GASOLINE MARKETING Uncertainties Surround Reformulated Gasoline as a Motor Fuel 142020 United States CkAO General Accounting Office Washington, DC, 20648 Resources, Community, and Economic Development Division B-227776.5 June 14,199O The Honorable Philip R. Sharp Chairman, Subcommittee on Energy and Power Committee on Energy and Commerce House of Representatives Dear Mr. Chairman: The administration’s July 1989 proposed legislation for amending the Clean Air Act included an initiative to promote the use of cleaner-burn- ing alternative fuels for motor vehicles, such as ethanol, methanol, and compressed natural gas, to reduce motor vehicle emissions. Shortly after the proposal’s introduction, officials from the petroleum and automobile industries suggested that gasoline could be reformulated to burn as cleanly as alternative fuels. Because little is known about reformulated gasoline, you requested that we provide the Subcommittee with infor- mation on (1) what reformulated gasoline is, (2) when reformulated gas- oline could be made available and how it will be produced, and (3) what the impacts will be of producing and using reformulated gasoline. Reformulating gasoline generally refers to changing the chemical Results in Brief makeup of gasoline for a specific purpose. Reformulated gasoline, as it is being discussed today, involves changing the composition of gasoline to improve its emissions characteristics. While some petroleum companies have recently begun selling limited quantities of a reformulated gasoline to meet specific markets, the most effective formulations for reducing emissions have yet to be determined. The petroleum and automobile industries have only recently undertaken in-depth research of possible reformulations which could lead to several recipes of reformulated gaso- line. Much remains to be learned about the benefits and costs of various possible compositions; therefore, the exact formulations and likely dates of availability are uncertain. In general, government and industry officials agree that reformulated gasoline could make a positive contribution to air quality by helping reduce some vehicle emissions. In addition, reformulated gasoline offers advantages over other clean-burning alternative fuels because it can use the existing petroleum distribution system. However, producing refor- mulated gasoline in large quantities and in the more effective formula- tions would require at least several years’ lead time and large Page 1 GAO/RCED-90-153 RePomwlated Gasoline B-227776.6 investments in new refinery equipment. These officials also believe it could adversely affect small refiners, increase the cost of gasoline to consumers, and require additional imports of crude oil. With the uncertainties concerning the composition and potential impacts of reformulated gasoline, it would be premature to draw conclusions about the potential of reformulated gasoline in comparison to other alternative fuels. Air pollution from motor vehicle emissions has been a major environ- Background mental issue over the past 2 decades. Thus far, the automotive industry has achieved emission reductions primarily with engine modifications and exhaust system improvements, most notably by equipping vehicles with catalytic converters (devices that transform vehicle exhaust con- stituents into relatively benign substances). During the same time frame, federal regulations required changes in gas- oline composition that helped reduce vehicle emissions. For example, regulations established in 1973 directed the petroleum industry to pro- duce unleaded gasoline to reduce the health hazard from toxic lead emis- sions. In addition, 1989 regulations imposed limits on gasoline volatility to reduce amounts of evaporative vehicle emissions (gasoline vapors escaping from a vehicle’s fuel system when the vehicle is not in use). Also during this time frame, tax incentives were introduced by federal and state governments to encourage the blending of ethanol in gasoline. Ethanol is one of several oxygenates (fuels containing oxygen) which help reduce carbon monoxide emissions. Four states require the use of oxygenates in certain areas during heavy pollution periods. Despite these actions to lessen the impact of emissions from motor vehi- cles, the problem has not been solved. The Environmental Protection Agency (EPA) has identified 101 areas in the United States which have not met the National Ambient Air Quality Standards for various pollu- tants which are primarily the product of vehicle emissions. An alternative fuels program was included in the administration’s July 1989 Clean Air Act proposal which recognized the need to further regu- late motor fuel composition to reduce vehicle emissions. The proposal required, among other things, the sale of specified numbers of vehicles using alternative fuels-such as methanol, natural gas, and ethanol-in areas with the most serious air pollution. The Senate, on April 3, 1990, Page 2 