The ethanol situation and us.
- Thanks to Robert Kirk for posting this.
In August, the U.S. Court of Appeals rejected a challenge by
automakers and other groups seeking to overturn the EPA's previous
approval of E15 automotive fuel containing 50% more ethanol. Brought
forth by the Alliance of Automobile Manufacturers, Global Automakers,
the Grocery Manufacturers Association and the petroleum industry, the
suit charged that the provision would likely cause a "concrete" and
"imminent" injury to any automaker, refiner or food processor. The
majority opinion held by Chief Justice David Sentelle and Judge David
Tatel found that the petitioners lacked standing to sue, arguing that
refiners and food producers are not injured because EPA is merely giving refiners the "option" to switch from E10 to E15, not a requirement to do so. Yet in practical terms, this is a distinction without any difference, since increased use of ethanol mandated by the Renewable Fuel Standard (RFS) will essentially force them to do so.
The Energy and Security Act requires that a certain amount of "renewable" fuel must be introduced into the market each year, an amount that will rise to 36 billion gallons in 2022. EPA regulations identify petroleum refiners and importers as "obligated" parties to bring this about. The only way to meet this arbitrary quota is to add more ethanol made from corn to the mix an additional 7 billion gallons annually.
So what does this mean to us? Possibly more than we realize. Let's consider a few reasons why.
1) Ethanol Yields Lousy and Expensive Gas Mileage:
Ethanol is certainly no bargain. Although it typically sells for less
than gasoline, a gallon of ethanol yields only 67% of its net energy,
meaning about one-third fewer miles per gallon. On that basis, it has
never been competitively priced. According to a study prepared by FarmEcon, ethanol E10 already added about $14.5 billion in automotive fuel costs during 2011 due to higher energy costs and negative effect on fuel mileage. This amounted to about 10 cents more for each gallon of U.S. gasoline. Ethanol tax credits (since discontinued), added another 4 cents/gallon.
2) E15 May Nullify Car Warranties:
Ethanol (grain alcohol) is hygroscopic, meaning that it absorbs large
amounts of water molecules that combine with petroleum to cause
premature rust. It is also a powerful solvent that attacks rubber seals and plastic parts used in engine components, causing them to dissolve, stretch and wear out, or become dry and brittle.
While EPA says tests show that E15 won't harm 2001 and newer vehicles, that claim is disputed. According to findings of the
Coordinating Research Council and other organizations, as many as 5
million cars manufactured since 2001 could have engines damaged by
running hotter fuel. Two (Toyota and Lexus), have put labels on gas caps warning that their engines are not designed to operate with E15, and that they won't be held responsible for damage caused by higher blend gasoline.
A cautionary note from the National Automobile Dealers Association
states that "If drivers mistakenly put E15 in their tanks and their
vehicles aren't designed to burn it, they could risk damaging their
engines. Car and truck owners may contact their dealership's service
department to determine any fuel restrictions."
3) E15 Approval Violates EPA's Own Clean Air Act Statute:
The Clean Air Act prohibits manufacturers of fuel or fuel additives
from introducing products into commerce for use in car models made after 1974 unless it is "substantially similar" to certain fuels already in use (which E15 clearly isn't), but can waive this prohibition if EPA determines that it will not cause or contribute to a failure of any emission control device or system over the useful life of the vehicle or engine. Yet the EPA issued a "partial waiver" for E15 allowing E15 use to apply to vehicles made after 2000.
Dissenting Circuit Judge Brett Kavanaugh pointed out that this is in clear violation of the statute, since even EPA acknowledged that E15 will likely contribute to the failure of some cars made between 1975 and 2000.
4) Ethanol Plays Havoc with Boat Engines and Fiberglass Gas Tanks:
Ethanol tends to dissolve and release corrosive matter (gunk) such as
resins, varnish and rust which contaminates fuel and travels through
marine engines to clog filters, carburetor jets and injectors. Since
boats live in a water environment, and ethanol (alcohol) loves to absorb water, use of ethanol above E10 invalidates all marine warranties. A particularly troublesome issue for boat and fishing enthusiasts is ethanol decomposition of fiberglass gas tanks. The usual fix involves tank replacement, often a costly and time-consuming project, although lining or sealing a tank is sometimes possible for added protection.
