Motor Fuels: Issues Related to Reformulated Gasoline, Oxygenated Fuels,
and Biofuels (Letter Report, 06/27/96, GAO/RCED-96-121).

Pursuant to a congressional request, GAO provided information on the
cost-effectiveness of reformulated gasoline (RFG), focusing on: (1) the
potential for oxygenates to reduce petroleum use; and (2) ongoing
federal biofuel research.

GAO found that: (1) RFG is more cost-effective than some automotive
emission control measures; (2) the extent and nature of air pollution in
any specific area determines whether certain pollution control measures
are used individually or in combination with other control measures; (3)
about 305,000 barrels of petroleum per day are at risk for displacement
by the year 2000; (4) this displacement amounts to nearly 3.7 percent of
the estimated gasoline consumption for year 2000 and 3.6 percent for
2010; (5) the Department of Energy is focusing its efforts on reducing
the cost of growing and converting biomass feedstocks into ethanol, and
the Department of Agriculture is focusing on reducing the cost of
growing and converting agricultural feedstock into ethanol; (6) advances
in biofuels research has reduced the cost of producing ethanol from
biomass crops; (7) further cost reductions in producing corn-based
ethanol, and the subsequent demand for it, may be constrained by the
price of corn and its many uses; and (8) the demand for ethanol will
increase assuming the successful development and commercialization of
biofuels technology.

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

 REPORTNUM:  RCED-96-121
     TITLE:  Motor Fuels: Issues Related to Reformulated Gasoline, 
             Oxygenated Fuels, and Biofuels
      DATE:  06/27/96
   SUBJECT:  Alcohol fuels
             Environmental policies
             Air pollution control
             Alternative energy sources
             Pollution monitoring
             Fuel research
             Gasoline
             Motor vehicle pollution
             Petroleum engineering
             Petroleum prices
IDENTIFIER:  USDA Biofuels Research Program
             
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Cover
================================================================ COVER


Report to the Honorable
Tom Daschle, U.S.  Senate

June 1996

MOTOR FUELS - ISSUES RELATED TO
REFORMULATED GASOLINE, OXYGENATED
FUELS, AND BIOFUELS

GAO/RCED-96-121

Motor Fuels

(308888)


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

  API - American Petroleum Institute
  DOE - Department of Energy
  EIA - Energy Information Administration
  EPA - Environmental Protection Agency
  ETBE - ethyl tertiary butyl ether
  GAO - General Accounting Office
  MTBE - methyl tertiary butyl ether
  NOx - nitrogen oxide
  psi - pounds per square inch
  RFG - reformulated gasoline
  TAME - tertiary amyl methyl ether
  USDA - U.S.  Department of Agriculture
  VOC - volatile organic compound

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


B-271630

June 27, 1996

The Honorable Tom Daschle
United States Senate

Dear Senator Daschle: 

The use of reformulated gasoline is now required in those areas of
the United States with the most severe ozone air pollution.  As part
of the reformulation process, oxygenates, such as methyl tertiary
butyl ether, or ethanol, are added to gasoline to enhance combustion
and reduce the emissions that cause ground level ozone problems as
well as reduce air toxics emissions.  Oxygenates are also sometimes
added to gasoline to increase octane levels, and according to the
Department of Energy (DOE), oxygenates can also help reduce our
growing need for petroleum. 

According to DOE, biofuels--primarily ethanol developed from corn or
from biomass such as fast-growing trees or grasses--also have the
potential to reduce air pollution and the demand for petroleum.  Such
ethanol can be used as an oxygenate or, in its pure or near-pure
form, as an alternative transportation fuel. 

This report responds to your request that we summarize (1) the
results of federal and other studies on the cost-effectiveness of
using reformulated gasoline compared to other measures to control
automotive emissions and compare the price estimates used in the
studies for reformulated gasoline with more recent actual prices; (2)
the results of studies estimating the potential for oxygenates to
reduce the use of petroleum; and (3) the ongoing federal research
into biofuels, including any related past or projected cost-reduction
goals, and any increased demand estimates based on such research
goals.\1 You also requested that we summarize the results of studies
that estimate the potential for reformulated gasoline to reduce
greenhouse gas emissions compared to conventional gasoline.  (See
app.  I for information on the greenhouse gas emission
characteristics of reformulated gasoline.)


--------------------
\1 In responding to your request, we previously provided a report,
requested by Senator Grassley, on the possible effects of eliminating
the current tax exemption for ethanol (GAO/RCED-95-273R, Sept.  14,
1995), and we briefed your staff on the tax expenditures associated
with oil and gas and biofuels. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Studies by the Environmental Protection Agency (EPA), the American
Petroleum Institute, and others suggest that reformulated gasoline
may be cost-effective compared to some automotive emission control
measures but less cost-effective than other measures.\2 Other
emission control measures contained in the studies include automobile
emission inspection and maintenance programs, on-board automobile
emission diagnostic equipment, and refueling vapor recovery equipment
at service stations.  The methodologies used and the results showing
the cost-effectiveness of the control measures for these studies vary
significantly, making comparisons very difficult.  The extent and
nature of air pollution in any specific area and the pollution
control measures already in use will have a large bearing on what
specific control measures are the most cost-effective and whether
they should be used either individually or in some combination.  The
price estimates for reformulated gasoline used in the studies also
varied but were generally consistent with the prices actually
experienced to date. 

About 305,000 barrels per day of the petroleum used to produce
gasoline will be potentially displaced by oxygenates in the year 2000
and about 311,000 barrels per day in 2010, according to the DOE
Energy Information Administration's projected oxygenate use.  This
petroleum displacement amounts to about 3.7 percent of the estimated
gasoline consumption in 2000 and 3.6 percent in 2010.\3

DOE and the U.S.  Department of Agriculture (USDA) are the primary
federal agencies with ongoing research into biofuels.  DOE is
focusing primarily on reducing the cost of growing and converting
biomass feedstocks, such as trees and grasses, into ethanol.  USDA is
focusing primarily on reducing the cost of growing and converting
agricultural feedstocks, such as corn, into ethanol.  DOE's and
USDA's data indicate that research has reduced the cost of producing
ethanol from both cellulosic biomass and from corn.\4 Further cost
reductions in producing ethanol from corn, and subsequent increases
in the demand for corn-based ethanol, may be constrained by the price
of corn and its use for other purposes.  DOE believes that the demand
for ethanol made from cellulosic biomass for use as an oxygenate and
as an alternative fuel could increase significantly, assuming the
successful development and commercialization of biofuels technologies
and the achievement of the agency's cost-reduction goals. 


--------------------
\2 For this report, cost-effectiveness is used as a comparative
measure between various pollution control options, taking into
consideration such factors as the cost to implement the option and
its effectiveness in reducing pollution. 

\3 To the extent petroleum is used to make oxygenates, these figures
would be lower. 

\4 Cellulosic biomass represents the major portion of plant matter,
such as wood, grass, organic wastes, and agricultural residues. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The 1990 amendments to the Clean Air Act require the use of
reformulated gasoline (RFG) in nine areas of the United States with
severe ozone pollution.  The act set up a two-phase program.  Under
phase I, beginning in January 1, 1995, volatile organic emissions and
toxic air pollutants are to be reduced by 15 percent.  During phase
II of the RFG program, to start in the year 2000, EPA's rules require
reductions of 5.5 percent of nitrogen oxides along with further
reductions in volatile organic and toxic emissions.\5 As an emission
control measure, areas that have less severe ozone problems but that
still exceed the standards may also use RFG to reduce pollution
problems.\6

Oxygenates are compounds that deliver oxygen to gasoline in various
concentrations.  As part of the required reformulation process,
oxygenates must be added to gasoline to make up 2 percent of the
finished product's weight.  A minimum of 2.7 percent oxygen is also
required to be added to gasoline sold in 39 areas of the country to
reduce carbon monoxide levels during the winter.\7

In the form of ethanol, oxygenate is also blended with conventional
gasoline to make gasohol--a gasoline extender and an octane enhancer. 

Biofuels are alcohols, such as ethanol or other chemicals, derived
from biomass or living matter.  Current research is focused on
developing biofuels from the starch in corn kernels or from the
fibrous cellulosic materials in the rest of the corn plant; it also
focuses on cellulosic plants, such as fast-growing trees or grasses,
and waste products, such as agricultural and forestry residues and
municipal and industrial wastes.  A glossary of terms appears at the
end of this report. 


--------------------
\5 Volatile organic compounds and nitrogen oxide emissions are two of
the more prevalent pollutants that are emitted by motor vehicles and
are precursors to ozone pollution. 

\6 Initially, the states designated about 40 such areas; however, the
states have since petitioned EPA to withdraw 16 of these areas.  As
discussed later, the Energy Information Administration's long-range
projections call for RFG to make up about 35 percent of all gasoline
sold in the United States. 

\7 According to EPA, the use of oxygenates in its oxygenated fuels
program has been steadily decreasing as areas reach attainment for
carbon monoxide and, therefore, no longer need to continue in the
program. 


   COST-EFFECTIVENESS STUDIES VARY
   IN APPROACH AND RESULTS
------------------------------------------------------------ Letter :3

The following sections summarize the results of studies on the
cost-effectiveness of RFG compared to other control options and the
estimates for the price of RFG used in the various studies that we
reviewed compared with the actual prices experienced. 


      COST-EFFECTIVENESS STUDIES
---------------------------------------------------------- Letter :3.1

Studies done by EPA, the American Petroleum Institute, Radian
Corporation, and Sierra Research, Inc., in conjunction with Charles
River Associates, suggest that RFG may be cost-effective when
compared with some pollution control measures but less cost-effective
than other measures.  However, significant differences in the
studies' objectives, methodologies, time frames covered, costs
considered, types and extent of pollutants considered, and other
factors produced widely varying estimates of costs per ton of
pollutant removed, a common cost-effectiveness measure.  Also, each
of the studies evaluated somewhat different control measures and made
different assumptions about the extent of the pollution and control
measures already in use.  These differences make comparisons of
results between the studies very difficult.  (App.  II identifies the
four studies that we reviewed and contains tables showing the
cost-effectiveness estimates that were made by the various
organizations.)

