Ethanol Talking Points For Media And Legislative Action
Unleaded auto gas, defined by ASTM D-4814, without
ethanol is an approved aviation fuel. No state can pass an ethanol
blending law that affects fuel service on an airport. However if premium
unleaded is taken suboctane, there will be no unleaded gasoline for
LSA and STC'd aircraft.
There are six mandatory ethanol states, Minnesota,
Missouri, Hawaii, Oregon, Washington and Florida. Montana and Pennsylvania
have untriggered mandatory E10 laws. The ethanol law in Washington is
not an E10 law, it is a volumetric law, 2% of the total gallons pumped
must be ethanol, this is similar to the federal RFS mandate.
Mandatory state ethanol blending laws have been
superseded by the federal RFS mandate in the Energy Independence and
Security Act of 2007 (EISA 2007) which now affects every state, not
just the six with mandatory blending law states.
The RFS mandates of EISA are overseen by the
Environmental Protection Agency (EPA). The EPA has complete jurisdiction
over the law.
EISA 2007 is NOT a mandatory E10 law,
E10 is never mentioned in the act. It is a corporate welfare act for
E85 disguised as a volumetric law, every year more and more ethanol
must be blended into gasoline in America.
EISA 2007 requires 9 billion gallons of ethanol
be produced in 2008, and that goal was met. Ethanol production and blending
must increase every year through 2022 when 36 billion gallons of ethanol
must be produced. Corn ethanol can only grow to 15 billion gallons by
2015 but is not allowed to grow any more after that. Starting in 2010,
100 million gallons of cellulosic ethanol must be produced rising to
3 billion gallons by 2015 when corn ethanol increases cease. After that
all of the annual increases demanded by EISA 2007 must be cellulosic
ethanol.
By the end of 2012
ethanol production will be able to take every gallon of gasoline produced
in the US to E10, even though EISA 2007 is not a mandatory E10 law.
After that all of the ethanol will have to be E85 or a mix of other
ethanol levels higher than E10, i.e. E20, E30, E50, etc. As of today
only Flex-Fuel vehicles can use ethanol blends higher than E10.
It is against federal law to run a higher blend than E10 in a non Flex-Fuel
car.
Minnesota, the first state to pass a mandatory
E10 law, has passed a new law to move to higher blends by 2010, E20
or E30, and has asked Detroit to warranty non Flex-Fuel vehicles for
these higher blending levels. There are no current production vehicles
that have a warranty for blends higher than E10, except a Flex-Fuel
vehicle.
Ethanol mandates are a hidden tax, state and
federal. Ethanol always reduces mileage. Every state collects the taxes
on the amount of fuel you buy. You have to buy more fuel when ethanol
is mandated, therefor you pay more tax.
Carrots and
Sticks in EISA 2007
Ethanol blending is not done at the refinery,
it is done at distribution terminals. Ethanol blended gasoline cannot
be shipped through a pipeline because it would cause increased corrosion.
Ethanol must be delivered by railroad tank car, barge or tank truck
to a terminal. The terminal stores the ethanol in tanks and mixes it
with gasoline to the specification of an order.
The terminal gets the federal blending tax credit.
The tax credit is $0.45 / gallon of ethanol blended. (That means each
gallon of E10 generates a $0.045 tax credit for the terminal, however
blending E85 would generate a $0.3825 tax credit for each gallon of
E85 produced. Now you know why all of the terminals are getting ready.)
Every large fuel marketer, especially the branded
gasoline distributors, must blend ethanol into their gasoline at a proportional
rate to the amount of gasoline they market and the amount of ethanol
produced every year under EISA 2007. The rate is set, and enforced,
each year by the EPA. Since the E85 market is so small now, this means
that they must blend ethanol into all gasoline which they can do up
to 10%. If a distributor doesn't meet their quota, there are substantial
monetary penalties, either they must purchase RINs or pay substantial
daily fines.
