Why automakers took up ethanol with the Supreme Court

Source: Gabe Nelson, Automotive News • Posted: Wednesday, March 27, 2013

WASHINGTON — In a slow trickle over the past year, the first gas stations have started carrying E15, a blend of gasoline that includes up to 15 percent ethanol.

Automakers say the fuel could harm older engines, which were not built to handle so much ethanol. But they have had no luck convincing the EPA, which has approved the fuel for use in cars and trucks built after the 2001 model year.

So yesterday, trade groups for car companies, including the Alliance of Automobile Manufacturers, filed a petition with the U.S. Supreme Court asking for help. The alliance is also part of the Engine Products Group, a coalition that also includes the makers of engines for boats, lawnmowers and motorcycles.

“It is not in the longer term interest of consumers, the government, and all parties involved to discover, after the fact, that equipment or performance problems are occurring because a new fuel was rushed into the national marketplace,” that group said in a statement Monday.

The automakers’ petition to the Supreme Court, which runs a hefty 298 pages with appendices, was written by a team of New York litigators led by Kathleen Sullivan, the former dean of Stanford Law School.

It must have cost a pretty penny, even though the chances of any petition being taken up by the Supreme Court are extremely slim.

So, at first blush, the effort might seem a bit surprising. It is almost impossible to find an E15 pump right now, except in corn states like Iowa and Kansas, where a handful of stations have started carrying the fuel. And the fuel has little or no price advantage over regular gasoline, so people are not climbing over one another to buy it.

It begs the question: why do automakers care so much?

Well, according to the Supreme Court petition, the sale of E15 will force automakers to spend substantial money figuring out whether certain models are at higher risk of damage.

It says automakers also worry that owners of cars damaged by the fuel could try to make car companies fix problems under their warranties.

Five manufacturers — BMW, Chrysler, Nissan, Toyota and Volkswagen — have explicitly said that their warranties do not cover E15 claims. Another eight — GM, Ford, Honda, Hyundai, Kia, Mazda, Mercedes-Benz and Volvo — have said that E15 may void warranties because it is not authorized for use in owners’ manuals, according to the AAA, which has also warned drivers about the risk posed by E15.

Oh, and the use of E15 “will place automobile manufacturers at substantial risk of engaging in a massive recall,” perhaps including millions of vehicles made after 2001, the petition adds.

OK, all of this sounds pretty bad for business.

But is it likely? After all, there is no sign that an ethanol craze will sweep the country. And gas stations that sell the fuel have to post signs warning customers not to use E15 if their engines cannot handle it.

And even the oil companies, which oppose ethanol most vigorously because it reduces the amount of oil that goes into a gallon of gasoline, concede that they have found no evidence of consumers’ cars being damaged.

They have found damage to valves and other parts, but through research — not on the road. Meanwhile, regulators at the EPA and the Department of Energy have studied the topic, and they insist that E15 is safe to use in older engines.

“The amount of E15 in the real world is too small to identify anything yet,” Bob Greco, a group director at the American Petroleum Institute, said recently.

Whether the damage is likely or not, it all comes down to risk. A single recall or a blockbuster lawsuit can cost a car company hundreds of millions of dollars, so automakers are not too happy about taking a gamble if they are not sure E15 works.

Ethanol was first introduced to gasoline because it could be made from American crops and because it was thought to be better for the environment. But now, with growing dissatisfaction over renewable fuel laws for all kinds of reasons, both Democrats and Republicans are saying they will take another look at the requirements.

U.S. Rep. Fred Upton, R-Mich., the chairman of the House Energy and Commerce Committee, is working with Rep. Henry Waxman, D-Calif., to study the issue. They do not tend to agree on much, but if they decide to chart a new path on ethanol, it could lead to more changes at the pump.

So if automakers want to avoid recalls, warranty jobs and lawsuits, engineers at car companies will need to be ready for anything. And so will their lawyers.