Chicago’s Proposed E15 Mandate is Bad News for Consumers

Five members of Chicago’s City Council have proposed an ordinance to require all self-serve gas stations within the city to offer mid-grade E15 at their pumps. This mandate will harm the small business owners that operate many of these gas stations and it will likely lead to more damaged engines as consumers use E15 in engines that were not specifically designed for it. Hopefully, the Chicago City Council will reverse course.

E15 is a blend of gasoline with up to 15 volume percent ethanol. According to the Environmental Protection Agency (EPA), E15 is sufficient for use in “all model year 2001 and newer light-duty vehicles”. But others disagree and explain that using E15 in engines not specifically designed for it could have potentially disastrous effects because the engines are not designed to hold up against ethanol’s harsh corrosive properties.

With this understanding, automotive manufacturers have announced that they will not cover fuel-related claims on vehicles that have used E15 as a fuel source and, according to testimony from AAA’s President and CEO (p. 2) Robert Darbelnet before the U.S. House Committee on Energy and Commerce, only 5 percent of vehicles in the U.S. have warranties that approve the use of the fuel. In the same testimony, Darbelnet noted that in 2012, a short time ago, “95 percent of consumers had never heard of the fuel,” much less understand the impacts it could have on the health of their car engines. Many consumer advocate groups worry that individuals will inadvertently fill their tanks with E15 and end up paying for the repairs on their own.

The Chicago ordinance will require stations with annual sales in excess of 500,000 gallons to offer the fuel, along with new equipment to dispense it. To put this in perspective, “the average convenience store in 2011 sold roughly 128,000 gallons of motor fuels per month” according to The Association for Convenience & Fuel Retailing (p.12). That’s over 1.5 million gallons a year on average. The only stations exempt from the proposed requirement are those that have underground storage tanks that are incompatible with blended fuels.

This leaves stations with incompatible equipment responsible for installing the upgrades necessary to dispense E15. A report by the Petroleum Equipment Institute, commissioned by the U.S. Department of Agriculture finds that these additions have an average cost of $40,874. This expense could have a big impact on station owners. A study by Sageworks, a financial analysis firm, determined that the owners of privately held gas stations pocket less than three cents of every dollar spent by consumers and as a result, “any unexpected expense could be crippling” to the business.

There was a time when consumers could safely assume that any fuel at a gas station was safe to use in their engines. If this ordinance passes, this will no longer be the case. Chicago City Council’s plan to require E15 dispensing equipment and fuel at self-serve stations is a costly move with no upside for gasoline buyers. Station owners will be required to shell out thousands of dollars to retrofit their equipment so that it can pump a fuel that is restricted for use in a small number of vehicles, is distrusted by automotive manufacturers and insurance companies, and is less efficient (3-4 percent fewer mpg) than traditional gasoline.

IER Summer Associate Justin Bohlen authored this post.