For example, EPA estimates that removing volatile organic compounds
using available control measures would cost from about $600 to $6,000
per ton of compounds removed.  Specifically, EPA estimates that it
would cost about $600 per ton for phase II of the RFG program;\8
$1,300 per ton for enhanced automobile inspection and maintenance
programs;\9 $2,000 per ton for on-board diagnostic requirements for
automobiles; $5,400 per ton for the basic automobile emission
inspection and maintenance program; $5,550 per ton for phase I of the
RFG program;\10 and $6,000 per ton for Tier I requirements, which is
an EPA emission standard for light-duty vehicles.  Officials in EPA's
Office of Mobile Sources consider these cost-effectiveness estimates
to be inexact, but they consider the estimates to be the best figures
that they could develop with the data available to them at that time. 

Some regions of the country that are not required to use RFG, but
which still need to lower ozone levels, are considering whether to
require RFG or gasoline with low vapor pressure.\11 Generally, in the
studies that we reviewed, low vapor pressure gasoline was not
included as an alternative control measure, but according to refining
industry officials, it has the potential to reduce volatile organic
compounds (VOC) at a lower cost than RFG.  In a February 17, 1994,
memorandum to an official in one area considering this option, EPA
stated that RFG offers a number of benefits, besides VOC reductions
that are due in part to the low vapor pressure of RFG, that low vapor
pressure gasoline does not, including the reduction of air toxics and
nitrogen oxides (when RFG phase II becomes effective) as well as
federal enforcement of the RFG program.  EPA also stated that the
lower cost of reduced volatility gasoline may be offset in whole or
in part by lower competition in the reduced volatility gasoline
market. 


--------------------
\8 EPA's RFG phase II estimate reflects an incremental cost over the
cost of implementing phase I of the RFG program. 

\9 When cost-effectiveness estimates are expressed as a range, we
used the mid-range for ranking purposes. 

\10 According to EPA's regulatory impact analysis and discussions
with EPA officials, this amount reflects the total cost of phase I of
the RFG program.  The amount includes the costs of adding oxygen,
reducing benzene, and lowering vapor pressure.  The majority of the
reductions in volatile organic compounds are attained by lowering
vapor pressure, which, according to EPA, costs between $261 and $270
per ton. 

\11 Vapor pressure is a measure of gasoline volatility that is
expressed as pounds per square inch, with higher pressures resulting
in higher volatility and more VOC emissions from evaporation. 


      PROJECTED VERSUS ACTUAL RFG
      PRICES
---------------------------------------------------------- Letter :3.2

We obtained the estimates used for the price of RFG from the four
cost-effectiveness studies that we reviewed along with other
organizations' price estimates.  The estimates varied but were all
close to the range of the actual prices experienced during the first
14 months of the RFG program, which began in January 1995.  The
estimates varied from a low of 3.3 cents to 4.0 cents per gallon more
for phase I RFG than the price of conventional gasoline (cited by
DOE's Office of Energy Efficiency and Alternative Fuels Policy) to a
high of 8.1 cents to 13.7 cents more per gallon (cited by the
American Petroleum Institute).  EPA estimated that the price of RFG
would be from 3.0 cents to 4.9 cents per gallon more than the price
of conventional gasoline for phase I of the program.\12

DOE's Energy Information Administration (EIA) has monitored prices
for both conventional gasoline and RFG since the program began in
January 1995.  In the early weeks of the program, retail prices for
RFG were as much as 12 cents a gallon more than those for
conventional gasoline.  However, March 1996 data indicate that the
average gap between RFG and conventional prices had narrowed to about
5 cents per gallon.  Furthermore, according to EIA, the price
difference may now be closer to 3 cents.  (See app.  III for
additional information on the estimated RFG prices compared with the
actual prices experienced.)


--------------------
\12 EPA's estimates are for the increased cost of producing RFG and
would not necessarily reflect the pump price. 


   OXYGENATES WILL DISPLACE SOME
   PETROLEUM
------------------------------------------------------------ Letter :4

EIA's Annual Energy Outlook for 1996 and supporting documents contain
the most current and comprehensive estimate we could find of the
potential for using oxygenates to displace the petroleum used to
produce gasoline.\13 EIA data indicate that for all uses of
oxygenates in gasoline, including the RFG program, about 384,000
barrels per day of oxygenates will be blended with gasoline in the
year 2000 and about 394,000 barrels per day in 2010.  These
projections compare with about 309,000 barrels per day of oxygenates
that EIA reports were used in 1995.  Adjusting for the lower energy
density of oxygenates,\14 the projected level of oxygenate use will
potentially displace about 305,000 barrels per day of petroleum used
to produce gasoline in 2000 and about 311,000 barrels per day in
2010.  (See app.  IV for additional information on EIA's projections,
along with the energy densities and volume blending ratios of the
various oxygenates.)

It is important to note that the above petroleum displacement
estimates do not account for differing amounts of petroleum that may
be used in the production process for ethanol and the other types of
oxygenates.  The extent to which petroleum will be used to produce
oxygenates depends on several variables and, therefore, is difficult
to predict.  The greater the amount of petroleum that is used to
produce oxygenates, the less petroleum will be displaced.  As such,
our estimates are likely to be somewhat higher than the displacement
that will be actually experienced. 

Furthermore, the displacement estimates do not include any possible
increases or decreases in refinery outputs made possible by using
oxygenates in the refining process.  The use of oxygenates could
allow some refineries to operate their reformers at lower
temperatures, thus increasing the amount of gasoline produced.\15
Doing so, however, may result in reductions in the other
petroleum-based products produced, making the total petroleum
displacement potential difficult to assess.  According to DOE, EIA,
and petroleum industry officials, any increase in the finished
products related to lower reformer operating temperatures would vary
on the basis of the different refinery configurations but, in total,
would likely be relatively small.  One EIA analysis concludes that,
not counting the volume displacement discussed above, the amount of
petroleum used in the refining process may actually increase when
using oxygenates, but that the increase is not statistically
significant. 

The 1992 Energy Policy Act requires the Secretary of Energy to
determine the technical and economic feasibility of replacing 10
percent of projected motor fuel consumption with nonpetroleum
alternative fuels by the year 2000 and 30 percent by 2010.  Using the
EIA's projected oxygenate use discussed earlier and adjusting for
energy density differences, oxygenates would displace about 3.7
percent of the 8.21 million barrels per day of the projected gasoline
consumption in 2000 and about 3.6 percent of the 8.64 million barrels
per day by 2010.  In terms of meeting the act's 10- percent and
30-percent petroleum replacement goals, this amount of displacement
will account for about 37 percent of the motor fuel replacement goal
for the year 2000 and about 12 percent of the 2010 goal.\16

Your office also asked us to estimate the level of petroleum
displacement if all gasoline sold was reformulated.  EIA's
projections assume that about 35 percent of all gasoline will be
reformulated and another 5 percent will contain some level of
oxygenates for other purposes.\17 Assuming the same percentage share
for the different types of oxygenates, and other assumptions that EIA
used in projecting future oxygenate consumption, we estimate that
about 762,000 barrels per day of petroleum would be displaced in the
year 2000 and 777,000 barrels per day in 2010, if all gasoline were
reformulated.  This would amount to about 9.3 percent of projected
gasoline consumption in the year 2000 and about 9 percent in 2010. 
We did not assess the added costs or other implications of
reformulating all gasoline. 


--------------------
\13 Annual Energy Outlook 1996 With Projections to 2015, DOE/EIA-0383
(96) (Jan.  1996). 

\14 Gasoline-blended fuels that contain oxygenates with a lower
energy density than gasoline require a greater volume to achieve the
same driving range. 

\15 Reforming is one refining process in which crude oil is converted
into gasoline and other products. 

\16 DOE's Policy Office has prepared a draft report that contains
similar estimates of oxygenates use and the extent to which
oxygenates will contribute to meeting the petroleum displacement
goals. 

\17 EIA's 40-percent assumption is based on all forms of oxygenate
use including RFG, oxygenated gasoline used during the winter months,
gasohol, and oxygenate used in conventional gasoline as an octane
booster. 


   SUCCESSFUL RESEARCH COULD LEAD
   TO INCREASED USE OF BIOFUELS
------------------------------------------------------------ Letter :5

The transportation sector is currently about 97 percent dependent on
petroleum-based fuels such as gasoline.  According to DOE, this
dependence contributes to our vulnerability to oil supply disruptions
and related price shocks.  DOE and USDA have a number of research
projects under way to develop biofuels technologies as alternative
transportation fuels.  Most of the projects focus on reducing the
costs of raw material feedstocks and of transforming the feedstocks
into ethanol.  Progress has been made in reducing the cost of
ethanol, and additional cost reductions are projected in the future. 
If such reductions are achieved, DOE and USDA expect increased demand
for biofuels. 


      ONGOING FEDERAL BIOFUELS
      RESEARCH
---------------------------------------------------------- Letter :5.1

The primary focus of DOE's biofuels program is to produce ethanol
from low-cost, high-yield cellulosic feedstocks.  These are dedicated
energy crops, such as trees that can be grown in short-rotation time
periods (3 to 10 years), grasses that can grow on marginal croplands,
agricultural residues, and waste products.  To a lesser extent, DOE
is also conducting research into biofuels technologies to produce
biodiesel.\18 The feedstock production research is conducted at DOE's
Oak Ridge National Laboratory in Tennessee, where crops grown
specifically for energy purposes are studied.  Biofuels produced from
waste products, such as municipal and industrial wastes, could
potentially supply a small portion of transportation fuels in the
near future. 

DOE's National Renewable Energy Laboratory in Colorado conducts
research on converting biomass feedstocks to competitively priced
transportation fuels.  Research activities include (1) pretreating
biomass to facilitate its conversion to fermentable sugars, (2)
improving enzyme technologies to convert cellulosic biomass into
fermentable sugars, and (3) developing processes to rapidly ferment
sugars from biomass materials to ethanol.  According to the Director
of DOE's Biofuels System Division, the total DOE funding for the
transportation biofuels program was about $26 million for fiscal year
1995.  (App.  V provides more detailed information on DOE's and
USDA's biofuels research efforts and describes the process of
converting corn and biomass to ethanol.)

