Gasoline Markets:

Special Gasoline Blends Reduce Emissions and Improve Air Quality, but Complicate Supply and Contribute to Higher Prices

GAO-05-421: Published: Jun 17, 2005. Publicly Released: Jul 6, 2005.

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The Clean Air Act, as amended, requires some areas with especially poor air quality to use a "special gasoline blend" designed to reduce emissions of volatile organic compounds (VOC) and nitrogen oxides (NOx) and requiring the use of an oxygenate such as ethanol. In less severely polluted areas, the Act allows states, with EPA approval, to require the use of other special blends as part of their effort to meet air quality standards. GAO agreed to answer the following: (1) To what extent are special gasoline blends used in the United States and how, if at all, is this use expected to change in the future? (2) What effect has the use of these blends had on reducing vehicle emissions and improving overall air quality? (3) What is the effect of these blends on the gasoline supply? (4) How do these blends affect gasoline prices?

Although there is no consensus on the total number of gasoline blends used in the United States, GAO found 11 distinct special blends in use during the summer of 2004. Further, when different octane grades and other factors are considered, there were at least 45 different kinds of gasoline produced in the United States during all of 2004. The 11 special blends GAO found are often used in isolated pockets in metropolitan areas, while surrounding areas use conventional gasoline. The use of special blends may expand because a new federal standard for ozone may induce more states to apply to use them. To date, the Environmental Protection Agency (EPA) has generally approved such applications and does not have authority to deny an application to use a specific special blend as long as that blend meets criteria established in the Clean Air Act. EPA staff told us that there had been recent congressional debate regarding EPA's authority with regard to approving special gasoline blends but that the bills had not passed. EPA models show that use of special gasoline blends reduces vehicle emissions by varying degrees. California's special blend reduces emissions the most--VOCs by 25-29 percent, NOx by 6 percent compared with conventional gasoline, while also reducing emissions of toxic chemicals. In contrast, the most common special gasoline blend (used largely in the Gulf Coast region) reduces VOCs by 12-16 percent and NOx by less than 1 percent compared with conventional gasoline. The extent of reductions remains uncertain, because they rely, at least in part, on data regarding how special blends affect emissions from older vehicles, and these estimates have not been comprehensively validated for newer vehicles and emissions controls. Regarding air quality, EPA and others have concluded that improvements are, in part, attributable to the use of special blends. The proliferation of special gasoline blends has put stress on the gasoline supply system and raised costs, affecting operations at refineries, pipelines, and storage terminals. Once produced, different blends must be kept separate throughout shipping and delivery, reducing the capacity of pipelines and storage terminal facilities, which were originally designed to handle fewer products. This reduces efficiency and raises costs. In the past, local supply disruptions could be addressed quickly by bringing fuel from nearby locations; now however, because the use of these fuels are isolated, additional supplies of special blends may be hundreds of miles away. GAO evaluated pretax wholesale gasoline price data for 100 cities and generally observed that the highest prices tended to be found in cities that use a special gasoline blend that is not widely available in the region, or that is significantly more costly to make than other blends. There is general consensus that increased complexity, and higher costs associated with supplying special blends, contribute to higher gasoline prices either because of more frequent or severe supply disruptions or because higher costs are likely passed on at least in part to consumers.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To provide a better understanding of the emissions impacts of using special gasoline blends and these blends' impacts on the gasoline supply infrastructure, the EPA Administrator should direct the agency to work with states, the Department of Energy, and other stakeholders to develop a plan to balance the environmental benefits of using special gasoline blends with the impacts on gasoline supply infrastructure and prices, and report the results of this effort to Congress.

    Agency Affected: Environmental Protection Agency

    Status: Closed - Implemented

    Comments: EPA has addressed this recommendation through various actions including the Boutique Fuels Task Force Report Process (report issued in June 2006) and in developing and submitting the Boutique Fuels Report to Congress (issued in December 2006) required by EPAct Section 1541(c). In support of developing the Boutique Fuels Task Force Report, states and federal agencies obtained the input of industry and other stakeholders to identify opportunities and options for effectively balancing the environmental benefits of special gasoline blends with the impact boutique fuels have on the U.S. fuels market. Further, the work conducted and results communicated in this process were further evaluated and affirmed in the Section 1541 DOE / EPA Boutique Fuels Report to Congress.

    Recommendation: To provide a better understanding of the emissions impacts of using special gasoline blends and these blends' impacts on the gasoline supply infrastructure, the EPA Administrator should direct the agency to use this updated information to revise the emissions models that states use to estimate the emissions and air quality benefits of these fuels and provide this information to Congress.

    Agency Affected: Environmental Protection Agency

    Status: Closed - Implemented

    Comments: EPA implemented this recommendation with the publication of its report "EPACT Section 1541 (C): Boutique Fuels Report to Congress," published December 2006. In the work that supports this report, EPA addressed our recommendation to revise emissions models used to estimate emissions of fuels and report to Congress. Specifically, In this report, EPA discusses DOE's and EPA's joint effort to perform a fuel harmonization study, which will provide "...an overview of the status of state boutique fuel programs."

    Recommendation: To provide a better understanding of the emissions impacts of using special gasoline blends and these blends' impacts on the gasoline supply infrastructure, the EPA Administrator should direct the agency to work with states and other stakeholders to comprehensively analyze how various gasoline blends affect the emissions of vehicles that comprise today's fleet, including how overall emissions are affected by the use of ethanol and other oxygenates.

    Agency Affected: Environmental Protection Agency

    Status: Closed - Implemented

    Comments: EPA implemented this recommendation with the publication of its report "EPACT Section 1541 (C): Boutique Fuels Report to Congress," published December 2006. In the work that supports this report, EPA addressed our recommendation to comprehensively analyze gasoline markets and how various blends affect emissions. Specifically, EPA reported on the results of a study of "...the impact of state fuel programs...on air quality, the number of fuel blends, fuel availability, and on fuel costs" (page 1, paragraph 1). This report also covered the effects of increasing use of ethanol and other oxygenates on emissions (page 15 and 16).

    Recommendation: To provide a better understanding of the emissions impacts of using special gasoline blends and these blends' impacts on the gasoline supply infrastructure, the EPA Administrator should direct the agency to work with the states, the Department of Energy, and any other appropriate federal agencies to identify what statutory or other changes are needed to achieve this balance and report these findings to Congress and request that Congress provide these authorities to the appropriate federal agency or agencies.

    Agency Affected: Environmental Protection Agency

    Status: Closed - Implemented

    Comments: EPA addressed this recommendation by consulting with stakeholders in May 2006 which resulted in a June 2006 report which identified a broad assessment of actions, next steps and recommendations to simplify the U.S. fuel system, increase fuel supply, encourage cooperation, among states and identify legislative changes that may impact fuel supply. In addition, in conjunction with DOE, EPA plans to submit to Congress their Harmonization Study as required in EPACT Section 1509, however, because this is a much more detailed report, it will require the results of many highly complex efforts prior to its release. Many of the efforts that will feed into the 1509 report are currently underway, including the emissions testing on new emissions technologies, an advanced notice of proposed rulemaking on greenhouse gases regarding vehicle and fuel controls, identification of legislative changes and new authorities needed, and a national biofuel action plan.

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