Alternative Fuels

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					  ALTERNATIVE FUEL USE IN TRANSPORTATION:
                                 ETHANOL AND BIODIESEL




                                    Submitted by 2006 MDOT Fellows Interns:
Laura Brench – University of Maryland College Park              Andrew Gates – University of Maryland Eastern Shore
Kitaka Craig – Bowie State University                           Marta Kikena – Towson University
                                  Douglas Miller – University of Maryland Baltimore County
                                       Table of Contents
Executive Summary ...................................................................................... 3

1.0 Introduction ............................................................................................. 5

2.0 Problem Overview .................................................................................. 7

3.0 Alternatives ............................................................................................. 8

           3.1 Petroleum – The Status Quo ....................................................... 8

           3.2 Ethanol (E85) .............................................................................. 10
                Gasoline/Ethanol Comparison Chart....................................................... 13

           3.3 Biodiesel (B20) ........................................................................... 14
                Diesel/Biodiesel Comparison Chart ........................................................ 17

4.0 Recommendations ................................................................................... 18

5.0 Acknowledgments .................................................................................. 20




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                                 Executive Summary
Purpose

Rising concern over US dependence on petroleum-based fuels has increased discourse on
the potential role of alternative fuels in reducing petroleum consumption. Focusing
specifically on the characteristics and potential of ethanol and biodiesel, this document
examines current usage in Maryland of these two fuels and proposes avenues to further
integrate alternative energy sources into the state’s transportation networks.

Justification

According to the 2006 International Energy Outlook Report, the US Energy Information
Administration projects world energy consumption will increase 71 percent from 2003 to
2030. Continuing high energy use in the West and rapid industrialization in developing
countries, notably China and India, account for this demand. Petroleum-based fuels
continue to be a dominant source of energy, particularly in the transportation sector.

While the possibility of a crippling domestic oil supply crisis like the 1973 oil embargo is
remote, dependence on a single type of fuel nevertheless leaves the US susceptible to
even minor supply chain disruptions. As the US transportation system, public and private,
is almost fully reliant on petroleum-based fuels, this sector is especially vulnerable.

In addition to mitigating national dependence on foreign oil, alternative fuel use in
transportation offers a way to reduce vehicle emissions, reduce costs, and support the
domestic agriculture industry. The State of Maryland and MDOT have responded with
initiatives such as the Renewable Fuels Promotion Act of 2005 and the State Fleet
Biodiesel Fuel Usage Act of 2006. However, to approach the strides made in alternative
fuel promotion in the Midwest and, recently, in New York, Maryland must actively
continue to expand public access to and awareness of ethanol and biodiesel.

Alternatives

Because a multitude of alternative energy technologies are in various levels of
development today, this document specifically focuses on alternative liquid fuel types
that fit into the existing petroleum infrastructure with minimal modification. To this end,
ethanol and biodiesel make the most sense for widespread use in Maryland. Advantages
include potential rapid adoption, ease of transition, and interoperability with petroleum
and petrol-fueled products.

Ethanol is a form of pure grain alcohol produced by fermenting and distilling sugars from
corn, wheat, or other plant matter. It can be used as a complete gasoline replacement in
specially modified combustion engines or blended with gasoline in other combinations
for use in a wider range of vehicles. This document primarily focuses on E85, which is
composed of 85 percent ethanol and 15 percent gasoline. Five gas stations in Maryland
currently carry E85, of which only three are accessible to the public.



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Biodiesel is a renewable fuel produced primarily from soybean oil, waste cooking oil, and
animal fats. It is largely equivalent to diesel fuel and can be used in diesel engines with
little modification. Although biodiesel can be burned as fuel in a pure form, most
biodiesel sold is blended with petrol diesel. This document addresses B20, a popular
blend comprising of 20 percent biodiesel and 80 percent diesel. Currently, Maryland has
four biodiesel stations.



Recommendations

I.      Lower the state excise tax on E85 and B20 to make their at-pump price equal to
or less than that of their petroleum-based counterparts. Maryland taxes E85 the same
amount as gasoline and B20 the same as diesel. To increase demand to salient levels,
state excise tax on E85 and B20 should be reduced to make them cost competitive with
gasoline and diesel, respectively. Annually indexing the cost of the two alternatives to
their petroleum-based counterparts will indicate how much the tax needs to be lowered.
By equalizing prices, consumers will have increased incentive to switch to vehicles
already compatible with ethanol and biodiesel. Once demand reaches sustainable levels,
the state excise tax can be elevated, yielding higher revenue from the overall increase in
transportation fuel consumption – alternative and petroleum-based.

II.      Increase the number of gas stations carrying E85 and/or biodiesel by partially
subsidizing the costs of installing an additional pump or converting an existing pump.
Helping station owners to implement E85 and B20 pumps increases public access and
fueling options. An MDOT committee will administer the process and disperse subsidies
from the Transportation Trust Fund, offset by an increase in the retest fee for vehicles
that fail emissions inspections. To minimize expense and encourage statewide
proliferation, the subsidy will be limited to one pump per fuel type at each station.

