E15 retailer is part salesman, part educator, all cheerleader

Source: Amanda Peterka, E&E reporter • Posted: Tuesday, April 9, 2013

Scott Zaremba wants Kansas to know that he fills up his 2001 Chevrolet pickup truck with 15 percent ethanol.

The owner of Zarco 66, a small fuel retailer based in the eastern half of the state, Zaremba has slapped a large decal displaying the common name for the fuel, “E15,” to the hood of the truck.

“I’m a rolling ad,” Zaremba of Lawrence, Kan., said.

In the fuel world, where petroleum marketers are still shying away from selling the ethanol blend, Zaremba is also somewhat of an anomaly. Last July, he became the first retailer in the country to pump E15 into cars — including his own — and has since expanded E15 to all eight of his stations throughout Kansas.

E15 is the common name for a fuel blend of 15 percent ethanol and 85 percent gasoline. U.S. EPA last year issued final approval for it to be sold in the marketplace to cars with model years 2001 and newer as a means of expanding the amount of ethanol in the market.

But E15 has so far penetrated the market — which is dominated by gasoline containing 10 percent ethanol — at a snail’s pace, largely due to the engine damage and liability concerns raised by auto manufacturers and major oil companies.

Zarco 66 owner Scott Zaremba keeps this photo from the summer of 1969 as a reminder of the days when he rode with his father, Stan, to deliver fuel to customers. Photo courtesy of Scott Zaremba.

The introduction of E15 has been so slow, in fact, that Zaremba’s eight stations make up the entire E15 market in the state of Kansas. In the whole nation, Zaremba owns slightly less than half of the gas stations currently selling the fuel.

Zaremba, though, is not fazed. He says E15 makes up about 20 percent of all his sales and is currently selling for about 2 cents cheaper than E10. He hasn’t heard a single complaint.

“Here I am in the real world, and in the real world, this is what’s happening, which is nothing,” Zaremba said. “There’s not an issue.”

How Zaremba, a 47-year-old family man, became the national face of E15 is, in a way, not surprising. He’s been around gasoline all his life.

Zaremba is a second-generation energy marketer who grew up watching his father, Stan, build a gasoline business from the ground up beginning in 1968.

Back in those days, Stan Zaremba had a single tank wagon and a bulk fuel plant; he made house calls much like a doctor, bringing the gasoline to where it was needed. Even before he was old enough to attend school, Scott often got to ride along and was immersed in all aspects of the family business.

A photograph Scott keeps on the wall shows him with his father, who is now 75 years old, standing on top of the tank wagon in the summer of 1969.

“I was with him the whole time and with him every summer,” Zaremba recalled. “Our family was a true family business. When the phone rang at the office, it rang at the house, 24 hours a day, seven days a week. And when the phone rang and somebody needed something, no matter what it was, you got up and went and did it.”

Zaremba has retained a lot of that attitude. He doesn’t wear a suit to work because on any given day, he can be found plunging a toilet at one of his retail stations or covered in grease from something he’s fixed — whatever needs to be done.

The business is still a family operation, despite having 100 employees — or crew members, as Zaremba calls them. Zaremba makes the rounds in his pickup truck to each of his retail locations, while his wife of 17 years, Darby, works the stores. His father still pops by every day to talk shop, and his mother does much of the paperwork.

When there’s a big job that needs to be done, such as cleaning out the new store Zaremba bought a few years back, the whole family, including his 14-year-old son and 15-year-old daughter, rolls up its sleeves and gets to work.

“It’s our lifestyle,” Zaremba said. “A lot of people don’t understand when you’re in this business and you’re a small family business, it’s your life. That’s what we do. They say, ‘Well, what do you do for fun?’ Well, we work.”

Seen it all

Growing up in the energy business, Zaremba has lived through all the ups and downs of the past 50 years. He watched as his father was unable to sell any gasoline for a month during the oil embargo of 1973. He lived through the 1991 Gulf War. And most recently, he watched the collapse of the economy beginning in 2007.

After watching the instability in the fuel market for decades, Zaremba made the decision to go all renewable in 2008 at his gas station in Lawrence. He put a vertical wind turbine on top of the location and outfitted it with blender pumps capable of blending any mixture of gasoline and ethanol. Back then, as ethanol was just beginning to get a boost from the 2007 renewable fuel standard, Zaremba didn’t have much experience to go by, so he helped design some of the pumps himself. They cost him $25,000 each.

“We had to have custom equipment made in order to make it all function the way I wanted it to function. They weren’t available to do what I wanted to do,” Zaremba said.

When he opened it, the station offered every renewable fuel on the market: E10, E85 for flex-fuel vehicles and biodiesel. The gas station oasis also features a touch of Zaremba humor: A fake palm tree greets customers as they enter the driveway, and the sandwich counter — known as the “Sandbar” — has a corrugated tin roof and is modeled after an outside beach bar.

