EPA also said it is testing higher ethanol blends in cars and light trucks of model years 2001-2006 and expects results in November.
The agency has limited E15's Reid Vapor Pressure to 9 psi so the fuel can meet summertime emissions standards.
Cars built in 2000 or older have been denied E15 approval on a lack of test data; however, EPA officials said they are open to performing more tests. Regardless, it does not look like the decision has unleashed E15 in what is now a mostly E10 marketplace.
The ethanol industry hopes to start E15 sales as soon as the first quarter of 2011, said Tom Buis, CEO of renewables group Growth Energy, during a conference call October 13. But he added that "obviously how quickly we can market it will determine how quickly it will get in" to the market. The first marketing push for E15 is expected in the Midwest.
EPA's decision to cover only certain model years for more ethanol creates a bifurcated market that retailers, refiners and ethanol producers have all said will be a tough sell (ON 10/6).
Liability over misfueling at the pump is one of the biggest concerns. In addition, a clean-air group said October 13 the E15 decision should be delayed since higher emissions from ethanol will come as EPA is altering its ozone rules.
Automakers, who have E10 warranties in their non-flex fuel cars, are also against EPA's decision. They support E85 "because we have 'hardened' or upgraded parts [for E85 vehicles] to accommodate greater amounts of ethanol, which can degrade rubber, plastic, metal and other materials," said Gloria Bergquist, spokeswoman for the Alliance of Automobile Manufacturers.
Lawsuits against E15 are being considered by the National Petrochemical & Refiners Association and the American Petroleum Institute, according to NPRA and API spokesmen.
EPA is aware that any sales of E15 are up to fuel suppliers, retailers and other members of the industry, said Gina McCarthy, EPA assistant for air and radiation, during a conference call. "EPA is not requiring the use of E15," said McCarthy, adding the waiver is "not a mandate" but has "the potential" to increase ethanol use.
EPA did not take corn or ethanol prices into account for the waiver, said McCarthy. The price of both commodities have been spiking after the government cut its corn crop forecast last week (ON 10/13).
EPA approval of E15 is just the start of using the higher blends. There are other changes that must be made, on both federal and state levels, to reformulated gasoline and gasoline detergent additive regulations, as well as RVP allowance, fuel rating and labeling requirements.
The labeling rules will cost the industry $3.65 million/year, according to EPA's E15 documentation. "We believe these costs to industry will be offset by the avoided costs to consumers of repairing engines, vehicles and equipment that would otherwise potentially have been damaged by misfueling," the agency said.
Several groups admonished EPA for moving ahead before full engine tests are complete and an analyst speculated the timing had something to do with mid-term elections in November. "Nine at-risk House Democrats hail from the nation's top 10 ethanol producer states.
This could explain why, one day after being buffeted by the political rip currents that surround offshore drilling, the Obama administration appears to be taking a run at the ethanol 'blend wall'," said Clearview Energy Partners analyst Kevin Book. He was referring to the October 13 announcement of a lifting of the deepwater moratorium that was met with skepticism (ON 10/13).
EPA's approval of more ethanol for cars of model year 2007 and above could theoretically boost the market for ethanol by 1.4-1.6 billion gal/year to about 15 billion gal/year, according to the Renewable Fuels Association. But the group has said sales of the fuel appear unlikely.
If EPA had granted an E15 waiver for all cars, it would have created a potential increase of 6.5 billion gal/year of new ethanol demand and displaced more than 200 million barrels of imported oil, according to RFA.
EPA's decision relates to a request by Growth Energy last year that conventional vehicles be approved to run gasoline-ethanol blends above E10. Growth Energy's EPA "green jobs" waiver request was made to boost ethanol demand as production rises to meet future renewables mandates.
The E10 level now used in most cars is capping US demand and creating a so-called "blend wall" as production exceeds that demand.
EPA's decision on October 13 "is the first crack in the blend wall since it was created in 1979," said Growth Energy's Buis during the group's conference call.
Model year 2007 and newer cars make up 20% of the current US fleet, said Buis. If EPA approves E15 for vehicles of model year 2001-2006 later this year, 55% of the fleet or 130 million cars will be eligible for E15, he said, adding that will grow by 10-15 million vehicles annually as new cars are
purchased.
Meanwhile, traders said October 13 that an active market in E15 could push up spot market gasoline prices.
To achieve E15, they said gasoline being produced and traded in the cash market would have to be heavier, requiring the addition of expensive components.
"You have to have much heavier, components in the mix," said a trader for a European trading company.
"Heavy implies more aromatics... Aromatics are expensive," the trader said, referring to aromatic petrochemicals such as benzene, toluene and xylene. "Although you can always add alkylates -- which is light, but that is really expensive," he added.
However some traders pointed out that E15 would essentially mean less gasoline sold and that would mean more gasoline available in the physical market and lower prices.
But this is only if retailers sell E15, and most traders doubt it would happen anytime soon, mostly because of the lack of liability coverage.
Sources also said that under current economic conditions few retailers would invest in more tanks, and set up a system where cars are essentially vetted before being allowed to fill up at a pump.
"It will be a logistical nightmare," said a blender in the southeast. "It?s not possible to segregate E15 for just 2007 and newer cars, and tanks are not available."
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