III.    Allow flex-fuel and hybrid vehicles displaying proper alternative fuel license
plates to be driven in the high occupancy vehicle (HOV) lane regardless of time of day or
number of passengers. This policy, administered by the MVA, would provide tangible
incentive for drivers to use alternative fuels at little cost to the state. Florida, Georgia and
the District of Columbia have adopted such measures.

IV.     Heighten public awareness about ethanol and biodiesel as viable alternative fuels
by launching a public outreach campaign using MDOT’s various modals. Transport-
users are eager to lessen the high cost of fuel, but many are unaware of alternative fuel
options. Traditional outreach strategies should include press and video news releases,
local radio station airings, and posters given to gas stations and car dealerships explaining
the fuels and listing where they are available. Other strategies include putting signs on
MTA buses and setting up an MDOT web site on ethanol, biodiesel and other alternative
fuel use in Maryland.




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1.0 Introduction
Increasingly today, as a result of high fuel prices, market concerns, and environmental
issues, energy sources and potential alternatives are on consumers’ minds. Currently in
the United States, consumers use 20 million barrels of petroleum products a day, in
approximately 200 million motor vehicles.i

Americans depend upon these vehicles and the fuels that power them to get around.
However, there are signs that it will soon be prudent for consumers, public and private
alike, to consider the potential of alternative fuel sources. In 2000, the average gasoline
price was just $1.50 a gallon. In 2006, the nation is facing a market where around $3 a
gallon is becoming the norm.ii These high gas prices are initiating renewed interest in
vehicles with greater fuel efficiency and alternative fuels.

Additionally, about 50% of all fuel used in transportation in the United States is
imported.iii With an increasingly unstable Middle East and strained relationships with
several countries in the region, our nation’s dependence on imported energy sources may
be an economic and political liability. Indeed, in this year’s State of the Union Address,
President Bush pushed his Advanced Energy Initiative, which calls for cleaner fuels and
reducing foreign oil dependence.iv

While it is fairly clear why the average consumer and the nation as a whole is becoming
interested in alternative fuels, it may be less apparent why the Maryland Department of
Transportation (MDOT) should get involved. Alternative fuels are only now starting to
receive interest in Maryland. There are only five ethanol and four biodiesel stations in the
entire state. Additionally, there is only one biodiesel production plant in the state, which
only just opened in June 2006. There is a program in place, however, to provide
producers of biodiesel and ethanol with tax credits for their production. The Maryland
Energy Administration is working hard to promote alternative fuels, but given that fuels
are such a large part of transportation, it is prudent for MDOT to play a proactive role in
alternative fuel adoption and advocacy as well.

Many MDOT modals already use some forms of alternative fuels in their vehicles.
Several state buses utilize biodiesel or compressed natural gas. For example, the shuttle
buses at BWI Airport for their rental car facility use compressed natural gas.
Additionally, the State Highway Administration uses B20 in some, if not all, of its diesel
vehicles. Clearly MDOT cares about its community and is looking towards the future of
alternative fuels. Since the modals are already involved in alternative fuels, they could
probably use some help from MDOT in encouraging such fuel use in the future. This is
especially true since state departments are encouraged to procure and use alternative fuel
vehicles. With so few alternative fuel stations in the state, it could become difficult for
MDOT and its modals to fuel their required Alternative Fuel Vehicles.

Other states in the area are developing alternative fuel programs. For instance, New York
has a large alternative fuels program, run entirely through their department of
transportation. The department has such incentives as tax credits for production and
subsidies for procuring alternative fuel vehicles. Additionally, all of the states Thruway


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plazas will eventually have E85 (an ethanol blend) pumps.v The state also works with
private companies and the community to develop plans and events centered around
alternative fuels. New York’s program has drawn nationwide media attention and
acclaim. MDOT could benefit from the same positive public relations and image as New
York.

Finally, Maryland’s legislature is also pushing alternative fuels. This year the legislature
passed the State Fleet Biodiesel Fuel Usage Act, which requires that 50% of the states
vehicles use B5, a biodiesel blend, by 2008.vi The state also has a directive, mentioned
above, that all departments should work to procure more Alternative Fuel Vehicles. With
such public and state interest in alternative fuels, it is necessary for MDOT to become
involved. MDOT’s first focus has always been customer service, and an involvement in
alternative fuels would serve the public, garner good public relations, and benefit the
departments’ modals that already use alternative fuels.




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2.0 Problem Overview
The problem discussed in this paper is two-fold. First, this document addresses the
alternatives available to ease the fuel issues in Maryland, and second it addresses how
MDOT should advocate for these alternatives.

As discussed in the introduction, the United States is facing growing concern over the
fuel industry. On a national scale, the issues with the current situation are:

       High fuel prices
       Foreign oil dependence
       Some concern over environmental effects of gasoline

As far as Maryland and the Maryland Department of Transportation, the issues are:

       Few alternative fuel stations
       Growing legislative and executive pressure to utilize Alternative Fuel Vehicles
        (AFVs)
       Other states having initiatives
       Public relations

To this end, we first address the current gasoline situation, and then investigate the
properties of ethanol and biodiesel. This is limited to discussion of ethanol and biodiesel
because they fit in the current gasoline/diesel infrastructure (meaning pumps, vehicles,
and storage) with little alteration.

