Comment: RFS props big ethanol, hinders small businesses

Source: By Charlie Drevna, American Fuels and Petrochemical Manufacturers, The • Posted: Monday, July 28, 2014

There’s no way around it: the Renewable Fuel Standard (RFS) — the policy touted in The Hillby Sens. Grassley and Klobucharl as a cure-all for the nation’s energy woes — is actually a burden to consumers, their vehicles and the businesses trying to sell fuels the market demands.

The senators’ misguided claims about the oil industry’s “anticompetitive practices” are unfortunately not surprising given the common misperception that big oil companies own most U.S. gas stations. In reality, convenience stores operate more than 80 percent of the estimated 153,000 fueling stations across the country and sell roughly 80 percent of all the fuel purchased in the country. Of these stations, nearly 60 percent are locally owned small businesses. To stay afloat, these business owners must remain responsive to their consumers’ demands. While franchised retailers are typically contracted to offer several fuels produced by their refining partner, they retain every right to sell additional fuels that they see fit for their local marketplace. Despite this liberty, many choose not to sell higher ethanol blends like E15 and E85 (gasoline containing 15 and 85 percent ethanol, respectively) due to low consumer demand, engine damage concerns and compatibility issues.

It’s no wonder demand lags when the Environmental Protection Agency (EPA) has deemed E15 incompatible with cars manufactured before 2001, heavy duty vehicles, boats, motorcycles and small engine equipment. Meanwhile, more than 90 percent of the 253 million vehicles on the road today are not approved by automakers to use E15, including most 2001-2013 models. In fact, automakers like Chrysler, Ford, General Motors, Honda, Mazda, Toyota, Nissan and Hyundai’s warranties do not cover E15-related claims in most of their post-2001 models. Drivers are thus accountable for repairing any potential damage caused by E15, which can include corrosion, rust, clogging and deterioration of fuel system components.E85 is even less palatable in the marketplace. Today, just 5 percent of the U.S. light-duty vehicle fleet is equipped to handle E85. Furthermore, EPA estimates that only 4 percent of drivers of these vehicles who have reasonable access to the fuel actually use it. This low rate highlights consumer reluctance to use E85 when given the choice, likely due to the fact this and other ethanol fuel blends contain considerably less energy per gallon than regular gasoline.

Consumers consistently avoid higher ethanol blends due to decreased fuel mileage and its associated costs. Ethanol contains 33 percent less energy per gallon than gasoline, forcing drivers to fuel more often as the amount of ethanol in gasoline increases. This means on a cost-per-mile basis, fuels like E15 and E85 force drivers to spend more time and money refueling their vehicles than when using regular gasoline. To make matters worse, the Congressional Budget Office recently concluded that if more ethanol continues to be forced into the gasoline supply, fuel prices will rise up to 26 cents per gallon by 2017.

For these costly reasons, the assault on small business owners for not offering higher ethanol blends is ridiculous as demand remains low, vehicles are incompatible and stations could face legal action if misfueling occurs on-site. For example, if a customer pulls up to the pump in a pre-2001 vehicle and fuels with E15, intentionally or not, the driver may sue the retailer for potential fuel-related vehicle damage. Alternatively, under the Clean Air Act, the EPA may sue station owners for allowing misfueling to occur, wherein fines can exceed $37,500 per day.

Despite these concerns, the amount of ethanol required to be blended into gasoline has shockingly continued to rise due to the outdated framework of the RFS. This year, for the first time in the policy’s history, the EPA proposed to reduce the amount of ethanol blended in 2014. This proposal signals the agency’s acknowledgement of concerns that — if unabated — the original 2014 RFS targets would force more ethanol into the marketplace than consumers demand, or can currently handle. If the EPA’s proposal is finalized, consumers will enjoy short-term relief from potential damage and disrepair that increased ethanol blending presents.

Outside of EPA’s 2014 proposal, more and more members of Congress are recognizing the numerous problems associated with increasing amounts of ethanol in U.S. gasoline. In fact, more than 220 bipartisan members of congress have expressed support for lowering the ethanol mandate in hopes of addressing the policy’s impacts on consumers, automakers, engine manufacturers and other affected industries. Like Sens. Grassley and Klobuchar, I too urge Washington to ignore special interests. The market, not Big Ethanol, should dictate what’s best for our consumers, businesses and bottom line.

Drevna is president of American Fuels and Petrochemical Manufacturers