What's the Fuss Over E15 Really About?

The energy industry's lobby group said the White House has an opportunity to right the environmental ship with its choice of Gina McCarthy to lead the Environmental Protection Agency. American Petroleum President Jack Gerard said he was frustrated that, so far, the EPA wasn't embracing regulations that supported an energy industry that would put job creation at the top of the "all-of-the-above" policy agenda. Last month, API joined other industry groups in asking the Supreme Court to weigh in on the EPA's decision to allow the sale of gasoline blended with higher levels of ethanol. API contends the higher blend may harm vehicle engines, which for some is a sticky issue. Gerard's frustration with the EPA may have less to do with engines, however, than protecting business interests in a changing economic landscape.

President Barack Obama nominated McCarthy to take over for Lisa Jackson as the top official for the EPA. McCarthy served under Jackson during much of the Obama administration, arriving at her post from the Connecticut Department of Environmental Protection.

"She’s earned a reputation as a straight shooter," the president said. "She welcomes different points of views."

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Last week, API said it was relieved to see congressional leaders supporting legislation that would stop the EPA's move on gasoline blends containing 15-percent ethanol, known as E15. The trade group says the EPA approved the higher blend – 10 percent is used now – despite evidence suggesting that 5 percent extra ethanol would cause major mechanical problems in engines that use gasoline. API goes further to say there's research that shows there may be serious environmental consequences because of potential problems associated with retail gasoline station infrastructure.

The API joined other groups last month in asking the Supreme Court to reconsider a January ruling by the U.S. Court of Appeals for the District of Columbia. The lower court backed the EPA's position that E15 was permissible for model years 2001 and newer. Magazine Popular Mechanics described the vehicle side of the argument as "tricky." Some vehicles experienced corrosion in their fuel systems with the use of E15, but the magazine reports that argument is based on limited studies.

For those in the agriculture sector, meanwhile, opposition comes from the perception that the biofuels industry didn't pan out the way it was expected to when U.S. lawmakers enacted the Renewable Fuel Standard in 2005. Now, ethanol comes mostly from corn instead of switch grass or wood chips. Corn ethanol translates to lower fuel economy, higher corn prices and subsequently higher food costs, critics say.

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Supporters of ethanol, however, note the studies pointing to engine trouble were flawed, adding Department of Energy officials are rarely on hand to testify before E15 critics. Advocates contend much of the furor over E15 is the same as it was when E10 was first proposed. It took roughly 30 years, they say, to make that switch happen and now E10 is commonplace.

Conventional energy advocates argue that any gains made in the oil and natural gas industry have little to do with decisions made by the Obama administration. Nevertheless, the United States is on pace to rival Saudi Arabia in terms of oil. When retail gasoline tops the $4 per gallon mark, industry backers like API say it's time for even more oil and gas production in order to shield U.S. markets from overseas concerns rather than back conventional alternatives. At home, instead of engine failure, it may be that the slow and laborious march toward a low-carbon economy is what groups like groups like API fear more the most.

By. Daniel J. Graeber of Oilprice.com