COMMENTCongress should ban, not expand, the use of ethanol in gasoline

Cal Hodge, consultant
"A US federal ethanol mandate does little for energy, harms the environment, and reinforces an oligopoly. Congress should ban, not expand, the use of ethanol in gasoline."

Cal Hodge

(Editor's note: This is an abbreviated version of an article that will appear in the Sept. 9 issue of Oil & Gas Journal.)

HOUSTON, Aug. 30 - A US federal ethanol mandate does little for energy, harms the environment, and reinforces an oligopoly. Congress should ban, not expand the use of ethanol in gasoline.
Since 1978 there have been at least 18 attempts to calculate ethanol's net energy contribution. These calculations require many assumptions that can lead to biased results. The average of all 18 opinions indicates ethanol gives back 92% of the energy used to make it. If to eliminate bias we discard the three highest and the three lowest, we find that ethanol gives back 98% of the energy consumed in making it. The fact that subsidies and mandates are required confirms ethanol's marginal energy contribution.
The Senate recognized this inadequate energy contribution when they gave cellulosic-ethanol 1.5 renewable credits. There are two problems with this. 1) Economically obsolete corn-ethanol plants are still being built, and 2) Can we trust an industry that is emitting 5-430 times their permitted pollution to contain the genetically modified bacteria needed to make cellulosic-ethanol? Why risk releasing a new creation that can literally eat us out of house and home?

Ethanol's disadvantages
Blending ethanol in summer grade federal reformulated gasoline (RFG) or California RFG reduces the supply of cleaner-burning gasoline. Ethanol's vapor pressure forces refiners to reject light, clean-burning gasoline components. This volume loss helped cause the gasoline supply shortage and price spike in the Midwest gasoline market in 2000, when Phase 2 RFG was implemented.
Ethanol's environmental benefits are overstated. Evidence shows that ethanol's atmospheric benefits are overstated. Also, some ethanol production facilities are emitting more volatile organic compounds (VOCs), including carcinogens, than their permits allow.
Ethanol in gasoline increases ozone exceedances. Ozone is formed when VOCs and nitrogen Oxides (NOx) react in the presence of sunlight. Increasing the limiting reactant increases ozone. Increasing both assures more ozone.

RFG case study
When RFG was introduced in 1995, refiners satisfied the RFG regulations by using the "simple model". That means they made the RFG by lowering gasoline's vapor pressure and benzene content while adding an oxygenate. Ethanol and methyl tertiary butyl ether (MTBE) were the primary oxygenates chosen. The market allocated ethanol-based RFG to the Midwest and MTBE-based RFG to the rest of the country. The small gasoline quality changes other than oxygenate addition and regionalization lets us see the ozone fighting power of each oxygenate.
Ozone exceedance data from the US Environmental Protection Agency's database show that ozone increased nationwide during 1993-94 and 1995-96. The increase came mainly from conventional gasoline (CG) areas in which ozone exceedances increased about 40%. Because CG's quality did not change, the CG provided the control experiment. Deviations from this control indicated RFG's success or failure. Ozone exceedances decreased 20% in areas that used ether-based RFGs. Ozone exceedances increased about 100% (doubled) in ethanol-based RFG areas. Ethanol-based RFG performed 60 points worse than the control experiment, while MTBE-based RFG performed 60 points better. We must ask: Why?
The timing of the event (switching to RFG) and the effect (changes in ozone) suggests ethanol causes more ozone and MTBE causes less ozone. But, good problem-solving practice requires that there be a mechanism by which the event can cause the effect. These mechanisms are described in the following section.
Ethanol has more NOx emissions than MTBE. The Auto/Oil Air Quality Improvement Research Program emissions study in the early 1990s showed that adding 10 vol % ethanol to gasoline increased NOx emissions 5%. Adding ethers caused no change in NOx emissions. If the Upper Midwest ozone nonattainment areas are NOx limited, switching to ethanol-based RFG can explain the increased ozone exceedances.
EPA's Complex Model (CM) does not reflect ethanol's increased NOx emissions. The California Air Resource Board (CARB) Phase 2 Predictive Model (PM) shows that NOx increases with oxygen content. The CARB Phase 3 model indicates the Phase 2 PM's NOx response is understated. Recent data confirms the Phase 3 PM. Based upon recent data, CARB's PM, and the Auto/Oil data, gasoline containing ethanol should not be used in NOx limited ozone nonattainment areas.

