There Goes the `Blend Wall’ Keeping More Ethanol Out of Gasoline

Source: By Mario Parker, Bloomberg • Posted: Tuesday, December 1, 2015

So much for the so-called blend wall.

President Barack Obama’s administration on Monday ordered refiners to blend a record 14.5 billion gallons of ethanol into gasoline next year. For the first time ever, that will mean ethanol will make up more than 10 percent of the total U.S. fuel mix, a threshold that oil companies have said is dangerous to exceed because of potential damage to engines and catalytic converters.

Petroleum interests and biofuel supporters for years have sparred over whether the government should mandate higher blends of the fuel, so much so that the Environmental Protection Agency took the unprecedented step of delaying issuing targets for last year, 2015 and next, in an effort to reexamine the program. Monday’s long-delayed announcement comes as Obama meets with world leaders in Paris to discuss climate change.

“The victory here is that we are piercing the blend wall,” said Jeff Broin, chairman and chief executive officer of Sioux Falls, South Dakota-based Poet LLC, the second-biggest U.S. ethanol producer.

Consumers should use blends of ethanol above 10 percent in vehicles only if the owner’s manual says it is safe to use, Michael Green, a spokesman for AAA, the largest U.S. motoring group said in a statement Monday.

Americans will consume 139.8 billion gallons of gasoline in 2016, the U.S. Energy Information Administration forecast in its Nov. 10 Short-Term Energy Outlook.

The oil industry asked EPA to set the biofuel mandate at “no more than 9.7 percent of gasoline demand to help avoid the 10 percent ethanol blend wall while meeting strong consumer demand for ethanol-free gasoline,” the Washington-based American Petroleum Institute, which represents Exxon Mobil Corp. and Chevron Corp., said in a statement.

15 Percent

In 2011, EPA allowed blends of ethanol of as much as 15 percent for cars made after 2001 to be dispensed at filling stations, though it didn’t mandate it.

Broin said the overall higher national blend rate will be met mostly by growth in so-called E-15. Growth Energy, an industry group, is working with 5,000 retailers to install new pumps at filling stations, he said.

Still, the targets are about 500 million gallons short of statutory benchmarks laid out when Congress passed the law in 2007.

While biofuel blending requirements were established by the U.S. to cut pollution and shrink the country’s dependence on foreign oil, Janet McCabe, acting assistant administrator for EPA’s Office of Air and Radiation, said the latest targets are intended to expand the use of E-15 and E85, another brew that’s 15 percent gasoline and the rest ethanol.

“There will be increased availability of biofuels like E-85 and E-15,” McCabe said on a conference call with journalists on Monday to announce the rule.