It seems appropriate on Earth Day to write about a story that received little publicity last week, but which could have a major impact on you. The EPA is considering a petition to allow gasoline to contain as much as 15 percent ethanol, up from the current 10 percent.
The 10 percent figure was selected years ago because testing showed that no damage would occur to vehicles using that mixture. Beyond that percentage, things got a bit fuzzy.
I’m sure you’re probably wondering why the EPA is headed in that direction. Well, here’s the answer in a nut shell:
An oversupply of ethanol has prompted a wave of bankruptcies and made the ethanol industry eager to expand its market. Ethanol producers are being squeezed as corn prices stay relatively high and as ethanol prices stay relatively low. Todd Alexander, a partner at Chadbourne & Parke LLP, estimates that some ethanol producers are losing up to 10 cents on every gallon of ethanol.
Actually, that statistic should not come as any real surprise given the price of gasoline today, and the fact that it costs (according to a 2005 Department of Agriculture report) $2.53 to produce a gallon of ethanol.
But, not satisfied with the EPA’s somewhat slow process (by law, it has until December 1 to make a decision on the petition), the ethanol industry has turned to Congress for help. Some lawmakers have held meetings with the EPA designed to “urge” the EPA to allow blends of 12 percent to 13 percent immediately pending the decision on the 15 percent figure.
There is only one small problem with either “fix” for the ethanol industry’s dilemma.
Auto makers offer so-called flex-fuel vehicles designed to accept up to 85% ethanol fuels. But many current and older model cars aren’t designed for ethanol concentrations above 10%.
And, as a result, most car warranties use that standard when it comes to fuel system components.
Too much ethanol can, among other things, cause corrosion in a car’s fuel delivery pipes. To that end, when speaking about the proposed increase in allowable ethanol, Alan Adler, a spokesman for General Motors has said, “we want to make sure we’re not on the hook for vehicles” still under warranty should a problem arise in the fuel system.
No one disagrees with the fact that this country should become more energy independent. But, to enact a regulation that will put more money in the pockets of a company like Archer Daniels Midland, one of our larger ethanol producers, by reducing the “oversupply” of ethanol, but which could put all of our existing car warranties in jeopardy seems more than a bit foolish.
Were I the EPA I would want an agreement from every car manufacturer that they will honor the existing warranty should a problem arise with a 15 percent ethanol mix before I mandated a 15 percent mix. But, then again, that’s just me.