GAO/RCED-90-153 Reformulated Gasoline ,* B-227776.5 and the House of Representatives, on May 23, 1990, passed their ver- sions of the Clean Air Act amendments, which advocate the use of refor- mulated gasoline to meet vehicle emission performance standards in cities with severe air pollution problems. In a broad sense, reformulated gasoline may refer to any past changes in Composition of the chemical composition of gasoline which were done for a specific pur- Reformulated Gasoline pose. However, in the context of the debate over new clean air legisla- Is Uncertain tion, reformulated gasoline now specifically refers to new formulations of gasoline which industry is developing in response to the administra- tion’s alternative fuels proposal. In this sense, the composition of refor- mulated gasoline is yet to be determined. Recently, Atlantic Richfield Company (ARCO) began marketing a refor- mulated gasoline called Emission Control-l (EC-l). Beginning in Septem- ber 1989, EC-~replaced ARCO'S leaded regular gasoline in southern California. ARCO'S tests indicate that it reduces emissions from pre-1975 vehicles without catalytic converters. Two other companies, Conoco and Diamond Shamrock, subsequently began marketing limited quantities of reformulated gasolines similar to EC-l in parts of Colorado. Since our review work, other companies have also announced that they have begun or plan to market limited quantities of a reformulated gasoline in specific areas. For example, in April 1990 Shell Oil Company began mar- keting a reformulated premium gasoline in nine metropolitan areas hav- ing the most severe ground level air quality problems, as well as in Washington, DC. While gasoline has previously been reformulated to improve its emis- sions characteristics, government and industry officials said that with research, more effective new gasoline formulations intended to reduce emissions should be identified. They said that more information is needed about the emissions resulting from new gasoline compositions. To obtain this information, as well as emissions data on other alterna- tive fuels, the automobile and petroleum industries are currently engaged in a joint research program studying reformulated gasolines, methanol, and ethanol. (See app. I for a description of the research pro- gram.) IJntil the results of this program become available (Phase I is expected to be completed in late 1990 and Phase II at least 2 years later), industry officials said the composition of reformulated gasoline remains uncertain, These officials said a number of new gasoline recipes may emerge from this industry effort. (App. II discusses reasons why multiple recipes for reformulated gasolines are possible.) Page 3 GAO/RCEDdO-153 Reformulated Gasoline R-227776.5 Reformulating gasoline in the future to help reduce vehicle emissions could involve changing the concentrations of numerous components of current gasoline. Candidates for reduction include the aromatics, such as toxic benzene, the olefins, and hydrocarbons with high boiling points. (These and other gasoline components are described in app. III.) Also, a reduction in sulfur content could increase the effective life of catalytic converters. Increasing the oxygenate content of gasoline through the addition of ethanol or ethers such as methyl tertiary butyl ether (MTBE) and ethyl tertiary butyl ether (ETBE) is yet another possibility. Finally, removing more butane from gasoline could further reduce evaporative emissions. We asked officials at the Department of Energy (DOE) and EPA to com- ment on the likely composition of reformulated gasoline. Officials of both agencies said it was too early to predict the precise composition of the new fuel. However, EPA officials told us that two of the proposed measures for reformulating-adding more oxygenates and further reducing volatility-could reduce emissions from gasoline in the near- term. WA is planning an analysis of reformulated gasoline as part of its series of reports on alternative fuels but is awaiting definite specifica- tions from industry before proceeding with this effort. At this time, it is uncertain when reformulated gasolines intended to When and How help meet more stringent vehicle emissions standards will be widely Reformulated Gasoline available. While several firms are marketing reformulated gasolines, Will Be Produced Is these products represent only a limited portion of the total gasoline sales of these companies and are produced with only minor changes in Uncertain refinery operations. Industry officials told us that other companies could also produce limited amounts of reformulated gasoline within a short time. However, these officials pointed out that the production of larger amounts of reformulated gasoline in the more effective formula- tions would require substantial changes in refinery operations and would appear to be several years away at a minimum. Generally, they told us that the more severe the composition