Background

Most of the issues raised by Sen. Bingaman are associated with the following H.R. 4 proposed provisions: a Federal ban on MTBE with allowing State waivers; the removal of the oxygen requirement¹ for reformulated gasoline (RFG); a Renewable Fuel Standard (RFS), and a provision allowing States to seek exemption from the Federal Reid vapor pressure (RVP) waiver.² Many of EIA’s responses to these issues dealt with the increased use of ethanol. Loss of MTBE in gasoline will result in the use of more ethanol in RFG; the Renewable Fuel Standard essentially requires more use of ethanol, as this alcohol is the only widely available renewable fuel in the near term; and the provision to allow States exclusion from the RVP waiver when blending ethanol in conventional gasoline is directed towards concerns that the RFS could result in an increase in a State’s emissions of volatile organic compounds (VOCs).

Ethanol, or gasoline containing ethanol, cannot be moved practically through today’s pipeline system, because it tends to get pulled into the water that usually exists in petroleum pipelines and tanks. Instead, ethanol is blended into gasoline at terminals near the end users. Ethanol-blended product must be kept separate from product not containing ethanol, necessitating separate handling all the way to the gasoline pump. The separation is needed because movement of a small amount of ethanol (from the ethanol-blended mixture) to gasoline without ethanol can increase the vapor pressure of that gasoline mixture substantially, potentially pushing it above required VOC limits. Thus, ethanol must be moved through an independent distribution system until it is close to the end user, where it then is added before being delivered to retail stations. In the case of RFG, a special blend called reformulated gasoline blendstock for oxygenate blending (RBOB) is created, which is an unfinished gasoline that will meet RFG requirements after ethanol is added at terminals near consumers.

Refiners must also make changes to be able to blend ethanol into RFG. While ethanol has better emission properties than many other gasoline components and has high octane content, its effects on gasoline are different from those of MTBE. It has higher toxics emissions than MTBE and raises the tendency of gasoline to evaporate, as measured by RVP, which is the major parameter that affects VOC emissions from gasoline. Thus, refiners must also change their production facilities to remove other high RVP components to compensate for the addition of ethanol and to remove sulfur, benzene, and other aromatics in order to compensate for the increase in toxics.

These proposed H.R. 4 transportation fuel changes are taking place on top of existing regulations that require major industry investments, making it more difficult to achieve all of them simultaneously. In particular, Tier 2 low-sulfur gasoline requirements in 2005 and ultra-low-sulfur diesel fuel requirements in mid-2006 are expected to necessitate unprecedented capital investment levels and, in the case of ultra-low-sulfur diesel fuel, large distribution and storage challenges to maintain the integrity of the new product. Also, some MTBE bans are scheduled to begin in 2004 in a number States, including California, New York, and Connecticut, which will require many production and infrastructure changes, including more ethanol production in the Midwest and movement of ethanol to the East and West coasts.

Notes and Sources