We then discuss ways for MDOT to promote popular blends of both ethanol and
biodiesel, with the aim of at least somewhat addressing both the national and local issues
identified above.




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3.0 Alternatives
We first discuss petroleum and gasoline, delving into current usage and infrastructure.
We then investigate both ethanol (specifically E85) and biodiesel (specifically B20) as
possible alternatives to petroleum.

3.1 Petroleum – The Status Quo

Petroleum, or "crude oil," is a substance formulated of compressed hydrocarbons which
formed the earth over millions of years because of the pressure of layers of rock and
mineral on buried aquatic plant and animal remains. Different mixtures of organic
material exposed to combinations of heat, pressure, and time formed the various
hydrocarbon commodities we consume and trade, including fossil fuels (petroleum,
natural gas, coal) and some non-combustible material goods like diamonds.vii

   Production

   Reservoirs of crude oil collect as the substance seeps into the sponge-like pores of
   sedimentary rock. Surrounding non-porous layers of rock confine the liquid material,
   forming “petroleum traps.” Oil producers identify prospective trap sites through a
   variety of processes, including exploratory drilling and seismic testing. Historically,
   only one in five prospective wells contained enough crude oil to make extraction
   economically feasible, though technological advances – both in exploration and
   extraction – have reduced the rate of failure to one and three and made some
   previously discovered sites economically viable.

   After extraction, crude oil is generally shipped to a production facility for refinement
   located relatively close to where the derivative fuel products will ultimately be
   consumed. The primary refinement process is distillation, which separates crude oil
   into hydrocarbon categories by boiling them off at different temperatures. Additional
   complex “downstream” processing techniques follow, allowing producers to
   maximize output from input and rapidly respond to specific fuel demands.viii

   Price factors

   Even with stable crude oil prices, petroleum fuel prices fluctuate because of factors
   like seasonality and local market competition. Rapid price changes can also occur
   because of crude oil disruptions related to world event or domestic infrastructure
   problems.

   Refining costs and the associated profits comprise about 19 percent of the retail price
   of petroleum fuel products. This varies from region to region because of the different
   formulations required in different areas of the country. The distribution costs,
   marketing, and retailer costs and profits make up 9 percent of the cost of a gallon of
   petroleum fuel. The pump price also reflects purchase and operation costs as well as
   local market factors.ix




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Taxes also constitute a considerable part of the retail price of petroleum fuel products.
The federal excise tax is 18.4 cents per gallon for gasoline and 24.4 cents per gallon
for diesel fuel. The State of Maryland’s excise tax is 23.5 cents per gallon for
gasoline and 24.3 cents per gallon for diesel fuel. Combined, gasoline sold in
Maryland is taxed 41.9 cents per gallon and diesel 48.7 cents per gallon.

Infrastructure and usage

Petroleum products accounted for 40.2 percent of energy generated in the United
States in 2004, with 67 percent of that energy used for transportation needs.x

Nationally, consumers use 20 million barrels of petroleum each day. About half of
this is used as gasoline in the nation’s 200 million vehicles. Additionally, about 50%
of all fuel used in transportation in the United States is imported, leading to concerns
over foreign oil dependence.xi All estimates from the Department of Energy indicate
that this consumption will only increase in the future, to 28.3 million barrels a day in
2025.xii As of January 2006, Maryland uses 7.0 million gallons of gasoline and 2.5
million gallons of diesel fuel each day, which ranks the state 21st and 26th in
consumption per fuel type, respectively.xiii

Gasoline is the number one fuel used in the United States. In 2005, there are 168,987
retail gasoline stations across the United States (National Petroleum News, May
2005). In Maryland, there were 2,369 gasoline stations across the state. As almost
every consumer knows, a gasoline station can be found almost anywhere. Indeed, on
most major highways signs even direct consumers to specific franchises of gas
stations. However, in the past six years the price of gasoline at the pump as
doubled.xiv Additionally, legislation such as the Clean Air Act requires that certain
gasoline emissions be regulated. Concerns over global warming have also lead
scientists and some consumers to call for alternatives to gasoline.




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3.2 Ethanol (E85)

Ethanol is a pure grain alcohol produced by fermenting and distilling plant sugars.
Possible sources include: corn, potatoes, wood, barley, wheat, waste paper, brewery
waste, and many other agricultural products and food wastes. If a form of organic matter
contains sugar, starch, or cellulose, it can be fermented and distilled into ethanol.xv
Ethanol can also be produced synthetically using the catalytic hydrolysis of ethylene.
However, ethylene is a petroleum product and the production of ethanol from ethylene
does little to reduce the nations demand on petroleum.xvi

Ethanol within the automotive industry is rapidly growing in demand. In gasoline it is
used as an oxygenate to improve combustion and improve emissions, and it is blended
with gasoline in larger quantities to reduce gasoline demand and reduce harmful
emissions. Ethanol can be used as a complete gasoline replacement, known as E100, or it
can be blended with gasoline in any combination. The most popular blends in the United
States are 85% ethanol (E85), 10% ethanol (E10), and 5% ethanol (E5).xvii

