Ford Endorses Boosting Ethanol Blend to E15

The healthiest U.S. automaker is getting out ahead on higher blends of biofuels.

By Peter Rohde, Editor, Kiplinger's Biofuels Market Alert

March 5, 2009

A top Ford Motor Co. executive is giving the company's blessing to hiking the base level ethanol blend used by all vehicles in the near term to 15% or so. The ethanol industry sees the auto industry's acquiescence to slightly higher blends as critical to persuading the Obama administration's EPA to sign off on a waiver by declaring moderately higher blends substantially similar to the E10 blend of gasoline sold today.

The "sub-sim" ruling would sidestep the need for additional and costly testing of slightly higher blends in engines before they're approved for use. Moreover, it could push the blend wall -- the point at which the market for E10 is saturated -- ahead at least five years, a critical move for the economically beleaguered ethanol industry.

The letter from Susan Cischke, Ford's group vice president for sustainability, environment and safety engineering, to Jeff Broin, CEO of Poet -- the nation's largest ethanol producer -- supports the ethanol industry's endeavor. Broin is also founder of Growth Energy, a new trade group representing ethanol interests in Washington.

"Based on our biofuel discussions, it is clear that Ford and Poet share a common vision to accelerate renewable fuel use," Cischke writes in the letter obtained by Kiplinger's Biofuels Market Alert. "Ford endorses efforts to increase base level blends up to E15 and collaborate with key stakeholders to overcome challenges with introducing these higher levels of ethanol."

Another Ford executive says the letter is meant to "drive consensus around a solution" on higher blends. He says Ford isn't making an outright endorsement of E15 right now, but concedes the firm is not pushing the extended testing being sought by other automakers.

Sources say EPA is weighing issuing a split or partial waiver, which is likely to come later this year. The waiver would most likely be for legacy vehicles built after a certain year. Some sources say that year could be 1997; others say 1992 or 1993. Another possibility is a waiver for vehicles meeting a certain level of emissions standard, referred to as Tier 2. That would still open up a vast new market for ethanol.

EPA approval of E15 would increase the potential market for the alcohol fuel by at least half, to more than 18 billion gallons. Theoretically, it could pour about 21 billion gallons -- depending on gasoline demand -- of new ethanol into the market, though lack of infrastructure and refinery issues will likely continue to keep ethanol from being blended in some parts of the country. Nevertheless, the bump up to E15 would make it easier for the industry to meet its renewable fuels mandate almost through 2015.

Attached to Cischke's letter is a page of key discussion points proposed by Ford. One of them appears to signal the automaker's overall strategy -- beyond E15. The automaker's call for an "industrywide commitment" to making 50% of total new vehicle production flexible fuel vehicles (FFVs) -- cars and trucks capable of burning blends of up to 85% alcohol -- "as soon as possible (e.g. 2014)." Such a move would give Ford, General Motors and Chrysler a sizable head start on their foreign brand rivals. Representatives of GM and Chrysler could not be reached for comment at press time.

Although foreign brands wouldn't have to make many engineering changes to produce FFVs for the U.S. market (some already sell them in Brazil), one source for a leading foreign brand automaker says it would impose additional costs that domestic manufacturers have already presumably factored into their product planning. The international manufacturers would essentially be starting from scratch -- with the exception of a few models from Nissan and a couple from Toyota. The Detroit Three, on the other hand, agreed years ago to devote 50% of their total production to FFVs by 2012. Of course, the commitments come with the stipulation that adequate refueling infrastructure is in place.

For Ford -- the only Detroit-based automaker not asking or receiving help from Uncle Sam -- the push for biofuels will position it as a clear industry leader in the green fuels movement -- a progressive company willing to get out ahead on the issue. And it may also send a signal to consumers that its engines are better able than those of competitors to withstand higher alcohol blends.

The discussion points accompanying Cischke's letter go beyond regulatory issues -- blend levels and emissions -- to paint a picture of how Ford would like to see biofuels evolve. For example, the automaker wants to "reinforce a vision of ethanol becoming an alternative to gasoline rather than limited to a gasoline additive." It also proposes "developing the fuel distribution network to support customer choice and value." And it seeks "a firm planning horizon to support a higher base level ethanol blend, beyond E15" in years to come. Ford notes that continued support for "flex pumps" -- also know as blender pumps -- is important, but recognizes that will take "support from all stakeholders, including Underwriters Laboratories."

In another encouraging development for ethanol, UL is backing off its claim that existing fuel pumps bearing its seal of approval are not certified for blends higher than 10%.

For weekly updates on topics to improve your business decisionmaking, click here.