The vast majority of USDA's biofuels research program is focused on
developing corn starch as a feedstock for ethanol and, to a lesser
extent, research to produce biodiesel from farm crops.  A small
component of USDA's ethanol program is devoted to research on
producing ethanol from cellulosic biomass, such as agricultural
residues and the remaining portions of the corn plant, such as the
cob, hull, stalks, and leaves.  USDA's research on conversion
technologies focuses on enzyme research to convert feedstocks to
fermentable sugars, fermentation improvements to increase ethanol
yields, and other processes to minimize the cost of producing
ethanol.  According to the Director of USDA's Office of Energy and
New Uses, the total USDA biofuels research and development funding
for fiscal year 1995 was about $10 million. 


--------------------
\18 Biodiesel is a biofuel made from animal- and vegetable-derived
oils that can be used as a substitute or additive to diesel fuel. 
According to EPA, the use of biodiesel may increase some types of
emissions but reduce others. 


      COST-REDUCTION GOALS
---------------------------------------------------------- Letter :5.2

According to DOE's estimates, advances in research and development
have reduced the estimated cost of producing ethanol from biomass
energy crops in newly constructed plants from $5.32 per gallon in
1980 to the present estimate of $1.40 per gallon, measured in 1995
dollars, a reduction in real terms of about 74 percent.  According to
DOE, private companies, using proprietary technologies coupled with
zero- or low-cost feedstocks and taking advantage of existing
facilities to reduce capital costs, believe they can produce ethanol
for 60 to 80 cents per gallon in certain applications.  Based on
further research in developing lower-cost feedstocks and in improving
the process of converting biomass to ethanol, DOE's goal is to
produce ethanol at a cost of $0.67 per gallon by 2010, in current
dollars.  Oak Ridge National Laboratory researchers cautioned us,
however, that reaching cost-reduction goals can depend on how much
ethanol will need to be produced.  For example, DOE has the objective
of deploying technologies, by 2010, that could contribute to a
national annual production capacity of 518 million barrels of
petroleum-equivalent fuels in subsequent years.  If that much ethanol
were actually in market demand, it would require about 30 million to
50 million acres of land, depending on crop yields and conversion
efficiency.  As croplands are increasingly used to produce biomass,
land costs could increase due to greater competition for land
resources.  Increasing land costs and other factors, such as regional
biomass crop yield differences, could drive the cost higher than
$0.67 per gallon. 

According to a 1993 USDA analysis and USDA officials, improvements in
enzyme and production technologies have reduced the cost of producing
a gallon of corn-based ethanol from about $2.50 in 1980, to less than
$1.34 in 1992, measured in 1995 dollars, a reduction of about 46
percent in real terms.  USDA officials told us that they could not
estimate the current cost of producing ethanol because of
fluctuations in the price of corn.  The officials told us, however,
that corn prices are substantially higher today than in 1992.  USDA
has not developed any cost-reduction goals for corn-based ethanol
production. 


      POTENTIAL DEMAND FOR
      BIOFUELS
---------------------------------------------------------- Letter :5.3

According to DOE, the two largest potential markets for
biomass-derived fuels are ethanol used as an oxygenate in gasoline or
as a fuel itself.  While the potential oxygenate market discussed
above is limited to blending relatively small percentages of ethanol
with gasoline, ethanol used alone as an alternative motor fuel has
the potential to replace much larger amounts of gasoline.\19

The National Renewable Energy Laboratory estimates that by 2020 the
demand for biomass ethanol could exceed 14 billion gallons per year. 
This amount consists of a demand of 3 billion gallons per year to be
used as an oxygenate and 11 billion gallons per year for ethanol to
be used as a replacement fuel for gasoline.\20 This long-term
projection is based on achieving a market price for ethanol that is
predicted to be competitive with the price of gasoline.\21

DOE's Energy Efficiency and Renewable Energy Program Office also
provided us with an estimate of transportation biofuels use, which
shows an increasing use of biofuels from 126 million gallons in the
year 2000 to 4.6 billion gallons and 10.8 billion gallons,
respectively, in 2010 and 2020.  While these estimates differ
somewhat from the estimates provided by DOE's laboratory, the
differences reflect the uncertainties involved in making such
projections.  Both sets of estimates, however, predict growing use of
biofuels, particularly beyond 2010 when such fuels are expected to be
used as a replacement for gasoline. 

USDA has not projected ethanol demand on the basis of reductions in
ethanol production costs.  However, USDA's 1993 analysis showed that
further expansion of ethanol from corn is limited because of the high
price of corn and the fact that corn has many alternative uses. 
According to the analysis, these restrictions do not apply to biomass
feedstocks that could supplement corn as an inexpensive ethanol
feedstock.  According to DOE and USDA officials, many technical and
economic barriers must be overcome to achieve a significant increase
in the demand for biofuels.  These barriers include limited funding
for the successful development and commercialization of the biomass
technologies discussed above, as well as achieving the cost-reduction
goals mentioned earlier. 


--------------------
\19 Ethanol used as an alternative motor fuel is generally E85 or
E100.  E85 is a mixture of 85 percent ethanol and 15 percent
gasoline.  E100 is all ethanol. 

\20 The 3 billion gallons equate to about 131,100 barrels per day,
adjusted for the energy content of ethanol.  This figure would be
somewhat higher if ethanol was used to produce ethyl tertiary butyl
ether.  The 11 billion gallons equate to about 480,800 barrels per
day. 

\21 EIA projects that gasoline consumption would be 8.56 million
barrels per day in 2015.  Assuming that gasoline consumption remains
constant, we estimate that DOE's projected level of ethanol use would
represent about 7.1 percent of gasoline consumption in 2020.  This
estimate includes an adjustment made for ethanol's lower energy
content. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

We provided copies of a draft of this report to DOE, EPA, and USDA
for their review and comment.  DOE suggested several changes to
clarify information in the report.  We incorporated DOE's comments
where appropriate. 

Both EPA and USDA expressed concerns with our discussion in appendix
III on the average price of RFG over the life of the RFG program
compared to conventional gasoline.  The agencies believe that the
average price is misleading because it would reflect the very high
price of RFG experienced at the start of the program.  The officials
also believe that the more recent price difference of about 3 cents
to 5 cents per gallon is more accurate.  We concur with these
comments and deleted the reference to the average RFG price
difference. 

EPA said that EIA's projections for the future displacement of
petroleum by the use of oxygenates seem higher than what it would
expect.  According to EPA, while it is encouraging states to use RFG
where its use is now optional, it expects that the amount of
petroleum displaced by the use of oxygenates in future years will be
modest.  The reasons cited by EPA were that the oxygenate
requirements of the RFG program do not change over time, the number
of areas participating in the RFG program has remained fairly stable,
and the number of areas participating in the wintertime oxygenated
fuels program have been decreasing as the program succeeds in bring
areas into attainment for carbon monoxide. 

EIA projections show a 24.3- and 27.5-percent increase in oxygenate
use in 2000 and 2010, respectively, over 1995 levels.  According to
EIA, these increases are based on several factors, including
California's recent statewide adoption of more severely reformulated
gasoline requirements and projected increases in gasoline
consumption, including RFG.  In addition, the projections took into
consideration the declining use of oxygenates in the wintertime
oxygenated fuels program and do not include the expanded use of
ethanol as an alternative fuel.\22 Finally, EIA assumed a constant
market share of about 35 percent for RFG throughout the forecast
period.  The above factors and assumptions used by EIA seem
reasonable to us, but we agree that to the extent the projected
increases in oxygenate use do not take place, the amount of petroleum
displaced would be less. 

USDA said that from its perspective, our report does not sufficiently
analyze the competing information contained in the RFG studies
summarized in our report or critique the cost-effectiveness estimates
that were examined. 

As stated earlier, our objective in this area was to summarize the
results of studies on the cost-effectiveness of using reformulated
gasoline compared to other measures to control automotive emissions. 
We state in the report that significant differences in the studies'
objectives, methodologies, time frames covered, costs considered,
types and extent of pollutants considered, and other factors produced
widely varying estimates of cost-effectiveness.  A critique of the
studies' results or comparing the results on an equal basis may be
useful but would require redoing the studies, controlling for each of
the factors cited above.  Such an analysis was beyond the scope of
our review. 

Appendices VI, VII, and VIII contain DOE's, EPA's, and USDA's
comments, respectively, along with our responses where appropriate. 
App.  IX describes the objectives, scope, and methodology. 


--------------------
\22 According to an EIA official responsible for forecasts in this
area, some additional areas that dropped out of the oxygenated fuels
program in the fall of 1995 would not have been taken into account in
EIA's estimate of oxygenate use for the 1996 Annual Energy Outlook. 
However, the EIA official believes that the effect on the projected
use of oxygenates would not be significant. 


---------------------------------------------------------- Letter :6.1

We performed our work from July 1995 through April 1996 in accordance
with generally accepted government auditing standards. 

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 14 days from the date of this
report.  At that time, we will send copies of this report to
interested congressional committees, the Secretary of Energy, the
Secretary of Agriculture, and the Administrator of EPA.  We will also
make copies available to others upon request. 

Please call me at (202) 512-3841 if you have any questions.  Major
contributors to this report are listed in appendix X. 

Sincerely yours,

Victor S.  Rezendes
Director, Energy, Resources,
 and Science Issues


GREENHOUSE GAS EMISSION
CHARACTERISTICS OF REFORMULATED
GASOLINE
=========================================================== Appendix I

This appendix summarizes the results of a 1995 study performed by the
Department of Energy's (DOE) Argonne National Laboratory, which
evaluated, among other things, the greenhouse gas emission
characteristics of reformulated gasoline (RFG).\1 This is the most
current and comprehensive study that we could find on this issue. 

The study indicates that RFG's potential to reduce greenhouse gases
is small.  According to the study, the effects of using RFG on
greenhouse gas emissions varies according to (1) the specific
oxygenate that is added to conventional gasoline and (2) the time of
year that RFG is used.  According to one of the study's authors, the
time of year is a factor because of the volatile organic compound
(VOC) reduction requirements for high ozone season (summer) RFG. 
Table I.1 shows the comparative carbon dioxide equivalent emissions,
a common measure of greenhouse gases, of RFG made with ethyl tertiary
butyl ether (ETBE), an ether made from ethanol;\2 methyl tertiary
butyl ether (MTBE), an ether made from methanol; conventional
gasoline; and RFG made with ETBE, derived from ethanol produced with
new or additional rather than existing agricultural sources. 



