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E15 taking baby steps forward

DANIEL LOOKER 09/04/2013 @ 3:11pm Business Editor

This month marks one year since Linn Co-op Oil Company first sold E15 at its Marion, Iowa, station, becoming the first in that state to offer it. The new 15% ethanol blend makes up 5% of the farmer cooperative’s sales.

“Our customers who are using it have not seen any difference in mileage. There have not been any differences in performance,” the co-op’s car care center manager, Jim Becthold, told other gasoline retailers at a meeting this summer.

The experience of rural Linn County hasn’t prevailed elsewhere. Only about 24 stations nationwide sell E15. The blend faces technical barriers and fierce resistance from the oil industry. Most gasoline sold in the U.S. is E10 (10% ethanol). That market is saturated, without room for all 13.8 billion gallons of ethanol mandated for blending in 2013. E85, sold only to modified flex-fuel vehicles (FFVs), will siphon off just 600 million gallons. So some oil companies pay more than $1.70 a gallon for credits that they substitute for ethanol blending (called renewable identification numbers, or RINs).

We’ve hit the so-called blend wall for ethanol – and it may get worse. By 2015, the energy law’s Renewable Fuel Standard (RFS) ramps up to 15 billion gallons of grain ethanol use. Commercial production of cellulosic ethanol is starting, mixing in 100 million gallons more. EPA will find room first for cellulosic, says University of Illinois economist Scott Irwin. “While this is a small volume, it is not a good outcome for corn-based ethanol,” he says.

In early 2011, when EPA approved E15 for use by 2001 and newer vehicles, ethanol supporters hoped a higher blend would make room for all ethanol.

Irwin is skeptical. He sees four formidable obstacles.

  • Automaker warranties. GM approved E15 for 2012 models, Ford approved it for 2013 models, and Volkswagen will approve it for 2014 models. Many others, including Japanese companies, have not. Even Ford and GM discourage use in older makes. “The trickle-down effect that has with consumers, I think, is a real issue,” Irwin says.

  • State laws and rules. Many limit ethanol in gas to 10%.

  • Dealer liability. Many fear that if customers with older cars misfuel by using E15, they could be sued for engine damage. Iowa is the only state with a law exempting dealers from that risk.

  • Vapor pressure. In summer months, EPA won’t allow gas with more than 9 pounds of Reid Vapor Pressure to be sold, in order to fight smog. Ethanol has lower pressure, but when added to gas in small amounts, the combination is more volatile. So E10 has a waiver for 10 pounds of pressure. E15 does not, meaning that only FFVs can burn it in the summer.

“You put all those together and, I think, the headwinds are too stiff to make much progress,” says Irwin.

Battling headwinds

Dave Nelson, a Belmond, Iowa, farmer and Green Plains Renewable Energy shareholder, sees a huge barrier; namely, the big oil companies.

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