5) The Alcohol Wrecks Small Engines:
Using ethanol blends in 2-stroke engines such as mowers and chainsaws
results in a low octane mix (lean fuel) which can destroy them.
Referring to E10 ethanol, Rich Herder, owner of a lawnmower repair
business in Westfield, New Jersey, reported to Popular Mechanics that
"It's the biggest disaster to hit gasoline in my lifetime." He
estimates that as much as 75% of his repair work results from use of the blend.
6) The Ethanol Mandate Raises Food Costs:
Current consumption of 40% of U.S. corn for ethanol has already
raised prices for livestock, dairy, poultry, eggs and other food
industries that are passing cost hikes on to food consumers. Corn price volatility has more than doubled since RPS was enacted in 2007. Consumer food cost inflation, relative to all other goods, has risen to twice its 2005-2007 rate of increase as well due to sharp increases in corn, soybean and wheat prices. Corn prices have increased from $2.00/bushel in 2005/2006, to $6.00/bushel in 2011/2012. During these same periods, corn use for ethanol increased from 1.6 billion bushels to an estimated 5 billion, while feed-use corn declined from 6.2 billion bushels to an estimated 4.6 billion and corn exports declined from 2.1 billion bushels to an estimated 1.7 billion.
Most unfortunately, this escalating mandate-driven food price
inflation puts heaviest burdens upon our poorest citizens at a time when a deflated job market has record numbers of these same populations on unemployment subsidies and food stamps.
7) Ethanol Affords Absolutely No Net Energy Benefit:
Although ethanol has been touted as a "renewable" fuel, it is
anything but that. It offers no net fuel-saving benefit whatsoever since it requires as much fuel to plant, fertilize, harvest and process the corn into grain alcohol as it produces.
8) The Mandate Is Environmentally Destructive:
Mandated ethanol use has prompted farmers to shift land use from
balanced crop rotation practices in favor of an environmentally-costly emphasis on corn production. This irrigation and
fertilization-intensive development has depleted aquifers, and has
contaminated surface and subsurface water systems with nitrogen
pollution. In addition, burning ethanol releases nitrogen oxide smog
which causes respiratory diseases.
9) Ethanol Produces Even More Greenhouse Gases than Gasoline:
Just in case anyone should imagine any reason to worry, ethanol isn't
going to save the planet from carbon dioxide peril after all. According to a 2008 report published in Science magazine, widespread use of corn ethanol could result in nearly twice the amount of greenhouse gas emissions of the gasoline it replaces due to uprooting of land where carbon is being absorbed by trees and other plants. Although debate over climate legislation has frequently cited ethanol greenhouse gas reduction advantages, the researchers affiliated with Princeton and other institutions maintained that these analyses have been "one-sided", and counted carbon benefits of using land for biofuels while not including carbon costs of diverting land from existing uses.
10) E15 Mandate Exemplifies Out-of-Control Government:
The E15 mandate, in fact the RFS in general, represents a basic
government violation of American free market tenants by favoring one
industry over another. As Circuit Judge Kavanaugh wrote in his
dissenting opinion: "When an agency illegally regulates an entity's
competitor in a way that harms the entity-for example, by loosening
regulation on the competitor-we have said that the entity has Article
III standing to challenge the allegedly illegal regulation. Here, EPA's E15 waiver loosens a prohibition on gasoline and ethanol producers and thereby harms entities such as the food group that directly compete with gasoline and ethanol producers in the upstream market for purchase of corn."
Judge Kavanaugh went on to say: "Before the E15 mandate, petroleum
producers likely could not meet the requirement set by the statutory
renewable fuel mandate. Now that EPA has allowed E15 onto the market,
producers likely can meet the renewable fuel mandate-but they must
produce E15 in order to do so In the real world, does the petroleum
industry have a realistic choice not to use E15 and still meet the
statutory renewable mandate? The answer is no, and the intervenor Growth Energy's claim to the contrary seems rooted in fantasy."
