oversight

Air Pollution: Air Quality Implications of Alternative Fuels

Published by the Government Accountability Office on 1990-07-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

     ._ . .^._.”._..___.._
                        - ..-..__.____
                                   .--- ___-..---.-._____
                                                       -.---_-
.11115’I !)!)O
                                                  AIR POLLUTION
                                                  Air Quality
                                                  Implications of
                                                  Alternative Fuels




                                                                                                      141965




                                                   RJZ§TRI(=TED--    Not to be released outside the
                                                   General Accounting OfWe unless speclflcally
                                                   approved by the Offlce of Congressional
                                                   Relations.
                                                                                   RELEASED
 *                 United States
GAO                General Accounting Office
                   Washington, D.C. 20648

                   Resources, Community, and
                   Economic Development Division

                   B-239340

                   July 9, 1990

                   The Honorable Philip R. Sharp
                   Chairman, Subcommittee on Energy
                     and Power
                   Committee on Energy and Commerce
                   House of Representatives

                   Dear Mr. Chairman:

                   As requested in your March 2, 1988, letter and as agreed to in subse-
                   quent meetings with your office, this letter provides information about
                   the impact of alternative motor vehicle fuels on improving air quality.
                   These fuels include methanol, ethanol, liquified petroleum gas, com-
                   pressed natural gas, oxygenated fuels, and reformulated gasoline,


                   It is generally recognized that most alternative fuels will reduce such air
Results in Brief   pollutants as ozone, carbon monoxide, and air toxics, but there is disa-
                   greement over the extent of the reductions, as well as concerns that
                   some alternative fuels may increase the levels of other pollutants.
                   Although research has been done on the air quality implications of alter-
                   native fuels, the results reported by the Environmental Protection
                   Agency (EPA) and the petroleum and automobile industries vary. For
                   example, EPA estimates that alternative fuels are capable of reducing
                   ozone-forming hydrocarbons by approximately 80 percent or more com-
                   pared to conventional gasoline burned in vehicles meeting the more
                   stringent emission standards proposed by the agency. While industry
                   groups also believe that hydrocarbons can be reduced by using alterna-
                   tive fuels, they are less optimistic about the extent of these reductions.


                   In spite of significant improvements in air quality, over 120 million peo-
Background         ple continue to live in areas that exceed one or more national air quality
                   standards. The more than 178 million vehicles that travel the nation’s
                   highways are major contributors of hydrocarbons, carbon monoxide,
                   and other air pollutants. Approximately two-thirds of all carbon monox-
                   ide and at least one-third of all hydrocarbons and nitrogen oxides that
                   are emitted into the air each year in the United States are estimated to
                   come from motor vehicles. Hydrocarbons and nitrogen oxides react in




                   Page I                           GAO/RCED-90-143   Implications   of Alternative   Fuels
                                                                                                                    l


                       B239340                                                                                            c T”,




                       the atmosphere to form ozone, a primary ingredient of urban smog.’ In
                       addition to these pollutants, motor vehicles also emit approximately
                       one-half of the nation’s toxic air pollutants.

                       According to EPA, today’s automobiles may emit 60 to 80 percent less of
                       some air pollutants than automobiles built in the 1960s; however, much
                       of the emission reductions are offset by increases in the number of vehi-
                       cles and the number of miles traveled. One solution being considered by
                       the Congress and the Administration is the use of alternative fuels that
                       burn cleaner than gasoline or diesel fuel.

                       Alternative fuels reduce air pollution because hydrocarbon emissions
                       contained in the exhaust of alternative-fueled vehicles are less reactive
                       in the atmosphere and thus less likely to form ozone than hydrocarbons
                       emitted from gasoline vehicles, and alternative fuels have lower evapo-
                       rative emissions. For example, methanol and ethanol will not evaporate
                       from conventional fuel tanks as readily as gasoline, and liquified petro-
                       leum gas and compressed natural gas, although more volatile, are con-
                       tained in sealed vehicle fuel tanks.