                               Table I.1
                
                 Comparisons of Emissions of Greenhouse
                Gases for Reformulated and Conventional
                                Gasoline


Fuel                                        Winter              Summer
------------------------------  ------------------  ------------------
Reformulated gasoline\a                     11,422              11,794
 (existing)\b
Conventional gasoline                       11,545              11,821
Reformulated gasoline w/MTBE                11,389              11,844
Reformulated gasoline\a                     11,568              11,926
 (new)\c
----------------------------------------------------------------------
\a ETBE is used in RFG in the summer and ethanol is used in the
winter. 

\b Diverted from existing ethanol markets. 

\c ETBE is derived from ethanol beyond that which is currently being
produced. 

The table shows that in the summer when ozone problems are most
severe, ETBE made with existing sources of ethanol produces the least
amount of greenhouse gases;\3 while ETBE from new sources of ethanol
emits the highest amount of greenhouse gases.  Emissions of
greenhouse gases from conventional gasoline are the second lowest,
followed by emissions from RFG made with MTBE.  In all cases,
however, as discussed above, the difference in greenhouse gas
emissions between RFG and conventional gasoline is small. 

Nearly all ethanol is currently made with corn.  According to the
Department of Agriculture, current research on using biomass
feedstocks to produce ethanol, combined with improved production
processes, may lead to greater reductions of greenhouse gases for RFG
made with ethanol.  However, a DOE official noted that while ethanol
made with biomass can significantly reduce the amount of greenhouse
gas emissions compared with corn-based ethanol, all oxygenates
comprise only a small part of the RFG mixture.  Hence, unless the use
of RFG becomes more widespread, and specifically RFG made with
ethanol derived from biomass, the potential for large greenhouse gas
reductions appears limited. 


--------------------
\1 Impact of the Renewable Oxygenate Standard for Reformulated
Gasoline on Ethanol Demand, Energy Use, and Greenhouse Gas Emissions,
ANL/ESD-28, Argonne National Laboratory, (Apr.  1995). 

\2 Greenhouse gases can be generically measured in carbon dioxide
equivalents.  This term is a measure representing the weighted impact
of the emissions of all greenhouse gases, including carbon dioxide,
water vapor, methane, nitrous oxide, and chlorofluorocarbons. 

\3 One of the study's authors explained that existing ethanol is
ethanol that is derived from existing markets where the ethanol is
then replaced by conventional gasoline. 


SUMMARY OF REFORMULATED GASOLINE
COST-EFFECTIVENESS COMPARISONS BY
VARIOUS ORGANIZATIONS
========================================================== Appendix II

The Environmental Protection Agency (EPA), the American Petroleum
Institute (API), Radian Corporation, and Sierra Research, Inc., in
conjunction with Charles River Associates, conducted studies of the
cost-effectiveness of RFG compared to other automotive emission
control measures.  A list of the studies follows. 

"Final Regulatory Impact Analysis for Reformulated Gasoline," EPA
(Dec.  1993). 

"The Cost Effectiveness of VOC and NOx Emission Control Measures,"
Publication No.  326, API (Sept.  1994). 

"Emission Reductions and Costs of Mobile Source Controls,"
DCN92-221-054-01, Radian Corporation (Dec.  1992). 

ï¿½The Cost-Effectiveness of Further Regulating Mobile Source
Emissions,ï¿½ SR94-02-04, Sierra Research, Inc., and Charles River
Associates (Feb.  1994). 

Tables II.1-II.5 and accompanying narrative contain the results of
the cost-effectiveness analyses made by the various organizations
that we reviewed.  The costs indicated are expressed in dollars per
ton of volatile organic compounds (VOC), nitrogen oxide (NOx), or air
toxics removed.  Significant differences in the analyses' objectives,
methodologies, time frames, costs considered, and other factors
produced varying estimates of costs per ton of pollutant removed. 
Also, each of the analyses evaluated somewhat different control
measures, making comparisons among the studies very difficult. 

An API analyst reported on various estimates of the
cost-effectiveness of emission control strategies and found several
problems that make comparison among the studies' results very
difficult.\1 The analyst found that cost-effectiveness is dependent
on several factors, including the baseline emission level, whether
cost-effectiveness is calculated on a marginal or total cost-
effectiveness basis, the assignment of control costs for different
emission reductions, the extent of emission reductions in attainment
areas, and the seasonality of ozone pollution, which would vary from
locality to locality. 


--------------------
\1 Improving Cost-Effectiveness Estimation:  A Reassessment of
Control Options to Reduce Ozone Precursor Emissions, Research Study
#075, American Petroleum Institute, (Aug.  1994). 


   ENVIRONMENTAL PROTECTION AGENCY
-------------------------------------------------------- Appendix II:1

Table II.1 contains cost comparisons, which are drawn from EPA's 1993
Regulatory Impact Analysis for the RFG program.  Some of the costs
reflected in the table are the total costs of implementing some
control measures and others are the incremental costs--the additional
costs--incurred to implement control measures with more stringent
requirements that are added to earlier measures.  For example, the
costs reflected for phase I of the federal RFG program are the total
costs of that measure.  Whereas, phase II of the RFG program reflects
the incremental cost of implementing more stringent requirements in
addition to phase I of the program.  The glossary at the end of this
report defines the control measures identified in this table and
subsequent tables, as well as other terms that are contained in this
report. 



                               Table II.1
                
                 Comparison of EPA's Cost Estimates for
                 Several Mobile Source Control Measures
                       for Reducing VOC Emissions

                                                       Cost per ton of
Control measures                                         VOC reduction
--------------------------------------------------  ------------------
Reformulated gasoline--phase II                                 $600\a
Enhanced automobile emission inspection and             $900 to $1,700
 maintenance program
On-board automobile emissions diagnostic equipment              $2,000
Basic automobile emission inspection program                    $5,400
Reformulated gasoline--phase I                      $5,200 to $5,900\b
Stricter emission standards for light-duty                      $6,000
 vehicles (tier I)
----------------------------------------------------------------------
\a Meeting RFG phase II requirements by controlling the vapor
pressure and sulfur in gasoline to 6.7 pounds per square inch (psi)
and 250 parts per million, respectively, could yield a reduction from
baseline VOC emissions of about 26 percent at an incremental
cost-effectiveness of about $3,700 per ton of VOC reduced.  The
estimates for RFG phase II represents costs in addition to those in
RFG phase I. 

\b According to EPA's regulatory impact analysis and discussions with
EPA officials, this amount reflects the total cost of phase I of the
RFG program.  The amount includes the costs of adding oxygen,
reducing benzene, and lowering vapor pressure.  The majority of VOC
reductions are attained by lowering vapor pressure, which, according
to EPA, costs between $261 and $270 per ton. 

EPA officials told us that because the Clean Air Act Amendments of
1990 mandated the RFG program, the regulatory impact analysis focused
on the cost differences of various RFG formulas and, therefore,
contained only limited information comparing RFG with other control
measures.  Even this focus was constrained somewhat because the
legislation specified that oxygen must make up a minimum of 2 percent
of the RFG's total weight.  EPA also estimated the cost of RFG phase
II in removing NOx at about $3,700 per ton and the cost of removing
air toxics at about $40,000 per ton for RFG phase I. 

EPA has recognized the limitations of the cost-effectiveness
information for RFG and specifically the need for additional
information that compares the costs of the RFG program with other
control measures.  According to an official in EPA's Office of Mobile
Sources, the cost figures used in the regulatory impact analysis are
the best available from EPA.  Furthermore, EPA officials said that
comparative data are not readily available for most of the other
control measures because the purposes of these programs are not the
same as the RFG program, especially with regard to reducing NOx and
air toxic emissions.  RFG phase I is ranked fifth of the six control
measures listed in table II.1. 


   AMERICAN PETROLEUM INSTITUTE
-------------------------------------------------------- Appendix II:2

Table II.2 summarizes the results of API's analysis of the
cost-effectiveness of the RFG program in reducing VOC and NOx
emissions in five cities.  The analysis was prepared for API by
Radian Corporation. 



                               Table II.2
                
                  Analysis of API's Cost-Effectiveness
                Estimates for the Reformulated Gasoline
                    Program for Reducing VOC and NOx
                Emissions in Five Cities (1993 dollars)


City                                           VOC                 NOx
------------------------------  ------------------  ------------------
Chicago                                     $3,302             $30,440
Philadelphia                                $3,992             $43,843
Houston                                     $9,357             $36,668
Baltimore                                   $9,742             $37,904
Washington, D.C.                           $10,716             $44,205
======================================================================
Average                                     $7,422             $38,612
----------------------------------------------------------------------
\a The study assumed the ozone reduction benefits were obtained for
only 6 months of the year; therefore, annual costs for reducing VOCs
were reduced by 50 percent. 

The study found that there were major differences among the cost-
effectiveness of RFG among the five cities.  In some cities, RFG is
up to three times more cost-effective than in other cities.  The data
take into consideration the vapor pressure of gasoline sold in these
cities and other factors, such as the length of the ozone season that
varies by city.  The study indicates that a primary reason for the
RFG cost-effectiveness differences was the vapor pressure of the
gasoline used in those cities.  The data show that the lower costs
for VOC reductions are in the cities that use gasoline with higher
vapor pressures.\2 Table II.2 contains values for the years 1995
through 2004 and, therefore, includes cost figures for NOx control
that is part of the phase II RFG program. 

Table II.3 summarizes comparisons of mid-range cost estimates by API
for RFG in the five cities reviewed with other control measures for
VOC and NOx.  These figures also reflect estimates for the years 1995
through 2004.  The table shows that RFG is ranked second out of the
eight control measures studied for VOC. 



