United States
                          Environmental Protection
Office Of Solid Waste And
Emergency' Response
(5401G)  :
       Januaary 1998
                          Office Of Underground Storage Tanks
                          Fact  Sheet  #3
                          Use  And   Distribution  Of
                          MTBE  And   Ethanol

                          Methyl tertiary-butyl ether (MTBE) and
                          ethanol are the most common oxy-
                          genates used to meet the requirements
                          for the U.S. EPA's Reformulated Gas-
                          oline (RFG) and Oxygenated Fuel
                          (Oxyfuel) Programs. Both additives
                          have been used in gasoline in the United
                          States since 1979. MTBE was
                          originally added as an octane-enhancing
                          replacement for lead. Ethanol was
                          originally introduced to make gasohol
                          (i.e., 10-percent ethanol in gasoline) as
                          part of a program to reduce reliance on
                          oil imports.

                          Summary Of Two U.S. EPA
                          Clean Air Programs

                          The Oxyfuel and RFG Programs were
                          initiated by the U.S. EPA in 1992 and
                          1995, respectively, to meet require-
                          ments of the 1990 Clean Air Act
                          Amendments. The Oxyfuel Program
                          requires the use of gasoline with 2.7-
                          percent oxygen (by weight) in areas with
                          high levels of carbon monoxide during
                          the fall and winter. When MTBE is
                          used to meet this requirement, it is used
                          at a concentration of 15 percent (by
                          volume) in gasoline. Because ethanol
        has a higher oxygen content, it can meet
        this requirement with a concentration of
        7.3 percent (by volume). The RFG
        Program requires 2.0-percent oxygen
        (by weight) throughout the year in the
        most polluted metropolitan areas.
        MTBE meets this level with an 11-
        percent (by volume) concentration, and
        ethanol can be used with a 5.4-percent
        (by volume) concentration.

        Extent Of MTBE And Ethanol
        Use In The United States

        Approximately 30 percent of all gaso-
        line in the United States contains fuel
        oxygenates for compliance with RFG
        requirements. An additional 4 percent is
        used for compliance with Oxyfuel
        requirements. MTBE, which is the most
        common fuel oxygenate, is used in more
        than 80 percent of oxygenated fuels.
        Since 1993, MTBE has been the second
        most produced organic chemical
        manufactured in the United States.
        Ethanol, which is the second most
        common fuel oxygenate, is used in about
        15 percent of the oxygenated fuels.
        Other oxygenates, which constitute the
        remaining 5 percent of the market,
        include tertiary amyl methyl ether
        (TAME), ethyl tertiary butyl ether
       January 1998
     1  MTBE Fact Sheet #3: Use and Distribution

                        (ETBE), diisopropyl ether (DIPE), and
                        tertiary butyl alcohol (TEA).

                        In additional to its use as a fuel oxy-
                        genate, MTBE is widely used for octane
                        enhancement in mid and high-octane
                        blended conventional gasoline, typically
                        at concentrations ranging from 2 to 8
                        percent (by volume). It may also be
                        found in regular grade gasoline at lower
                        concentrations. The Oxygenated Fuels
                        Association estimates that about 70
                        percent of all gasoline in the United
                        States contains MTBE at varying con-
                        centrations. As a consequence of the
                        wide-spread use of oxygenated fuels,
                        underground storage tank regulators
                        cannot assume that the gasoline in their
                        region is free of MTBE just because the
                        tank is located outside an RFG/Oxyfuel

                        Although it is difficult to predict the
                        type of oxygenate used in a specific
                        gasoline, there are general trends in their
                        use. Ethanol is used primarily during
                        the winter months to meet the require-
                        ments of the Oxyfuel Program. MTBE
                        is used throughout the year, but its use
                        increases in summer months as it re-
                       places ethanol in regulated areas. Three
                       major factors have influenced how these
                       two fuel oxygenates are used in
                       petroleum products.

