates the “blend wall,” because the nation will surpass its use of E10 in 2012, at which point the mandated RFS volumes will require a per gallon concentration beyond 10 percent.
EPA is currently considering a petition by Growth Energy to authorize to sale and use of E15 (15% ethanol, 85% gasoline) in non-flexible fuel vehicles. The decision, which is expected in June 2010, will be based upon studies of emissions from use of such fuel as well as vehicle performance.
The use of concentrations above E10 presents a number of different problems, including:
- Local fire codes require retailers to sell only products for which their equipment is officially certified as compatible by Underwriters Laboratories (UL). Currently, UL has not certified a single dispenser as compatible with fuels containing more than 10% ethanol, thereby exposing retailers of such fuels (like E85) to the risk of gross negligence liability should they experience a fuel compatibility-related equipment failure.
- Converting a gasoline retail location to sell E85 is costly, with estimates up to $200,000 depending upon the modifications required and the associated regulations governing those modifications. Retailers converting a location to sell blends greater than 10 percent may also incur similar costs.
- Retailers who sell gasoline blended with greater than 10 percent ethanol through equipment not certified as compatible with such fuels risk exposure to gross negligence liability. They risk substantial regulatory fines and could be sued by consumers, environmental organizations, or any other person for significant damages.
- In March 2009, UL issued a statement suggesting that existing dispensers currently listed under UL87 as compatible with E10 were suitable for use with blends up to 15 percent ethanol. This statement was issued to support local authorities having jurisdiction to provide retailers with waivers to use higher blends of ethanol. However, UL has advised NACS it will not recertify any equipment currently in use in the market. Consequently, the recent statement does not provide any legal protection for retailers wishing to sell gasoline blended with more than 10 percent ethanol, despite any waivers received. Retailers remain subject to certification requirements stipulated by the OSHA, UST tank insurance policies and state tank funds. In addition, retailers remain subject to claims of gross negligence.
- Auto manufacturers currently extend warrantees on the existing fleet to accommodate gasoline blended with up to 10 percent ethanol. To date, they have not been willing to amend their warrantees to provide coverage retroactively in the event consumers refuel with blends higher than 10 percent.
- Small engines (such as lawn mowers, chain snows, snowmobiles, etc) and marine engines are likewise not suitable for fuels containing more than 10% ethanol. Such fuels may cause performance or even safety issues.
- Many observers suspect EPA may approve the E15 waiver request for vehicles manufactured after a certain year-such as model year 2001.
- The potential bifurcation of the market (between model year vehicles as well as between vehicles and small engines) creates a significant liability exposure for retailers. If a consumer misfuels their engine, the retailer might be held liable for equipment damage or even potential operator injury. In addition, the Clean Air Act will hold the retailer responsible for allowing the consumer to improperly fuel their engines, resulting in fines of up to $32,500 per day.
NACS has developed the following legislative proposal:
- Establish a new standard for determining equipment-fuel compatibility. By empowering a retailer, through due diligence, to establish a reasonable belief that his equipment is compatible with a higher ethanol blended fuel (i.e., citing the UL announcement or manufacturer’s statement of compatibility), this bill would open the door to the marketing of additional renewable fuels consistent with the federal RFS, avoid imposing unsustainable costs on petroleum retailers, and remove the specter of litigation from the market.
- Direct the EPA to issue regulations to prevent the misfueling of non-compatible vehicles and establish labeling requirements to protect retailers from consumer misfueling liability.
NACS staff is currently educating Congress about retail concerns regarding the RFS and lobbying for our legislative solution to be examined in a timely manner. Staff is also working with related interest groups ranging from the petroleum industry, consumer advocates, environmental groups, and the ethanol industry to ensure continuity and gain support.
In December 2009, EPA delayed a decision on the E15 waiver request, acknowledging the fact that ongoing research concerning emissions and vehicle performance were not complete. It is expected these studies will be complete before June 2010, at which time it is anticipated EPA will release a decision.