                       Although alternative fuels offer many advantages to improving air qual-
Uncertainties About    ity when compared to conventional gasoline, uncertainties remain
the Influence of       regarding their specific pollution-reduction potential and the extent that
Alternative Fuels on   they will be attractive to and thus widely used by consumers. For exam-
                       ple, while EPA estimates that methanol can reduce ozone-forming hydro-
Air Quality            carbon emissions from vehicles by up to 90 percent, representatives of
                       the oil industry estimate the reductions to be much less. One of the nega-
                       tive aspects of methanol is also the subject of disagreement. EPA esti-
                       mates that while methanol-fueled vehicles will triple toxic
                       formaldehyde emissions from tailpipe exhausts, these increases will be
                       offset by reductions in formaldehyde formed by reactive hydrocarbons
                       in the atmosphere. The Congressional Research Service (CRS) and a pri-
                       vate research firm report that formaldehyde emissions from methanol-
                       fueled vehicles could be higher than those produced by gasoline-fueled
                       vehicles.

                       Consumers’ willingness to purchase alternative-fueled vehicles and to
                       operate them using cleaner fuels will be a major determinant of the
                       extent to which these fuels will be used and of the ultimate reduction in

                       ‘Ozone is also a critical component of the earth’s stratosphere that absorbs much of the sun’s destruc-
                       tive ultraviolet radiation.



                       Page 2                                        GAO/RCED-90-143      Implications   of Alternative     Fuels
                       B-239340




                       air pollution. Alternative fuels that are the most attractive from a cost
                       and convenience standpoint may be more widely accepted by
                       consumers.

                       Although some alternative fuels such as liquified petroleum gas and
                       compressed natural gas are estimated to be cost- competitive with con-
                       ventional gasoline, other factors such as the lack of a network of refuel-
                       ing stations and reduced driving ranges may impede their widespread
                       use for other than commercial fleets. Also, while the cost of liquified
                       petroleum gas and compressed natural gas may be competitive with gas-
                       oline, additional costs will be required to either modify existing automo-
                       biles or ’ 3 equip new cars to use these fuels,

                       Unlike most other alternative fuels, reformulated gasoline-a fuel pro-
                       duced by changing the concentration of one or more components of con-
                       ventional gasoline to reduce emission levels-can be delivered to
                       consumers through existing gasoline distribution systems with little or
                       no inconvenience to distributors, retailers, or consumers. Limited quanti-
                       ties of reformulated gasoline are currently being sold at approximately
                       the same price as conventional gasoline, but larger quantities of more
                       extensive reformulations that are required to significantly reduce air
                       pollution are likely to cost more. Petroleum industry officials estimate
                       that reformulating large quantities of gasoline may require purchasing
                       $20 to $30 billion of new refinery equipment and may require several
                       years for constructing new refineries.Z Similarly, widespread use of
                       methanol will require costly changes in existing production facilities.

                       Appendixes I through VII provide a more detailed discussion of the air
                       quality implications for each alternative fuel as well as information on
                       related health, safety, and cost implications.


                       Our work, which was conducted from November 1989 through June
Objective, Scope,and   1990, was directed at identifying, reviewing, and summarizing the
Methodology            results of studies, research projects, and reports done by EPA, CRS, the
                       Office of Technology Assessment (OTA), and industry and environmental
                       groups. We did not independently verify the results of these studies,
                       research projects, and reports. We discussed the facts contained in this
                       report with EPA officials and made changes as appropriate; however, we
                       did not obtain official agency comments.


                       “A related report (GAO/RCED-90-163) provides additional information on reformulated gasoline.



                       Page 3                                     GAO/RCED-90-143    Implications   of Alternative   Fuels
                                                                                   /
B-239340




Unless you publicly announce its contents earlier, we plan no further
distribution of this report for 30 days, At that time we will make copies
available to others upon request. If you have any questions about the
report, please call me at (202) 275-6111. Other major contributors are
listed in appendix VIII.

Sincerely yours,




Richard L. Hembra
Director, Environmental
  Protection Issues




Page 4                           GAO/RCED-90-143   Implications   of Alternative       Fuels
Page 5   GAO/RCED-90-143   Implications   of Alternative   Fuels
Contents


Letter
Appendix I
SomeAdvantages and
Disadvantages of
Alternative Fuels
Compared to Gasoline
Appendix II                                                                          10
Methanol
Appendix III                                                                         13
Ethanol
Appendix IV                                                                          14
Liquified Petroleum
GZiS
Appendix V                                                                           16
CompressedNatural
GaS
Appendix VI                                                                          17
Oxygenated Fuels
Appendix VII                                                                         19
Reformulated Gasoline
Appendix VIII                                                                        21
Major Contributors to
This Report”



