Gasohol: Federal Agencies' Use of Gasohol Limited by High Prices and
Other Factors (Letter Report, 12/13/94, GAO/RCED-95-41).

The total amount of gasohol used by the federal government remains
unknown because agencies do not keep information on purchases by
individual drivers, which account for about 54 percent of all motor fuel
use.  The remaining motor fuel is bought in bulk, and the percentage
represented by gasohol has not increased significantly since 1981.  GAO
found that gasohol consumption by the federal fleet was 269 million
gallons in fiscal year 1993.  This amount would represent the upper
limit of potential gasohol consumption if all vehicles used by federal
agencies were refueled with gasohol during that year.  If, instead,
federal agencies bought gasohol at the same rate as the general
public--7.1 percent of gasoline consumption--they would potentially use
about 19 million gallons.  Although federal agencies have tried to
encourage the use of gasohol since 1991, several barriers still exist
that limit purchases.  The main impediment is that the price of gasohol
is not competitive with the price of gasoline.  Gasohol is also
sometimes unavailable because of the small number of ethanol and gasohol
suppliers in some locations.  In addition, environmental regulations
mandating the use of clean-burning fuels to reduce emissions may limit
the use of gasohol in some areas or affect its supply and price in
others.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-95-41
     TITLE:  Gasohol: Federal Agencies' Use of Gasohol Limited by High 
             Prices and Other Factors
      DATE:  12/13/94
   SUBJECT:  Energy consumption
             Alcohol fuels
             Petroleum industry
             Federal agencies
             Federal procurement
             Motor vehicles
             Petroleum prices
             Alternative energy sources
             Gasoline
             Fuel sales

             
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Cover
================================================================ COVER


Report to the Honorable Byron L.  Dorgan, U.S.  Senate

December 1994

ADVANCED TECHNOLOGY PROGRAM -
FEDERAL AGENCIES' USE OF GASOHOL
LIMITED BY HIGH PRICES AND OTHER
FACTORS

GAO/RCED-95-41

Federal Agencies' Limited Use of Gasohol


Abbreviations
=============================================================== ABBREV

  DFSC - Defense Fuel Supply Center
  DOD - Department of Defense
  DOE - Department of Energy
  EPA - Environmental Protection Agency
  GAO - General Accounting Office
  GSA - General Services Administration
  USDA - Department of Agriculture

Letter
=============================================================== LETTER


B-258825

letter date goes here


B-258825

The Honorable Byron L.  Dorgan United States Senate

Dear Senator Dorgan: 

To help reduce the nation's dependence on imported oil, the Congress,
in December 1991, enacted the National Defense Authorization Act for
Fiscal Years 1992 and 1993, which includes a provision directing
federal agencies to purchase gasohol (gasoline containing 10 percent
ethanol, which is primarily made from corn) when it is available at a
price equal to or lower than gasoline.  Concerned that gasohol
purchases may have increased only slightly since this provision was
enacted, you requested that we follow up on a 1992 GAO review of
federal agencies' use of gasohol.\1

Specifically, you requested that we provide you with information on
(1) federal agencies' gasohol use before and after the act and their
potential consumption of gasohol; (2) steps taken by federal
agencies, particularly the Department of Agriculture, to encourage
the use of gasohol since 1991; and (3) impediments to federal
agencies' use of gasohol. 

RESULTS IN BRIEF

The total amount of gasohol used by the federal government is unknown
because agencies do not maintain data on individual drivers'
purchases, which account for about 54 percent of all motor fuel use. 
The remaining motor fuels are purchased in bulk, and the percentage
constituted by gasohol has not increased significantly since 1991. 
With respect to potential federal gasohol consumption, we found that
gasoline consumption in the federal fleet was 269 million gallons in
fiscal year 1993.  This amount would represent the upper bound of
potential gasohol consumption if all vehicles used by federal
agencies were refueled with gasohol during that year.  If, instead,
federal agencies purchased gasohol at the same rate as the general
public--7.1 percent of gasoline consumption--they would potentially
use 19.1 million gallons. 

