The RFS generally requires that U.S. transportation fuels in 2022 contain  36 billion gallons of biofuels. At the terminals, most ethanol is currently blended as an  additive in gasoline to make E10 fuel blends. Challenges to Transporting Additional Volumes of Ethanol to Wholesale Markets May Require Large Investments in Infrastructure over the Next Decade

Existing ethanol infrastructure should be sufficient to transport the  nation’s ethanol production through 2015, according to DOT officials and  industry representatives, but large investments in transportation  infrastructure may be needed to meet 2022 projected consumption,  according to EPA documentation. This volume represents  roughly a 2.4 billion gallon increase from 2011 RFS consumption targets  for corn ethanol. EPA estimated that approximately $87 million would be  needed for an additional 480 tank trucks. We and  others have reported that congestion is constraining the capacity and  increasing the costs of U.S. rail and highway transportation. The Compatibility of Many UST Systems with Intermediate Blends Is Unclear

According to our discussions with knowledgeable federal officials and  several industry association representatives, the compatibility of many  existing UST systems with intermediate ethanol blends is unclear for two  main reasons—many fuel retailers have older equipment and lack records,  and recent federally sponsored research indicates potential problems with  the use of intermediate blends. However, important gaps exist in current federal research efforts in this  area. However, to date EPA has  not developed a plan to undertake such research. According to EPA and industry estimates, the total cost of installing a new  single-tank UST system compatible with intermediate ethanol blends is  more than $100,000. However, since EPA has only allowed E15 for use in model year 2001 and  newer automobiles, these retailers would not be able to sell fuel to  consumers for use in older automobiles and nonroad engines. For example, some industry association  representatives stated that some consumers will not understand the label,  or the label might get lost among the other labels commonly found on  dispensers. Federally Sponsored Studies Are Evaluating Effects of Using Intermediate Ethanol Blends in Automobiles and Nonroad Engines

With the possibility of introducing intermediate ethanol blends in the  nation’s motor-fuel supply, DOE began to study the effects of these fuels in  automobiles and nonroad engines in 2007. DOE, EPA, and CRC have provided about $51 million in  funding (for fiscal years 2007 through 2010) for ten research projects (see  table 2). Fuel economy. Catalyst temperatures. Three handheld trimmers had higher idle speeds and experienced  unintentional clutch engagement, which DOE laboratory officials  identified as a potential safety concern that can be mitigated in some  engines by adjusting the carburetor. Conclusions

The RFS calls for increasing amounts of biofuels to be blended in the  nation’s transportation fuel supply, including up to 15 billion gallons of  ethanol made from corn starch and potentially billions of gallons of  additional ethanol made from cellulosic sources. However, the effects of intermediate ethanol blends on key components of  the nation’s retail fueling infrastructure—such as gaskets and seals in  dispensing equipment and UST systems—are not fully understood. While DOE is conducting studies on the compatibility  of UST materials with intermediate blends, and while EPA plans to  conduct a study limited to experts’ views on the subject, EPA officials  have acknowledged that additional research, including research on the  suitability of specific UST components with intermediate blends, will be  needed to facilitate a transition to storing intermediate ethanol blends. GAO staff who made major contributions to this  report are listed in appendix V.

Appendix I: Scope and Methodology

To determine the challenges associated with transporting additional  volumes of ethanol to wholesale markets to meet Renewable Fuel  Standard (RFS) requirements, we interviewed relevant government,  industry, academic, and research officials. In particular, we asked a nonprobability sample of  knowledgeable stakeholders, among other things, to discuss the  challenges, if any, associated with transporting additional volumes of  ethanol to wholesale markets. We also conducted site visits to the research centers responsible for  coordinating federal studies on the effects of intermediate ethanol blends  on materials and components used in retail fuel storage and dispensing  equipment. Due to ongoing litigation over EPA’s  decision to allow ethanol blends with 15 percent ethanol (E15) for use  with certain automobiles, we did not evaluate any research by federal  agencies and others into the effects of intermediate ethanol blends on  automobiles and nonroad engines.
Why GAO Did This Study

U.S. transportation relies largely on oil for fuel. Biofuels can be an alternative to oil and are produced from renewable sources, like corn. In 2005, Congress created the Renewable Fuel Standard (RFS), which requires transportation fuel to contain 36 billion gallons of biofuels by 2022. The most common U.S. biofuel is ethanol, typically produced from corn in the Midwest, transported by rail, and blended with gasoline as E10 (10 percent ethanol). Use of intermediate blends, such as E15 (15 percent ethanol), would increase the amount of ethanol used in transportation fuel to meet the RFS. The Environmental Protection Agency (EPA) recently allowed E15 for use with certain automobiles. GAO was asked to examine (1) challenges, if any, to transporting additional ethanol to meet the RFS, (2) challenges, if any, to selling intermediate blends, and (3) studies on the effects of intermediate blends in automobiles and nonroad engines. GAO examined government, industry, and academic reports; interviewed Department of Energy (DOE), EPA, and other government and industry officials; and visited research centers.

What GAO Found

According to government and industry officials, the nation's existing rail, truck, and barge infrastructure should be able to transport an additional 2.4 billion gallons of ethanol to wholesale markets by 2015--enough to meet RFS requirements. Later in the decade, however, a number of challenges and costs are projected for transporting additional volumes of ethanol to wholesale markets to meet peak RFS requirements. According to EPA estimates, if an additional 9.4 billion gallons of ethanol are consumed domestically by 2022, several billion dollars would be needed to upgrade rail, truck, and barge infrastructure to transport ethanol to wholesale markets. GAO identified three key challenges to the retail sale of intermediate blends: (1) Compatibility. Federally sponsored research indicates that intermediate blends may degrade or damage some materials used in existing underground storage tank (UST) systems and dispensing equipment, potentially causing leaks. However, important gaps exist in current research efforts--none of the planned or ongoing studies on UST systems will test actual components and equipment, such as valves and tanks. While EPA officials have stated that additional research will be needed to more fully understand the effects of intermediate blends on UST systems, no such research is currently planned. (2) Cost. Due to concerns over compatibility, new storage and dispensing equipment may be needed to sell intermediate blends at retail outlets. The cost of installing a single-tank UST system compatible with intermediate blends is more than $100,000. In addition, the cost of installing a single compatible fuel dispenser is over $20,000. (3) Liability. Since EPA has only allowed E15 for use in model year 2001 and newer automobiles, many fuel retailers are concerned about potential liability issues if consumers misfuel their older automobiles or nonroad engines with E15. Among other things, EPA has issued a proposed rule on labeling to mitigate misfueling. DOE, EPA, and a nonfederal organization have provided about $51 million in funding for ten studies on the effects of intermediate blends on automobiles and nonroad engines--such as weed trimmers, generators, marine engines, and snowmobiles--including effects on performance, emissions, and durability. Of these studies, five will not be completed until later in 2011. Results from a completed study indicate that such blends reduce a vehicle's fuel economy (i.e., fewer miles per gallon) and may cause older automobiles to experience higher emissions of some pollutants and higher catalyst temperatures. Results from another completed study indicate that such blends may cause some nonroad engines to run at higher temperatures and experience unintentional clutch engagement, which could pose safety hazards.

What GAO Recommends

GAO recommends, among other things, that EPA determine what additional research is needed on the effects of intermediate blends on UST systems. EPA agreed with the recommendation after GAO revised it to clarify EPA's planned approach.