Special Gasoline Blends Are Widely Used and Use May Increase in the Future

There were 12 distinct gasoline blends in use in the United States during  the summer of 2004: 11 special gasoline blends and the conventional  gasoline used everywhere a special blend is not used. When different  grades of gasoline, special blends used in winter, and other factors are  considered, the number of gasoline blends rises to at least 45. New ozone  standards and other factors may further increase the number or the use of  special gasoline blends in the future, in part because EPA must approve any  state’s application to require use of a special gasoline blend as long as the  proposed fuel meets EPA’s environmental standards. In addition, a new federal standard for all  gasoline—including special blends—that mandates reduced sulfur,  promises to improve the effectiveness of catalytic converters already  present in most vehicles and could aid some areas in meeting federal air  quality standards, potentially reducing the need for these fuels in some  areas. EPA staff told us that there had been congressional debate  regarding EPA’s authority during consideration of recent energy legislation,  but that its authority had not changed as of May 2005. The extent of reductions remains unclear,  however, because the estimates have not been comprehensively validated  through testing on current vehicles and emissions controls. As shown in table 1, the  models estimate that special gasoline blends reduce emissions by varying  degrees. The special gasoline blend most commonly used in areas not using  conventional gasoline—gasoline with an RVP of 7.8—is estimated to  reduce VOC emissions by 12-16 percent and NOx by about 0.7 percent. Reduced Vehicle Emissions Have Led to Air Quality Improvements, but the Extent of Benefits Attributable to Special Gasoline Blends Is Uncertain

EPA and other experts have concluded that improvements in air quality in  some parts of the country are at least partly attributable to the use of  special gasoline blends. Special blends also add to the number of fuels shipped through pipelines,  reducing the efficiency of the pipelines and raising costs. MTBE is generally less expensive than ethanol as an oxygenate  but has raised water quality concerns. Several  terminal operators told us that their terminals were built before the  proliferation of special gasoline blends and were designed to handle fewer,  but larger, batches of gasoline. Areas That Use Uncommon Special Gasoline Blends Tend to Have Higher and More Volatile Gasoline Prices

Among the 100 cities we examined, the highest wholesale gasoline prices  tended to be found in cities that used a special gasoline blend not widely  available in the region or that is more costly to make than other blends. Further, the greater complexity and higher  refining, transportation, and storage costs associated with supplying  special gasoline blends have almost certainly resulted in increased prices  or volatility, either because of more frequent or severe supply disruptions,  or because higher costs are likely passed on, at least in part, to consumers. Recommendation for Executive Action

To provide a better understanding of the emissions impacts of using special  gasoline blends and these blends’ impacts on the gasoline supply  infrastructure, we recommend that the EPA Administrator direct the  agency to take the following four actions: (1) work with states and other  stakeholders to comprehensively analyze how various gasoline blends  affect the emissions of vehicles that comprise today's fleet, including how  overall emissions are affected by the use of ethanol and other oxygenates;  (2) use this updated information to revise the emissions models that states  use to estimate the emissions and air quality benefits of these fuels and  provide this information to Congress; (3) work with states, the Department  of Energy, and other stakeholders to develop a plan to balance the  environmental benefits of using special gasoline blends with the impacts on  gasoline supply infrastructure and prices, and report the results of this  effort to Congress; and (4) work with the states, the Department of Energy,  and any other appropriate federal agencies to identify what statutory or  other changes are needed to achieve this balance and report these findings  to Congress and request that Congress provide these authorities to the  appropriate federal agency or agencies. Scope and Methodology

To determine the extent to which special gasoline blends are used in the  United States and how, if at all, this use is expected to change in the future,  we reviewed related literature, reviewed data on the use of these fuels, and  interviewed government and other officials.
Why GAO Did This Study

The Clean Air Act, as amended, requires some areas with especially poor air quality to use a "special gasoline blend" designed to reduce emissions of volatile organic compounds (VOC) and nitrogen oxides (NOx) and requiring the use of an oxygenate such as ethanol. In less severely polluted areas, the Act allows states, with EPA approval, to require the use of other special blends as part of their effort to meet air quality standards. GAO agreed to answer the following: (1) To what extent are special gasoline blends used in the United States and how, if at all, is this use expected to change in the future? (2) What effect has the use of these blends had on reducing vehicle emissions and improving overall air quality? (3) What is the effect of these blends on the gasoline supply? (4) How do these blends affect gasoline prices?

What GAO Found

Although there is no consensus on the total number of gasoline blends used in the United States, GAO found 11 distinct special blends in use during the summer of 2004. Further, when different octane grades and other factors are considered, there were at least 45 different kinds of gasoline produced in the United States during all of 2004. The 11 special blends GAO found are often used in isolated pockets in metropolitan areas, while surrounding areas use conventional gasoline. The use of special blends may expand because a new federal standard for ozone may induce more states to apply to use them. To date, the Environmental Protection Agency (EPA) has generally approved such applications and does not have authority to deny an application to use a specific special blend as long as that blend meets criteria established in the Clean Air Act. EPA staff told us that there had been recent congressional debate regarding EPA's authority with regard to approving special gasoline blends but that the bills had not passed. EPA models show that use of special gasoline blends reduces vehicle emissions by varying degrees. California's special blend reduces emissions the most--VOCs by 25-29 percent, NOx by 6 percent compared with conventional gasoline, while also reducing emissions of toxic chemicals. In contrast, the most common special gasoline blend (used largely in the Gulf Coast region) reduces VOCs by 12-16 percent and NOx by less than 1 percent compared with conventional gasoline. The extent of reductions remains uncertain, because they rely, at least in part, on data regarding how special blends affect emissions from older vehicles, and these estimates have not been comprehensively validated for newer vehicles and emissions controls. Regarding air quality, EPA and others have concluded that improvements are, in part, attributable to the use of special blends. The proliferation of special gasoline blends has put stress on the gasoline supply system and raised costs, affecting operations at refineries, pipelines, and storage terminals. Once produced, different blends must be kept separate throughout shipping and delivery, reducing the capacity of pipelines and storage terminal facilities, which were originally designed to handle fewer products. This reduces efficiency and raises costs. In the past, local supply disruptions could be addressed quickly by bringing fuel from nearby locations; now however, because the use of these fuels are isolated, additional supplies of special blends may be hundreds of miles away. GAO evaluated pretax wholesale gasoline price data for 100 cities and generally observed that the highest prices tended to be found in cities that use a special gasoline blend that is not widely available in the region, or that is significantly more costly to make than other blends. There is general consensus that increased complexity, and higher costs associated with supplying special blends, contribute to higher gasoline prices either because of more frequent or severe supply disruptions or because higher costs are likely passed on at least in part to consumers.