   Pump Price

   The price of ethanol varies by geographic location, with the lowest prices centered in
   the upper Midwest. On average though, E85 is more expensive than gasoline on an
   equivalent scale. This equivalent scale takes into account the reduced energy content
   of ethanol when compared to gasoline and increases the cost of E85 by the percent of
   the energy difference. In June ’06, the national average for E85 was $2.43 per gallon
   and $3.43 in gasoline gallon equivalents (gge) and gasoline was $2.84 per gallon. In
   the Central Atlantic region, which consists of Maryland, Delaware, Pennsylvania,
   New Jersey, and New York, the average price for E85 was $2.95 per gallon and $4.16
   gge. Gasoline averaged $2.90 per gallon.xviii As production of ethanol increases and
   as more efficient ways of producing ethanol are developed, the price of ethanol
   should decrease to market competitive rates over time. Combine this with the
   increasing price of gasoline and ethanol becomes more cost effective.

   Fuel Efficiency

   Ethanol in its pure form has a higher octane rating than gasoline, 100 and 86-94
   respectively.xix It is important to realize that octane is not a measurement of how
   much energy a fuel has. Octane is a measure of the antiknock properties of a liquid
   motor fuel. The higher octane rating of ethanol means that it has a greater effect in
   reducing engine knocking.xx The actual energy content of ethanol is on average
   ~66,000 Btu per gallon while the average energy content of gasoline is on average
   ~115,000 Btu per gallon.xxi xxii Since ethanol has a lower Btu per gallon, in order to
   travel the same distance as 1 gallon of gasoline, it would take 1.74 gallons of ethanol.
   However, if ethanol were used in an engine designed specifically to run on only
   ethanol, mileage would improve since it would be able to take full advantage of the
   higher octane value, and be able to use a higher compression ratio. Currently there are
   no engines in mass production designed to run solely on ethanol. When blended as




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E85, the Btu per gallon increases to ~80,000 Btu per gallon, increasing mileage in
flex-fuel vehicles.xxiii

Emissions

Emissions from engines burning ethanol blends are reduced from engines that burn
only gasoline. Emissions of benzene, formaldehyde, CO, and volatile organic
compounds are reduced. Acetaldehyde and unburned ethanol emissions are increased,
however both are less reactive than formaldehyde and gasoline, reducing the
formation of NOx.xxiv In vehicles burning E85, it is estimated that there is a 25%
reduction in ozone-forming emissions, a 20% reduction in particulate emissions, a
80% reduction in sulfate emissions, a 10% reduction in NOx emissions, a 40%
reduction in CO emissions, and a 15% reduction in volatile organic compounds.xxv xxvi
In vehicles burning pure ethanol, these emissions benefits are even higher.

Availability

In 2004, the U.S. consumed 34,349,052,000 gallons of ethanol-blended fuel, with
Maryland using 3,033,000 gallons. In 2005, the U.S. produced 4,264,000,000 gallons
of ethanol; currently Maryland does not have any ethanol production facilities.xxvii On
July 3, Maryland had four E85 stations; three open to the public. Nationwide there
were 676 E85 stations.xxviii As of July 27, Maryland still has five stations, still only
three are public. Nation wide the number of stations has increased to 709.xxix
Distribution of ethanol and E85 can use the same infrastructure that is already in
place for the distribution of gasoline.

Special Requirements

There are some special requirements and considerations for ethanol that must be
taken into account. Ethanol does not mix well with diesel fuel and when in a diesel
substitute blend of E95, CO emissions are much higher than #2 diesel.xxx xxxi Some
vehicle manufacturers require that special lubricants be used in the engine, sometimes
at a slightly higher cost. During the winter, ethanol has a low-volatility; but in the
summer, it has a higher volatility than gasoline, posing a slight risk. Ethanol is not
considered a toxic substance at levels likely to be inhaled when used in motor fuel.xxxii
In the event of a fuel spill, ethanol is less flammable, water soluble, and will
biodegrade quickly. If the ethanol is blended, than the gasoline must still be cleaned
up.

Since ethanol is slightly corrosive, it makes for a cleaner engine. This keeps the
engine running better and allows for an increase in between oil changes.xxxiii
However, this same property can cause rubber hoses and gaskets to break down much
faster than in regular gasoline cars. Special hoses, gaskets and other parts resistant to
this corrosion must be used in vehicles that burn ethanol in blends any higher than
E10.xxxiv




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Use in Maryland

Currently there is legislation in the state that provides production credits to producers
of ethanol. This legislation, the Renewable Fuels Promotion Act of 2005, provides for
credits of $.20 per gallon of ethanol produced from small grains, and $.05 per gallon
produced from other agricultural materials. This credit is only valid for the first
15,000,000 gallons produced per calendar year, and the bill sunsets in 2017. There is
no other legislation in Maryland to either mandate or promote the use of ethanol.

