MEMORANDUM

Subject: Projection of potential E15 consumption and its impacts on total ethanol

consumption

From: David Korotney , U.S. EPA, Office of Transportation and Air Quality

To: EPA Air Docket EPA

- HQ

- OAR

- 20 15

- 0111

In the context of estimating the total volume of ethanol that can be produced and consumed in 2014 for purposes of setting the applicable volume requirement for total renewable fuel under the RFS program, we have estimated th e contribution that consumption of E15 can

ma ke to total ethanol.

A ccording to the national E15 compliance survey there were 63 stations that operate d blender pumps selling E15 as of February, 2014

. This number is expected to grow throughout

2014. For instance, MAPCO has indicated that it intends to offer E15 at 100 of its stations, though it is unclear how many will be installed in 2014. 1 For the purposes of this analysis we have assumed that 100 stations will offer E15 in 2014. This number could, for instance,

represen t a rampup of about 10 new E15 stations per month between March and December 2014. While there would be a total of 163 E15 stations by December 2014, some stations would only be operational for part of the year. The average number of stations in operatio n for all of 2014

would be about 100 in this scenario.

The number of all retail stations selling fuel in the U.S. has been in steady decline over the last decade. Using station counts from the National Petroleum News, this trend can be projected into th e future. On this basis, the projected number of service stations in 2014 will be 153,488.

1 http://www.businesswire.com/news/home/20140115005879/en/MAPCO

- offer

- E15

- Customers

2014#.UuKJJ_tOm00Table 1

Total Number of Retail Stations (Source: National Petroleum News " 2012 Market Facts" )

2000 175,941

2001 172,169

2002 170,018

2003 167,571

2004 167,346

2005 168,987

2006 167,476

2007 164,292

2008 161,068

2009 162,350

2010 159,006

2011 157,393

2012 156,065

Figure 1

Least

- Squares Regression for Total Number of Retail Stations

Therefore, the fraction of retail stations selling E15 in 2014 is projected to be 0.065%.

100 E15 stations / 153,488 retail stations = 0.065%

A simplified estimate of the volume of E15 that might be sold in 2014 would use the per

station sales rate for E10 as a substitute. Given that in 2014 about 134 bill gal of gas oline is expected to be sold through 153,488 stations, the average station is projected to sell about 870,000 gallons of E10 in 2014. If stations offering E15 sell it at this same rate, a total of 87 millgal of E15 could be sold in 2014 (870,000 × 100 st ations). However, an estimate of 87 mill gal

of E15 for 2014 is likely to be an overprojection for the following reasons:

• Stations offering E15 are unlikely to do so to the exclusion of E10. That is, it would be unreasonable to expect that a retail station selling E15 would not also sell E10. The purpose of blender pumps is to provide customers with a choice, and even those whose vehicles can use E15 would not be expected to use E15 100% of the time. As a result, E15 sales at those stations offerin g E15 are likely to be less than 870,000 gal per year per station.

• While all 2001 and newer model year vehicles are legally permitted to use E15, most of them were not designed by manufacturers with the expectation that they might operate on E15. Manuf

acturers have only recently begun adding E15 to the list of fuels covered by their vehicle warranties. Absent the explicit inclusion of E15 to the warranty, vehicle owners may be reluctant to use E15 even if legally permitted to do

so.

Since only mode l years 2012

- 2014 have been explicitly warranted to use E15 (and in fact not all models within these model years) , it may be that vehicles manufactured prior to 2012 do not use E15 at all. Model years 2012

- 2014 comprise about 22% of

all the vehicle s i n the 2014 in

- use fleet.

While we are not able at this time to quantitatively estimate the impact of these factors on E15 sales for 2014, it seems reasonable to assume that together they would likely result in more than

a 50% reduction in the maximum of 87 mill gal that we estimated above. For the purposes of estimating potential E15 sales in 2014, then, a projection of 40 mill gal appears to be reasonable.