changes undertaken and the greater the percentage of the total gasoline pool affected, the longer it will take to make reformulated gasoline available. Government and industry officials said that reformulating all gasoline could not be accomplished quickly. This would entail significant changes at existing refineries, including the reduction or complete elimination of some processes and the construction of new processing units to replace them. For example, an ARCO spokesman estimated that his firm will need Page 4 GAO/RCED-90-163 Reformulated Gasoline B227776.5 to invest approximately $2 billion over the next 5 years in improve- ments to existing facilities to reformulate all its gasoline. Mobil Oil Cor- poration officials told us that 3 to 4 years would be needed to obtain necessary permits, and design and install new refinery units following a decision to produce reformulated gasoline in quantity. The fact that several firms were able to quickly introduce reformulated gasolines to replace leaded gasoline does not necessarily demonstrate whether large quantities of reformulated gasoline could be made availa- ble in a short time. For example, ARCO'S EC-I represents only a limited portion of its gasoline. An ARCO official told us that the firm was able to offer EC-I for sale within a month of completing emissions tests on the new fuel because z-1 is produced by changing the blending of existing refinery products rather than by adding new refinery processes. For instance, aromatics have been reduced in EC-I by moving some of them into unleaded regular gasoline, where ARCO contends they are burned more cleanly by vehicles with catalytic converters. Officials of Diamond Shamrock and Conoco told us that their firms’ reformulated gasolines are produced in a manner similar to EC-~. The above three reformulated gasolines on the market replaced leaded gasolines only in portions of California and Colorado. Furthermore, an official of the Lundberg Survey, Inc., told us that leaded regular sales currently account for about 8 percent of the total U.S. gasoline sales. Given these limitations, the share of the total U.S. gasoline market that could be affected by these reformulated gasolines is small at this time. An official of the National Petroleum Refiners Association observed that the movement toward reformulated gasoline has been influenced by petroleum companies’ perception that further government regulation of motor fuels is inevitable. However, in the absence of an actual govern- ment mandate, there is no guarantee that these companies and others will decide to reformulate all gasoline. Thus, government and industry officials believe the decision to reformulate larger volumes of gasoline is not likely to occur until after the passage of new clean air legislation and the issuance of implementing regulations. We identified several potential positive and negative impacts of refor- Potential Impacts of mulated gasoline. Potential positive impacts include an improvement in Reformulated Gasoline air quality and no necessity to develop a new motor fuel distribution system. Possible negative impacts include increased production costs for refiners, the financial failure of some small refiners and independent Page 6 GAO/RCEDSO-153 Reformulated Gasoline B-227770.5 gasoline marketers, increases in the consumer cost of gasoline, and an increase in crude oil imports. The severity of these impacts is unclear at this time because of uncertainties about the composition of reformulated gasoline and the amount of gasoline to be modified. Generally, the more severe the reformulation and the greater the volume of gasoline affected, the more significant the impacts will be. A brief discussion of each potential impact follows. Air Quality Many government and industry officials agreed that the widespread introduction of reformulated gasoline would have a positive impact on air quality. While the extent of the benefit is uncertain at this time, offi- cials we contacted believe that reducing concentrations of gasoline com- ponents such as aromatics and olefins will result in some decreases in the ozone and air toxics attributable to motor vehicles. They told us that the current joint research program should provide the data necessary to estimate these benefits. Industry officials pointed out that some of the emissions benefits of reformulated gasoline could, in a relatively short time, be achieved by the existing vehicle fleet, unlike other alternative fuels for which new distribution systems and new vehicles may need to be developed. According to these officials, this would make significant emissions reductions possible from older vehicles- the most serious polluters. For example, an ARCO research report states that pre-1975 cars and trucks without catalytic converters make up about 15 percent of the vehicles in southern California. The report concludes that using EC-l, a reformu- lated gasoline, in those older cars could reduce vehicular