The mix of 85-percent ethanol and 15-percent gasoline is promising, but you can't buy it in New England yet

01:00 AM EDT on Sunday, April 30, 2006

BY PETER C.T. ELSWORTH
Journal Staff Writer

With gas prices soaring, hybrid cars are in the news, but the focus is on those, like the Ford Escape, Honda Civic and Toyota Prius, that run on a combination of gasoline and electric batteries. Vehicles that run on a blend of gasoline and ethanol have taken a back seat, despite a ringing endorsement of the technology from the president in his State of the Union speech.

And while the 85-15 ethanol-gas mix may be a fuel of the future, it is currently not available in New England, even though you may be driving a vehicle capable of running on the fuel and not even know it.

In fact, most Rhode Islanders are already driving cars with 10-percent ethanol mixed into the gasoline.

Ethanol is alcohol made from grain or any kind of plant material -- in the U.S. it is made primarily from fermented corn. Apart from being the alcohol you drink in beer and wine, it has many industrial uses. As a fuel, it is typically blended at terminals where tanker trucks fill up, at a ratio of 85-percent ethanol to 15-percent gasoline to create a fuel known as E85. Cars that run on E85 are called flexible-fuel vehicles, because they can run on either gasoline or E85.

While E85 provides marginally less power than gasoline, it is cleaner and offers the possibility of some relief from unstable world oil prices. Brazil has been switching to E85 over the last 30 years and expects to be energy self-sufficient this year.

So why has E85 had such a hard time getting established in the Northeast? After all, the fuel is now available in every state outside of New England except for New Jersey and Delaware in the Northeast, Alabama, Arkansas and Louisiana in the South and Alaska and Hawaii. While it is well established in Midwestern, corn-growing states, it is growing in popularity and the National Ethanol Vehicle Coalition expects the number of service stations to increase to about 2,000 this year from the current 600.

But there is no production in the Northeast, which means all the supplies have to be brought in by train or truck from production facilities in the Midwest. Ethanol cannot be piped, because, unlike oil and gasoline, it absorbs water in the pipelines and becomes contaminated.

Indeed, the nearest production plant is in South Bend, Ind., so transportation adds to the cost. But ethanol is available here. A Cibro Petroleum terminal on the Hudson River in Albany, N.Y., for example, transfers millions of gallons of ethanol a week from trains coming in from the Midwest to tanks and then barges it out to refineries. In addition, U.S. Development, a Houston-based railcar and storage company, is building two ethanol terminals in the Northeast, one in Linden, N.J., and the other in Baltimore, Maryland.

But the main problem is that no regional service station has so far stepped up to sell the fuel.

"It's a chicken-and-egg thing," said Janice McClanaghan, Energy Program Manager at the Rhode Island State Energy Office. "[The service stations] have to know the vehicles are out there before they put in the pumps.

"Ethanol is available in bulk, but not at retail service stations," said Steven J. Levy, managing director of business development at Portsmouth, N.H.-based Sprague Energy, a division of Axel Johnson Inc., of Stamford, Conn. The company has petroleum product terminals on the East Coast, including one on Allens Avenue in Providence.

"Everyone wants to be the second person to do it," said Rhea Bozic, Northeast coordinator for the National Ethanol Vehicle Coalition. But she added that with more car makers producing flexible-fuel vehicles, the word about E85 is getting out and a number of production plants are currently being planned in the Northeast. In fact, an argument in ethanol's favor is that it offers economic opportunity to depressed rural areas such as upstate New York.

Northeast Biofuels, for example, plans to start producing ethanol in 2008 in partnership with a Canadian company in an old Miller Brewing Plant in Fulton, N.Y. And Empire Biofuels, which is associated with the New York Corn Growers Association, is in the permitting stage for an ethanol plant. Executive Committee member Brian Manktelow, a grain farmer in Lyons, N.Y., said the company plans to build a plant capable of producing 50 million gallons a year.

"We plan to use as much corn as possible from New York state," he said, adding he hoped the plant would be up and running by late 2007. Because the plan was still seeking site approval, he declined to give additional details, including its proposed location.

He said the plan met two needs: first, by providing a market for local farmers' corn, and second, by helping to stabilize fuel prices. "Fuel prices are killing us," he said. "They're terrible high."

ACTUALLY, E85 IS PRICED to be competitive with 87 octane gasoline. In Sioux City, Iowa, earlier this week, for example, E85 was selling for about $2.54 a gallon compared with $2.89 for gasoline, according to Ron Lamberty, vice president of market development at the American Coalition for Ethanol. He said that while "E85 is such a new product, people are feeling their way there [in terms of pricing]," many stations are fixing on a 30 cent differential that includes a federal subsidy on ethanol and makes up for the difference in mileage.