                               Table II.3
                
                 Comparison of API's Cost-Effectiveness
                   Estimates of Mobile Source Control
                   Measures for Reducing VOC and NOx
                        Emissions (1993 dollars)


Control measures                               VOC                 NOx
------------------------------  ------------------  ------------------
Refueling vapor recovery                    $2,802                  \b
 equipment (stage II)
Reformulated gasoline (phases               $7,422             $38,612
 I and II)
Enhanced automobile emission               $13,621             $17,030
 inspection and maintenance
 program
Vehicle scrappage program                  $14,153                  \b
Expanded automobile emission               $14,243                  \b
 inspection and maintenance
 program
Use of natural gas-fueled                  $25,338                  \b
 vehicles
California's stricter                      $55,164             $18,190
 reformulated gasoline
California's low emission                 $297,703            $139,880
 vehicle requirements
----------------------------------------------------------------------
\a The cost per ton is an annual average for the five cities that API
included in its study, except for the RFG program whose annual costs
were reduced by 50 percent because the reduced ozone benefits are
only realized during 6 months of the year. 

\b Data not available. 


--------------------
\2 The vapor pressure for Chicago and Philadelphia was 8.0 psi and
for Baltimore, Houston, and Washington, D.C., the vapor pressure was
7.1 psi. 


   RADIAN CORPORATION
-------------------------------------------------------- Appendix II:3

Table II.4 summarizes Radian Corporation's study of the emission
reductions, costs, and cost-effectiveness of different mobile source
control strategies.  The study was prepared for the Virginia
Petroleum Council, for the Virginia State Legislature's use in
determining which air pollution control measures to adopt in Northern
Virginia.  The table shows that RFG is ranked seventh out of the
eight control measures. 



                               Table II.4
                
                    Radian Corporation Comparison of
                Emission Reductions and Costs of Mobile
                     Source Controls (1993 dollars)

                                                       Cost per ton of
Control measures                                           reduction\a
--------------------------------------------------  ------------------
Refueling vapor recovery equipment (stage II)                   $2,820
Enhanced automobile emission inspection and                     $5,940
 maintenance program
Maximum automobile emission inspection and                      $7,440
 maintenance program (with tier II)\b
Maximum automobile emission inspection and                      $7,500
 maintenance program (with tier I)\c
Clean fleet vehicle program                                    $11,856
Vehicle scrappage program                                      $12,420
Reformulated gasoline (phases I and II)                        $14,700
Low emissions vehicle program                       $18,500 to $37,700
----------------------------------------------------------------------
\a The amount of pollutant removed was calculated by adding the total
of VOC reductions to one-half of the NOx reductions.  The cost
reductions are for the year 1999.  Radian also calculated the costs
for the year 2015.  The ranking of RFG compared to the other control
measures (based on cost per ton emission reduction) did not change in
2015. 

\b Assumes that tier II emission standards for light-duty vehicles
will be met. 

\c Assumes that tier I emission standards for light-duty vehicles
will be met. 


   SIERRA RESEARCH, INC., AND
   CHARLES RIVER ASSOCIATES
-------------------------------------------------------- Appendix II:4

Sierra Research, Inc., and Charles River Associates' study estimated
the cost-effectiveness of mobile source emissions control measures
required by the Clean Air Act Amendments of 1990 and the California
Air Resources Board regulations.  The study was prepared for the
American Automobile Manufacturers Association.  Table II.5 summarizes
the results of the key control measures identified in the study.  RFG
is ranked fourth out of the 14 mobile source control measures. 



                               Table II.5
                
                Sierra Research, Inc., and Charles River
                   Associates Comparison of the Cost
                 Effectiveness of Mobile Source Control
                                Measures

                                                       Cost per ton of
Control measures                                           reduction\a
--------------------------------------------------  ------------------
Reid vapor pressure control                                     $1,100
Enhanced automobile emission inspection and                     $1,700
 maintenance program
Refueling vapor recovery equipment (stage II)                   $3,300
Reformulated gasoline                                           $4,600
California phase II reformulated gasoline                       $6,100
New evaporative standards and test procedures to                $6,300
 control vehicle emissions
Stricter emissions standards for light-duty                    $12,100
 vehicles (tier I)
Vehicle scrappage program                                      $13,900
Transitional low emissions vehicle program                     $26,200
Low emissions vehicle program                                  $40,600
Stricter emissions standards for light-duty                    $46,400
 vehicles (tier II)
On-board automobile emissions diagnostic equipment             $58,500
Ultra low emissions vehicle program                            $72,800
Zero emissions vehicle program                                $173,600
----------------------------------------------------------------------
\a The cost of emission reductions includes VOC, NOx, and one-seventh
of carbon monoxide emissions.  The analysis reflects nationwide
emission reductions occurring in nonattainment areas during the
season when violations of the air quality standards occur.  The
methodology used would result in higher costs per ton of emissions
reduction since emission reductions occurring at other times and
locations were not counted. 


COMPARISON OF ESTIMATED
REFORMULATED GASOLINE PRICES WITH
ACTUAL PRICES
========================================================= Appendix III

This appendix compares the price estimates used for RFG in the four
cost-effectiveness studies that we reviewed, along with the price
estimates of other organizations, with the actual RFG prices reported
by DOE's Energy Information Administration (EIA). 



                              Table III.1
                
                Comparison of Estimated Price Increases
                    for RFG by Various Organizations

                           (Cents per gallon)

Organizations                              Phase I            Phase II
------------------------------  ------------------  ------------------
DOE Office of Policy                       3.3-4.0             6.9-9.3
EPA\a                                      3.0-4.9             3.2-5.9
EIA                                        4.0-6.0                  \b
Radian Corporation\c                           7.0                11.0
Sierra Research, Inc., and
 Charles River Associates                      7.3                10.9
National Petroleum Council                     8.0            9.0-11.1
New York State Energy Research
 and Development Authority                   9.1\d                10.5
API\e                                     8.1-13.7            9.8-17.6
----------------------------------------------------------------------
\a EPA's estimates are for the increased cost of producing RFG; not
necessarily the increased price.  The estimates include an adjustment
of about 2 cents per gallon for the loss in fuel economy associated
primarily with the oxygen requirement. 

\b Data were unavailable for phase II of the RFG program. 

\c In addition, a 3-cents per gallon fuel economy penalty was
assumed. 

\d Price is for the 1998-1999 portion of phase I of the RFG program. 

\e API included several cost categories such as refining, oxygenates,
fuel economy penalty, stationary source controls, logistics, and
retail marketing regulations in its cost-effectiveness study, which
made API's costs per gallon higher.  When only those cost categories
used by EPA are considered, API's estimate is about 8 cents to about
10 cents per gallon more. 

EIA has monitored prices of both conventional gasoline and RFG since
the RFG program began.  Figure III.1 shows EIA data on actual retail
prices from the beginning of the RFG program in January 1995 through
the week of March 18, 1996. 

   Figure III.1:  Comparison of
   the Average Retail Prices of
   Conventional and Reformulated
   Gasoline

   (See figure in printed
   edition.)

Source:  GAO illustration based on data provided by EIA. 

The EIA data show that in the early weeks of the program, average
retail prices for RFG were as much as 12 cents a gallon more than
those for conventional gasoline.  However, more recent data indicate
that the average gap between RFG and conventional gasoline prices had
narrowed to about 5 cents per gallon.  Furthermore, according to EIA,
the price difference may now be closer to 3 cents. 


POTENTIAL PETROLEUM DISPLACEMENT
FROM USING OXYGENATED FUELS
========================================================== Appendix IV

This appendix discusses the potential petroleum displacement from
using oxygenated fuels, identifies some of EIA's assumptions used in
its Annual Energy Outlook for 1996 to forecast gasoline and oxygenate
consumption, and provides information on the volume and energy
density of oxygenates blended with gasoline. 



                               Table IV.1
                
                 Projected Use and Potential Petroleum
                 Displacement From Using Oxygenates in
                       Gasoline in 2000 and 2010

                           (Barrels per day)


                                     Potential               Potential
                         Projected   petroleum   Projected   petroleum
                         oxygenate  displaceme   oxygenate  displaceme
Type of oxygenate              use       nt\ a         use       nt \a
----------------------  ----------  ----------  ----------  ----------
Ethanol\b                   70,000      46,900      90,000      60,300
ETBE                             0           0      28,000      23,800
MTBE                       310,000     254,200     270,000     221,400
TAME\c                       4,000       3,520       6,000       5,280
======================================================================
Total                      384,000     304,620     394,000     310,780
----------------------------------------------------------------------
\a The projected oxygenate use was adjusted for the lower energy
density of the oxygenate to arrive at its potential petroleum
displacement.  No adjustment was made for the petroleum content used
to produce the oxygenate.  For example, MTBE is produced from
methanol (an alcohol made primarily from natural gas) and
isobutylene, which may be produced from petroleum within a refinery
or derived from natural gas outside a refinery.  The extent to which
petroleum will be used to produce oxygenates depends on several
variables and, therefore, is difficult to predict.  The greater the
amount of petroleum that is used to produce oxygenates, the less
petroleum will be displaced.  More detailed information on the extent
of petroleum used to produce oxygenates can be found in the Argonne
National Laboratory April 1995 report referred to in appendix I. 

\b In addition to the 90,000 barrels of ethanol blended with gasoline
in 2010, EIA's forecast shows that an additional 70,000 barrels of
ethanol will be used in E85, an alternative motor fuel consisting of
85 percent ethanol and 15 percent gasoline. 

\c TAME represents tertiary amyl methyl ether. 


      ASSUMPTIONS IN EIA'S 1996
      ANNUAL ENERGY OUTLOOK
------------------------------------------------------ Appendix IV:0.1

EIA used several assumptions in forecasting gasoline and oxygenate
consumption to 2015.  Some of the key assumptions are described as
follows: 

  -- EIA assumes that the tax exemption of $0.54 per gallon of
     ethanol will continue past the year 2000 to 2015.\1 The subsidy
     is in nominal terms. 

  -- EIA models the production and distribution of four different
     types of gasoline:  traditional, oxygenated, reformulated, and
     reformulated/high oxygen.  RFG is assumed to account for about
     35 percent of annual gasoline sales throughout the forecast. 
     The total estimated market for all oxygenated fuels, including
     RFG and traditional gasoline that may contain some oxygenates,
     is about 40 percent throughout the forecast. 