Since 1991, federal agencies have taken a number of steps to
encourage the use of gasohol.  For example, the Department of
Agriculture issued a policy directive requiring the use of gasohol,
depending on its availability and price, and the Department of
Defense (DOD) eliminated or tightened federal agencies' exemptions to
the use of gasohol that had contributed to limited purchases in the
past. 

A number of impediments still exist, however, that limit purchases of
gasohol by the federal government.  The major factor is that the
price of gasohol is often not competitive with the price of gasoline. 
Gasohol is also sometimes not available because of the small number
of ethanol and gasohol suppliers in certain locations.  In addition,
environmental regulations that require the use of clean-burning fuels
to reduce emissions may restrict the use of gasohol in some locations
or affect its supply and price in others. 

BACKGROUND

Since the early 1980s, the federal government has encouraged the use
of gasohol as a substitute for gasoline to reduce U.S.  dependence on
imported oil.  Executive Order 12261, dated January 5, 1981, requires
federal agencies procuring unleaded gasoline to give preference to
gasohol whenever feasible.  In 1991, the Congress passed the National
Defense Authorization Act, which, among other things, directs DOD to
procure alcohol-gasoline blends containing at least 10- percent
domestically produced alcohol in any case in which the price of the
blend is the same as or lower than the price of unleaded gasoline. 
Also, Executive Order 12759 of April 17, 1991, requires federal
agencies operating 300 or more commercially designed motor vehicles
to reduce their consumption of petroleum products by 10 percent.  One
approach to meeting this mandate is through federal agencies' use of
gasohol. 

Federal agencies obtain gasohol primarily through two methods. 
First, DOD purchases motor fuel in bulk through the Defense Fuel
Supply Center (DFSC) for both defense activities and for federal
civilian agencies.\2 Under this bulk fuels program, DFSC asks the
government agencies for their regional fuel requirements for a 2-year
contract period and then issues regional solicitations for contracts
with fuel suppliers to deliver a variety of fuels, including gasoline
and gasohol, to federal installations throughout the country. 
Second, individual federal drivers can purchase fuel at gasoline
service stations under the federal charge card program.  DFSC is
responsible for contracting with service station owners to
participate in the charge card program.  The General Services
Administration (GSA) is responsible for issuing the charge cards to
users in federal agencies. 

Our 1992 review of federal agencies' use of gasohol disclosed that
bulk purchases of gasohol had been limited but that DFSC had taken
steps to eliminate or tighten federal agencies' exemptions from using
gasohol.\3 In addition, we reported that DFSC had encouraged gasohol
providers to accept the federal charge card. 

USE OF GASOHOL BEFORE AND AFTER 1991

The federal government annually purchased an average of about 1.6
million gallons of bulk gasohol before the Defense Authorization Act
and about 2 million gallons after the act.\4 The percentage of fuel
constituted by bulk gasohol purchases increased slightly by
six-tenths of a percentage point after the act, as table 1 shows. 
(App.  I lists the total contract awards for bulk purchases of
gasohol and gasoline by each of the DFSC's eight regions.  App.  II
presents a map that shows the DFSC's regional coverage.)



                Table 1

   Average Annual Bulk Fuel Purchases


--------------------
\1 GAO provided testimony before the Chairman, Subcommittee on
Investigations, House Committee on Armed Services, entitled Federal
Agencies' Use of Gasohol (GAO/T-RCED-92-73, June 24, 1992) on the
results of this review. 

\2 Individual federal agencies occasionally purchase motor fuels
directly from local suppliers if the federal activity uses less than
10,000 gallons of fuel per year. 

\3 Federal agencies may obtain an exemption from using gasohol
because of potential problems associated with gasohol storage and
use.  A more detailed discussion of exemptions appears later in this
report. 

\4 We calculated average annual gasohol usage on the basis of
contract awards generally made 4 years before and 4 years after the
Defense Authorization Act. 

