Ethanol issue sputters along

Spiel · May 23, 2009

Ethanol issue sputters along

Makers of cars and marine engines wary of EPA's proposed ethanol fuel cap increase

May 20, 2009

For the past few years, many boaters have been using fuel that contains 10 percent ethanol. Most of those boaters probably haven't noticed much of a difference in engine performance while they're up on plane.

Marine manufacturers, however, say that a tsunami of bad side effects might be on the way, especially if the Environmental Protection Agency (EPA) decides to raise the ethanol cap from 10 to 15 percent of fuel content. The ethanol industry, composed of refiners and agricultural interests, have requested that the EPA grant a waiver on its 10 percent cap and allow a standard of 15 percent.

This is the story of how contentious 5 little percentage points can get.

Ethanol, which has been in use in the Midwest for several decades, started to become a household name in the rest of the country after the Energy Policy Act of 2005 required the use of renewable fuels to cut down carbon emissions into the atmosphere.

The Renewable Fuel Standard, part of the program, calls for a graduated increase in the general usage of "biofuels," with a cap of 10 percent of total volume for most engines. Thus, the E10 designation for ethanol.

There are specially designed engines in "flexible-fuel" vehicles that can run on ethanol up to 85 percent by volume (E85). Provisions of the 2007 Energy Act also addressed the development and use of alternative biofuels.

This spring the proponents of increased ethanol usage started putting pressure on the EPA to allow the blend cap to go from E10 to E15. The EPA is in the process of collecting comments on the waver request and has until Dec. 1 to decide.

In the meantime, it's sandwiched between a consortium of E15 proponents called Growth Energy (co-chaired by Wesley Clark, the retired Army general and would-be President) and opponents led by the National Marine Manufacturers Association (NMMA), leaders of the not-so-healthy auto industry and — strangely even by the standards of political bedfellows — the environmental movement.

Except as it applies to the latter, the controversy centers on money, and lots of it. Agribusiness, represented by Growth Energy, wants to get a bigger slice of the American pie. Various marine engine and vehicle manufacturers want to keep the cost of research and development, plus warranty service charges, as manageable as possible, and E15 probably isn't going to let that happen.

High stakes

Ethanol refiners are awash in money. They've received billions of dollars in subsidies and research grants from the federal government in recent years to develop and market a fuel that it hopes will be cheaper and cleaner-burning than fossil fuels.

The U.S. Department of Energy estimates that in 2008, American producers cranked out 9 billion gallons of ethanol, some of which was exported.

Depending on who's estimating, that fuel cost between $1.50 and $1.74 to produce, for a total worth between $13 billion and $16 billion last year alone. Tack on another 50 percent in production, which is what E15 will do as soon as Growth Energy and its allies can make it happen, and the stakes get astronomically higher.

In the U.S., all that cash is riding on corn. Nowadays, about a fourth of the corn grown in this country is used in the distillation of ethanol, a form of alcohol. Ethanol can be cheaper to produce than undiluted gasoline, depending on the current asking price for oil and taking into account the various government subsidies that support the production of what in the U.S. is principally a corn-based fuel.

As far as engine manufacturers are concerned, the issue with ethanol is whether its side effects, namely degradation of fuel system components and engine performance, are going to be greatly exacerbated if the EPA grants the waiver. Some marine manufacturers admit that they don't know, and the E15 proponents don't seem to care.

"Our position is not anti-ethanol, but that the waiver shouldn't be approved until there is sufficient test data to show it works as advertised and doesn't hurt engines or affect emissions negatively," says Steve Fleming, a Mercury Marine spokesman. "Some valid tests of road and non-road engines have been proposed by the EPA, and it wants some companies to conduct them. Mercury is willing to be one of them."

Most gas-operated engines are designed and calibrated to handle E10. The long-term effects it has on engines, fuel lines and fuel system components are less understood.

"There are about 18 million boats in this country, and about 98 percent of them are trailerable," says Matthew Dodd, the legislative director for the NMMA. "The owners pull into gas stations somewhere, fill up their boats' fuel tanks, often if not usually with E10 fuel, and head for the water. The boats run, but it's the after-effects that we have questions about."

Generally, such concerns involve:

• The affinity between ethanol and water, which encourages condensation and causes more corrosion in metal parts

• The fact that ethanol burns hotter and faster than regular unleaded gas, which ultimately shortens engine life

• The heat buildup in engines, which could lead to vapor lock in the carburetion system and sudden engine failure

Other issues relate to the caustic effect of ethanol on various resins and materials in fuel lines and fiberglass gas tanks.

Last winter, for example, Toyota recalled more than 200,000 Lexus cars to replace fuel-line components damaged by ethanol residue, and then spent big bucks making sure all of its vehicles could thwart the deleterious effects of E10.

Outboard engine purchasers also spend big bucks on what they assume will be an investment they can count on for 10 or 15 years, at least. Depending on the horsepower rating, engine prices vary from a few hundred dollars to more than $20,000 for a top-of-the-line model in the 350-horsepower range. Offshore anglers in the Great Lakes or along the coasts typically pair outboards, and might spend more than $30,000 for twin 250-hp engines.

