Dear Chairman Hunter:

On behalf of the Texas ethanol industry, we are writing to voice our opposition to House Bill 3835, and to urge the House Committee on Calendars to vote against adding the bill to the calendar for House consideration. The bill would effectively prohibit state agencies from purchasing or leasing vehicles that use ethanol or ethanol/gasoline blends of 85% (typically referred to as “E85”) or greater. As detailed below, the stated justification for HB3835 completely lacks factual support and the proposal is based on utterly false premises.

The Bill Analysis accompanying HB3835 suggests that “[i]nterested parties note…that ethanol has been shown to be a less efficient alternative fuel and has been proven to cause internal damage to a vehicle” and that the purpose of the bill is “to address this issue.” Notwithstanding the fact that the purported “interested parties” are unidentified, the Bill Analysis provides no evidentiary support whatsoever for the claims that ethanol is “less efficient” and “cause[s] internal damage to a vehicle.” We are unaware of any credible research or analysis that would support either of those assertions. In fact, there is ample evidence showing that ethanol and E851 are more efficient than petroleum gasoline on the basis of cost per mile and greenhouse gas (GHG) emissions, and unquestionably more efficient than other alternative fuels on the basis of energy density, cost per mile, and GHG emissions.

Ethanol and Efficiency

On the subject of ethanol’s energy efficiency, the latest official estimate of grain-based ethanol’s energy return on investment (sometimes called “energy balance”) finds that one unit of energy invested in the corn ethanol production process yields 2.3 units of usable energy in the form of fuel ethanol.2 Meanwhile, U.S. Department of Energy (DOE) research shows that one unit of fossil energy invested in making gasoline yields just 0.81 units of usable energy in the form of gasoline.

While it is true that a gallon of E85 typically has 20-25% less energy content than a gallon of ethanol-free gasoline, E85 prices are generally discounted to offset the disparity in energy density. For example, E85 was priced 28% lower than ethanol-free gasoline on average in April 2015 according to E85prices.com.4 This means that despite its lower energy content, the cost per mile using E85 was less than the cost per mile on ethanol-free gasoline. Further, research by automakers and DOE laboratories shows that gasoline/ethanol blends containing 20-40% ethanol can achieve equivalent fuel economy with gasoline when used in optimized engine platforms.

It should also be noted that E85 has a higher energy density than many other alternative fuels. Liquefied natural gas (LNG), for instance, contains 71,100 British Thermal Units (BTUs) per gallon, compared to the 88,284 BTU in a typical gallon of E85.6 Similarly, E85 is more energy dense than liquefied petroleum gas (LPG), which contains 83,200 BTU per gallon.

Moreover, in terms of lifecycle GHG reductions, the DOE’s GREET model finds that natural gas as a vehicle fuel reduces GHG emissions by just 6-11% compared to petroleum gasoline, while grain ethanol reduces GHG emissions by 34% on average compared to gasoline.7 Thus, grain-based ethanol’s GHG reduction benefit is roughly three to six times greater than that of compressed natural gas (CNG) or LNG.

Ethanol and Engines/Vehicles

We also strongly dispute the claim in the Bill Analysis that ethanol somehow “cause[s] internal damage to a vehicle.” Since the early 1980s, conventional automobiles have been designed and manufactured to tolerate gasoline containing 10% ethanol. Further, all flex-fuel vehicles (FFVs), of which there are more than 17.9 million today in the United States, are explicitly approved and warrantied by their manufacturers for the use of ethanol/gasoline blends up to E85.8 According to R.L. Polk, Texas has more FFVs (2.03 million) than any other state, and FFVs represent more than 10% of the state’s light-duty vehicle population.9

Further, all non-FFV gasoline vehicles on Texas roadways (with the possible exception of “classic” and antique automobiles) today are approved and were warrantied by manufacturers to use up to 10% ethanol blends, and many newer vehicles are in fact warrantied by manufacturers for up to 15% ethanol blends.10 We are unaware of any substantiated warranty claims or documented cases of “internal damage” related to approved use of ethanol blends in FFV or non-FFV automobiles, and would challenge the sponsor and supporters of HB3835 to provide such evidence.

Cost of FFVs Versus Other AFVs

The Fiscal Note related to HB3835 states that “no significant fiscal implication to the State is anticipated” as a result of the proposal. However, this “budget neutral” result stems from the fact that a state agency is excused from the requirement to purchase alternative fuel vehicles (AFVs) if it “demonstrates that it will incur net costs by meeting the requirements.” Currently, FFVs capable of operating on E85 are the only AFV options that are cost competitive with their conventional automobile counterparts. That is, state agencies are currently able to purchase an FFV model for the same price as the corresponding non-FFV (gasoline) model.

Thus, state agencies that purchase FFVs are able to meet the requirements of Government Code, Section 2158.0013 without “incur[ring] net costs.” This will not be the case if HB3835 is enacted and state agencies are prevented from purchasing the only cost-competitive AFVs available. For example, the cost of a Ford Focus FFV is $23,170, which is the same as a conventional Ford Focus (non-FFV).11 But the cost of a Ford Focus electric vehicle is $29,170. As another example, the cost of both a conventional and FFV-capable Chevrolet Impala 3.6L LS is $27,885. Meanwhile, a Chevrolet Impala 3.6L LS bi-fuel vehicle capable of operating on CNG costs $38,210.

Under current code, state agencies are effectively exempted from the AFV purchase requirement if the only AFV options run on CNG, LNG, LPG, or electricity because those vehicles cost more than conventional gasoline/diesel and FFV models. Thus, taking away the option to purchase FFVs, as HB3835 seeks to do, means it is unlikely state agencies would purchase any AFVs at all. The implications of eliminating the AFV purchase requirement, in practice, are that the State would essentially be turning its back on a program designed to support energy diversity and domestic energy production, create local jobs, and increase state economic activity.

* * * * *

In closing, we believe Texas lawmakers should be held accountable for the legitimacy of the stated purposes and motivations behind their legislative proposals. Public policy debates should be driven by facts and objective analysis—not hyperbole and hearsay. Unfortunately, HB3835 seeks to address “issues” that don’t actually exist in reality. Ethanol and E85 are neither “less efficient” than other fuel alternatives, nor do they “cause internal damage” to vehicles. Further, the bill would take away the only cost-competitive AFV option available to state agency fleets, leaving them with no choice but to purchase conventional gasoline/diesel vehicles that do nothing to advance the goals of energy diversity and security.

In light of the facts presented herein, we urge you to vote against adding HB3835 to the calendar. Further, we would be glad to address any questions you may have regarding ethanol, E85, FFVs, or other related issues.

 

Sincerely,
Don Gales, CEO
White Energy, Inc.
Trey Stutts, Vice President
Hereford Renewable Energy, LLC;
Senior Director of Renewable Energy
Murphy USA, Inc.

Cc:

Rep. Eddie Lucio III, Vice Chairman
Rep. Roberto R. Alonzo
Rep. Byron Cook
Rep. Sarah Davis
Rep. Charlie Geren
Rep. Helen Giddings
Rep. Patricia Harless
Rep. Dan Huberty
Rep. Eric Johnson
Rep. Ken King
Rep. Lyle Larson
Rep. Four Price
Rep. Debbie Riddle
Rep. Eddie Rodriguez
Ginny Bell, Committee Clerk
Tom Willis, CEO
Conestoga Energy Partners, LLC
Bob Dinneen, CEO
Renewable Fuels Asso

May 7, 2015
The Honorable Todd Hunter
Chairman, House Committee on Calendars
Room GW.5
P.O. Box 2910
Austin, Texas 78768
Re: House Bill 3835