                        Page 6   GAO/RCED-90-143   Implications   of Alternative   Fuels
Contents




Abbreviations

API        American Petroleum Institute
ARC0       Atlantic Richfield Company
co,        Carbon Dioxide
co         Carbon Monoxide
CNG        Compressed Natural Gas
CRS        Congressional Research Service
EPA        Environmental Protection Agency
ETBE       Ethyl Tertiary Butyl Ether
LPG        Liquified Petroleum Gas
MTBE       Methyl Tertiary Butyl Ether
ClIA       Office Of Technology Assessment
NOy        Nitrogen Oxides
VOC        Volatile Organic Compound


Page 7                          GAO/RCED-90-143   Implications   of Alternative   Fuels
Appendix I

SomeAdvantages and Disadvantages of
Alternative Fuels Compared to Gasoline

                          Advantages
Methanol
                      l   May reduce ozone-forming hydrocarbon emissions by up to 40 percent
                          when used as a mixture of 85 percent methanol and 15 percent gasoline
                      l   May reduce ozone-forming hydrocarbon emissions by up to 90 percent
                          when 100 percent methanol is used
                      l   Eliminates benzene and other toxic emissions



                      . Reduces ozone-forming hydrocarbon and toxic emissions similar to
Ethanol                 methanol
                      l Reduces carbon dioxide emissions


                          Produces an estimated 50 percent fewer hydrocarbons, which have less
Liquified Petroleum   l


                          ozone-forming potential
Gas                   l   May reduce carbon monoxide emissions by an estimated 25 to 80
                          percent


                        Reduces hydrocarbon emissions by an estimated 40 to 90 percent
CompressedNatural     l


                      . Reduces carbon monoxide emissions by an estimated 50 to 90 percent
GaS                   . Reduces emissions of benzene and other toxic pollutants


                          Reduces carbon monoxide emissions by an estimated 12 to 22 percent
Oxygenated Fuels      l


                      l   Increases gasoline octane levels, thus decreasing the need for harmful
                          additives such as benzene


                      . Deliverable to consumers through existing distribution system
Reformulated          . Estimated to reduce ozone and air toxics produced by automobile
Gasoline                emissions
                      l Requires few, if any, vehicle modifications




                          ‘These statements represent opinions held by EPA or organizations, such as the petroleum and auto-
                          mobile industries, whose viewpoints often differ greatly. This is not a comprehensive listing but is
                          intended to illustrate that the use of alternative fuels presents difficult choices because the environ-
                          mental benefits are sometimes uncertain and may be offset by other problems.



                          Page 8                                         GAO/RCED-90-143      Implications   of Alternative   Fuels
                           Appendix I
                           Some Advantages and Disadvantages    of
                           Ahmative    Fuels Compared to Gasoline




                           Disadvantages
Methanol
                      l    May increase formaldehyde emissions
                      l    Requires significant costs for new production and distribution systems
                      l    Reduces vehicle driving range and is corrosive to engine parts
                      l    Difficult to start vehicle in cold temperatures


                           Emits more acetaldehyde
Ethanol               l


                      l    Would cost consumers substantially more without federal tax exemption
                      l    Requires vehicle modifications estimated at $300 per vehicle


                           Reduces vehicle driving range and causes refueling inconveniences
Liquified Petroleum   l


                      l    Required pressurized fuel tanks restrict vehicle cargo space
GaS                   l    Increases new car cost by up to $1000


                           Emits more nitrogen oxides
CompressedNatural     ’I   Requires new distribution system
GaS                        Reduces vehicle driving range and causes refueling inconveniences
                           Requires large, heavy, pressurized fuel tanks
                           May increase vehicle costs by up to $2,000


                        Increases evaporative emissions of volatile organic compounds
Oxygenated Fuels      l


                      9 Oxidizes to form toxic chemicals, such as formaldehyde
                      . May increase nitrogen oxide emissions
                      l May contribute to auto fuel system problems and reduced fuel economy
                      . Increases the cost of gasoline


                      . May require purchasing significant amounts of new refinery equipment
Reformulated            and constructing new refinery units
Gasoline              l Will not provide emission benefits comparable to fuels such as pure
                        methanol and compressed natural gas
                      . Extensive reformulation could result in substantial price increases to
                        consumers




                           Page 9                                    GAO/RCED-90-143   Implications   of Alternative   Fuels
                                                                                              c
Appendix II                                                                                        C

Methanol


               Methanol is a clear, colorless liquid, most of which is made from natural
               gas. It can also be made from coal, wood or methane (a gas produced
               from municipal waste). Today methanol is produced at about 75 plants
               in over 30 countries. Although methanol is probably best known as a
               fuel for Indianapolis-type racing cars, it is primarily used to produce
               other chemicals and as a gasoline additive. Of the approximately 1,300
               methanol-burning vehicles in use in the world today, most are in the
               United States.