There is a way for an oil company to buy their
way out of their blending shortfall. It is called a RIN. This is where
ethanol blending gets very complicated. It is a style of cap and trade
system. Suffice it to say it is the darling of the futures and derivatives
markets, and you know where they have taken our economy.
It is obvious that there is an economic incentive
for terminals to blend ethanol, the direct tax credit. But there is
another more subtle and insidious incentive for refineries to get all
of their distributors to blend E10. Once that happens they can ship
"suboctane" gasoline to the terminals. Since blending ethanol
at 10% or higher raises the Anti Knock Index (AKI) by more than 3 points,
refineries can produce and ship 84 AKI BOB (Blendstock for Oxygenated
Blending) for regular unleaded E10 blending. This is already happening
in Oregon. They can also ship 89-90 AKI BOB for premium unleaded blending.
Suboctane gasoline generally costs less to produce. BOB is not necessarily
legal gasoline that can be sold at retail.
The most acute problem for aviation is that
if the premium unleaded is taken suboctane, when all gasoline is E10,
there will be no 91+ AKI unleaded gasoline made, which is required for
100 HP Rotax LSA engines and Petersen high compression STCs.
The Problem
With Ethanol / The Three Phony Assumptions
Phony assumption #1: ethanol will reduce the
price at the pump.
Sometimes it does, sometimes it doesn't,
it is an agricultural commodity subject to all the vagaries of speculation
in the futures market.
Phony assumption #2: ethanol will improve air
quality.
There is no proof, nor any way to prove
this statement. For every study that says ethanol will improve air
quality there is another study that says it won't. There are studies
that say it will reduce certain green house gasses and other studies
that say it will increase other noxious chemicals.
This argument is dubious when you consider
the clearing of rain forests in third world countries to either
plant more sugar for ethanol or to replace the loss of food crop
imports, especially soy beans.
Phony assumption #3: ethanol will reduce our
dependence on foreign oil.
Just because you say this over and over
it doesn't make it so. Nobody actually knows if it is true.
There has never been a statistically significant,
large scale, independent study of mileage before and after a mandatory
E10 program. Without such a study there is no way to prove this
statement.
Nobody knows how the engine control units
in cars respond to E10. It is clear that some handle it better than
others, because there are many reported cases of mileage decreasing
10% or more, which would indicate that a lot of cars are using more
gasoline than before the ethanol mandates. Who knows how many? Where
is the data?
What Needs
To Be Done In Oregon
The Oregon mandatory ethanol law has been superseded
by the federal RFS mandate EISA 2007. The state mandate needs to be
repealed for two reasons:
There is no escape clause in HB-2210. Now
that ethanol is more expensive than gasoline, Oregon has the highest
gasoline price in the four Northwestern states according to AAA.
(Be sure to take the tax out.) No matter what the price of ethanol,
Oregonians will have to pay it. Even worse, if ethanol becomes unavailable
for any reason, mother nature or shortage because ethanol companies
go bankrupt and can no longer deliver, then gasoline distribution
must cease. If a terminal can't get ethanol, it cannot ship gasoline,
especially if all of its blending stock is suboctane.
SB-1079, the promised relief for the people
who can't use ethanol blended gasoline in certain engines doesn't
work. Large areas of rural Oregon have no access to unblended fuel.
SB-1079 does not prohibit suboctane production of premium unleaded.
If premium unleaded is taken suboctane, which is rumored, SB-1079
will be worthless.
The mandate needs to be repealed and a new law
passed prohibiting the blending of ethanol in premium unleaded gasoline.
Repealing the mandate and prohibiting ethanol
blending in premium unleaded will not interfere with the ethanol
mandate in EISA 2007, because EISA isn't an E10 mandate.
Oregon will see no change in ethanol blending
in regular gasoline unless EISA 2007 is repealed.
If premium unleaded gasoline is not protected
from ethanol blending there will be a direct negative impact on aviation
and other SB-1079 constituents in Oregon.