  -- Oxygenated gasoline, which has been required during winter
     months in many U.S.  cities to control carbon monoxide
     emissions, requires an oxygen content of 2.7 percent by weight. 

  -- Reformulated/high oxygen gasoline, used in overlapping areas
     that require oxygenated gasoline and RFG, requires 2.7 percent
     oxygen. 

  -- RFG requires 2.0 percent oxygen by weight.  EIA assumes that RFG
     will be certified in accordance with the EPA models. 

  -- Only ethanol made from corn is currently modeled.  About 95
     percent of the U.S.  production of fuel ethanol is derived from
     corn. 

  -- The Energy Policy Act of 1992 mandates that government,
     business, and fuel providers purchase a specified percentage of
     alternative-fueled vehicles in their fleets.  EIA assumed that
     both business and fuel-provider fleet mandates do not take
     effect until the year 2000.  (Footnote ï¿½bï¿½ in table IV.1 shows
     that some ethanol will be used in E85, an alternative motor
     fuel, in 2010.)



                               Table IV.2
                
                   Volume of Oxygenates Blended With
                    Gasoline to Meet Various Oxygen
                              Requirements


Percent of oxygen
requirement by
weight\a                   Ethanol        ETBE        MTBE        TAME
----------------------  ----------  ----------  ----------  ----------
2.0                            5.7        12.0        11.0        12.4
2.7                            7.7        17.2        15.0        16.7
3.5                         10.0\b          \b          \b          \b
----------------------------------------------------------------------
\a The Clean Air Act Amendments of 1990 require that RFG be blended
at a minimum oxygen weight of 2.0 percent to control ozone levels and
that other oxygenated fuels be blended at a minimum of 2.7 percent to
control carbon monoxide emissions.  EPA regulations allow ethanol to
be blended at a 3.5-percent rate. 

\b Prior to March 18, 1996, EPA's RFG fuel regulations did not allow
oxygenates to be blended above 2.7 percent oxygen by weight during
the summer high ozone season.  EPA revised these fuel regulations
effective March 18, 1996, allowing higher concentrations of
oxygenates under certain circumstances.  EPA does not expect
significantly higher use of oxygenates as a result of this change. 



                               Table IV.3
                
                Energy Content of Oxygenates Relative to
                                Gasoline

                                   British thermal
                                        unit\a per          Percent of
                                          gallon\b            gasoline
------------------------------  ------------------  ------------------
Gasoline                                   114,000                 100
Ethanol                                     76,100                  67
ETBE                                        96,900                  85
MTBE                                        93,500                  82
TAME                                       100,700                  88
----------------------------------------------------------------------
\a British thermal unit is a standard unit for measuring the quantity
of heat energy equal to the quantity of heat required to raise the
temperature of 1 pound of water by 1 degree Fahrenheit. 

\b Gasoline-blended fuels with a lower energy density than gasoline
require a greater volume to achieve the same driving range. 


--------------------
\1 Ethanol fuels are exempt from 5.4 cents of the total amount of the
per gallon tax imposed on gasoline sales (for 90-percent
gasoline/10-percent ethanol blends). 


DOE AND USDA BIOFUEL RESEARCH
EFFORTS
=========================================================== Appendix V

DOE and the Department of Agriculture (USDA) have several research
projects to develop biofuels technologies from renewable resources
for the transportation fuel market.  This appendix provides
additional information on the agencies' efforts.  The appendix also
shows the processes for converting corn and biomass to ethanol. 


   DOE'S BIOFUELS RESEARCH EFFORTS
--------------------------------------------------------- Appendix V:1

Since the ethanol supply is limited due in part to the high cost of
corn feedstocks and the use of corn for other purposes, DOE's
biofuels research program is aimed at developing biomass-based
transportation fuels from cellulosic feedstocks.  Such feedstocks are
derived from renewable resources such as grasses, trees, and waste
products.  DOE is also conducting research to convert these
feedstocks to liquid transportation fuels.  DOE's program envisions
that such fuels have the potential to displace a large percentage of
petroleum-based transportation fuels in the future.  The following
summary outlines the focus of DOE's biofuels research efforts. 

To lower the cost of cellulosic feedstocks, the Oak Ridge National
Laboratory leads a research and analysis program with many
collaborators nationwide to

  -- identify and develop plants that can be used as high-yield
     dedicated energy crops on excess cropland;

  -- develop specialized site management, crop management, harvest
     and handling techniques to obtain optimum yields from plants
     with high-yield potential;

  -- identify crop production techniques that ensure the protection
     of the environment and natural resources;

  -- identify locations where high-yields can be achieved on low cost
     land; and

  -- obtain cost, risk, and environmental data under operational
     conditions by collaborating with private industry, USDA, and
     local organizations to demonstrate crop production systems. 

To lower feedstock conversion costs, the National Renewable Energy
Laboratory is conducting biofuels research to

  -- demonstrate a process to convert 1 ton per day of cellulosic
     waste feedstock to produce 100 gallons of ethanol in cooperation
     with industrial partners;

  -- demonstrate a process of using the cellulosic fiber of the corn
     kernel to improve yields;

  -- develop and evaluate a new process that combines two main
     biomass sugar fermentation steps into one, to decrease the
     production time and increase yields;

  -- develop new cellulase enzymes that more economically degrade
     cellulose to sugar;

  -- determine the potential to produce ethanol from switchgrasses,
     sugarcane, tropical grasses, trees, paper and sawmill wastes,
     forestry residues, and rice straw; and

  -- develop new technologies to produce biodiesel from waste fats
     and oils.\1


--------------------
\1 Biodiesel is a biofuel made from animal and vegetable derived oils
that can be used as a substitute or additive to diesel fuel. 
According to EPA, the use of biodiesel may increase some types of
emissions but reduce others. 


   USDA'S BIOFUELS RESEARCH
   EFFORTS
--------------------------------------------------------- Appendix V:2

The cost of producing ethanol from corn depends on several factors,
including the price of corn, the value of co-products, the cost of
energy and enzymes, the size of the production plants, and the level
of technology in the plant.  USDA's efforts have largely focused on
improving technologies that would increase the efficiencies of
feedstocks (primarily corn), speed up the production process, and
raise the yield of ethanol in order to reduce its overall cost.  USDA
conducts or funds biofuels research on the projects summarized below. 

To lower the cost of feedstocks, USDA research is conducted on

  -- starches, such as corn, wheat, sorghum, and potatoes;

  -- fruit and vegetable by-products;

  -- corn cobs, straws, and corn hulls;

  -- corn stover and grasses;

  -- potential energy crops such as trees (e.g., evaluate the energy
     yield from short rotation of different types of woods); and

  -- agricultural residues. 

To lower feedstock conversion costs, USDA research is conducted on

  -- organisms that can produce ethanol from various feedstocks
     through genetic engineering;

  -- biomass conversion processes to convert feedstocks to
     fermentable sugars through more efficient and cost-effective use
     of enzymes;

  -- processes to increase the yield of ethanol and other
     co-products, such as food additives; and

  -- advanced fermentation technologies to more efficiently and cost
     effectively produce ethanol. 

Two primary methods are used to make ethanol from corn:  dry milling
and wet milling.  Dry milling, used for about one-third of ethanol
production, is used to produce mainly ethanol, while wet milling
generates ethanol and a variety of co-products, such as corn oil,
animal feed, and other starch products.  Figure V.1 illustrates the
process used to convert corn into ethanol. 

   Figure V.1:  Corn-to-Ethanol
   Conversion Process

   (See figure in printed
   edition.)

DOE's biofuels research focuses on developing biomass-based
transportation fuels from cellulosic feedstocks.  Figure V.2
illustrates the process used to convert biomass feedstocks into
ethanol. 

   Figure V.2:  Biomass-to-Ethanol
   Conversion Process

   (See figure in printed
   edition.)




(See figure in printed edition.)Appendix VI
COMMENTS FROM THE DEPARTMENT OF
ENERGY
=========================================================== Appendix V




(See figure in printed edition.)Appendix VII
COMMENTS FROM THE ENVIRONMENTAL
PROTECTION AGENCY
=========================================================== Appendix V



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on the Environmental Protection
Agency's letter dated May 17, 1996. 


   GAO'S COMMENTS
--------------------------------------------------------- Appendix V:3

1.  We agreed with this comment and have revised the report. 

2.  We agreed with this comment and have revised the report. 

3.  Our report refers to the use of oxygenated fuels to reduce carbon
monoxide emissions.  We revised the report to reflect EPA's comment
that the number of areas participating in the oxygenated fuels
program have been reduced. 

4.  We agreed with this comment and have revised the report. 

5.  We agreed with this comment and have revised the report. 

6.  According to EPA's regulatory impact analysis and discussions
with EPA officials, $5,550 reflects the total cost of phase I of the
RFG program.  We added EPA's views on the costs of reducing VOCs to
our report. 

7.  We agreed with this comment and have revised the report. 

8.  We revised the report to more clearly reflect EPA's position
stated in its memorandum. 

9.  We agreed with this comment and have revised the report.  (This
comment relates to comment 17.)

10.  We agreed with this comment and have revised the report. 

11.  The assumptions used for EIA's projected oxygenate use is
explained in the agency comments section of this report.  EIA's
projections of oxygenate use do not include the future use of ethanol
as an alternative fuel. 

12.  We said in our report that the petroleum displacement estimates
do not account for differing amounts of petroleum that may be used in
the production of ethanol and other types of oxygenates.  We also
said that the extent to which petroleum will be used to produce
oxygenates depends on several variables and, therefore, is difficult
to predict.  According to EIA officials, factors affecting the extent
of petroleum use to produce oxygenates include the type of oxygenate
and different assumptions about the source of raw materials and the
energy used to produce the oxygenates and the vapor pressure of the
blended fuel.  We also pointed out that the greater amount of
petroleum that is used to produce oxygenates, the less petroleum will
be displaced.  More detailed information on the extent of petroleum
used to produce oxygenates can be found in the Argonne National
Laboratory's April 1995 report referred to in appendix I. 

