October 8, 2010

EPA expected to increase ethanol levels

After a slumping market for ethanol in recent years, good news apparently is right around the corner for the industry.

After a slumping market for ethanol in recent years, good news apparently is right around the corner for the industry.

The potential market for ethanol would increase up to 45 percent with approval of a higher blend level the Environmental Protection Agency is expected to announce in two steps by the end of the year.

The EPA has told Growth Energy, an ethanol trade group, that it expects to approve an increase of the blend limit to 15 percent — known as E15 — from the existing 10 percent, Dave Vander Griend said Thursday at the Ethanol Leader's Summit at the Courtyard Wichita at Old Town.

Vander Griend, a Growth Energy board member and president and CEO of Colwich-based ICM, said the EPA will approve E15 for vehicles 2007 and newer next week and for 2001-06 models by the end of the year.

That's encouraging news for the ethanol industry, which had fallen on hard times as demand for ethanol dropped with lower gas prices.

ICM, a 15-year-old company founded by Vander Griend, designed many of this country's ethanol plants. ICM has tried to adjust to the downturn by moving to a more service-based business while still working on technological solutions.

But ICM also had to cut its work force from a peak of 750 employees in 2007 to its current level of about 300.

Now, the picture looks brighter.

"It's a big positive for us, puts more clarity into the industry," Vander Griend said after addressing the summit. "Anything we can do to put a little more clarity, a little more certainty into the industry, it's just good.

"It gives plants the willingness to do a little expansion work, look at some new opportunities. So it will bring in more business to ICM. We're definitely excited about that."

The United States currently produces 13.2 billion gallons of ethanol yearly for a U.S. market that can absorb only 11 billion gallons at the E10 level. The difference is being exported to Europe, Vander Griend said.

But with the approval of E15 for 2001 and newer models — representing about 60 percent of the nation's vehicles — the annual market for ethanol in the U.S. would increase to 15 billion to 16 billion gallons, Vander Griend said.

There has been concern that the EPA will create confusion by announcing the increase in two steps.

He said the reason EPA is doing it in two steps is because two groups were subcontracted by the Department of Energy to study the two sets of vehicles.

The report for 2007 and newer models was submitted to the EPA late last month. DOE is expected to deliver data on vehicles built from 2001 to 2006 by the end of November.

Vander Griend said he doubts E15 will be available in gas stations until after approval is given for the 2001-06 models in late December.

Since 2007 and newer models represent only 20 percent of the nation's vehicles, he said, "No gas station owner is going to switch for that amount. He's not going to take the risk of someone fueling E15 and then coming back to him with a problem."

Once EPA's final approval is given for both sets of cars by the end of the year, Growth Energy has said E15 could be available at gas stations in March or April.

By next spring, EPA is expected to begin requesting data on vehicles 2000 and older and consider allowing them to also use E15, Vander Griend said.

There have been repeated delays in getting EPA's approval for a higher blend since Growth Energy first requested it in March 2009.

But Vander Griend doesn't foresee any more delays.

"I don't think so," he said. "The information we're hearing from them — as much as they'll tell us — is that all the data looks good. There's nothing that says E15 is causing additional damage to any vehicle."

The auto industry had urged the government to conduct full tests for E15 because it is worried the blend could corrode and damage fuel lines.

Studies done by ICM indicate that vehicles actually run best on E30 to E40 in terms of cost and mileage, Vander Griend said.

Over the past two years, he has used his car — a 2001 Oldsmobile Aurora — in testing the different blend levels by using pumps at a blend station in Colwich. He found he gets 22 mpg with E10, 23 with E20 and 21 with E30.

"If I want the lowest cost per mile, I use E30 because E30 is five cents per gallons cheaper than E20," he said. "I'm only sacrificing two miles to the gallon."

The limit on the blend level has been at E10 since the 1970s.

Since corn is used to help produce ethanol, some food organizations have blasted the ethanol industry for driving up food prices.

"We're not consuming food, we're consuming starch (from corn)," Vander Griend said. "Starch is not food. There's no nutritional value in starch by itself."

Increased use of ethanol will also help clean up the air by replacing the aromatics —benzene, toluene and xylene — currently used in gasoline, Vander Griend said.

In urban traffic with vehicles all around you, Vander Griend said, "It's worse than being in the smokiest cigar bar."

He said that message needs to be made clear to those who make decisions in Washington.

Because the ethanol industry hasn't pushed for reduction of aromatics as required by the 1991 Clean Air Act amendments, Vander Griend said Washington has "kind of given the petroleum people a bye on it. They have convinced Washington they don't have an alternative.

"We're here saying, 'Yes, there is an alternative; it's ethanol.' The more ethanol you put in, the less bad stuff you need to put in."

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