Technical Report Documentation Page 1. Report No. 2. Government Accession No 3. Recipient's Catalog No SWUTC/11/167360-1 4. Title and Subtitle 5. Report Date An Alternative Transportation Fuels Update: A Case Study of the October 2011 Developing E85 Industry 6. Performing Organization Code 7. Author(s) 8. Performing Organization Report No. Sharon Lewis and Papa S. Travare Report 167360-1 9. Performing Organization Name and Address 10. Work Unit No. (TRAIS) Center for Transportation Training and Research Texas Southern University 11. Contract or Grant No. 3100 Cleburne 10727 Houston, Texas 77004 12. Sponsoring Agency Name and Address 13. Type of Report and Period Covered Southwest Region University Transportation Center Texas Transportation Institute Texas A&M University System 14. Sponsoring Agency Code College Station, Texas 77843-3135 15. Supplementary Notes Supported by general revenues from the State of Texas. 16. Abstract As the United States imports more than half of its oil and overall consumption continues to climb, the 1992 Energy Policy Act established the goal of having “alternative fuels” replace at least ten percent of petroleum fuels used in the transportation sector by 2000, and at least thirty percent by 2010. Currently, alternative fuels consumed in Alternative Fuel Vehicle (AFVs) account for less than one percent of total consumption of gasoline. This paper examines how alternative fuel E85 can be used to reverse that trend. In addition, this research paper will take a look at some of the ongoing government decisions concerning the use of the alternative fuel E85, and will discuss what policy makers might hold for the future in terms of the supply and demand of alternative fuels in the United States. This case study will be useful to all stakeholders involved in the transportation industry, including, but not limited to the government, policy makers, automakers, motorists, and researchers, eager to find a just balance with both a better transportation system and a healthy and clean environment. 17. Key Words 18. Distribution Statement Alternative Fuels, E85 No restrictions. This document is available to the public through NTIS: National Technical Information Service 5285 Port Royal Road Springfield, Virginia 22161 19. Security Classif.(of this report) 20. Security Classif.(of this page) 21. No. of Pages 22. Price Unclassified Unclassified 54 Form DOT F 1700.7 (8-72) Reproduction of completed page authorized ii AN ALTERNATIVE TRANSPORTATION FUELS UPDATE: A CASE STUDY OF THE DEVELOPING E85 INDUSTRY by Sharon Lewis Research Associate Texas Southern University Papa S. Travare Graduate Research Assistant Texas Southern University Report 167360-1 Sponsored by the Southwest University Transportation Center Texas Transportation Institute October 2011 TEXAS SOUTHERN UNIVERSITY 3100 Cleburne Houston, TX 77004 iv ABSTRACT As the United States imports more than half of its oil and overall consumption continues to climb, the 1992 Energy Policy Act established the goal of having “alternative fuels” replace at least ten percent of petroleum fuels used in the transportation sector by 2000, and at least thirty percent by 2010. Currently, alternative fuels consumed in Alternative Fuel Vehicle (AFVs) account for less than one percent of total consumption of gasoline. This paper examines how alternative fuel E85 can be used to reverse that trend. In addition, this research paper will take a look at some of the ongoing government decisions concerning the use of the alternative fuel E85, and will discuss what policy makers might hold for the future in terms of the supply and demand of alternative fuels in the United States. This case study will be useful to all stakeholders involved in the transportation industry, including, but not limited to the government, policy makers, automakers, motorists, and researchers, eager to find a just balance with both a better transportation system and a healthy and clean environment. v DISCLAIMER The contents of this report reflect the views of the authors who are responsible for the facts and accuracy of the information presented herein. This document is disseminated under the sponsorship of the US Department of Transportation, University Transportation Centers Program, in the interest of information exchange. Mention of trade names or commercial products does not constitute endorsement or recommendation for use. ACKNOWLEDGMENTS The authors recognize that support was provided by a grant from the US Department of Transportation, University Transportation Centers Program to the Southwest Region University Transportation Center which is funded, in part, with general revenue funds from the State of Texas. vi EXECUTIVE SUMMARY Alternative fuels, including E85, play a key role in policy discussions about energy, agriculture, taxes, and the environment. In the United States, ethanol is made from corn but, is made from sugar cane in other countries. E85 is a blend of 85 percent ethanol and just 15 percent gasoline. E85 is an alternative fuel as defined by the Department of Energy (DOE). As transportation is vital to the economic growth of any nation, recent bumps in oil and gasoline prices have led to increased interest in finding alternatives to petroleum for the transportation sector. With the United States importing more than half of its oil and overall consumption continuing to climb, policy makers are supporting the production and use of ethanol through tax credits and other financial incentives in order to reduce the United States dependence on foreign oil. Furthermore, the 2005 Energy Policy Act (P.L. 109-56) established a renewable fuel standard (RFS). However, the production and use of ethanol has its pros and cons. Supporters of ethanol argue that its use can help lower emissions of toxic and ozone-forming pollutants, and greenhouse gases, especially if a higher-level blend is used. For example, E85 is known to help reduce carbon dioxide (CO2), a harmful greenhouse gas and a major contributor to global warming. They further argue that ethanol use can reduce petroleum imports, thus promoting energy security. Ethanol’s detractors argue that various government policies and incentives used to support ethanol distort the market and lead to corporate welfare for corn growers and ethanol producers. As transportation is the second largest source of pollution, the United States has a key challenge in having all stakeholders work together in developing a sustainable market for E85 ethanol that would improve the economic and environmental picture of the United States. vii TABLE OF CONTENTS ABSTRACT ................................................................................................................................... v DISCLAIMER…………………………………………………………………………………..vi ACKNOWLEDGEMENTS…………………………………………………………………….vi EXECUTIVE SUMMARY ........................................................................................................ vii INTRODUCTION ......................................................................................................................... 1 Background of Research .............................................................................................................. 1 Research Objectives ..................................................................................................................... 2 Report outline ............................................................................................................................... 2 LITERATURE REVIEW ............................................................................................................. 3 E85 AUTOMOBILE DEVELOPMENT PLAN ......................................................................... 7 CURRENT GOVERNMENT INITIATIVES & POLICIES .................................................. 11 Policy Justification to Support Alternative Fuels & E85 ........................................................... 17 Economic Political Factors .................................................................................................... 17 Oil Reliance on Foreign Countries ......................................................................................... 18 Environmental concerns ......................................................................................................... 21 Domestic Income ................................................................................................................... 22 NEW E85 REFINERS ................................................................................................................. 25 CONCLUSION ............................................................................................................................ 29 RECOMMENDATION............................................................................................................... 31 REFERENCES ............................................................................................................................ 32 APPENDIX................................................................................................................................... 36 Appendix A ................................................................................................................................... 37 Flexible Fuel Vehicle ................................................................................................................. 37 Flexible Fuel Vehicles ...........................................................................................................