13.  We agreed with this comment and have revised the report. 

14.  We did not omit the greenhouse gas emissions associated with RFG
produced with ethanol, as indicated by EPA.  The table shows RFG with
existing and new sources of ethanol as stated in notes b and c. 

15.  We agreed with this comment and have revised the report. 

16.  We agreed with this comment and have revised the report. 

17.  We agreed with this comment and have revised the report to
explain EPA's RFG estimates. 

18.  We agreed with this comment and have revised the report. 

19.  We agree that EPA's phase II RFG requirements are likely to
increase the use of ETBE due to the more stringent VOC emissions
reduction requirements.  The increase in ETBE use did not show up in
the year 2000 because the lowest amount of oxygenate usage reflected
was 1,000 barrels per day.  However, EIA's forecast of oxygenate use
to the year 2015 shows that ETBE usage increases after the year 2000. 
In fact, the table shows that 28,000 barrels per day of ETBE is
predicted to be used in 2010. 

20.  See comment 12 above, which relates to this issue.  We revised
the note to table IV.1 to reflect that petroleum displacement would
be lower given the extent of petroleum used to produce the
oxygenates, as previously stated in the letter, and referred the
reader to the Argonne National Laboratory report for further
information on this issue. 

21.  We agreed with this comment and have revised the report. 

22.  We agreed with this comment and have revised the report. 

23.  We agreed with this comment and have revised the report. 




(See figure in printed edition.)Appendix VIII
COMMENTS FROM THE DEPARTMENT OF
AGRICULTURE
=========================================================== Appendix V



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)

of the report. 


The following are GAO's comments on the Department of Agriculture's
letter dated May 16, 1996. 


   GAO'S COMMENTS
--------------------------------------------------------- Appendix V:4

1.  We agreed with this comment and have revised the report. 

2.  We agreed with this comment and have revised the report. 

3.  The cost-effectiveness studies that we reviewed use VOC
reductions as a proxy for ozone reductions.  We state in our report
that VOCs and NOx emissions are two of the more prevalent pollutants
emitted by automobiles and are precursors to ozone pollution.  We
recognize in the background and other sections of the report that RFG
helps to reduce VOC, NOx, and air toxics emissions. 

4.  We state in the referenced paragraph that RFG offers a number of
benefits that low vapor pressure gasoline does not, including the
reduction of air toxics and nitrogen oxides.  We have revised this
paragraph to make it clear that these benefits are in addition to VOC
reductions, which are due in part to the lower vapor pressure of RFG. 

5.  This comment also responds to USDA's comment 15.  Our report does
not indicate that API believes that low vapor pressure gasoline is a
cheap ozone control measure or that lowering the vapor pressure
represents a major cost.  In the text following table II.2 that USDA
refers to, we point out that in cities that already use a low vapor
pressure gasoline, the cost-effectiveness of adding a RFG requirement
is higher.  This is because some of the benefits of RFG was already
obtained by using the low vapor pressure gasoline. 

6.  We agreed with this comment and have revised the report. 

7.  In this section, we gave the range of the price estimates for RFG
compared to conventional gasoline prices--the low estimate cited by
DOE and the high estimate cited by API.  Appendix III.1 cites some of
the reasons for the API higher price estimates.  While API's estimate
is in the high end of the range of estimates, it is largely within
the range of prices actually experienced during the initial months of
the RFG program.  We agree, however, that to the extent API's
estimated costs are higher than the actual costs experienced, its
estimated costs to reduce pollutants would also be higher than
actual. 

8.  We agreed with this comment and have revised the report. 

9.  While additional estimates of the cost-effectiveness of
reformulated gasoline have been reported, and other estimates can be
calculated, our objective was to identify and present
cost-effectiveness data contained in major federal and other studies. 
Therefore, we made no change to the report. 

10.  We discussed this issue in detail with representatives from DOE
and industry and concluded that varying industry practices make it
difficult to assess the amount of petroleum used to produce
oxygenates.  As such, the displacement numbers presented likely
represent the most petroleum displacement that can be expected.  We
revised the report to make this point clearer. 

11.  As our report indicates, the use of oxygenates could allow some
refineries to operate their reformers at lower temperature, thus
increasing the amount of gasoline produced.  We also point out,
however, that DOE, EIA, and industry officials believe that any such
increases industrywide are likely to be relatively small. 

12.  Addressing potential price changes of crude oil and gasoline
resulting from the displacement of crude oil by oxygenates was beyond
the scope of our review.  While there may have been some downward
pressure on crude oil prices resulting from less demand as oxygenates
were introduced, the overall impact on gasoline prices has been an
increase in price as discussed in our report. 

13.  According to the author of DOE's Argonne National Laboratory
study containing the information in question, USDA is incorrect in
its position that renewable fuels such as ethanol necessarily emit
fewer greenhouse gases than conventional gasoline.\1 The author
pointed out that there are differing opinions regarding the amount of
energy required to produce ethanol and that USDA's estimation is
lower than that of EPA and DOE.  According to the author, USDA's
estimation of greenhouse gas emissions by reformulated gasoline
neglect to account for a number of sources of carbon dioxide
equivalent emissions resulting from the production and transport of
the fuel.  For instance, carbon dioxide emissions result from oil
used by farming equipment, oil used to transport corn to ethanol
plants, the production of fertilizer, and the burning of coal used in
producing ethanol in processing plants. 

14.  Our report focused on the results of cost-effectiveness analyses
done by EPA, API, Radian Corporation, and Sierra Research.  We
recognize in our report that a number of variables can affect the
benefits and cost-effectiveness of the different measures for
controlling VOCs and other air pollutants.  We also point out that
the costs and benefits across these studies are not measured
uniformly, making it difficult to make comparisons among the control
measures.  However, the objective of our work was not to conduct our
own analysis of the control measures, controlling for all the factors
that may affect the results.  We also discussed this issue in the
agency comments section of our report. 

15.  See our response to comment 5. 

16.  The API study did not address whether the NOx cost estimates
affect the winter particulate matter benefits associated with NOx
controls. 

17.  The API study measured all VOC and NOx reductions in percentages
rather than tons of reduction. 

18.  The API study did not indicate whether modernization costs were
included as part of the cost estimates. 

19.  See our response to comment 7. 

20.  We agreed with this comment and have revised the report. 


--------------------
\1 See footnote 1 in app.  I. 


OBJECTIVES, SCOPE, AND METHODOLOGY
========================================================== Appendix IX

The objectives of our review were to (1) summarize the results of
federal and other studies on the cost-effectiveness of using RFG
compared to other automotive emission control measures and compare
estimates of the price of RFG used in such studies with more recent
actual experience; (2) summarize the results of studies estimating
the potential for oxygenates to reduce the use of petroleum; and (3)
summarize the ongoing federal research into biofuels, including any
related past or projected cost reduction goals, and any increased
demand estimates based on such goals. 

To identify studies on the cost-effectiveness of using RFG compared
to other automotive emission control measures, we interviewed
officials from EPA, DOE, USDA, the petroleum industry, associations
representing the petroleum, oxygenated fuels, and renewable fuels
industries, state and local government agencies, and others.  Several
organizations have conducted cost-effectiveness studies of air
quality control measures.  We examined those studies that (1)
reviewed the cost-effectiveness of RFG as well as other mobile source
control measures and (2) contained original analyses.  The four
studies listed in appendix II were the only studies we found that met
these criteria.  To compare estimates of the price of RFG used in
such studies with more recent actual price experience, we used the
price estimates used in the studies and obtained actual RFG prices
reported by DOE's EIA. 

To determine what estimates were available on the potential petroleum
displacement through the use of oxygenates in gasoline, we
interviewed officials from DOE, the refinery industry, and
associations representing the oil and oxygenated fuels industries. 
Through these sources, we learned that DOE had the most comprehensive
effort underway that would provide an estimate of the petroleum
displacement potential by using oxygenated fuels.  Accordingly, we
obtained information on the use of oxygenates and its petroleum
displacement potential from EIA and DOE's Office of Energy Efficiency
and Alternative Fuels Policy.  Because the Office had undertaken a
study of the potential for replacement fuels to displace petroleum
fuels by the years 2000 and 2010, we used those 2 years to show the
estimated oil displacement from using oxygenated fuels. 

We agreed with your office to identify any studies on the costs and
benefits of using oxygenates versus aromatics as octane enhancers in
gasoline and whether refiners were making appropriate cost
comparisons between the use of oxygenates and aromatics.  During this
assignment, we informed your office that we had not been able to
identify any such studies.  According to the DOE officials we talked
with, the petroleum refining industry and associations representing
the petroleum industry, the costs and benefits of using oxygenates
versus aromatics would vary greatly from refinery to refinery and are
dependent on the economic and plant-capacity factors of each
refinery.  This makes it difficult to generalize about the
appropriateness of refining decisions on using oxygenates or
aromatics.  Most of the officials we talked with, however, believed
that refiners would act in their own economic interest in making this
decision.  We agreed with your office that no further work was needed
on this issue. 

To identify major federal research on biofuels, including any related
production cost-reduction goals and the estimated use of biofuels
based on such goals, we interviewed officials at DOE, USDA,
representatives of the biofuels industry, and universities conducting
biofuels research.  We also met with officials at the Office of
Technology Policy, Executive Office of the President; attended
conferences related to biofuels; conducted literature searches; and
reviewed and analyzed several reports and documents on biofuels.  In
addition, we interviewed officials at DOE's Oak Ridge National
Laboratory and National Renewable Energy Laboratory, where DOE's most
extensive biofuels research is conducted.  We obtained information on
past and projected cost-reduction goals achieved through biofuels
research and development from officials at Oak Ridge National
Laboratory, the National Renewable Energy Laboratory, DOE, and USDA. 
To identify the potential increased demand for biofuels, based on
cost-reduction achievements, projections and goals, we obtained
estimates on the demand for biofuels from DOE's National Renewable
Energy Laboratory.  We did not evaluate the methodology and
assumptions the National Renewable Energy Laboratory used to arrive
at the demand estimates cited in this report. 