Use in Other Areas

Brazil. The country produces over 4 billion gallons per year of ethanol from
sugarcane, and ethanol makes up 20% of Brazil’s transportation fuel market. This has
actually led to a decline in the countries use of gasoline. Early in the 1970’s the
government mandated the use of ethanol in gasoline and that it be available at every
pump. The Brazilian government also provided large subsidies to the producers of
ethanol so that it could more easily compete with gasoline at the pump.xxxv

With ethanol and E85 available at every gas station in Brazil and pure-ethanol, and
more recently flex-fuel, vehicles widely available, the ethanol industry grew and
expanded to the point were in the late 1990’s the Brazilian government was able to
discontinue the subsidies of the ethanol industry. Without the subsidies the industry
was forced to become more efficient in order to remain competitive with gasoline.
Currently, many of the refineries in Brazil are self-sufficient, using the leaves and
leftover material to burn and power the refineries. This practice even produces excess
electricity that the refineries are able to sell. Currency the Brazilian ethanol industry
exports its extra ethanol to other countries like Sweden and Japan.xxxvi




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3.3. Biodiesel (B20)

Biodiesel is a renewable fuel that is produced from soybean oil, waste cooking oils,
rapeseed oil, and animal fats. The fuel is produced domestically, with most production
occurring in the Midwest due to the large amount of soybean growers in those states.
Biodiesel is not the same as straight vegetable oil, which has also been used as an
alternative fuel. While straight vegetable oil is recovered from cooking and put into
vehicles without alteration, biodiesel is a processed fuel that in general burns cleaner and
is safer than regular diesel fuel.xxxvii

Biodiesel is largely equivalent to No. 2 diesel fuel. This means that it can be used in
diesel engines without many alterations to the engine or vehicle. Biodiesel in its pure
form, B100, can be used, but most biodiesel sold is a blend of biodiesel and regular
diesel.xxxviii Such blends combine the useful characteristics of biodiesel with the fuel
efficiency of No. 2 diesel and are designated by B-, where the dash is the percentage of
biodiesel in the fuel. The most common blends of biodiesel are B2, B5, and B20.xxxix
Lower biodiesel blends can be used in diesel engines without any alterations at all. In this
paper we will be concentrating on B20.

   Pump Price

   Like any fuel, the price of B20 sold at the pump fluctuates over time. According to
   the Clean Cities Alternative Fuels Price Report, published semi-annually by the
   Department of Energy, in September 2005 the national average price per gallon of
   B20 was $2.91. The average price per gallon for the Central Atlantic region, of which
   Maryland is a member, was $3.07. At that time, the national average for No. 2 diesel
   was $2.81 and the Central Atlantic average was $2.83.xl In February 2006, the most
   recent Clean Cities report, the national average price per gallon for B20 was $2.64
   and the Central Atlantic average was not reported. The diesel national average price
   per gallon was $2.56 and Central Atlantic average was $2.62. In terms of diesel
   gallon equivalency, meaning the cost of biodiesel measured in diesel energy gallons,
   the national average was $2.69.xli Clearly, B20 is more expensive, in general, than
   regular diesel. Additionally, B20 seems to be more expensive in the Central Atlantic
   region than in other parts of the nation, probably due to few production plants being
   located in this area.

   Fuel Efficiency

   It is hard to compare No. 2 diesel to B20 in terms of miles per gallon, as the mileage
   depends on both the vehicle driven and the terrain driven. However, it is known that
   pure biodiesel’s energy content is about 10% less than that of No. 2 diesel. Blends,
   such as B20, reduce this difference to about 1-2%, depending on the amount of
   biodiesel in the mixture.xlii In terms of energy content per gallon, No. 2 diesel’s
   energy content is 128,000-130,000 Btu while B20’s is 117,000-120,000 Btu.xliii This
   shows the reduction in energy content in biodiesel. However, this reduction is not
   overwhelming and could be reduced with future developments.




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Emissions

Four types of emissions regulated by the Environmental Protection Agency under the
Clean Air Act are NOx, carbon monoxide, particulate matter, and hydrocarbons.
When used in diesel engines, B20 reduces CO emissions by 11%, particulate matter
emissions by 10.1%, and hydrocarbons by 21.1%. However, use of B20 did increase
NOx emissions by 2%.xliv While this increase is minor, it is still notable. The use of
properly tuned engines and catalytic converters could help reduce this NOx increase.
There are other emissions benefits, such as a reduction in CO2 emissions, that derive
from the fact that biodiesel is a renewable resource, and requires less fossil fuels than
regular diesel. It is important to note that biodiesel emissions can vary based what the
biodiesel is made of (i.e. soybean oil vs. animal fats). More research is needed to
investigate the differences between each type of biodiesel.

Availability

Biodiesel is made through a process called transesterification. The only byproduct of
transesterification is glycerol, a valuable product used in cosmetics and other
industries. Approximately 65 companies have invested in producing biodiesel
nationwide, with a theoretical top production capacity of 395 million gallons per year.
However, in 2005 the United States produced 75 million gallons of biodiesel, mostly
in the Midwest.xlv Maryland’s first biodiesel plant opened on June 19, 2006 in Berlin,
MD. It is currently capable of producing 500,000 gallons per year.xlvi There are a total
of 431 stations that sell biodiesel in the United States, with only three of the stations
located in Maryland.xlvii Maryland is thus not heavily involved in the biodiesel
industry at this point in time, but may become so in the future, with the opening of the
new production plant, which is expected to double its production capacity by the end
of the year, and other biodiesel stations.

