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Big Oil Builds the Blend Wall

• Failure to Invest in Higher Level Ethanol Blend Infrastructure — Oil companies and their downstream partners knew six years ago when the RFS2 was adopted that the policy would eventually drive demand for ethanol blends above E10. Yet, these companies failed to make any meaningful investments in the terminal and retail infrastructure needed to distribute higher level blends like E85 and E15. EPA determined that it would cost just $0.06 per gallon of ethanol to modernize the existing infrastructure to handle 33 billion gallons of ethanol—that equates to fractions of a penny per gallon of gasoline sold.
• Anti-Ethanol PR — The oil industry has orchestrated a multi-faceted public relations campaign against ethanol. Media reports have stated that API has pledged a multi-million dollar effort against the RFS that is expected to last up to 18 months. The anti-ethanol campaign appears to include coordination with a large assortment of co-conspirators ranging from livestock producers, grocer manufacturers, fast food restaurants, and even AAA.  It is a multi-front attack on topics ranging from the RFS, blend wall, E15, food vs. fuel, and misleading oil-sponsored studies. Efforts appear to be coordinated by a large public relations firm in Washington, D.C.
• Refusing to offer E85 — Despite more than 14 million flex-fuel vehicles on the roads, only 3,000 stations offer E85 out of the total 140,000. Given current wholesale economics, E85 can be offered at about $1 per gallon less than gasoline today. However, even if a station owner wants to offer E85, many franchise agreements will not allow E85 to be installed or sold.
• Refusing to Offer E15 — Similarly, oil refiners and their downstream partners have failed to make necessary investments in E15 blend infrastructure. Hiding behind a veil of purported “liability concerns,” refiners and most blenders have refused outright to offer E15 to their retail customers. Here’s the truth behind Big Oil’s motives on E15, as noted recently by oil analyst Dan Dicker: “Remember, refiners don’t make ethanol, so they’re not really all that happy about making E15. What they want to do is make gasoline, because that’s what they make money on.”
• AAA Scare Campaign — Big Oil enlisted the help of the AAA auto club to scare motorists away from using E15. In a series of press releases and media appearances, AAA dutifully repeated the oil industry’s talking points and promoted the dubious results of an anti-E15 three car study funded by Big Oil, while ignoring the results of a much more rigorous analysis of 89 vehicles completed by the U.S. Department of Energy. AAA cited lack of warranty coverage for E15 as a concern for consumers, however they fail to raise any concerns whatsoever about the fact that automakers do not approve the use of sub-87 octane gasoline—yet such fuel is sold at thousands of gas stations in the High Plains and Rocky Mountain regions.
• Frivolous E15 Lawsuit — In an effort to block consumer access to E15, Big Oil and its cohorts sued EPA over its decision to allow the use of E15 in cars built in 2001 or later. Despite a preponderance of evidence that E15 is safe and effective for use in all automobiles built since 1994, the anti-E15 crowd inexplicably argued that EPA’s testing was incomplete. The challenge was denied by the D.C. Appeals Court, and—as expected—Big Oil and its Big Food pals appealed the decision to the Supreme Court.
• Funding Junk Science — Big Oil designed and funded a fundamentally flawed study on the effects of E15 on certain automobiles. The oil industry hand-picked certain vehicle models with a history of known recalls and failures (unrelated to ethanol) for the study, and then blamed the failures on E15. They also neglected to mention that some of the vehicles failing the tests on E15 also failed on straight gasoline with no ethanol. Accordingly, DOE experts who reviewed Big Oil’s study concluded, “We believe the study is significantly flawed.”
• Threatening Language in Franchise Agreements — Oil refiners and gasoline suppliers are using a variety of strong-arm tactics to discourage gasoline retailers from offering E15 and other higher level blends. As an example, the first retail gasoline station in the country to offer E15 has been handcuffed by its supplier who threatened exorbitant fines if the retailer continued to sell E15.
• Erecting Unnecessary Technical Barriers — Introducing a new fuel, like E15, into commerce is a complex and tedious process. At every turn in the road to commercialization stands a new technical or regulatory barrier. Ultimately, these barriers protect the incumbent fuel source—petroleum—from new competitors. Indeed, the complicated spider web of requirements for new fuels did not exist when crude oil rose to fuel market supremacy.
• Onerous OSHA Requirements — Big Oil used OSHA as a scare tactic for retailers wanting to offer E15. The OSHA requirement highlighted was for full service stations, which are rare in most of the country today. Regulatory protocol affects only employees.
• Frivolous RFS Lawsuits — In yet another example of Big Oil’s “if you can’t beat ‘em, sue ‘em” mentality, opponents of biofuels—including API and AFPM—have filed several lawsuits against EPA over implementation of the program. One challenge that was rejected by the D.C. Appeals Court took issue with various aspects of EPA’s treatment of corn ethanol in its final rule for the RFS2. Other suits have been filed challenging EPA’s establishment of annual cellulosic biofuel requirements. The real motivation behind these lawsuits, as noted by energy economic Phil Verleger, is that “[t]he oil industry doesn’t like to sell less oil, so they are trying hard to kill the [RFS] program … so they can sell more gasoline and not have to use as much ethanol.”
• Food vs. Fuel Myth — The oil industry learned long ago that the best way to divert attention from the near-perfect linkage of oil and food prices was to scapegoat biofuels. Despite a preponderance of data showing that biofuels and the RFS have had negligible impacts on retail food prices, Big Oil has been quick to perpetuate this myth at every turn.
• Anti-ethanol Advertising — Some gasoline additive manufacturers have undertaken a coordinated advertising campaign to disparage ethanol and spread mistruths about the fuel’s properties. While the purported goal of these advertisements is to create consumer demand for these additive products, the real beneficiary of undermined consumer confidence in ethanol is Big Oil.
• Divested Retail Ownership — Big Oil has rapidly divested ownership of retail gas stations and now owns less than three percent of the stations in the United States. This convenient timing allows them to claim that they have “no way” to ensure retail distribution of E15 and other higher level blends to consumers. What they fail to mention is that, through franchise agreements and supply contracts, they still control what fuels are made available to retailers.
• Small Engine Scare Tactics — Some manufacturers and users of small engines, lawn care equipment, motorcycles, and other off-road equipment teamed up with the oil industry to scare consumers away from E15. Despite an obvious pump label that clearly informs consumers that E15 is “prohibited” in small engines, these groups characterized E15 as a “mandated fuel” and outrageously suggested E10 or unblended gasoline would no longer be available in the market. Further, these groups sounded the alarm bells about EPA’s “four-gallon minimum purchase” misfueling mitigation option, even though the Agency had already approved more practical options for retailers.
• Biased UL Protocol — Many state and local codes and regulations require gasoline retailers to use only equipment that has been certified by Underwriters Laboratory (UL), or a similar testing and certification entity. Despite the fact that UL specifies that equipment tested under its protocol for ethanol-blended gasoline must tolerate up to E15, UL claims the certification only applied to E10. Still, the major manufacturers of gasoline dispensers have issued guarantees and warranty coverage for up to E15 dating back several years, should retailers want to offer E15 in existing equipment.
• Land Use Change Myth — As part of the campaign against biofuels, Big Oil and its cronies have outrageously claimed ethanol is no better for the climate than gasoline when hypothetical and unproven emissions from “land use change” are included. Despite the fact that U.S. cropland has not expanded since passage of the RFS, and despite the fact that numerous scientific papers have confirmed that the anti-ethanol crowd’s land use claims are terribly overblown, this myth lives on.  And don’t dare ask any questions about the land, water, and air impacts or indirect effects of crude oil!