The RFS Is Broken And E85 Is No Solution

on June 20, 2014 at 10:00 AM

Farmland Tapped For Oil In The Midwest

Almost half of 2014 is behind us, and yet EPA still hasn’t finalized the ethanol requirements for this year. This is not a recipe for predictability and reliability in the gasoline markets, and the administration’s inability to meet the congressionally-mandated deadline of November 30th is a clear example of how unworkable the RFS is.

Given the rule has yet to be submitted to the White House for interagency review, it most likely won’t be finalized for several more months, perhaps not until September. The law requires EPA to finalize next year’s volume requirements by November 30th. Right now, EPA should be proposing the 2015 requirements, but we’re still waiting for them to finalize requirements for this year. Unfortunately, this has become the rule rather than the exception when it comes to implementation of the RFS under this administration.

The administration hasn’t released the requirements on time since 2011. In 2012, the rule was one month late. In 2013, it was nine months late. And this year, it could be 10 months late. Companies are left to guess how much ethanol they must blend into gasoline, making it harder to produce the fuels Americans need. Bottom line, the EPA needs to finalize the 2014 rule now and start the process of finalizing the 2015 rule to meet the November 30th deadline, as required by law.

And as the process continues to grind along, we are concerned that EPA will raise ethanol requirements from its 2014 proposal, based on the specious reasoning that E85 – a mixture of up to 85% ethanol with 15% gasoline – is a workable solution. It is not.

Only 6% of the current vehicle fleet can even use E85. But even those motorists have largely rejected the fuel because ethanol is less energy-dense than gasoline. That means lower miles per gallon – a tank of E85 won’t get you as far. And it means more money out of your wallet. According to Triple-A, E85 costs consumers more when accounting for lost fuel economy. In fact, it has cost consumers more for as long as Triple-A has been tracking E85 retail prices.

Further, consumers don’t want E85. It accounts for only 0.15% of gasoline demand. And data from the Energy Information Administration shows no growth in consumer demand for E85 between 2010 and 2013. Ethanol proponents will claim that more E85 would be sold if more gas stations offered it for sale. Such a claim ignores the fact that over 95% of gas stations are owned by independent businessmen and women, not by oil companies. These local businesses in some cases would have to invest hundreds of thousands of dollars so their stations could sell E85, and they have to weigh the limited market for E85 against such potentially cost-prohibitive investments.

The fact is consumers have largely rejected E85, which severely limits its ability to act as a safety valve to forestall the looming 10% ethanol blend wall crisis. This lack of E85 demand stands in stark reality to the consumer demand for E0 – non-ethanol gasoline – which currently stands at over 3% of gasoline demand. Consumers want E0 for their boats, for lawn equipment, and for recreational vehicles.

Given the increasingly long delays in finalizing volume mandates each year, as well as the negative impacts on consumer property, market choice and the environment, it is clear that Congress must act to repeal the RFS outright. But in the meantime, we need EPA to provide a short-term solution by rolling back ethanol mandates to protect consumers from damaged vehicles, to allow for non-ethanol gasoline for consumers who demand it, and to reduce carbon emissions.

By Bob Greco

Originally Posted June 18, 2014 
Energy Tomorrow is brought to you by the American Petroleum Institute (API), which is the only national trade association that represents all aspects of America’s oil and natural gas industry. Our more than 500 corporate members, from the largest major oil company to the smallest of independents, come from all segments of the industry. They are producers, refiners, suppliers, pipeline operators and marine transporters, as well as service and supply companies that support all segments of the industry.