                        Lower Vapor Pressure-MTBE

                       In addition to requiring that fuels bum
                       cleaner, EPA requires areas with high
                       levels of smog (including but not lim-
                       ited to RFG areas) to reduce the vapor
                       pressure of gasoline in the summer
                       months in order to decrease the volatil-
                       ization of petroleum constituents at
                       storage facilities and during fuel trans-
                       fer. Because MTBE-blended gasoline
                       has a lower vapor pressure than ethanol-
 blended gasoline, MTBE is the preferred
 oxygenate in warm weather.


 The cost of transportation and the con-
 venience of use favors MTBE over eth-
 anol. Because MTBE is more compat-
 ible with gasoline, it can be blended at
 the refinery and distributed with gasoline
 through pipelines. Ethanol, on the other
 hand, must be shipped separately from
 gasoline and added at the distribution
 terminal soon before use. If ethanol-
 blended gasoline is exposed to water or
 even water vapor (as in pipelines), eth-
 anol will bring the water into solution
 and make the gasoline unusable. In
 addition, if ethanol-blended gasoline is
 stored for an extended period, the ethan-
 ol will begin to separate from the gaso-
 line. As a result, ethanol is often manu-
 factured close to the point of use or ship-
 ped by rail, increasing the cost of its use.

 Tax Incentives-Ethanol

 Market price and tax incentives play a
 major role in the use of MTBE and
 ethanol. Although the market price of
 MTBE is typically lower than that of
 ethanol, when the government subsidies
 are included, ethanol often costs less.
 The federal government provides a sub-
 sidy of $0.54 per gallon of ethanol when
 it is blended in gasoline at concentra-
 tions between 5.4 and 10 percent (by
 volume). Furthermore, 12 states (Alas-
 ka, Connecticut, Hawaii, Iowa, Illinois,
 Kansas, Minnesota, Missouri, North
 Dakota, Nebraska, Ohio, and South
 Dakota) have additional incentives for
 ethanol production and use, making it
even more competitive for these loca-
tions. Specific price information for
MTBE and ethanol, including the effect
MTBE Bact Sheet #3: Use and Distribution
                                                                                       January 1998

                      of federal tax subsidies, is provided in
                      Exhibit 1.            ;      ;

                      Additional Distribution Factor

                      Areas not required to use RFG/Oxyfuel
                      may still receive these fuels on occasion
                      if they are near RFG/Oxyfuel areas
                      because of the complexity and imperfec-
                      tions of gasoline distribution systems.
                      This situation, called "spillover," is
                      most likely to occur when there is a
                      shortage of non-oxygenated fuel and a
                      surplus of oxygenated fuel. The petro-
                      leum industry tries to avoid this situation
                      because RFG/Oxyfuel is more expensive
                      to produce than conventional fuel. There
                      are no accurate measurements of how
                      often this situation occurs, but it proba-
                      bly accounts for less than 10 percent of
                      total RFG/Oxyfuel sales.

  MTBE is preferred by the petroleum
  refinery industry over ethanol for octane
  enhancement and RFG (2.0 percent
  oxygen, all year) because it is less
  expensive, is easier to use, and creates a
  gasoline with a lower vapor pressure.
  Although MTBE is also used in winter
  months, ethanol is commonly used in
  Oxyfuel (2.7-percent oxygen in the
  fall/winter months) because govern-
  ment subsidies make it price competi-
  tive and because gasoline volatility is
  not a major concern in cold weather.
  Although these trends in the use and
  distribution of oxygenated fuels are
  useful in helping to determine what type
  of additive to expect in a region, they are
  not predictive. MTBE may be found in
  new or old releases in virtually all areas
  of the United States.
                                 Exhibit I.  Price Ranges For MTBE And Ethand1
                                                Price Range
          Ethand With Federal Subsidy

   Price Range
                        1 January! 995 through October 1997.
January 1998
3   MTBE Fact Sheet #3: Use and Distribution