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Court upholds higher blend of ethanol in gasoline

Industry News

The approval of E15 worries many equipment suppliers, and could have a big impact on contractors across the country.

Reuters | August 23, 2012

WASHINGTON – A U.S. appeals court upheld government approval for a higher blend of corn ethanol into gasoline on Friday in a ruling that may help the biofuels industry in the longer term but have little immediate impact on sales, Reuters reported.
 
In a 2-1 ruling, the court said foodmakers, automakers and oil refiners failed to show they were harmed by approval of a 15 percent blend of ethanol, up from the usual 10 percent. Foodmakers said the approved blend could mean higher corn prices and automakers said they might be sued if the fuel leads to engine malfunctions.
 
OPEI and partner groups sued EPA maintain that EPA’s weak labeling effort is inadequate to protect consumers and avoid potential misfueling and damage to millions of legacy products not designed to run on any ethanol fuel higher than E10.  
 
In March 2011, auto, marine, motorcycle, outdoor power equipment, personal watercraft and snowmobile groups filed a petition for rulemaking asking the EPA to ensure the continued sale and availability of gasoline blends of no greater than 10 percent ethanol (E10) for the 400 million engine products used by tens of millions of people every day in the U.S.  
 
“OPEI is deeply disappointed by the decision, but we are heartened by the dissenting opinion of Judge Kavanaugh who wrote in his strong dissent, that ‘[i]n granting the E15 partial waiver, EPA ran roughshod over the relevant statutory limits.’ This premise and many of the themes in the dissent on the merits were briefed by OPEI and the other engine manufacturers,” said Kris Kiser, OPEI CEO in a statement. “While the other two judges ultimately denied the position, the chief judge denied each of the petitions based on standing, and therefore the court was unable to address the merits of the case due to a procedural issue.”
 
Kiser says OPEI will likely appeal in the next two weeks. 
 
The Environmental Protection Agency approved the 15 percent blend, known as E15, in 2011 for cars and light trucks made since model year 2000. E15 is barred from use in light equipment or older vehicles.
 
Biofuels makers sought the higher blend rate as a way to satisfy a federal guarantee of a share of the gasoline market, set at 13.2 billion gallons this year and rising to 15 billion gallons annually from 2015. Governors of four poultry-raising states asked EPA in the past week for relief from the mandate.
 
"It (the court ruling) is an important decision. It validates the EPA decision," said Bob Dinneen, head of the ethanol trade group Renewable Fuels Association. As for sales, "I'm not sure it's going to have much of an immediate impact."
 
There is a limited network for sale of E15, with practical barriers that include the cost of installing so-called blender pumps that can dispense blends as high as E85 and the ongoing process of obtaining state approval of E15 for sale. EPA gave its final regulatory approval in June.
 
Only one retailer, in Kansas, sells E15 at present. A comparative handful of about 2,500 pumps can dispense blends other than E10 at the nearly 160,000 gasoline outlets, such as gas stations, truck stops, convenience stores, grocery stores and marinas, across the country.
 
Besides the cost of equipment, retailers worry they will be legally liable if customers put the wrong blend in their cars and void vehicle warranties. Beyond that, "our customers aren't asking for it (E15)," said a spokesman for the National Association of Convenience Stores. The trade group says convenience stores ring up 80 percent of U.S. fuel sales.
 
"I think you'll see a slow progression of it showing up in more stations," said Michael Frohlich of Growth Energy, the ethanol trade group that petitioned EPA in 2009 for approval of E15. The ethanol industry is centered in the U.S. Midwest and Plains, so the regions probably will lead in E15 adoption, he said. "It won't happen overnight."
 
With its ruling, the court gave "a significant victory" to ethanol makers and kept E15 open as a route to expand biofuels sales and meet U.S. targets for renewable fuels, analysts Guggenheim Partners said in a market commentary.
 
Read the full Reuters story here.

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