Ethanol:

Environmental Working Group's Karpf says auto warranties won't cover E15

What impact could a higher ethanol blend in gasoline have on vehicles? During today's OnPoint, Sheila Karpf, legislative analyst at the Environmental Working Group, discusses new research on vehicle warranties for cars using E15. Karpf says many manufacturers will void vehicle warranties if engines are damaged due to E15 use. She also explains how the government and automakers can better educate consumers on ethanol blends.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Sheila Karpf, legislative analyst at the Environmental Working Group. Sheila, thanks for coming on the show.

Sheila Karpf: Thanks for having me, Monica.

Monica Trauzzi: Sheila, you've recently done some research on the impacts of ethanol on vehicles, specifically you called around to major automakers and found that their warranties would not cover engine problems that occurred as a result of using E15. Tell us a bit about who you called and what exactly you found out.

Sheila Karpf: Exactly, well, as you mentioned, we did call 13 headquarters of, you know, automakers, not only U.S. automakers, but also foreign automakers and we just simply asked them if you were to use E15, 15 percent ethanol in a vehicle that was manufactured after 2001, you know, would it void your warranty if there were problems with E15? And four of them did say yes, that there would be -- that your warranty would be voided if E15 was tied back to the problem with the engine. Other automakers said, you know, contact your local dealer or use a higher octane fuel blend or some of them hadn't even heard of E15 before, so there were a lot of questions. A lot of them had to check with subject matter experts. So I think the whole point here is that there's a lot of consumer confusion, even within the automakers, within the government about what to do with E15 and how it's going to affect consumers and their vehicles.

Monica Trauzzi: What do you think this says about how automakers perceive ethanol or does this tell you anything about how they perceive ethanol?

Sheila Karpf: Right, well, you know, the Auto Alliance and these other groups have actually sued EPA over their decision on E15, not only for the earlier model vehicles, the 2001 to 2006 vehicles, but also model year 2007 and later. So it shows that there's a lot of questions yet to be answered by not only the Environmental Protection Agency, but also to be worked out within these companies and then educating consumers as well.

Monica Trauzzi: Yeah, I mean it's a fairly recent decision by EPA. So could it just be that the automakers haven't had the time to establish the warranty rules at this point?

Sheila Karpf: Exactly. I mean as EPA comes out with their mis-fueling rule, you know, soon, they've said it could be any day now, you know, they'll make adjustments. They may have to change their owner's manuals to accommodate E15 and the effect that would have on vehicles. And EPA didn't approve the waiver for model year vehicles 2001 and earlier. So the older vehicles still aren't able to use E15 and the problems at the pump are going to be numerous when consumers go and try to figure out what this label, which EPA is proposing, might say. Some people may not even read the label. You know, there's a lot of issues with that.

Monica Trauzzi: So taking it one step further, more broadly, do you have an issue with corn ethanol in general and the use of ethanol to displace gasoline?

Sheila Karpf: Exactly. You know, Environmental Working Group's stance on ethanol policy has been that it's not only increasing food prices and having an effect on conversion of environmentally sensitive land, which then has an effect on soil and water, which we're very concerned about, but also it hasn't really reduced our dependence on foreign oil and it hasn't had a dent in our consumption of gasoline. So with all that together, we're not in support of the U.S. corn ethanol policy.

Monica Trauzzi: So is this a roundabout way saying that the industry should no longer receive subsidies? It's a big topic right now on the Hill.

Sheila Karpf: Exactly, I mean we've been advocating for a long time to get rid of the VEETC, the ethanol tax credit. You know, it's set to expire at the end of this year and there's already been bills introduced, as you know, to eliminate the VEETC, but we're definitely in support of that. There's been 90 other groups that have signed on to a letter in support of eliminating this ethanol tax credit this year, so we have a lot of support behind us. On the other side there's only a handful of groups, 4 to 5 maybe, that are in support of this. So we're hoping it will be eliminated this year and can have somewhat of an influence on lower corn prices and food prices.

Monica Trauzzi: What's happening internationally that points to the idea that this is a much larger problem on the use of ethanol in vehicles?

Sheila Karpf: What specifically?

Monica Trauzzi: I think in Germany there were --

Sheila Karpf: Right.

Monica Trauzzi: Some issues with the 10 percent.

Sheila Karpf: Exactly, yes, Germany has had major issues with their introduction of the E10, 10 percent ethanol, because consumers just simply do not want to buy it for several reasons, effects on engines. You know, there's corrosion problems with ethanol, also the lower mileage per gallon that ethanol receives as compared with regular gasoline. So E85, for instance, gets about 27 percent less gas mileage than regular gasoline. So even though it may be cheaper at the pump, when you actually work out the numbers, E85 has been more expensive in every year that the department of energy has kept data on this issue.

Monica Trauzzi: Do you support the development of second-generation biofuels like cellulosic ethanol and the use of those at the pump in these blends?

Sheila Karpf: Potentially. I mean we're still really concerned about second-generation ethanol feedstocks effect on land use and water and soil, like I mentioned before. So if those feedstocks were to have a positive effect on our environment, then that would be something that we would support. But right now, you know, 95 percent or more of the ethanol market here in the U.S. is consumed by corn ethanol, which is environmentally detrimental. So getting over that bridge possibly into something that's better for the environment, we would be in support of that. But we'd have to actually make sure that it's going to be better for the environment before we start incentivizing these new forms of ethanol and before it has a bad effect on the environment.

Monica Trauzzi: So what's your recommendation of how this should be handled moving forward on E15? Is it just about educating consumers or does something need to be done legislatively?

Sheila Karpf: Right, well, I mean there was the amendment to HR1 earlier this year that would prohibit the EPA from implementing their E15 rule and we were in support of that, you know, to give more time for everyone to come together to the table and say what are we going to do about the warranty problems, the liability issues. So we were definitely in support of that. You know, going forward there's going to be a lot of issues to work out, so we'd like to be at the table in helping consumers figure out those issues.

Monica Trauzzi: OK, we'll end it right there. Thank you for coming on the show.

Sheila Karpf: Thank you, Monica.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]

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