               EPA reports that methanol has the potential to significantly reduce ozone
Air Quality    levels in the most seriously polluted areas of the country. There is dis-
Implications   agreement, however, about how much methanol can reduce vehicle
               emissions and improve air quality.

               Two forms of methanol for motor vehicle use have been evaluated by
               EPA. One form-a     mixture of 85 percent methanol and 15 percent gaso-
               line (M85)-is estimated by EPA to reduce ozone-forming emissions by 20
               to 40 percent as compared to vehicles operating on pure gasoline. The
               other form-100 percent methanol (MlOO)- is estimated to produce
               ozone-forming emissions that are 75 to 90 percent lower than those from
               gasoline vehicles. The reductions are due, in part, to methanol’s low vol-
               atility, which significantly reduces evaporative emissions and the lower
               photochemical reactivity of methanol emissions.

               Studies by Ford Motor Company, the American Petroleum Institute
               (API), and Chevron Corporation, and others have also addressed metha-
               nol’s potential for reducing ozone. Their findings differ somewhat from
               those reported by EPA. For example, Chevron reports that methanol use
               would probably reduce peak ozone levels by less than five percent and
               could potentially increase ozone levels. Ford reports that tests on both
               M85 and Ml00 vehicles showed hydrocarbon emissions to be about the
               same as those from conventional gasoline vehicles. Furthermore, API
               states that EPA'S claims regarding ozone reductions are overestimated
               because EPA calculates the reductions based on gasoline vehicles which
               emit more vocs than some vehicles already on the road.

               An official in EPA'S Office of Mobile Sources told us that EPA'S findings on
               methanol’s impact on ozone formation may not be as different from
               those of the oil and auto industries as they appear. He stated that indus-
               try studies have focused on the use of M85 (instead of MlOO) and have
               primarily addressed tailpipe emissions, ignoring methanol’s lower evap-
               orative emissions and reduced photochemical reactivity.


               Page 10                           GAO/RCED-90-143   Implications   of Alternative   Fuels
                     Appendix   II
                     Methanol




                     There is less disagreement among EPA and industry officials over the
                     impact of methanol-fueled vehicles on nitrogen oxides (NO,), another
                     component of ozone. Most research results show that vehicles burning
                     methanol will produce NO, emissions that are generally equivalent to
                     those from gasoline-fueled cars. The Congressional Research Service
                     reports that, in general, NO, emissions tend to be lower from engines
                     running on methanol, but that emissions from individual cars vary
                     considerably.

                     Methanol use could have a significant impact on reducing toxic air pollu-
                     tants EPA reports that Ml00 virtually eliminates emissions of benzene
                     and other air toxics that cuase up to 1,500 cancer cases a year in the
                     United States. Its impact on formaldehyde emissions, however, is less
                     certain. For example, EPA estimates that Ml00 fueled vehicles will emit
                     three times the amount of formaldehyde from the tailpipe as gasoline-
                     fueled vehicles, yet ambient formaldehyde levels formed by reactive
                     hydrocarbons in the atmosphere will be less. In contrast, a private
                     research firm and CRSreport that formaldehyde emissions from metha-
                     nol vehicles could be as much as 10 times higher than those from gaso-
                     line vehicles. API states that EPA is considering formaldehyde controls,
                     which have not yet been effectively demonstrated. A study prepared by
                     Chevron indicates that almost all tests for formaldehyde emissions have
                     been done on vehicles with less than 30,000 miles, and normal deteriora-
                     tion of an automobile’s emission control equipment may have a signifi-
                     cant impact on formaldehyde emissions in older vehicles.


