EPA Grants E15 Fuel Waiver for Some Older Vehicles

American taxpayers have already spent $41.2 billion since 1980 on tax-based subsidies for ethanol, according to the Senate Energy Committee.

The U.S. Environmental Protection Agency (EPA) today waived a regulation preventing the sale of gasoline with more than the 10% ethanol blend now in use for model year 2001- 2006 passenger vehicles, including cars, SUVs, and light pickup trucks.

EPA also announced that no waiver is being granted this year for use of the new fuel – E15 – in any motorcycles, heavy-duty vehicles, or non-road engines because current testing data does not support such a waiver.

Ethanol is corrosive, breaking down engine and fuel system seals. Ethanol is also harder to ignite but burns at higher temperatures, potentially damaging engine and exhaust system components, including air-cleaning catalytic converters. It is also not as fuel efficient as gasoline.

During the past six months oil imports have averaged 381,000/month or more than the peak imports in 2005 on an annual basis.

Now the majority of vehicles on the road in the U.S. can safely use the new fuel that contains 15% ethanol, according to the EPA, an assertion that is decried by automakers and refiners who aren’t producing the fuel. Both groups, as well as consumers, could face higher costs because of the ruling.

Last October EPA approved a waiver allowing the use of E15 for MY 2007 and newer cars and light trucks over the objections of automakers and refiners. EPA is currently being sued by a variety of industry groups over its ethanol mandate. Court challenges of the extension of the waiver are likely.

Since engine warranties run 10 years, automakers, or consumers if the warranty is denied or not transferable, could face expensive repairs. How the refiners will respond is also unclear, but another grade of fuel is now needed, or expensive new gasoline pumps that blend varying amounts of ethanol at the point of sale will have to be developed and installed. Neither option appear immanent.

The waiver applies to fuel that contains up to 15% ethanol – known as E15. EPA Administrator Lisa P. Jackson made the decision after a review of the Department of Energy’s “thorough” testing and other available data on E15’s effect on emissions from MY 2001 through 2006 cars and light trucks.

“In our view, EPA has prematurely granted the partial waiver, which – if applied at all – should only be imposed prospectively,” said Michael J. Stanton of Association of International Automobile Manufacturers. AIAM, as part of a coalition of vehicle and engine products associations, is challenging in court EPA’s grant of a partial waiver permitting gasoline with E15 for 2007 model year and newer vehicles.

Ethanol production is heavily subsidized by taxpayers, while imports of less expensive, more efficient sugar cane versions are effectively blocked by taxes. Currently U.S. taxpayers are handing agribusiness a subsidy of about $7 billion annually to use corn to make ethanol, according to the Congressional Budget Office.

Critics of the subsidy say, correctly, that virtually all of the ethanol used in the U.S. comes from corn, thereby raising the price of food. Producing ethanol from corn is also energy intensive, thereby increasing greenhouse gas emissions. Ethanol fuel also has less energy density than gasoline, meaning mileage reductions of up to 25% are possible for E85.

EPA granted the waiver after considering the E15 petition submitted by Growth Energy and 54 ethanol manufacturers in March 2009.

The Energy Independence and Security Act of 2007 mandated an increase in the overall volume of renewable fuels into the marketplace, reaching a 36 billion gallon total in 2022. Ethanol is considered a renewable fuel because it is produced from plant products or wastes and not from fossil fuels.

Thus far taxpayers have little to show for the billions of dollars in subsidies doled out to special interest groups under the act, as energy is neither independent nor secure in the U.S. Oil import peaked in 2005 at 420 million barrels, and have remained below that level as the ongoing Great Recession took hold in 2008. During the past six months though, oil imports have averaged 381,000/month or more than the peak imports in 2005 on an annual basis.

The U.S. Energy Information Administration won’t release it annual projects until march 2011, but a preliminary report last December project a decline.

“Recently completed testing and data analysis show that E15 does not harm emissions control equipment in newer cars and light trucks,” said EPA Administrator Lisa P. Jackson. “Wherever sound science and the law support steps to allow more home-grown fuels in America’s vehicles, this administration takes those steps.”

These waivers represent one of a number of controversial actions that EPA says are needed from federal, state and industry to commercialize E15 gasoline blends.

EPA is developing requirements to ensure that E15 is properly labeled at the gas pump. Since E15 will likely be priced lower than current E10 fuel if oil prices keep rising, its use will become widespread even in older vehicles that might be damaged by it, critics contend.