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix X

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION

Bernice Steinhardt, Associate Director
Gregg A.  Fisher, Assistant Director
Michael F.  Duffy, Senior Evaluator
Isidro L.  Gomez, Evaluator
Francis J.  Kovalak, Senior Evaluator

NORFOLK REGIONAL OFFICE

William F.  McGee, Assistant Director
Harry C.  Everett, Senior Evaluator
Kellie O.  Schachle, Evaluator
Kathryn D.  Snavely, Evaluator
Joseph L.  Turlington, Evaluator

GLOSSARY


      AROMATICS
------------------------------------------------------- Appendix X:0.1

A class of high-octane hydrocarbons that constitute a certain
percentage of gasoline.  The chief aromatics in gasoline are benzene,
toluene, and xylene.  In addition to concerns about the toxicity of
benzene, some aromatics are highly reactive chemically, making it
likely that they are active in ozone formation. 


      BIODIESEL
------------------------------------------------------- Appendix X:0.2

Biodiesel is a biofuel made from animal and vegetable derived oils
that can be used as a substitute or additive to diesel fuel. 
According to EPA, the use of biodiesel may increase some types of
emissions but reduce others. 


      BIOFUELS
------------------------------------------------------- Appendix X:0.3

Biofuels are alcohols, such as ethanol or other chemicals, derived
from biomass or living matter.  Current research is focused on
developing biofuels from the starch in corn kernels or from the
fibrous cellulosic materials in the rest of the corn plant; it also
focuses on cellulosic plants, such as fast-growing trees or grasses,
and waste products such as agricultural and forestry residues and
municipal and industrial wastes. 


      CLEAN FLEET VEHICLE PROGRAM
------------------------------------------------------- Appendix X:0.4

This program, starting in 1998, will require certain fleets (in
certain nonattainment areas) of 10 or more vehicles, which can be
centrally fueled, to meet clean-fuel vehicle volatile organic
compounds (VOC) and nitrogen oxides (NOx) emissions standards.  These
standards can be met through the use of alternative fuels such as
compressed natural gas or through the use of reformulated gasoline
(RFG). 


      ENHANCED AUTOMOBILE EMISSION
      INSPECTION AND MAINTENANCE
      PROGRAM
------------------------------------------------------- Appendix X:0.5

More stringent vehicle emission testing and repair program that is
required to be implemented in areas in the United States with more
serious air pollution problems. 


      EXPANDED AUTOMOBILE EMISSION
      INSPECTION AND MAINTENANCE
      PROGRAM
------------------------------------------------------- Appendix X:0.6

An automobile emission inspection and maintenance program that
requires testing more vehicles than required by EPA. 


      ETHANOL
------------------------------------------------------- Appendix X:0.7

An alcohol produced from starch or sugar crops, such as corn or sugar
cane, or from cellulosic biomass materials.  Ethanol may be used as a
fuel by itself (an alternative motor fuel) or blended into gasoline
to increase the octane of gasoline and increase the gasoline supply. 
In the United States, ethanol has been largely blended in a
10-percent mixture with gasoline to form gasohol.  As an oxygenate,
ethanol supplies oxygen to gasoline, which reduces carbon monoxide
emissions from vehicles.  Because ethanol is water soluble, it must
be blended into gasoline outside the refinery and it cannot be
transported in the same pipelines with gasoline.  In addition,
ethanol increases the volatility of gasoline thereby increasing
evaporative emissions.  These drawbacks can be overcome if ethanol is
converted to its ether form, ethyl tertiary butyl ether. 


      ETHYL TERTIARY BUTYL ETHER
      (ETBE)
------------------------------------------------------- Appendix X:0.8

An ether compound made using ethanol, which is used as a gasoline
additive to boost octane and provide oxygen.  Since ETBE has low
vapor pressure, it could be useful in helping to comply with
volatility controls on gasoline.  Unlike alcohols, ETBE could be
produced and blended with gasoline at the refinery and shipped in
gasoline pipelines. 


      GREENHOUSE GASES
------------------------------------------------------- Appendix X:0.9

Gases, including carbon dioxide, water vapor, methane, nitrous oxide,
and chlorofluorocarbons, that when emitted into the atmosphere
threatens to change the earth's climate. 


      LOW EMISSION VEHICLE PROGRAM
------------------------------------------------------ Appendix X:0.10

A California program that prescribes the maximum emissions permitted
from new vehicles sold in that state. 


      MAXIMUM AUTOMOBILE EMISSION
      INSPECTION AND MAINTENANCE
      PROGRAM
------------------------------------------------------ Appendix X:0.11

More stringent automobile emission testing and repair program, which
assumes that automobiles will meet appropriate emission standards
over their useful life. 


      METHYL TERTIARY BUTYL ETHER
      (MTBE)
------------------------------------------------------ Appendix X:0.12

An ether compound made using methanol, which is used as a gasoline
additive to boost octane and provide oxygen to help reduce carbon
monoxide emissions.  MTBE is the most widely used oxygenate in RFG. 
Unlike alcohols, because MTBE could be produced and blended with
gasoline at the refinery and shipped in gasoline pipelines, it is the
most widely used oxygenate. 


      NEW EVAPORATIVE STANDARDS
      AND TEST PROCEDURES TO
      CONTROL VEHICLE EMISSIONS
------------------------------------------------------ Appendix X:0.13

New standards and test procedures that EPA is required to promulgate
to control vehicle emissions under summertime, ozone conditions. 


      ON-BOARD AUTOMOBILE
      EMISSIONS DIAGNOSTIC
      EQUIPMENT
------------------------------------------------------ Appendix X:0.14

Technology on vehicles that allows an on-board computer to detect and
record malfunctions in the emission control system, allowing more
effective repair of vehicles with high VOC and NOx emissions. 


      OXYGENATE
------------------------------------------------------ Appendix X:0.15

The term applies to any gasoline additive containing oxygen.  Oxygen
in gasoline helps to reduce carbon monoxide, VOC, and air toxics
emissions from vehicles.  Oxygenates include alcohols, such as
ethanol, and ethers, such as ETBE and MTBE.  Each of these compounds
also enhances the octane of gasoline, while their effects on
volatility vary. 


      REFORMING
------------------------------------------------------ Appendix X:0.16

Reforming is one refining process in which crude oil is converted
into gasoline and other products. 


      REFORMULATED GASOLINE
------------------------------------------------------ Appendix X:0.17

Gasoline whose composition has been changed through fuel
reformulation.  The Clean Air Amendments of 1990 requires certain
fuel specifications and performance standards that RFG must meet to
reduce air toxic and ozone-forming emissions in specified
nonattainment areas.  These areas are to start using RFG in January
1995 and in the year 2000, phase II RFG must be used, which further
reduces VOCs, NOx, and air toxic emissions.  California RFG
requirements are stricter than the federal RFG requirements. 


      REFUELING VAPOR RECOVERY
      EQUIPMENT (STAGE II)
------------------------------------------------------ Appendix X:0.18

This is a control measure for capturing the emissions of gasoline
vapor during vehicle refueling and returning them to the storage
tanks at service stations. 


      REID VAPOR PRESSURE CONTROL
------------------------------------------------------ Appendix X:0.19

A control measure of gasoline volatility.  Vapor pressure is
expressed as pounds per square inch (psi) with higher pressure
resulting in higher volatility of gasoline. 


      TERTIARY AMYL METHYL ETHER
      (TAME)
------------------------------------------------------ Appendix X:0.20

An ether compound made using methanol, which is used as a gasoline
additive to boost octane and provide oxygen.  Since it has low vapor
pressure, TAME could also be useful in helping to comply with
volatility controls on gasoline. 


      TIER I EMISSION STANDARDS
      FOR LIGHT-DUTY VEHICLES
------------------------------------------------------ Appendix X:0.21

National VOC, NOx, and carbon monoxide emission standards that
light-duty vehicles are required to meet. 


      TIER II EMISSION STANDARDS
      FOR LIGHT-DUTY VEHICLES
------------------------------------------------------ Appendix X:0.22

Standards for certain light-duty vehicles and light-duty trucks to
further reduce emissions.  These standards would be more stringent
national emissions standards that the federal government has the
option of mandating beginning in model-year 2004. 


      TRANSITIONAL LOW-EMISSION
      VEHICLE PROGRAM
------------------------------------------------------ Appendix X:0.23

A program that requires a portion of the California vehicle
population to meet approximately 50 percent lower VOC emissions than
the national VOC standards. 


      ULTRA LOW EMISSION VEHICLE
      PROGRAM
------------------------------------------------------ Appendix X:0.24

A program that further lowers VOC emissions for the California
vehicle population beyond that required in the transitional
low-emission vehicle program. 


      VEHICLE SCRAPPAGE PROGRAM
------------------------------------------------------ Appendix X:0.25

This program accelerates the removal of older vehicles from the fleet
that have high mobile source emissions. 


      VOC/NOX EMISSIONS
------------------------------------------------------ Appendix X:0.26

VOC and NOx emissions are two of the more prevalent pollutants that
are emitted by motor vehicles and are precursors to the formation of
ozone. 


      ZERO EMISSION VEHICLE
      PROGRAM
------------------------------------------------------ Appendix X:0.27

A California program that requires that by 2003, 10 percent of
vehicles marketed in that state must be zero emission vehicles. 
Currently, the electric vehicle produces essentially no pollution
from the vehicle's tail pipe or through fuel evaporation.  Several
other states have adopted zero emission vehicle requirements. 




RELATED GAO PRODUCTS
============================================================ Chapter 0

Gasohol:  Federal Agencies' Use of Gasohol Limited by High Prices and
Other Factors (GAO/RCED-95-41, Dec.  13, 1994). 

Energy Policy:  Options to Reduce Environmental and Other Costs of
Gasoline Consumption (GAO/RCED-92-260, Sept.  17, 1992). 

Air Pollution:  Oxygenated Fuels Help Reduce Carbon Monoxide
(GAO/RCED-91-176, Aug.  13, 1991). 

Alcohol Fuels:  Impacts From Increased Use of Ethanol Blended Fuels
(GAO/RCED-90-156, July 16, 1990). 

Gasoline Marketing:  Uncertainties Surround Reformulated Gasoline as
a Motor Fuel (GAO/RCED-90-153, June 14, 1990). 


*** End of document. ***