E85 - FAQs

What is Ethanol?

Ethanol is a high octane, liquid, domestic and renewable fuel, produced by the fermentation of plant sugars. In the United States, ethanol is typically produced from corn and other grain products, although in the future it may be economically produced from other biomass resources such as agricultural and forestry wastes or specially grown energy crops.

What is E85?

E85 is the term for motor fuel blends of 85 percent ethanol and just 15 percent gasoline. E85 is an alternative fuel as defined by the U.S. Department of Energy. Besides its superior performance characteristics, ethanol burns cleaner than gasoline; it is a completely renewable, domestic, environmentally friendly fuel that enhances the nation's economy and energy independence. Today, the U. S. imports more than half of its oil, and overall consumption continues to increase. By supporting ethanol production and use, U.S. drivers can help reverse that trend. 85% ethanol can reduce pollution. Government tests have shown that E85 vehicles reduce harmful hydrocarbon and benzene emissions when compared to vehicles running on gasoline. E85 can also reduce carbon dioxide (CO2), a harmful greenhouse gas and a major contributor to global warming. Although CO2 is released during ethanol production and combustion, it is recaptured as a nutrient to the crops that are used in its production. Unlike fossil fuel combustion, which unlocks carbon that has been stored for millions of years, use of ethanol results in low increases to the carbon cycle.

Ethanol also degrades quickly in water and, therefore, poses much less risk to the environment than an oil or gasoline spill. What are the channels that ethanol moves through as it is marketed from the plants?

Ethanol moves via a variety of marketing and logistical channels once it leaves the plant. Rail and truck transport to local and destination markets covers most of the transportation although some barge transport is currently in play. A typical local marketing situation would be for a transport load of gasoline to move from terminal to plant; gasoline is off loaded into plant bulk storage for use as denaturant; bulk ethanol is denatured and put on rail or truck; ethanol used in local markets may move back to terminal and into bulk storage or it may go to a bulk plant where it is blended and then moved to retail; if ethanol moved to terminal it goes back into bulk storage; retail or wholesale customer buys load of E10 or E85 at terminal, loads transport at terminal and then goes to retail delivery point. Marketing directly from the ethanol plant is contrary to current practices but it would be an evolution that increases efficiency and presents much better potential for managing ethanol value and control of the federal tax credit.

Can you provide a breakdown of possible pricing of the ethanol as it moves through the channels of distribution?

Ethanol is traded physically and on paper. Each transaction captures a margin. Several transactions are involved with each gallon. For example, Plant A sells to a marketing company from IL; this company provides Oil Co. B ethanol for NE sales; Oil Co. B sells ethanol to Wholesale Co. C; Wholesale Co. C sells to Branded Retailer D, who adds a margin and sells at retail. Each transaction adds to the cost of the product.