When ethanol prices rise, as they have right now due to extra demand from oil refineries, "station owners will take a hit; when they fall they'll put the extra margin in the bank."

Demand from refineries is up because they are substituting ethanol for methyl tertiary butyl ether (MTBE). The Clean Air Act of 1990 requires the use of an oxygen-enhancer in cleaner-burning "reformulated" gasoline, but MTBE is being phased out because it contaminates water and may cause cancer. In Rhode Island, the sale of MTBE will be illegal after June 1, 2007, following a bad spill in Pascoag five years ago.

And while ethanol offers some relief from the volatile world oil market -- where prices have been breaking records in the $70-plus a barrel range -- it remains an alternate fuel, not a replacement fuel, Lamberty said. Consider, for example, that the current U.S. production of ethanol from corn totals about 4.5 billion gallons a year compared with 140 billion gallons of gasoline. Production is expected to increase to about 6 billion gallons by the end of 2008, but the upper limit of ethanol produced from corn is about 10 percent of the nation's fuel supply, or 14 billion gallons, he said.

At the same time, manufacturers now routinely produce flexible-fuel vehicles, many of which are driven by owners who have no idea they have one. Fleet sales of flexible-fuel vehicles have been in place for a number of years, as many states -- including Rhode Island, which has 63 state vehicles -- have mandated that a certain percentage of state cars be purchased with the technology, even if the fuel is not currently available.

Bill Ferguson, associate director of the State Energy Office, said the state was taking a closer look at E85 but added that nobody had yet approached the office with proposals to sell the fuel to the public. "We keep revisiting it," he said. "It seems inevitable that it will become available."

Overall, there are about 6 million flexible-fuel vehicles on the nation's roads, including 20 models of DaimlerChrysler, Ford and GM cars, minivans, SUVs and trucks as well as Nissan models.

And then there is the power issue. While ethanol has a higher octane rating, it has a lower energy level, so you burn more of it. "Your car would have more power, but you'd lose gas mileage," said Bozic. The drop in fuel economy ranges from 5-to-15 percent.

However, ethanol offers the possibility of helping to lessen the nation's controversial dependence on imported oil, which accounts for about 60 percent of our consumption.

IN FACT, stability in both supply and price make up the key national security argument for the domestically grown product. While oil prices are subject to a number of pressures, including rapidly increasing demand from developing giants such as China and India, to say nothing of the political instability in the Mideast where most of the world's reserves are to be found, the cornfields of the Midwest are a rustling picture of political stability.

Certainly, it was the national security argument President Bush was referring to when he cited ethanol in his State of the Union speech as part of his initiative for alternate fuels.

"We'll also fund additional research in cutting-edge methods of producing ethanol, not just from corn, but from wood chips and stalks, or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years," he said in his speech. "Breakthroughs on this and other new technologies will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by 2025."

IN FACT, Brazil has made itself independent of the vagaries of the world old market by focusing over the last 30 years on ethanol. To be sure, Brazil makes its ethanol from sugar cane, which yields nearly eight times as much energy as ethanol from corn. And it has not been all smooth sailing, especially when sugar prices spiked in the late 1980s, but the country expects to become energy self-sufficient this year.

But as McClanaghan of the State Energy Office noted of Brazil's 30-year program, "You have to gear up for these things."

The technology is also a winner on environmental grounds, because ethanol is water soluble, non-toxic and biodegradable. One minor drawback is that ethanol is more corrosive that gasoline, which means transportation and storage facilities have to be adapted, which can add a few cents to the short-term price.

And while carbon dioxide, a major contributor to global warming, is produced during the production and burning of ethanol, the National Ethanol Vehicle Coalition claims the use of E85 can actually reduce CO2 because it does not add to the carbon cycle. Fossil fuel combustion, on the other hand, adds to the overall carbon cycle because it releases carbon that has been stored deep in the earth for millions of years, the coalition argues.

So while E85 is cleaner than gasoline and is not totally dependent on oil prices, it offers a partial solution to the nation's energy problems. "A lot would have to happen to have everyone use ethanol," said Lamberty of the American Coalition for Ethanol. "Cars would have to be more efficient, more cars would have to use the fuel and we would have to make ethanol in other ways (than from corn). But anything is possible -- I mean, we put a guy on the moon, right?"

pelsworth@projo.com (401) 277-7403