pollutants in that area by an amount equivalent to removing 20 percent of those vehi- cles from the road altogether. An EPA official told us it is possible that reformulated gasoline may be able to match the automotive emission reductions that may be achieved by an MS5 methanol fuel (85 percent methanol, 15 percent gasoline). The agency has estimated that using an MS5 fuel would reduce current automotive emissions by 30 percent. On the other hand, EPA believes it unlikely that reformulated gasoline can match the potential emission reductions of a pure methanol fuel (MlOO), which it believes may reduce emissions by approximately 80 percent. Eliminating the last remaining amounts of gasoline can provide substantial emission benefits. In spite of this limitation, EPA and DOE officials view the development of reformulated gasoline as a positive step. They told us it signals a new Page 0 GAO/RCED-90-163 Reformulated Gasoline R-227776.5 willingness on the part of the petroleum industry to seriously examine fuel composition as a part of the solution to vehicle emissions. They also said that reformulated gasoline could make a modest, short-term contri- bution to cleaner air because of its potential to reduce emissions from older cars. According to an EPA official, this benefit of reformulated gas- oline would be useful during a period of transition to fuels which EPA considers to be inherently cleaner, such as Ml00 or compressed natural gas. Fuel Distribution System Petroleum industry officials said that reformulated gasoline has an advantage over other alternative fuels in that it can make use of the existing petroleum distribution system. Changes to pipelines, storage facilities, and service stations would not be necessary. A petroleum industry official claimed that the cost of replacing or modifying the dis- tribution system to accommodate other alternative fuels would be far higher than the increased costs of producing reformulated gasoline. Cost of Reconfiguring According to government and industry officials, the more extensively Refineries that refiners have to change their operations to produce reformulated gasoline, the more expensive it will be to produce. They told us it will be very expensive to construct the necessary new refinery equipment. Two industry officials estimated that this reconfiguring of refineries might require capital investments of $20 billion to $30 billion to reformulate all gasoline. Several petroleum industry officials told us they would incur an addi- tional cost from reformulated gasoline in the form of reduced value for some refinery products. For example, as gasoline blending components, aromatics have relatively high value. To reduce the aromatics content of gasoline, refiners would need to find other uses for them or reduce the amount of aromatics produced during the production of gasoline. They could be sold to the chemical industry as feedstocks. However, govern- ment and industry officials said the market would have difficulty in absorbing the large surpluses of aromatics that would likely result from reformulating all gasoline. These officials said depressed prices for aro- matics would probably result from this oversupply situation. Viability of hall Refiners Government and industry officials said they believe that some small refiners may be forced out of business if required to produce signifi- cantly reformulated gasoline. Currently, there are approximately 75 Page 7 GAO/RCED-90-163 Reformulated Gasoline 5227776.5 small U.S. refiners with crude oil processing capacity of 100,000 barrels per day or less, representing approximately 13 percent of total U.S. gas- oline production. Officials of trade associations representing small refin- ers told us that their members generally lack the processing flexibility to adjust to a demand for a significantly different product. Furthermore, they tend to operate on small profit margins and would have difficulty in attracting investors if expensive new equipment were required to pro- duce a new gasoline formulation. Viability of Independent Officials of the Society of Independent Gasoline Marketers of America (SIGMA) told us that reformulated gasoline could create difficulties for Gasoline Marketers their members. They explained that independent marketers supply or operate chains of high- volume/low-price gasoline retail stations. These officials indicated that their members’ ability to stay in business depends upon a competitive wholesale gasoline market. Currently, com- petition is ensured by the availability in that market of numerous sup- ply options, including the small domestic refiners and foreign refiners. If these sources were to be eliminated, independent marketers believe wholesale gasoline prices would rise and they would lose their competi- tive advantage. According to SIGMA officials, reformulated gasoline could threaten these wholesale sources. As discussed above, reformulation could cause small refiners to