                     There is also considerable disagreement among EPA, industry, and others
Other Implications   concerning the cost compet,itiveness of methanol compared to gasoline.
                     Reports by EPA, the Department of Energy, and CIIA have shown metha-
                     nol to be economically competitive with gasoline based on current oil
                     prices. EPA, for example, estimates that on an energy-equivalent basis,
                     methanol could sell for between $.85 and $1.09 compared to the cost of a
                     gallon of gasoline. API estimates, however, range from $1.30 to $2.07 a
                     gallon.

                     EPA,  CRS,and the Petroleum Marketers Association of America report
                     that significant increases in methanol use will entail additional costs.
                     These include a major investment in new methanol production facilities
                     estimated at up to $1 billion for a large plant; a retrofit of existing ser-
                     vice stations, estimated at $30,000 to $45,000 per station; and increased
                     distribution costs. They also estimate that it will cost up to $300 more to
                     build a car that can use either methanol or gasoline.


                     Page 11                           GAO/RCED-SO-143   Implications   of Alternative   Fuels
                                                                            *
                                                                                  pt-
Appendix   II                                                                           *
Methanol




Other factors that may affect consumer acceptance of methanol as a
motor vehicle fuel are difficulty starting vehicles at temperatures below
about 60 degrees, the corrosive effect of methanol on engine and other
parts, and reduced driving ranges compared to gasoline. Also, methanol
has some advantages and disadvantages regarding health and safety
risks as compared to gasoline. For example, methanol is more readily
absorbed through the skin and ingestion of significantly smaller
amounts can be fatal. Also, according to EPA, methanol’s lower volatility
makes it less flammable, resulting in fewer and less severe vehicle fires.
Once ignited, however, methanol burns with an almost invisible flame,
which makes fire detection more difficult.




Page 12                          GAO/RCED90-143   Implications   of Alternative     Fuels
&@&ix   III

Ekhanol


                     Ethanol is a liquid alcohol fuel produced from corn and other agricul-
                     tural products such as sugar cane. In 1988, United States production of
                     ethanol was about 840 million gallons. Ethanol is primarily used as a
                     component of gasohol, a blend of ethanol and gasoline. In Brazil, govern-
                     ment-subsidized ethanol has been used in modified motor vehicles since
                     the early 1980s and is currently widely used as a vehicle fuel. This
                     appendix discusses the use of 100 percent ethanol used in vehicles spe-
                     cifically designed to operate on alcohol fuels. The use of ethanol as a
                     gasoline blend is discussed in appendix VI.


                          reports that ethanol offers several air quality advantages over gaso-
Air Quality          EPA
                     line. First, EPA estimates that ethanol-fueled vehicles can reduce ozone-
Implications         forming hydrocarbon emissions at approximately the same levels as
                     methanol. EPA also reports that ethanol use eliminates benzene emissions
                     and could reduce carbon dioxide (CO,) emissions. One disadvantage of
                     ethanol is that it yields higher acetaldehyde emissions, a toxic pollutant
                     that may cause cancer.


                     Ethanol prices ranged from $1.00 to $1.20 per gallon in 1989, reflecting
Other Implications   a federal tax exemption of 60 cents per gallon which is scheduled to
                     expire in September 1993. A California Energy Commission study esti-
                     mates that the retail price of ethanol could increase to $2.33 (in 1988
                     dollars) per gallon by the year 2000, without the tax exemption.

                     Currently, vehicle modifications needed to burn ethanol in automobiles
                     produced in the United States include a cold starting system and corro-
                     sion resistant fuel tanks and fuel pumps. According to Ford Motor Com-
                     pany, the production cost of an ethanol vehicle is about $300 more than
                     a gasoline vehicle. Ethanol vehicles are currently being sold in Brazil by
                     Ford, Volkswagen, and General Motors.

                     Although ethanol may not present as great a health risk as some other
                     fuels, EPA reports that ethanol use presents some potential health con-
                     cerns. Ingestion of several ounces of ethanol, while not harmful to
                     adults, could be harmful to children. Also, some additives used to distin-
                     guish ethanol from alcohol used for beverage purposes may be toxic.




                     Page13                           GAO/RCED-90-143   Implications   of Alternative   Fuels
Appendix IV

Liquified Petroleum Gas


                     Liquified Petroleum Gas (LPG) is a mixture of petroleum and natural
                     gases that become liquid under pressure or at reduced temperatures.
                     The principle liquified petroleum gases are propane and butane, which
                     are converted into a liquid state for ease of storage and handling. LPG
                     comes from two main sources: natural gas processing and crude oil
                     refining. Domestic production of LPG in 1987 was about 15.7 billion
                     gallons.