Other factors
But, what if an area is not NOx limited?
Data presented by Harold Haskell, a consultant for CARB, show that ethanol causes permeation losses that are not reflected in government models. The data show it takes time for permeation losses to appear. The emissions test data used to build the government models cannot reflect ethanol permeation. But the timing of the switch to ethanol-based RFG makes ethanol's permeation defect a mechanism that links ethanol to the increased ozone exceedances.
Ethanol's poorer driveability is another mechanism that links ozone increases to ethanol. In its World Fuel Charter, the Alliance of Automobile Manufacturers states that gasoline containing 10 vol % ethanol has a driveability index that is 70 points worse than that of gasoline containing only hydrocarbons or ethers. SAE Paper 910382 shows that exhaust emissions increase as driveability worsens. The combination indicates that ethanol blends have 19% more exhaust emissions than pure hydrocarbon or hydrocarbon-ether blends with the same distillation properties.

Recent data
To quantify ethanol's increased NOx and VOC emissions, I amended EPA's Phase 2 CM. NOx emissions were adjusted to reflect the most recent data. Haskell's permeation data was used to adjust evaporative VOC emissions. Exhaust VOC emissions were adjusted to reflect the change in exhaust VOC emissions due to ethanol's poorer driveability. The model output for gasoline meeting the prevailing 1995-96 Simple Model standards for RFG is summarized in Table 1.
The output verifies that the mechanisms explain why ethanol-based RFG caused ozone exceedances to double.
Recently, ozone exceedances in the ethanol-based RFG areas have declined. Let's review the timetable to see who deserves credit for this accomplishment. Midwest RFG ethanol content has remained constant since 1995, when ethanol-based RFG was introduced. Therefore, ethanol could not have caused the recent reduction in ozone exceedances. Gasoline sulfur content decreased from over 400 ppm during the middle 1990s to about 100 ppm in 2000. The refining industry deserves the credit for offsetting ethanol's defects and lowering ozone.

But the question "Will gasoline burn cleaner without ethanol?" remains. Ethanol's permeation and driveability defects remain unresolved. Old and new data show that ethanol-based gasoline emits more NOx. To answer the question, the properties of CARB Phase 3 RFG (CaRFG3) were processed in the more complete model. The differences in emissions between the oxygenated and nonoxygenated CaRFG3 blends are shown in Table 2. The model indicates that ethanol-based RFG is more likely to increase ozone exceedances and cancer risk than either MTBE-based RFG or nonoxygenated CaRFG3.
Ethanol plants emissions exceedances
"Factories that convert corn into the gasoline additive ethanol are releasing carbon monoxide, ethanol, and some carcinogens at levels 'many times greater' than they promised," EPA said in an Apr. 24 letter to the industry's trade group, adding that the problem is "common to most, if not all, ethanol facilities."
When the plants were built, many reported VOC emissions below 100 tons/year. This allowed them to bypass a lengthy and stringent permitting process. EPA and Congress should investigate to see if the pollution projection was low-balled intentionally.
Ethanol plant emissions, even in rural locations, include carcinogens and ozone exceedances downwind. Ethanol plants must be treated as chemical plants. Based upon the above track record, new plants should be assumed to be major emissions sources subject to the same standards as other chemical plants until proven otherwise.

Antitrust questions
When briefing California Democratic Sen. Dianne Feinstein, the nonpartisan General Accounting Office (GAO) stated that the ethanol industry is highly concentrated.
GAO based its finding on production capacity. Marketing agreements increase the concentration. The US Federal Trade Commission should use its investigation of one company's attempt to buy more ethanol capacity as an opportunity to see how much marketing agreements increase price setting power.

The conclusions of this analysis are that:
-- The average ethanol energy balance shows ethanol consumes more energy than it delivers.
-- Ethanol's use in RFG causes ozone exceedances to increase.
-- Ethanol causes gasoline to pollute more than nonoxygenated or MTBE-based gasoline.
-- Most if not all ethanol producers are out of compliance with their emissions permits.
-- The ethanol oligopoly must be investigated before Congress strengthens their price power.
-- Congress should wait to see if California's switch to ethanol increases ozone before it mandates more ethanol use.
-- If Congress cannot want to wait for the outcome of the California experiment, it should ban, not expand, the use of ethanol in gasoline.

The author
Cal Hodge is president of A 2nd Opinion Inc. (A2O). His firm advises on regulatory, clean fuels, and economic issues. He has 34 years of experience in refining and petrochemicals economics, strategic planning, fuel formulations, governmental affairs, litigation, product distribution, industry analysis, and regulatory compliance. Prior to founding A2O in 1998, Hodge held positions with Amoco Corp., Pace Consultants & Engineers, and Valero Energy Corp. His early focus included a specialization in unleaded premium gasoline blending prior to the introduction of unleaded regular. Hodge developed an expertise on refinery economics in the late 1960s and has taught other engineers and clients basic refining economics principles and applications. He gained further expertise in gasoline regulations, clean fuels, and air quality by participating in the regulatory negotiation that resulted in US federal reformulated gasoline regulations. Hodge graduated from the University of Kansas in 1968 with a BS in chemical engineering. His e-mail is

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