"As we see it, it's not that outboard engines won't operate on E15, it's that they won't function well over time," says Martin Peters, of Yamaha. "We've fielded customer complaints about the indirect damage of ethanol on their engines. Somebody asks them if they burn E10 in their engines frequently, and the answer in the majority of such cases is yes. So we see a definite correlation there.

"Typically, the owners of outboards rightfully expect them to remain operable for many years. That's a fair expectation; we've all got to help ensure that those outboard owners aren't ignored in all this."

Enter the environmentalists

Not everyone shares Peters' concern for customers. In a Growth Energy phone-in press conference two weeks ago, the subject of E15 and engines was barely mentioned. Of greater concern was "indirect land use," which relates to the destruction of rainforests in sub-equatorial countries to make room for the crops that will provide the raw material for ethanol in its various forms.

In fact, when contacted later and offered the opportunity to address and refute some of the concerns that engine manufacturers have, spokeswoman Nicole Oliver replied via email that "Growth Energy cannot comment regarding the issues such as small engines, marine engines, etc."

By way of a compromise, Growth Energy suggests that gas stations sell both E15 and regular fuel, so that those who don't want to run the risk of damage to their outboards or other types of engines have a choice. That presupposes the cooperation of fuel wholesalers, distributors and retailers, however, or suggests government mandates.

Indirect land use is a big deal to environmental groups such as Greenpeace and Friends of the Environment, which don't want to see natural ecosystems converted into croplands for sugar cane, switch grass, corn or any other main ingredient for biofuel.

Although Growth Energy claims that ethanol's emissions are much less harmful than those of fossil fuels, there's no scientific consensus yet. The chemical composition of E10 and petroleum-based fuel are certainly different, but whether ethanol emissions are safe for people and the environment is a thesis awaiting final proof.

In the coming months, the EPA will decide whether to grant the E15 waiver or to stick with E10. It may instead call for additional study, which is a popular option for any agency or governmental body. Here again, it's emissions, and not engines, that concerns the EPA. Anticipating that the issue will pivot on environmental effects, some politicos in the Corn Belt, where ethanol is old hat, are already fuming.

Sen. Charles Grassley (R-Iowa) and Rep. Collin Petersen (D-Minn.) have charged the EPA with blocking this new clean, green path to the future after the EPA noted in early May that initial study results indicated corn-derived ethanol would likely not meet federal emission standards.

Scarcely fazed by the EPA party-poopers, Sen. John Thune (R-S.D.) asked the agency to raise the ethanol waiver to 12 or 14 percent now as it conducts or authorizes studies related to such issues.

If stalling for time is the EPA's intent, it has allies in the boating industry and the environmental movement. Both groups also want more studies, but don't want any changes to the current E10 standard until and unless conclusive proof is provided that more ethanol won't cause harm.

Though it's still pushing its "Green Jobs" initiative, of which the E15 waiver is part, Growth Energy can afford to be patient a bit longer. Last week, the Obama administration announced that the ethanol industry was eligible for about $1 billion to fund studies on emissions, indirect land use and the impact of converting a food crop (corn) into a fuel crop. Likewise, the administration has charged automakers with developing engines that are more compatible with ethanol, and urged that ethanol be made available at more fuel stations across the country.

Where we're headed

As recently as last year, when a barrel of oil cost upwards of $140, gasoline refiners saw ethanol as a cheaper alternative to oil, an additive that would help them be more competitive. Gas prices went to more than $4 a gallon, but they could have gone higher across the board had it not been for ethanol.

That was then, this is now. Though oil prices are inching up in anticipation of the summer travel season, they're still hovering around $55 a barrel and costs aren't expected to reach last year's highs. In 2008, ethanol was cheaper than oil, but times have changed.

E10 fuels are still available almost everywhere there are gas pumps, of course. The larger refineries are required to produce a certain amount of ethanol each year (and they get tax credits for doing so), but it's a gradual escalation by volume and most are conforming to the standards set by the Energy Policy Act of 2005 and continued in the 2007 Energy Act.

As far as ethanol content goes, they'll use whatever the government tells them to use or otherwise conform to industry standards. Right now, that's E10.

If gasoline refiners and blenders aren't compelled by profit margins to market more biofuels now, and they aren't compelled to add more ethanol into their current fuel blends yet, why should they? Though nobody is saying it, a lot of people are thinking it: Getting the EPA to raise the ethanol content allowance from 10 to 15 percent is the first necessary step toward legislative intervention.

The second part of the strategy could include legislation proffered by Corn Belt congressmen that mandates the production of more ethanol and a blend requirement equal to 15 percent by volume. Such a provision might be tacked on as an amendment to an otherwise innocuous bill dealing with agriculture or natural resources, or as a stand-alone.

One thing is certain: Members of the House and Senate from the breadbasket and labor union states constitute an undeniably powerful group, if recent federal "stimulus" measures are any indication.

If the EPA is compelled to grant the E15 waiver, and agribusiness sets loose its Congressional champions to mandate its usage, boaters and others might find that "going green" ultimately involves more green than is standing in Midwestern cornfields.

Sound Off

The Environmental Protection Agency announced Monday that it has extended the public comment period regarding the E15 waiver. Slated to end on May 21, the comment period will now end on July 20. To express and opinion or make an observation, go the federal government comment web site, www.regulations.gov, type "ethanol" in the Search box and follow the instructions.