Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...

information on biodiesel freight costs is lacking. The need to protect biodiesel from
gelling during the winter may marginally increase freight costs over those for ethanol.
Counterbalancing this is the likelihood that biodiesel shipping distances may be
somewhat shorter due to the more geographically dispersed nature of biodiesel
production facilities. In any event, the potential difference between biodiesel and
ethanol freight costs is likely to be small and the cost of distributing biodiesel does not
appreciably affect the results of our analysis. Therefore, we believe that estimated freight
costs for ethanol of 9.2 cents per gallon adequately reflects the freight costs for biodiesel
for this analysis.
The capital costs associated with distribution of biodiesel will be somewhat
higher per gallon than those associated with the distribution of ethanol due to the need for
storage tanks, barges, tanker trucks and rail cars to be insulated and in many cases heated.
We estimate that to handle the increased biodiesel volume will require a total capital cost
investment of $49,813,000 which equates to about 2 cents per gallon of new biodiesel
volume.
We estimate the total cost for producing and distributing biodiesel to be between
$2.00 and $2.22 per gallon of biodiesel, on a nationwide average basis. This estimate
includes both the capital costs to upgrade the distribution system and freight costs.
C. Estimated Costs to Gasoline
To estimate the cost of increased use of renewable fuels, the cost savings from the
phase out of MTBE and the production cost of alkylate, we developed our own
spreadsheet cost model. As described above in Section VI.A, the cost analysis is
conducted by comparing a base year before the Energy Act's fuel changes to a modeled
year with the fuel changes. We used 2004 as the base year. We grew the 2004 gasoline
demand to 2012 to create a reference case assuming that the 2004 fuel demand scenario
remained the same (fuel quality remained constant). The sum of fuel changes, including
the increased use of ethanol, the phase-out of MTBE and the conversion of a part of the
MTBE feedstocks to alkylate, is all assumed to occur by 2012 and is compared to the
2012 reference case. This analysis considers the production cost, distribution cost as well
as the cost for balancing the octane and RVP caused by these fuel changes.
In addition to assessing the cost at 7.2 and 9.6 billion gallons of total ethanol use
in gasoline, we considered that ethanol could be used at different levels in RFG. Instead
of picking a single point for ethanol use in RFG, we assessed a range (see Section VI.A
above). At the high end of the range, ethanol is used in RFG in both summer and winter.
At the low end of the range, ethanol is still used in wintertime RFG, but to only a very
limited extent in summertime RFG. The lower rate of ethanol use in summertime RFG
may occur because the RVP increase associated with ethanol will cause refiners to incur a
cost to further control the volatility of their summertime RFG.
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