Special Requirements

Biodiesel has a higher freezing point that regular diesel. B100 therefore needs special
heated storage tanks and transport tanks when used in cold climates or during the
winter months. However, B20 does not need special tanks since it contains 80%
regular diesel. The blend of biodiesel and diesel lowers B20’s freezing point,
allowing it to be stored in existing storage tanks.xlviii

Biodiesel also erodes natural rubber, so engines with natural rubber gaskets could be
affected. It is recommended that all natural rubber in an engine be replaced before
using biodiesel. Many manufacturers are already switching to Viton gaskets instead
of the natural rubber, but older vehicles should check their gaskets. Biodiesel
additionally cleans out engines of deposits, which can clog the air filter quickly,
especially when biodiesel is first used. New users of biodiesel should check and
replace the air filter often at first, but this need is reduced over time.xlix




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In general, biodiesel is safer than No. 2 diesel because its flashpoint is higher,
meaning that the fuel is less combustible. Additionally, biodiesel requires no special
dispensers or vehicles, so it is easy for consumers to purchase and use.l

Use in Maryland

In 2005, Maryland passed the Renewable Fuels Promotion act, which gives credits to
producers of biodiesel or ethanol. For biodiesel, the producer receives $.20 per
soybean gallon produced, and $.05 per other gallon produced. These credits were
designed to encourage biodiesel production in MD. Additionally, in 2006 the
Maryland Legislature passed the State Fleet Biodiesel Fuel Usage Act, which requires
50% of State Fleet vehicles to use B5 by 2008. The State Highway Administration
already uses B20 in its vehicles.li The new production factory, mentioned above, will
buy soybean oil from Perdue Farms, another Maryland business. Finally, the
Maryland Soybean Board offers a half-price rebate to consumers on all biodiesel
purchased. However, consumers can only apply for the rebate for one fiscal year.
Currently, consumers can only purchase biodiesel at four stations in the state.

Precedence of Other States

Virginia has a similar biodiesel production law as Maryland, with tax credits for
producers. They are also encouraging all state vehicles to use biodiesel. To the north,
Pennsylvania has enacted a biodiesel committee to study possible future incentives
and use of biodiesel in the state. Delaware has some form of production facility grants
and biodiesel rebates as well. Clearly the entire Central Atlantic region is looking into
biodiesel and its benefits and drawbacks. On a more national level, all branches of the
military use B20 in their vehicles. Finally, New York has a bus incentive plan, where
companies and government entities can be reimbursed for using alternative fuels in
buses. They also have a facility rebate, where 50% of the cost of a property is given
as tax credit if an alternative fuel station is located on the property.lii




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17
4.0 Recommendations
The US Department of Energy describes Maryland as a “diverse state with diverse energy
sources.”liii In to maximize those resources and keep up with the nationwide transition to
alternative fuel use, we propose the following strategies for the State of Maryland and the
Maryland Department of Transportation to adopt:

       I.      Lower the state excise tax on E85 and B20 to make their at-pump price
               equal to or less than that of their petroleum-based counterparts.

The Transportation Trust Fund, heavily funded by the excise tax, has been very
successful in providing the flexibility needed for a premier state transit system. Such
flexibility is needed now. Although reducing the excise tax would lower Transportation
Trust Fund revenue for the short term, MDOT should advocate this course of action as an
investment to increase future revenue as well as MDOT’s reputation as a progressive
entity in alternative fuel use.

To increase demand to salient levels, state excise tax on E85 and B20 should be reduced
to make them cost competitive with gasoline and diesel, respectively. Annually indexing
the cost of the two alternatives to their petroleum-based counterparts will indicate how
much the tax needs to be lowered. By equalizing prices, consumers will have increased
incentive to switch to vehicles already compatible with ethanol and biodiesel. Once
demand reaches sustainable levels, the state excise tax can be elevated, yielding higher
revenue from the overall increase in transportation fuel consumption – alternative and
petroleum-based.

In July 2006, New York fuel use eliminated all state tax on renewable motor fuels,
including ethanol and biodiesel. The action was part of an overall aggressive plan of the
state working in conjunction with the New York Thruway Authority to promote
alternative fuel use.liv Maryland should not eliminate all tax on these two alternate fuels,
but lower it enough to come down to the price of gasoline and diesel.

       II.     Increase the number of gas stations carrying E85 and/or biodiesel by
               partially subsidizing the costs of installing an additional pump or
               converting an existing pump.

As of this writing, Maryland only has five stations that carry E85 and four stations that
carry biodiesel – a total of nine stations for the entire state. To increase this number and
add Maryland to the 13 stateslv that currently have retail pump incentives, MDOT should
support this action. MDOT’s specific role will be to administer the application and
subsidization process as well as to disperse the amounts from the Transportation Trust
Fund.

To increase the number of petroleum stations statewide carrying E85 and biodiesel,
economic incentives must be presented to petroleum station owners to carry these fuels
and to implement the infrastructure modifications they require. We recommend to
increase E85 or biodiesel pumps at gas stations by subsidizing:


                                                                                           18
       a)      20 percent, or up to $8,000, whichever is less, of the cost of installing a
               new pump, which is approximately $40,000 per pump.

       b)      30 percent, or up to $1,500, whichever is less, of the cost of a pump
               conversion, which is approximately $5,000 per pump.

