How Trump (and Iowa) Changed How You Fuel Your Car

(Bloomberg) -- Ethanol, the intoxicating alcohol found in beer, wine and liquor, has been powering automobiles in the U.S. since the era of the Model T more than a century ago. Since the 1970s, when oil became more expensive and subject to international disputes -- and as worries rose about the environmental damage caused by fossil fuels -- the U.S. government has used tax policy and regulations to encourage use of ethanol and other environmentally friendly alternatives to gasoline. (Ethanol provides oxygen, making gasoline burn more cleanly in engines.) U.S. President Donald Trump has made it easier to sell more ethanol, even as opponents raise environmental concerns with the corn-based fuel.

1. What change did Trump make?

The U.S. Environmental Protection Agency, which regulates air pollution from gasoline, changed U.S. policy to allow the sale of so-called E15 fuel -- so-called because it contains 15% ethanol and 85% gasoline -- year-round. Until now, the sale of E15 has been blocked from June 1 to September 15 in areas where smog is a problem. That three-and-a-half-month blackout period deterred some retailers from offering E15 at all, since they’d need to change pumps and warning labels at the start and end of each summer. Trump ordered the EPA to waive E15 from air-pollution requirements.

2. What’s so special about E15?

Ethanol is corrosive, and some critics believe that E15, with its 15% ethanol, can cause damage to cars. (E10, by contrast, with its 10% ethanol, is widely accepted and available in the U.S.) In 2011, the Environmental Protection Agency authorized the use of E15 for newer cars made in 2001 and later. But it’s still not common at U.S. service stations; just about 1,430 of the nation’s 122,000 filling stations sell E15.

3. Why is summertime an issue?

Since the heat of summer increases the evaporation of all liquids, including gasoline, the EPA has had more stringent rules in place between June 1 and Sept. 15 to regulate Reid vapor pressure, the propensity for gasoline to evaporate and lead to smog.

4. Why is Trump so involved?

As a presidential candidate, he promised voters in Iowa -- the top U.S. producer of corn-based ethanol -- that he would support increasing the amount of it that’s mixed in fuel. Despite that pledge, Trump lost Iowa’s first-in-the-nation Republican presidential nominating contest to Senator Ted Cruz, an ethanol critic.

5. Who supports year-round use of E15?

Mainly agricultural interests in the Midwest. Corn use for ethanol has more than tripled since 2005, when President George W. Bush enacted the Renewable Fuel Standard, which compels refiners and fuel importers to use a variety of biofuels. Ethanol now accounts for about 10% of U.S. gasoline usage, up from less than 1/10 of 1% in 1993. Demand was given a boost by the Clean Air Act amendments of 1990, which spurred the use of ethanol as an oxygenate to combat pollution, and the RFS, created in 2005 and expanded two years later.

6. Who opposes year-round use of E15?

Oil companies have battled it for years, warning about potential engine damage from motorists inadvertently pumping it into vehicles and other equipment not approved to use it. The top U.S. oil refining trade group has filed a lawsuit challenging the EPA’s rule change. Some automakers warn that car warranties would be voided if motorists use E15. Oil refiners already dealing with slowing gasoline demand growth worry that increased use of ethanol will pare their share of the 143 billion gallon market. (This risk is less acute for refiners that also produce ethanol, such as Valero Energy Corp.) Some environmental activists argue that expanding the availability of E15 will drive the production of more corn, resulting in more prairies being plowed and waterways polluted by agricultural runoff.

7. What would broader use of E15 mean for industry?

Not very much, especially in the short term. Analysts expect only gradual growth in E15, as litigation and other constraints discourage widespread pickup of the blend by filling stations. ClearView Energy Partners analyst Neelesh Nerurkar predicts "limited short-run volume impact, perhaps on the order of 14 million gallons per year of additional ethanol." For oil companies, that could mean a gradual reduction in U.S. demand for petroleum, which refineries can offset with increased exports.

The Reference Shelf

• The U.S. Energy Information Administration explains ethanol.
• Iowa is again a presidential campaign battleground.
• Ethanol pioneer Archer-Daniels-Midland Co. is considering spinning off its ethanol business.
• The U.S. Department of Agriculture on corn used to make ethanol.
• The U.S. Environmental Protection Agency’s Renewable Fuel Standard program page.

To contact the reporters on this story: Mario Parker in Chicago at mparker22@bloomberg.net;Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, ;James Attwood at jattwood3@bloomberg.net, Laurence Arnold, David Marino

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