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Inside the Beltway: Ethanol Prices Soften as We Reach the Blend Wall
by Eric Washburn

The telltale sign that the U.S. ethanol industry is indeed reaching the so-called blend wall is being expressed in the softening of prices compared to gasoline. This could lead to an extended period of tough economic times for the industry and adds greater urgency to the effort to approve higher blends like E15 and E20 for widespread use.

Unfortunately, it is becoming increasingly clear that the U.S. Environmental Protection Agency is on track to approve the use of E15 only for model year 2001 and newer vehicles. The agency has indicated that the lack of testing data regarding the effects of mid-level blends on older vehicles has led it to conclude that it cannot approve the use of E15 for those vehicles at this time. The agency is unlikely to approve the use of E15 or higher blends for all vehicles until the Department of Energy completes testing of older models.

If this turns out to be EPA’s decision later this year, then the industry will face a largely unworkable bifurcated fuel supply system, one in which only newer vehicles are permitted to use E15, but pre-2001 vehicles will only be allowed to use blends up to E10. Few retail filling stations are likely to install pumps to dispense E15 to serve only a segment of the market, particularly when all vehicles will be able to use E10 from the existing fuel pumps. Moreover, retail associations have made it clear that fear of the potential liability that their members could face in cases of misfueling will also make gasoline station owners reluctant to install pumps to dispense E15.

To address this challenge, the ethanol industry at a minimum needs to do two things:

First, we need to work to enact the Consumer Fuels and Vehicle Choice Act (S. 1627), referred to as the Choice Act. This bill, introduced by Senators Harkin (D-IA) and Lugar (R-IN), will require the widespread deployment of blender pumps and provide grants for that purpose, while also ensuring that an increasing percentage of cars sold in the U.S. be flexible fuel vehicles (FFVs). Installing more blender pumps now is the only realistic way to implement a system where only newer vehicles will be able to use higher blends.

Second, we need to work with Congress and the Department of Energy to ensure that the agency has the funding and inclination to undertake a thorough program of testing mid-level ethanol blends on vehicles made before 2001. The sooner this testing can begin, the better.

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The American Coalition for Ethanol publishes Ethanol Today magazine each month to cover the biofuels industry�s hot topics, including cellulosic ethanol, E85, corn ethanol, food versus fuel, ethanol�s carbon footprint, E10, E15, and mid-range ethanol blends.
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