To minimize expense and encourage statewide proliferation, the subsidy will be limited
to one pump per fuel type at each station.

New York once again serves as a model. The state introduced a $10 million grant
program designated to provide incentives for private gas companied to install E85 and
biodiesel pumps at their stations. The grants are estimated to support the development of
400 to 600 pumps statewide. lvi

       III.    Allow flex-fuel and hybrid vehicles displaying proper alternative fuel
               license plates to be driven in the high occupancy vehicle (HOV) lane
               regardless of time of day or number of passengers.

Florida, Georgia and the District of Columbia have adopted such measures.lvii The Motor
Vehicle Administration would be responsible for issuing the proper license plates to
qualifying vehicles. This policy would provide tangible incentive for drivers to use
alternative fuels at little cost to the state.

       IV.     Heighten public awareness about ethanol and biodiesel as viable
               alternative fuels by launching a public outreach campaign using MDOT’s
               various modals.

Transport-users are eager to lessen the high cost of fuel, but many are unaware of
alternative fuel options. MDOT’s outreach campaign will serve to rectify that. Primarily
administered by the Maryland Transit Administration and the Maryland Vehicle
Administration, the campaign will have a two-fold purpose.

First, it will promulgate existing alternative fuel advancements Maryland and MDOT
have implemented, such as the Renewable Fuels Promotion Act of 2005 and the State
Fleet Biodiesel Fuel Usage Act of 2006 as well as other measures. The second part of the
campaign will be to raise the general public’s awareness about alternative fuels,
especially ethanol and biodiesel because of the ease with which they can be integrated
into the current petroleum-based infrastructure. Outreach strategies should include press
and video news releases, local radio station airings during busy drive times, and putting
signs on MTA buses. Additionally, posters will be given to gas stations and car
dealerships explaining the fuels. Posters for car dealerships should list gas stations that
carry these alternative fuels. Finally, ethanol and biodiesel should be promoted on the
MDOT homepage, with links directing where to go to for additional information.




                                                                                             19
             5.0 Acknowledgements


             We would like to thank the following people who assisted us during our research:

                    Christine Routzahn
                    Dave Marcotte
                    Missy Cassidy
                    David Fleming
                    Bob Frantz
                    Howard Simons

i
    "Where does gasoline come from?" Energy Information Administration Brochures. Department of Energy.
          <http://www.eia.doe.gov/neic/brochure/gas06/gasoline.htm>.
ii
      "High gas prices fuel schools' needs to reduce costs." Newsleader. 19 July 2006.
            <http://www.newsleader.com/apps/pbcs.dll/article?AID=/20060719/NEWS01/607190329/1002>.
iii
      "National Energy Security." Biomass Program. 08 Feb 2006. Department of Energy.
            <http://www1.eere.energy.gov/biomass/national_energy_security.html>.
iv
      Bush, George. "Advanced Energy Initiative." The White House. 20 Feb 2006.
            <http://www.whitehouse.gov/stateoftheunion/2006/energy/index.html>.
v
      "Alternative Fuels Program." New York Department of Transportation.
             <http://www.nyc.gov/html/dot/html/motorist/alternativefuel.html#alter>.
vi
      "Maryland Incentives and Laws." Alternative Fuels Data Center. Apr 2006. U.S. Department of Energy.
            <http://www.eere.energy.gov/afdc/progs/view_all.cgi?afdc/MD/0>.
vii
       “Supply.” Oil Market Basics. Energy Information Administration.
             <http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/default.htm>
viii
       “Demand.” Oil Market Basics. Energy Information Administration.
           <http://www.eia.doe.gov/oil_gas/petroleum/analysis_publications/oil_market_basics/refining_text.htm>
ix
      “A Primer on Gasoline Prices.” Energy Information Administration. 2005.
            <http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/primer_on_gasoline_prices/html/pet
            bro.html>
x
      “Petroleum Products Information Fact Sheet.” Energy Information Adminstration.
             <http://www.eia.doe.gov/neic/infosheets/petroleumproducts.htm>.
xi
      "National Energy Security." Biomass Program. 08 Feb 2006. Department of Energy.
            <http://www1.eere.energy.gov/biomass/national_energy_security.html>.
xii
       "Where does gasoline come from?" Department of Energy.
xiii
       “Petroleum Profile: Maryland.” Energy Information Administration. January 2006.
             <http://tonto.eia.doe.gov/oog/info/state/md.html>
xiv
       "Where does gasoline come from? Department of Energy.
xv
       Environmental Protection Agency. Clean Alternative Fuels: Ethanol. GPO, 2002.
xvi
       "Alcohol Fuels Review Article." Technical Library. 09 Oct 1998. National Alternative Fuels Training
            Consortium. <http://naftp.nrcce.wvu.edu/technical/indepth/methanol/methanol.html>.