fail. Furthermore, the independent marketers believe foreign refiners would seek other markets for their finished gasoline rather than alter their refineries to produce reformulated gasoline for the U.S. mar- ket. SIGMA officials said such changes in the wholesale market would likely cause the failure of some independent gasoline marketers. Cost to Consumers According to government and industry officials, the costs related to new capital investments incurred by petroleum companies and the decreased value of components removed from gasoline would be passed on to gaso- line consumers. It appears that limited reformulations would not result in large increases. For example, ARCO officials told us that EC-1 costs 2 cents more per gallon to produce than leaded regular, but ARCO is not passing this increase on to the retail level. However, more extensive reformulation would likely cost more. While petroleum industry officials did not speculate on possible price increases, a preliminary EPA estimate of aromatics reductions may give some indication of the magnitude of potential price increases. The estimate, based on EPA assumptions about current gasoline composition and refinery operating costs, suggests that Page 8 GAO/RCED-90-153 Reformulated Gasoline . R-227776.5 aromatics levels can be reduced from the current industry average of 35 percent of gasoline volume to 15 percent, for a cost of about 10 cents a gallon. The potential failure of independent gasoline marketers could have an additional impact on consumer prices. Representatives of these compa- nies said that their competitive pricing helps hold down the retail price of gasoline. Without this competition, they believe that the marketers of major brand gasoline would have greater freedom to raise their prices. --~ Energy Security Reformulated gasoline could negatively affect the nation’s energy secur- ity. Energy Information Agency reports show a trend toward increasing U.S. energy consumption and declining domestic crude oil production in recent years, to the point where the United States is becoming more dependent upon foreign oil sources to satisfy the growing demand. Petroleum industry officials stated that the production of reformulated gasoline is likely to exacerbate this situation. According to government and industry officials, severe gasoline refor- mulations would probably result in the production of lower volumes of gasoline per barrel of crude oil. Although uncertainty about the compo- sition of reformulated gasoline precludes precise estimates of the vol- ume loss, some increase in the supply of crude oil would be required to maintain the current volume of gasoline production. As indicated by several officials we interviewed, it is likely that this additional crude will have to be imported. Furthermore, government officials expressed concern that the emer- gence of reformulated gasoline might discourage the development of alternative fuels such as methanol and ethanol, which are not made from petroleum. Currently, the United States is almost totally dependent upon petroleum-based fuels to operate its motor vehicles. Other alterna- tive fuels may improve energy security because they use raw materials that can either be domestically produced or obtained from a wider vari- ety of foreign suppliers compared with petroleum. The benefits and costs of reformulated gasoline are yet to be quantitied Conclusions with any degree of certainty. Preliminary indications are that reformu- lated gasoline can offer reductions in some vehicle emissions that could help to achieve the goals of the proposed Clean Air Act. Furthermore, reformulated gasoline would not require major changes in the petroleum Page 9 GAO/RCED-90-163 Reformulated Gasoline . B-227776.5 distribution system. Industry officials contend that this represents a sig- nificant savings in comparison to other alternative fuels. On the other hand, while these officials acknowledge that increased production costs will probably cause consumers to pay more for reformulated gasoline than conventional gasoline, it is not yet known how reformulated gaso- line will compare in cost with other alternative fuels. However, price increases cannot be quantified until the type and quantity of reformula- tions are known. The automotive and petroleum industries are conducting extensive research on the emissions characteristics and cost-effectiveness of refor- mulated gasoline. Initial results are expected in late 1990. At least until then, there is insufficient evidence to indicate how reformulated gaso- line compares with other alternative fuels. The scope and methodology of our review are discussed in appendix IV. We discussed the information contained in this report with DOE and EPA officials. They offered some technical comments, which we have incor- porated in the report. As you requested, we did not obtain official writ- ten agency comments on this report. Our work was conducted from October 1989 through March 