Wednesday, October 20, 2010

Behind The Ethanol Controversy

Ethanol is supposed to be a clean bio-fuel that helps reduce our dependence on foreign oil. It's primarily produced from domestically grown corn. So why is it so controversial?
When the U.S. Environmental Protection Agency announced earlier this month that refiners could begin to sell gasoline with a 15-percent ethanol content, so called "E15," it raised outcry from a whole host of special-interest groups. Environmentalists objected. Oil companies complained. Gas station owners howled. Classic car owners moaned. Motorist groups whined. Even boat owners grumbled.

Just about the only people who like the new rule are corn farmers and Midwest Democrats running for Congress. More on that later...

Five Percent More

First, let's figure out what this fuel additive means for motorists. Currently, cars are designed to use gasoline with an ethanol content of 10 percent. After testing gasoline with a 15-percent ethanol blend, the EPA has concluded that it won't hurt vehicles built in 2007 or later. The agency took this action because Congress wants to expand the nation's use of ethanol and other bio-fuels.

Later this year, the EPA will decide whether E15 is safe for vehicles built from 2001 through 2006. But the agency's two-step approval process is causing lots of heartburn. The EPA will require gas stations to slap labels on gas pumps that dispense E15 fuel. But retailers and environmentalists fear motorists might get confused if they have a choice of two different ethanol blends.

If the owner of an older car uses the wrong fuel, the vehicle's catalytic converter might be damaged. That's because ethanol blends burn hotter than pure gasoline. Vehicles built in 2007 or later have an oxygen sensor that adjusts the combustion and protects the catalyst. Not so with older cars. A car with a damaged catalytic converter can be a serious polluter, says Sasha Lyutse, a New York-based policy analyst for the Natural Resources Defense Council.

"People are worried that you could have serious problems," she says. "I am quite skeptical of the EPA's ability to implement this system at the pump."

Gas station owners aren't happy either. The angry owner of a damaged car might well sue the retailer, warns Jeff Lenard, spokesman for the National Association of Convenience Stores, whose members sell 80 percent of the nation's gasoline.

"Do retailers have the stomach for the potential risk?" Lenard asks. "A lot of questions have to be answered before a retailer is going to sell E15. Nothing is going to happen overnight."

A Different Sort Of Green

There are other problems. Vehicles built in 2007 or later account for just 18 percent of the nation's total vehicle population. If a gas station wants to serve everybody – not just owners of new cars – it would have to install new pumps and new underground fuel tanks, Lenard says. Pumps cost about $18,000 to $20,000 apiece, while underground storage tanks can cost anywhere from $20,000 in a rural area to a whopping $250,000 in cities like San Francisco.

Then there's the tricky issue of fuel economy. Because ethanol is less energy dense than gasoline, pure gasoline delivers about 3 percent better fuel economy than an E15 blend, Lenard says.

Since the EPA isn't requiring retailers to use the new blend, one might expect gas stations to take a pass on E15. But ethanol is a bit cheaper than pure gasoline, so retailers can cut the price of a gallon of fuel by a few pennies. If a competitor down the road uses E15 to cut prices, that would be a powerful incentive for retailers to stock it, says Lenard.

"People might step over a penny on the pavement on the way to the pump, but they'll drive miles out of their way to save a few cents per gallon," he notes.

Other organizations have commented on the issue. The American Automobile Association, the nation's largest motorist organization, issued a statement warning against possible damage to older cars. The Alliance of Automobile Manufacturers, which represents automakers, did so too. In its statement, the alliance noted that automakers must "harden" the fuel systems of vehicles to run on fuel blends with a high ethanol content. But ethanol can corrode the engine seals and fuel lines of vehicles that haven't been upgraded. And it's not just older cars that are affected.

The EPA warns against the use of E15 fuel in motorcycles, school buses, delivery trucks, snowmobiles, lawn mowers, chain saws and boats. Which is why the National Marine Manufacturers Association was feeling cranky enough to complain about possible damage to boat engines.

Politics Over The Environment?

If environmentalists, automakers, oil companies and gas station owners all are worried about E15 fuel, why is the EPA moving ahead? In 2007, Congress passed the Energy Independence and Security Act, which mandates the nationwide consumption of 36 billion gallons of renewable fuel by 2022. Since the nation's motorists used only nine billion gallons in 2008, we've got a long way to go.

But why was the agency in such a rush to okay E15's use in new vehicles before tests on older vehicles are complete? The New York Times hinted at the answer Thursday when it noted that nine Democratic congressmen in ethanol-producing states face tough re-election bids in November. This is a make-or-break issue for voters in corn states like Iowa, whose livelihoods are tied to the industry.

Environmentalists favor the production of ethanol from substances like switch grass, which causes less environmental damage than corn. But don't hold your breath, said the NRDC's Lyutse.

"Corn ethanol has been getting [government] subsidies for more than 30 years," she said. "This is one more decision that supports corn ethanol at the expense of cleaner biofuels."

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