Fungibility 101

By Ted Aulich
Fungibility is a word rarely heard on the street, but it is common verbiage in the oil refining industry. It refers to the ease with which two fuels can be blended together without raising concerns about how the blended fuel will behave in pipelines, tanks and engines. Two fuels with similar chemistries are likely to be fungible with each other, while two fuels with different chemistries are less likely to be fungible.

For an example of how fungibility plays out in the marketplace, consider ethanol and gasoline. While they're both viable spark ignition engine fuels, each has its own unique set of properties. Gasoline is a mixture of hundreds of individual molecules containing carbon and hydrogen, and ethanol is a single molecule containing carbon, hydrogen and oxygen.

The presence of oxygen-in combination with ethanol's small molecular size-gives ethanol chemical properties that differ sufficiently from those of gasoline to result in a major fungibility issue. Although we've got lots of favorable experience with gasoline-ethanol blends in automobile tanks and engines that were designed to accommodate these two fuels, pipelines were designed to accommodate only gasoline and other hydrocarbon fuels. Pipeline operators are generally reluctant to transport ethanol because of the possibility that its unique chemistry may pose a corrosion risk.

The viability of pipelining ethanol has been studied and debated for years, and defendable arguments have been made on both sides of the issue. However, until sufficient data and experience are acquired to definitively establish its viability, pipelining ethanol is unlikely to be as widely practiced as pipelining gasoline. Regardless of how the issue is eventually resolved, it vividly illustrates the difficulty of introducing a new, chemically different fuel into the commercial marketplace, and the importance of real and/or perceived fungibility issues with the new fuel.

Because resolving fungibility issues is expensive and time-consuming, many renewable fuel developers are focused on the development of biofuels that match the chemistry of their petroleum-derived counterparts as closely as possible. Petroleum refiners interested in biofuels are also interested in fungibility, because fungible biofuels enable maximum leverage of high-capital-investment fuel production and distribution infrastructure. One example of the fungibility-driven biofuels development work ongoing around the world is a partnership between the Energy & Environmental Research Center and Tesoro Companies Inc., a San Antonio-based oil refiner with seven refineries in the western U.S. One of
Tesoro's refineries is located in Mandan, N. D. The EERC and Tesoro recently initiated a project to figure out how best to integrate renewable oil- and petroleum-refining technologies at the Mandan refinery.

The project will utilize upper Midwest-grown crop oil feedstocks including crambe, a drought-tolerant oilseed with demonstrated viability throughout western North Dakota and the surrounding region. Unlike soybeans, canola and other oilseeds, crambe produces an industrial (non-food-grade) oil, and it grows well with lower fertilizer and pesticide inputs.

Another feedstock to be utilized is camelina, a low-input oilseed well-suited to the more arid regions of the northern Great Plains and an excellent rotational crop with a short growing season.

The project goal is to tailor EERC-developed renewable oil-refining technologies as necessary to achieve maximum efficiency compatibility with Tesoro's petroleum refining technologies, thereby helping to reduce Tesoro's carbon footprint by producing commercial, renewable, fungible fuels. While fungibility is important in automobile fuel, it's even more important in aviation fuel. In the words of an old stunt pilot, "When your engine stops on the highway, you pull over onto the shoulder and call somebody. When your engine stops in the air, it can ruin your whole day."

Ted Aulich is a senior research manager at the EERC. Reach him at [email protected] or (701) 777-2982.