1990. Unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the date of this letter. At that time, we will send copies to the appropriate congressional commit- tees; the Secretary of Energy; and the Administrator, EPA. We will also make copies available to others upon request. Should you need further information, please contact me on (202) 275-1441. Other major contribu- tors to this report are listed in appendix V. Sincerely yours, I ./* /Ji7 / /& Victor S. Rezendes Director, Energy Issues Page 10 GAO/RCED-90-163 Reformulated Gasoline Page 11 GAO/RCED-90-163 Reformulated Gasoline Contents Letter Appendix I Industry Research Program on Motor Fuel Composition and Emissions Appendix II 16 Multiple Recipes for Reformulated Gasoline Are Possible Appendix III 17 Glossary of Gasoline Components Appendix IV 20 Scopeand Companies, Associations, and Government Agencies Contacted 20 Methodology Appendix V 22 Major Contributors to This Report Abbreviations ARC0 Atlantic Richfield Company DOE Department of Energy EC-1 Emission Control-l WA 1 Environmental Protection Agency ETI3E Ethyl Tertiary Butyl Ether MTBE Methyl Tertiary Butyl Ether SIGMA Society of Independent Gasoline Marketers of America Page 12 GAO/RCED-SO-159 Reformulated Gasoline Page 13 GAO/RCED-90-163 Reformulated Gasoline Appendix I Industry ResearchProgram on Motor Fuel Composition and Emissions On October 17, 1989, the 3 major domestic auto companies and 14 of the major petroleum companies announced plans for a joint research pro- gram designed to provide new information on the relationships between motor fuel composition and vehicle emissions. Officials involved in plan- ning the program provided the following information about its objec- tives and methodology: . The program is designed to provide results that will permit the assess- ment of relative reductions in vehicle emissions and improvements in urban air quality, especially ozone, achievable with reformulated gaso- lines and with methanol fuels. The program will also evaluate ethanol as an additive to reformulated gasoline. . The first phase of the program, expected to cost approximately $14 mil- lion, will test 26 gasoline formulations in vehicles with older emissions control technology (model years 1983-85) and in vehicles with current technology (model year 1989). It will also test two methanol fuels and an industry-average gasoline in flexible-fuel vehicles. In addition, the research program will measure the emissions impacts of adding 10 per- cent ethanol to reformulated gasoline, the effects of adding ethers- methyl tertiary butyl ether (MTBE) and ethyl tertiary butyl ether (ETBE) to gasoline- and the effects of sulfur content on catalytic converter activity. l The gasoline composition portion of Phase I will include measuring the emissions impacts of various concentrations of aromatics, olefins, and hydrocarbons with high boiling points. Many compounds in these three groups of gasoline components are highly reactive and are considered the most likely contributors to the formation of ozone, the chief ingredi- ent in urban smog. Moreover, these components contribute various tox- its to the atmosphere such as the carcinogen benzene, a member of the aromatics family. l Researchers will make use of sophisticated equipment and new test pro- cedures to identify the individual components in vehicle emissions rather than just measuring total emissions. This detailed information will be used in atmospheric chemistry and air quality models to deter- mine the potential reductions in urban ozone from the use of the tested fuels. . Phase I will include an economic analysis aimed at determining the cost- effectiveness of producing various new gasoline reformulations. Part of this effort will involve a survey of petroleum companies by the National Petroleum Refiners Association. Survey results, expected in the early spring of 1990, are expected to provide information on refiners’ ability to reconfigure their refineries to produce selected recipes of reformu- lated gasoline. The survey data will be used by a private consulting firm Page 14 GAO/RCED-90-153 Reformulated Gasoline Appendix I Industry Rwsrch Program on Motor Fuel Composition and Emissions to estimate the amount of investment required to produce reformulated gasoline and the increased cost per gallon to consumers. l Phase I testing was originally scheduled to begin in January 1990 and to conclude by approximately August 1990. However, as of mid-February, difficulties in establishing test procedures had delayed the start of actual testing. A program official could only tell us that testing would begin as soon as possible, with completion now expected near the end of 1990. . Final plans for the second phase of the research program have not been approved. Treating vehicles and the fuels they burn as a total system, Phase II will test the best of the new gasoline formulations identified in Phase I in future prototype vehicles designed to optimize