                     There are currently an estimated 330,000 highway vehicles using LPGin
                     the United States. Most of these vehicles were converted from gasoline
                     to LPG by modifying their carburetors and fuel tanks. There are approxi-
                     mately 10,000 stations in the United States capable of providing vehicle
                     refueling. Currently only about 2.8 percent of the total U.S. LPG supply is
                     used in transportation.


                     Limited data are available to assess the air quality implications of LPG as
Air Quality          a motor vehicle fuel. At the time of this report EPA was assessing the
Implications         economic and environmental implications of LPG along with other alter-
                     native fuels. Information contained in this appendix was obtained pri-
                     marily from the LPG industry.

                     The National Propane Gas Association states that hydrocarbon emis-
                     sions from LPG vehicles are 50 percent lower than those from gasoline
                     vehicles. The reduction is due in part to the negligible evaporative emis-
                     sions associated with LPG because it is always contained in sealed tanks.
                     Not only are there fewer hydrocarbons, but the Western Liquid Gas
                     Association and the California Air Resources Board both report that
                     hydrocarbons emitted from LPG-fueled vehicles are 47 to 60 percent less
                     reactive than those from gasoline-powered vehicles and thus have a
                     lower ozone-formation potential.

                     Research sponsored by the LPG industry indicates that COemissions can
                     be significantly decreased by using LPG. Estimated reductions range
                     from 25 to more than 80 percent compared to gasoline. Research con-
                     ducted by a private organization for Arizona’s Maricopa County Associ-
                     ation of Governments found that the extent of co reductions attributable
                     to LPG depends on the quality of vehicle conversions and that co emis-
                     sions can increase as the conversion systems age.


                     According to the National Propane Gas Association, LPG and gasoline
Other Implications   prices are generally comparable and LPG may result in some savings.


                     Page14                           GAO/RCED-90-143Implications   of Alternative   Fuels
Appendix    IV
Liquifled   Petroleum   Gas




Estimates of the cost to convert a vehicle to run on LPG, however, range
from $700 to $2,000 per vehicle, The additional cost for an LPG option in
a production passenger car is expected to be between $300 and $1,000.

Several factors concern consumers about the use of LPG as a motor vehi-
cle fuel. These include reduced driving range, refueling inconvenience,
restrictions on cargo space, and safety concerns. The main safety con-
cern is the risk of rupturing LPG fuel tanks on impact and fuel contact
with ignition sources. Studies show, however, that LPG presents no more
of an explosion risk than gasoline. Because LPG is non-toxic and is not
water soluble, it does not present as great a threat to underground wells
or aquifers as some other fuels.




Page 15                          GAO/RCED-90.143   Implications   of Alternative   Fuels
                                                                                                  c
Appendix V                                                                                              r’-5.

CompressedNatural Gas


                     Compressed Natural Gas (CNG), a gaseous fuel composed primarily of
                     methane and smaller amounts of other gases, is predominately used for
                     heating and power generation, Small amounts of natural gas have been
                     used as an automotive fuel since the last century. The technology never
                     flourished, however, because gas storage and compression facilities
                     have not been readily available. Currently, there are about 500,000 nat-
                     ural gas-fueled vehicles worldwide. Approximately 30,000 are in the
                     United States, mostly in commercial fleets.


Air Quality          decreases in ozone levels because of CNG'S lower levels of photochemi-
Implications         tally reactive emissions. CNGvehicles are estimated to emit 50 to 80 per-
                     cent fewer reactive hydrocarbons than gasoline vehicles. However, they
                     can emit significantly higher levels of NO,, another component of ozone.
                     The net effect appears to be a reduction in ozone formation compared to
                     gasoline vehicles. However, CRS has reported that additional research is
                     required to substantiate estimates of ozone reductions attributable to
                     CNG.

                     EPA estimates that CNG-fueled vehicles will emit 50 to 90 percent fewer
                     co emissions compared to gasoline vehicles and will virtually eliminate
                     particulate emissions when CNG is substituted for diesel fuel. According
                     to CYI'A,CNG also has the potential to reduce emissions of benzene and
                     other toxic compounds as compared to gasoline. Also, formaldehyde
                     emissions from CNG vehicles are estimated to be no higher than those
                     from gasoline-fueled vehicles.