                                                                                                                  20
xvii
        Environmental Protection Agency. Clean Alternative Fuels: Ethanol.
xviii
        Department of Energy. Clean Cities Alternative Fuel Price Report: June 2006. GPO, 2006.
xix
        "Custom Alternative Fuels Comparison Chart." Alternative Fuels Data Center: Compare Alternative Fuel
              Properties. 09 June 2003. Department of Energy.
              <http://www.eere.energy.gov/afdc/altfuel/fuel_properties.html>.
xx
       Environmental Protection Agency. Clean Alternative Fuels: Ethanol.
xxi
        "WVU's NAFTP - Alternative Fuel Table." Technical Library. National Alternative Fuels Training Consortium.
            <http://naftp.nrcce.wvu/technical/indepth/datatable.html>.
xxii
        "General Table of Fuel Properties." Alternative Fuels Data Center: Compare Alternative Fuel Properties. 03 Feb
             2005. Department of Energy. <http://www.eere.energy.gov/afdc/pdfs/fueltable.pdf>.
xxiii
        "Custom Alternative Fuels Comparison Chart." Department of Energy.
xxiv
        "Alcohol Fuels Review Article." National Alternative Fuels Training Consortium.
xxv
        "Custom Alternative Fuels Comparison Chart." Department of Energy.
xxvi
        Environmental Protection Agency. Clean Alternative Fuels: Ethanol.
xxvii
         Renewable Fuels Association. From Niche to Nation: Ethanol Industry Outlook 2006. Washington, DC: 2006.
xxviii
         "Alternative Station Counts By State and Fuel Type." Alternative Fuel Data Center: Alternative Fueling Station
             Locator. 03 July 2006. Department of Energy.
             <http://www.eere.energy.gov/afdc/infrastructure/station_counts.html>.
xxix
        Ibid.
xxx
        Environmental Protection Agency. Clean Alternative Fuels: Ethanol.
xxxi
        "Alcohol Fuels Review Article." National Alternative Fuels Training Consortium.
xxxii
         Environmental Protection Agency. Clean Alternative Fuels: Ethanol.
xxxiii
         Ibid.
xxxiv
         Ibid.
xxxv
         Luhnow, David, and Geraldo Samor. "As Brazil Fills Up on Ethanol, It Weans Off Energy Imports." Wall Street
             Journal. 16 Jan 2006.
xxxvi
         Ibid.
xxxvii
          "Biodiesel." Alternative Fuels Data Center. 14 June 2006. Department of Energy.
              <http://www.eere.energy.gov/afdc/altfuel/biodiesel.html>.
xxxviii
          "What is Biodiesel?" Alternative Fuels Data Center. 30 Sep 2005. US Department of Energy.
            <http://www.eere.energy.gov/afdc/altfuel/whatis_biodiesel.html>.
xxxix
         Ibid.
xl
      Department of Energy. Clean Cities Alternative Fuel Price Report - September 2005. GPO, 2005.
xli
       Department of Energy. Clean Cities Alternative Fuel Price Report - February 2006. GPO, 2006.
xlii
        Environmental Protection Agency. A Comprehensive Analysis of Biodiesel Impacts on Exhaust Emissions. GPO,
              2002.
xliii
        "Custom Alternative Fuels Comparison Chart." Department of Energy.
xliv
        Environmental Protection Agency. A Comprehensive Analysis of Biodiesel Impacts on Exhaust Emissions. GPO,
             2002.




                                                                                                                     21
xlv
       "U.S. Biodiesel Production Capacity." National Biodiesel Board. 01 May 2006. National Biodiesel Board.
             <http://www.biodiesel.org/pdf_files/fuelfactsheets/Production_Capacity.pdf>.
xlvi
        Wagner, Kate. "Maryland's First Biodiesel Plant Opens in Berlin." 19 June 2006. Maryland Energy
            Administration. <http://www.energy.state.md.us/press/2006-06-19.pdf>.
xlvii
         "Alternative Fueling Station Counts by State and Fuel Type." Alternative Fuels Data Center. 18 Apr 2006.
              Department of Energy. <http://www.eere.energy.gov/afdc/altfuel/fuel_comp.html>.
xlviii
         "What is Biodiesel?" Department of Energy.
xlix
        Ibid.
l
     Ibid.
li
      "Maryland Incentives and Laws." Alternative Fuels Data Center. Apr 2006. Department of Energy.
            <http://www.eere.energy.gov/afdc/progs/view_all.cgi?afdc/MD/0>.
lii
       "New York Incentives and Laws." Alternative Fuels Data Center. 26 July 2006. U.S. Department of Energy.
            <http://www.eere.energy.gov/afdc/progs/view_ind.cgi?afdc/6017/0>.
liii
       Department of Energy. Department of Energy – Maryland. <http://www.energy.gov/maryland.htm>.
liv
       “Governor Pataki Announces Groundbreaking of first ethanol fuel service location.” Governor’s Press Releases.
            New York State. <http://www.ny.gov/governor/press/06/0713063.html>.
lv
       Alaska, Connecticut, Hawaii, Idaho, Illinois, Iowa, Maine, Minnesota, Missouri, New York, North Dakota,
             Oklahoma and South Dakota.
lvi
       “Governor Pataki Announces Groundbreaking of first ethanol fuel service location.” New York State.
lvii
       Department of Energy. State Incentives for Alternative Fuel Vehicles and Fueling Infrastructure. 13 Dec 2004.
            <http://www.eere.energy.gov/cleancities/toolbox/pdfs/state_afv_incentives.pdf>.




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