the benefits of the new fuels. Phase II (originally projected to begin early in 1990) has, like Phase I, been delayed. New target dates for the beginning and end of Phase II had not been established as of mid-February. A program offi- cial speculated that it might begin in the fall of 1990 and continue for at least 2 years. Page 15 GAO/RCED-90-153 Reformulated Gasoline Appendix II Multiple Recipesfor Reformulated Gasoline ’ Are Possible --- According to industry and government officials, differing refinery processes and market needs affect the formulations of gasolines. For example, the percentages of various hydrocarbons in the crude oil feed- stocks that industry uses vary, and the combination of refinery processes that industry employs to convert the crude to gasoline differs considerably from one refinery to another. Furthermore, different petro- leum companies produce gasolines to meet the specific geographical and seasonal requirements of their marketing areas, such as the requirement for higher volatility gasolines in the winter in northern areas. If gasoline is eventually reformulated, according to industry and government offi- cials we contacted, these factors will continue to be in force, so that a number of different recipes for reformulated gasoline are possible. Page 16 GAO/RCED-90-153 Reformulated Gasoline AAendix III Glossary of Gasoline Components Modern gasoline is a complex mixture of hundreds of different compo- nents, mostly hydrocarbons (compounds of hydrogen and carbon), blended in many different combinations. A refiner has many choices regarding what components to include in the mixture to get the desired combination of properties, and many different refinery processes may be used to produce those components. Such factors as the cost and con- tents of crude oil feedstocks, equipment available at each refinery, and desired product slate affect each refiner’s choices regarding the compo- sition of the gasoline produced. Thus, gasolines available today in the United States vary widely in their concentrations of numerous components. Those proposing to reformulate gasoline suggest that vehicle emissions may be reduced by changing the concentrations of certain gasoline com- ponents. Given the variations in gasoline composition, any change would be relative to an overall industry average. A brief discussion of the com- ponents being discussed as candidates for change in reformulated gaso- line is given below. Aromatics A class of high-octane hydrocarbons that currently constitutes about 35 percent of gasoline. This percentage has increased in recent years, as refiners have blended more aromatics into gasoline to replace the octane lost as a result of lead reduction. The chief aromatics in gasoline are benzene, toluene, and xylene. In addition to concerns about the toxicity of benzene, some aromatics are highly reactive chemically, making it likely that they are active in ozone formation. Benzene A member of the aromatics family that currently constitutes about 1.5 percent of gasoline. EPA has identified benzene as a carcinogen and has regulated exposure to it in the workplace. EPA has not yet regulated ben- zene emissions from gasoline but is currently considering doing so. Butane A light hydrocarbon added to gasoline to raise octane and increase vol- ume. Since it has high vapor pressure, adding or removing butane is the common method by which refiners raise or lower the vapor pressure of gasoline. Removal of butane was made necessary by imposition of gaso- line volatility limits set by EPA. Page 17 GAO/RCEDQO-163 Reformulated Gasoline L Appendix III Glossary of Gasoline Components Ethanol An alcohol produced from starch or sugar crops such as corn or sugar cane. Ethanol may be used as a fuel by itself, as is done in Brazil, or blended into gasoline to boost octane and increase volume. In the United States, ethanol is usually blended in a lo-percent mixture with gasoline to form gasohol. As an oxygenate, ethanol supplies oxygen to gasoline, which reduces carbon monoxide emissions from vehicles. However, eth- anol cannot be transported in the same pipelines with gasoline, so it must be blended into gasoline outside the refinery. In addition, ethanol increases the volatility of gasoline. These drawbacks can be overcome if ethanol is converted to its ether form, ETBE. Ethyl Tertiary Butyl Ether An ether compound made using ethanol. Although not yet produced in commercial quantities, it could be used as a gasoline additive to boost octane and provide oxygen. Since it has low vapor pressure, it could also be useful in helping to comply with volatility controls on gasoline. Unlike alcohols, ETBE could be produced and blended with gasoline at the refinery and shipped in gasoline pipelines. Hydrocarbons With High Many of the hydrocarbons in gasoline with high boiling points are very Boiling Points reactive chemically and are considered to be likely contributors to ozone formation. These hydrocarbons