                     Cost estimates prepared by the California Energy Commission show CNG
Other Implications   fuel to be cost-competitive with gasoline. However, like LPG, vehicles
                     must be equipped at the factory or later converted to use CNGat costs
                     estimated by EPA at $1,000 to $2,000 per vehicle. Other obstacles impede
                     its widespread use for other than commercial fleets. For example, there
                     is no network of CNG refueling stations, and there is little incentive to
                     establish one because of the large capital costs required (estimated by
                     EPA to be $200,000 to $400,000 per station). Other consumer concerns
                     include CNG vehicles’ limited driving range (75 to 150 miles per fill-up)
                     and required pressurized tanks, which restrict cargo space and vehicle
                     performance. Although the California Air Resources Board reports that
                     some consumers perceive CNG as a safety hazard, fleet-use experience
                     indicates that CNG offers no greater safety risk than gasoline or
                     methanol.


                     Page 16                          GAO/RCED-90-143   Implications   of Alternative     Fuels
     I!



           ated IFuels


                     Oxygenated fuels are blends of gasoline with additives such as alcohol
                     and ether that increase the fuels’ oxygen content and cause more com-
                     plete combustion, The more widely discussed oxygenated fuels are the
                     gasoline/ethanol blend (gasohol), the gasoline/methanol blend, the gaso-
                     line/Methyl Tertiary Butyl Ether blend (MTBE), and the gasoline/Ethyl
                     Tertiary Butyl Ether blend (ETBE).

                     Gasohol, a blend of 10 percent ethanol and 90 percent gasoline, is the
                     most widely used oxygenated fuel, comprising about 7 percent of the
                     vehicle fuel market. A gasoline/methanol blend, containing no more than
                     5 percent methanol, is used in a limited number of cities. According to
                     API, MTBE has captured about 1 percent of the national gasoline market,
                     while ETBE is not available commercially.


                     Studies by EPA and others have shown that oxygenated fuels will reduce
Air Quality          CO emissions. API estimates that, in general, oxygenated fuels can
Implications         reduce CO emissions from 10 to more than 20 percent. It’s estimated that
                     gasohol can reduce co emissions by up to 22 percent when compared to
                     the gasoline burned in today’s automobiles. Improvements in pollution
                     control equipment on newer vehicles, however, may limit the reduction
                     to around 17 percent by the year 2000.

                     Adding oxygenates such as methanol and ethanol to gasoline increases
                     both the octane and volatility of the fuel. Higher octane levels reduce
                     the need to add toxic aromatics such as benzene, toluene, and xylene,
                     which increase hydrocarbon emissions. The increased volatility of some
                     oxygenated fuels, however, can result in more evaporative emissions of
                     VOCS, partly offsetting the reductions in exhaust emissions. Additionally,
                     EPA estimates that oxygenated fuels’ higher volatility will increase NO,
                     emissions from 2 to 8 percent. Furthermore, gasohol and gasoline/meth-
                     anol blends can oxidize to form toxic chemicals, such as formaldehyde
                     and acetaldehyde.


                     Oxygenated fuels are estimated to cost somewhat more than conven-
Other Implications   tional gasoline. A feasibility study prepared for Arizona’s Maricopa
                     County Association of Governments estimates the increased cost of
                     using oxygenated fuels to be between 2.0 and 8.0 cents per gallon. API
               ”     estimates that if a gasoline/methanol blend represented half of the
                     nation’s automotive fuel consumption, the increased cost would be
                     between 1.O and 1.8 cents per gallon. The increased cost is estimated to



                     Page 17                          GAO/RCED-90-143   Implications   of Alternative   Fuels
                                                                             ,

Appendix VI
Oxygenated Fuels




be between 2.1 and 2.8 cents per gallon if gasohol accounted for half the
automotive fuel used in the United States.

Several factors may affect the viability of oxygenated fuels as alterna-
tives to gasoline. For example, gasohol can contribute to fuel system
problems such as vapor locks and may reduce fuel economy. Further-
more, as many as 10 percent of the nation’s underground fuel tanks may
need to be replaced to insure that their linings are suitable for gasohol
storage.




