A new U.S. Environmental Protection Agency mandate under the Renewable Fuel Standard will require a minimum four-gallon purchase of the E10 ethanol-gasoline blend at service station pumps selling both E10 and E15 fuel from the same hose. E15 is an 85% gasoline, 15% ethanol fuel blend, and has only been approved for use in vehicles manufactured after 2001.

Roughly two-thirds of gasoline pumps in U.S. gas stations use one hose to dispense different blends of fuel. This has lead to concerns that residual E15 could end up in the engines of vehicles not designed to run on the higher blend, such as old cars and the kinds of smaller engines found in boats, lawnmowers, or motorcycles. The 4-gallon minimum mandate is intended minimize this risk by diluting the residual 15% ethanol blend left in the hose from the previous customer. For example, without the EPA rule, a motorcyclists fueling up a small tank with E10 after an E15 customer could pump enough residual E15 fuel to violate an engine warranty and possibly harm the engine itself.

Oil trade groups and some auto manufacturers voiced opposition to the rule, saying it violates consumer choice and could damage vehicles – even those manufactured after 2001, despite the EPA’s assurance that those vehicles could safely use E15. Republican Congressmen are also rallying against the EPA mandate, Rep. Jim Sensenbrenner (R-Wis.) said “This unprecedented, ill-conceived mandate is an example of the worst kind of government interference. It both squashes the free market and will inevitably fail to help those it claims to protect.” Rep. Sensenbrenner adds, “Other Americans will try unsuccessfully to fill up a one or two gallon fuel can with E10 to take it home and use in their outboard boat engine or lawnmower…. what will happen when they take the fuel home, tainted with E15, and overheat their snow blower?” However, one arguing point for opponents of the Renewable Fuel Standard – the lack of auto industry support – is less compelling after Ford and GM announced that new model vehicles will run on E15 fuel without the risk of engine damage.

What are the overall costs and benefits of this mandate? What lessons can industry and the EPA learn from the E15 mandate and the Renewable Fuel Standard?