are the last to boil away as gasoline is subjected to high temperatures. The group of hydrocarbons being tested by the auto/oil joint research project is referred to as “the T!,,,Boiling Point group.” This means the group consists of the last 10 percent of hydrocarbons that remain after 90 percent of the gasoline has already vaporized. Methanol An alcohol made primarily from natural gas. Methanol may be used as a pure (or neat) fuel, in which case it is called Ml00 (100 percent metha- nol). However, since Ml00 vehicles are hard to start and are still under development, some gasoline is usually added to methanol to form MS5 (85 percent methanol and 15 percent gasoline) for M86 vehicles. Metha- nol itself is not currently used as a gasoline additive for several reasons, including its adverse effects on fuel system components in conventional vehicles. However, when converted to its ether form, MTBE, it is widely used as a gasoline additive. Page 18 GAO/RCEDSO-163 Reformulated Gasoline , . Appendix III Glossary of Gasoline Components Methyl Tertiary Butyl An ether compound made using methanol. MTBE has been widely Ether accepted by refiners as a gasoline additive, and its use has been steadily increasing over the past several years. As an oxygenate, it supplies oxy- gen to help reduce carbon monoxide emissions. MTBE boosts octane, while having little effect on vapor pressure. Unlike alcohols, MTBE can be produced and blended with gasoline at the refinery and shipped in gaso- line pipelines. Olefins A group of highly reactive and volatile hydrocarbons that currently con- stitute about 12 percent of gasoline. Olefins are considered to be likely contributors to ozone formation. Oxygenate This term applies to any gasoline additive containing oxygen. Oxygen in gasoline tends to reduce carbon monoxide emissions from vehicles. Therefore, four states (Arizona, Colorado, Nevada, and New Mexico) have mandated the use of oxygenated gasoline during winter months in areas with high carbon monoxide emissions levels. Oxygenates include the alcohols, such as ethanol and methanol, and the ethers, such as MTBE and ETBE. Each of these compounds also boosts the octane of gasoline, while their effects on volatility vary. Sulfur A contaminant found to varying degrees in crude oil. Most of it is removed during refinery processing so that the amount remaining in gasoline averages only about 300 parts per million. However, industry researchers believe that even this amount may adversely affect the durability of catalyst material in catalytic converters, Page 19 GAO/RCED-90-163 Reformulated Gasoline I Appendix IV Scopeand Methodology In performing this assignment, we reviewed pertinent legislation, publi- cations, testimony, technical literature, and reports by various interest groups. However, because the concept of reformulated gasoline is rela- tively new, the existing documentation was limited. Therefore, we relied heavily on information obtained through discussions with officials from the three domestic automobile manufacturers, seven petroleum compa- nies, four trade associations, and a research firm. We also discussed the concept of reformulated gasoline with officials from DOE and EPA and the California Air Resources Board. To obtain views on reformulated gaso- line from a non-petroleum perspective, we interviewed an official from a major methanol-producing company. The companies, associations, and government agencies we contacted are shown below. Companies, Associations, and Government Agencies Contacted Automobile Chrysler Manufacturers Motors Corporation Ford Motor Company General Motors Corporation Petroleum Companies Amoco Corporation Ashland Oil, Inc. Atlantic Richfield Company (ARCO) Conoco, Inc. Diamond Shamrock, Inc. Mobil Oil Corporation Sun Refining and Marketing Company Trade Associations American Independent Refiners Association American Petroleum Institute National Petroleum Refiners Association Society of Independent Gasoline Marketers of America Page 20 GAO/RCED-90-163 Reformulated Gasoline Appendix IV Scope and Methodology Researchand Technology Talbert Fuel Systems, Inc. Company Methanol Company Hoechst Celanese Corporation Government Agencies California Air Resources Roard US. Department of Energy 1723.Environmental Protection Agency Page 21 GAO/RCED-90-163 Reformulated Gasoline Appendix V Major Contributors to This Report Judy A. England-Joseph, Associate Director Resources, James A, Fowler, Assistant Director Community, and Barry R. Kime, Assignment Manager Economic Development Division, Washington, DC. Anthony A. Krukowski, Evaluator-in-Charge Detroit Regional Office Michael R. Martin, Site Senior Rebecca L. Thompson, Evaluator (aonnln) Page 22 GAO/RCED-90.153 Refommlated Gasoline 3 =a
Gasoline Marketing: Uncertainties Surround Reformulated Gasoline as a Motor Fuel
Published by the Government Accountability Office on 1990-06-14.
Below is a raw (and likely hideous) rendition of the original report. (PDF)