Meanwhile, Governors of Arkansas, Delaware, Georgia, Maryland, New
Mexico, North Carolina and Texas have petitioned EPA Administrator Lisa Jackson to waive RFS ethanol mandates in order to lower and stabilize corn prices which have hit record highs due to recent drought conditions. As Arkansas Governor Mike Bebe wrote in his letter to Jackson: "Agriculture is the backbone of Arkansas's economy, accounting for nearly one-quarter of our economic activity. Broilers, Turkeys, and cattle, sectors particularly vulnerable to this corn crisis represent nearly half of Arkansas's farm marketing receipts. Arkansas's poultry operators are trying to cope with grain cost increases and cattle families are struggling to feed their herds."
But EPA relief doesn't appear to be likely. Bush EPA Administrator
Stephen Johnson previously rejected a 2008 petition from Texas Governor Rick Perry to waive 50% of its corn ethanol mandate after he reported that rising corn prices had imposed a net $1.17 billion loss on the state's economy during 2007. And according to the same "analytical approach" and "legal interpretation" that EPA still plans to apply to new petitions, the states argue that EPA will have ready-made excuses not to waive ethanol blending requirements regardless how high corn prices get, or how serious the associated economic harm becomes. Here, EPA's burden of proof requires that petitioners must show that the "RFS itself" would cause economic harm, not merely contribute to it assuming that outside factors such as droughts and bad economic conditions with high unemployment rates aren't relevant influences warranting consideration.
However, Marlo Lewis, a senior fellow at the Competitive Enterprise
Institute, sees a possible silver lining after all. He envisions that "If EPA once again refuses to balance the interests of corn farmers against those of other industries and consumers, it will furnish new evidence that RFS is a policy disaster. Especially if the drought persists into 2013, an EPA that won't heed the reasonable requests of domestic livestock producers, seven governors, 156 House members, 26 senators, the head of the U.N. Food and Agriculture Organization, and other food security advocates will build support for RFS reform or repeal."
Let's hope that this occurs even without a continuing drought. It's time to mandate that this man-made RFS disaster be ended.
The author is a Forbes contributor. The opinions expressed are those of the writer.
Robert Kirk www.kirks-auto.com
Perhaps the most galling thing about the failure of the legal process to stop the ethanol E15 mandate is that this is irrefutable evidence that neither the Legislative, the Executive nor the Judicial branches of government, are paying attention to the science of the matter at all. The real reasons for this, as usual, are money (the taxpayers') and power (corporate interests vs. individuals' interests). Sadly, the American system of governance is so jacked up that there is
essentially no chance that this will change. Until science, and the free market, are allowed to fix the energy sector, we will continue to get this result: more government overreach into our pockets, causing every individual these demonstrable and tangible harms. If the government wants to get involved to improve things, then they need to look at infrastructure improvements, like a more robust and intelligent power grid, or building more baseline nuclear reactors. The rest of this business, is just snake oil, designed to look like they are doing something progressive, but in reality just lining the pockets of those with insider government connections.
As you may have noticed, ILTA is a petitioner in this suit. And you are correct that while there may be a "voluntary" aspect to participating in the E10 market for some in the distribution segment, RFS would make it absolutely compulsory for the refining industry to participate in E15 markets. The battle is not yet over
Let's just take the octane debate, which has actually been settled
not in favor of ethanol. Ethanol is said to have an octane rating of
112. This is completely bogus because it employs a method called BOV
(blending octane value). Using the (R+M)/2 method (also known as the
antiknock index), while a small percentage of ethanol does increase
octane by reducing volatility, increased levels of ethanol run don't
give you the same payback. And the reason is simple. The energy just
isn't there as compared to conventional gasoline components. Just a little knowledge of fuel chemistry is all that's needed to understand that the basic thrust of Mr. Bell's arguments is completely accurate.