Page 18                          GAO/RCJ3D-fJO-143 Implications   of Alternative   Fuels
Apgndix   VII

Reformulated Gasoline


                Reformulated gasoline is produced by changing the concentration of one
                or more components of conventional gasoline to reduce emission levels.
                The removal of lead from gasoline and the recent development of ARCO'S
                EC-l and Shell’s SU-2000E gasolines are examples of gasoline reformu-
                lations. However, the term is most commonly used to refer to more
                extensive changes that are expected to result from ongoing research by
                the petroleum and auto industries to develop cleaner gasolines. Until
                this research is completed, the exact content of reformulated gasoline
                will not be known.

                Refineries generally lack the capacity to produce significant quantities
                of reformulated gasoline, but limited amounts of reformulated gasoline
                can be produced almost immediately by changing existing refinery
                blending processes. Several petroleum companies are already marketing
                reformulated gasolines in selected areas. For example, the Atlantic Rich-
                field Company (ARCO) is selling EC-l in southern California, replacing its
                former leaded regular gasoline. Conoco and Diamond-Shamrock are also
                selling limited amounts of reformulated gasoline in some areas of Colo-
                rado. Shell’s SU-2000E will replace the company’s premium unleaded
                gasoline in the 10 U.S. cities experiencing the most severe air pollution
                problems.


                The air quality implications of reformulated gasoline are difficult to
Air Quality     quantify at this time. Petroleum industry officials informed us that they
Implications    cannot predict the benefits until the results of current research efforts
                are available. In general, however, they expect reformulated gasoline to
                help improve air quality. More specifically, industry officials believe
                that reformulated gasoline will reduce the levels of ozone and air toxics
                produced by automobile emissions.

                Unlike other alternative fuels, reformulated gasoline offers some imme-
                diate emission benefits, especially for older vehicles, which are often the
                most serious polluters. For example, it is estimated that pre-1975 vehi-
                cles without catalytic converters make up about 15 percent of all high-
                way vehicles in southern California. ARCO estimates that using EC-l, its
                reformulated gasoline, in these older vehicles could reduce emission
                levels equivalent to removing 20 percent of the vehicles from the road.

                EPA officials view reformulated   gasoline as a positive step, but one that
                should not be considered a long-term solution to the nation’s air quality
                problems, In their opinion, it is unlikely that reformulated gasoline can
                provide emission benefits comparable to some cleaner alternative fuels,


                Page 19                           GAO/RCED-90-143   Implications   of Alternative   Fuels
                     Appendix VII
                     Refommlated  Gasoline




                     including 100 percent methanol and CNG. Therefore, EPA views reformu-
                     lated gasoline as a short-term solution until cleaner fuels can be made
                     available in sufficient quantities.


                     Although reformulated gasoline can be distributed through existing gas-
Other Implications   oline delivery systems, reformulating large quantities of gasoline would
                     require purchasing significant amounts of new refinery equipment and
                     constructing new refinery units that could take several years, at a mini-
                     mum. Some petroleum industry officials estimate that needed refinery
                     reconfigurations may cost the industry $20 to $30 billion. One company
                     estimates that it would need to spend about $2 billion over the next five
                     years to modify its facilities to reformulate all of its gasoline. Another
                     company estimates that three to four years would be required to pre-
                     pare for and to construct new refinery units to produce reformulated
                     gasoline in significantly larger quantities.

                     It is almost certain that reformulated gasoline will cost consumers more
                     than conventional gasoline, but the amount of increase will not be
                     known until the extent of reformulation is determined. According to
                     ARCO officials, EC-l is selling for approximately the same price as leaded
                     regular gasoline, although it costs about 2 cents a gallon more to pro-
                     duce. Petroleum industry officials acknowledge, however, that more
                     extensive reformulations are likely to increase fuel costs. A preliminary
                     study by EPA suggests that reducing aromatic levels from the current
                     industry average of 35 percent of gasoline volume to 15 percent could
                     raise the price of gasoline by approximately 10 cents a gallon.




                     Page 20                          GAO/RCED-90-143   Implications   of Alternative   Fuels
*n&x      VIII

ll!hjor Contributors to This Report


                               Peter F. Guerrero, Associate Director
Resources,                     William F. McGee, Assistant Director
Community, and
Economic
Development Division,
Washington, D.C.

                               Harry C. Everett, Evaluator-In-Charge
Norfolk Regional               Susan J. Schildkret, Site Senior
Office

Detroit    Regional   Office   Anthony A. Krukowski, Advisor




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