The decision to sell E15 came naturally, he said. It was simply a matter of switching the blender pumps over to a combination of 15 percent ethanol and 85 percent gasoline. And then it was a matter of displaying the EPA-mandated labels for E15 and putting up signs in his stores to teach customers about the fuel.

The move, though, hasn’t been completely smooth. When Phillips 66, the oil company Zarco has held a contract with for the last 25 years, heard that Zaremba intended to sell E15, it threatened to end the agreement if Zarco didn’t agree to fill up one of its ethanol tanks with premium gasoline. The national ethanol trade group Renewable Fuels Association recently asked several government agencies to open an investigation into the matter.

Phillips 66 didn’t respond to a request for comment, but Zaremba said the relationship between the two companies has become strained in recent years.

“There continues to be issues that are growing,” he said. “Dealing with somebody for more than 25 years and not having any issues with them, and getting to the point where we are today, is unfortunate.

While Zaremba counts E15 as a success so far, he’s hesitant to start a full-fledged advertising campaign because he still worries about having a consistent product. The drought last year squeezed him a bit, forcing him to go farther to purchase his ethanol. He has two E15 stations in areas that EPA has deemed nonattainment regions for ozone, meaning he can’t sell the fuel in the summer in those locations.

But he said he’s had none of the issues with E15 that critics raise: that it damages car engines and fuel systems, that it corrodes fuel infrastructure and that its cost is too steep for small fuel retailers.

“We call it the bumper problem: My bumper fell off my car; it must have been E15,” Zaremba said. “That’s one of the most frustrating things that we get out there because there has been so much money poured into the negative things that are arbitrary and have no basis.”

For the most part, petroleum marketers don’t see a big enough incentive to switch to E15, said Dan Gilligan, president of the Petroleum Marketers Association of America. Blender pumps are still fairly uncommon, and gas stations that haven’t already installed them, as Zarco did in 2008, face uncertainty and high costs.

Gilligan said that fuel retailers, 90 percent of which are owned by small-business owners like Zaremba, are concerned that much of the piping and glue used in fuel infrastructure is not certified for E15. For a retailer to put in a small, 8,000-gallon underground tank with dispensers to sell E15, the cost is upward of $50,000, Gilligan said.

Blender pumps still cost tens of thousands of dollars, though the price varies based on the fueling infrastructure that’s already in place in a location. And not all retailers have bought into the idea of blender pumps because they would have to decide to get rid of premium gasoline, Gilligan said.

Many gas stations serve rural regions with declining populations — which offers even less incentive.

Even retailers that are putting in new stations today aren’t necessarily putting in equipment that’s compatible with E15, according to a recent survey done by the Petroleum Equipment Institute.

“Their problem is, there’s not a huge incentive for retailers to do all of that,” Gilligan said, “especially when car manufacturers are advising their customers not to buy E15. Then retailers have concerns about small engines and liability. There’s not a lot of incentive for a retailer to invest the time and money.”

On top of that, there are efforts in several states to restrict the sale of E15, as well as two Supreme Court challenges related to EPA’s decision to allow its introduction into the market. A recent spike in ethanol credit prices has spurred heightened talk of repealing the renewable fuel standard.

‘People are creatures of habit’

Geoff Cooper, an economist for the Renewable Fuels Association, said he expects E15 gas stations will number in the hundreds by the end of the year, despite the challenges.

They’ll have to do it without help from large oil companies, which have publicly said that they don’t intend to sell E15. Valero Energy Corp., for example, said it won’t sell the fuel at any of its 1,000 retail locations in the country because it hasn’t been approved for all cars on the road.

“You’re running the risk of selling something that will damage a good portion of the engines of your customers,” said Bill Day, a spokesman for Valero, which is also one of the nation’s largest ethanol producers.

Zaremba, who calls his customers his “lifeblood” — he even hangs signs in his gas station restrooms telling customers to email him personally if they have any issues — said he has not had any liability issues with any renewable fuels he has sold.

A lot of his job, he said, is educating customers on what E15 is and in what vehicles it can be used.

“Our No. 1 challenge for us is simply education,” he said. “People are creatures of habit.”

Part of his job involves speaking at events and conferences and advocating in his roles as president of the Kansas Petroleum Marketers Association and chairman of the south-central division of the Petroleum Marketers Association of America — which he fits in with positions on the boards of the Kansas Cities Regional Clean Cities Coalition, the Lawrence Chamber of Commerce, the major gifts committee at the Lawrence Memorial Hospital Endowment Association and, previously, his county’s air quality board.

His 15-year-old daughter has taken up the cause. She and a friend recently made a video on ethanol for her freshman high school history class. A proud father, Zaremba said he received calls from parents after the presentation saying they weren’t aware of renewable fuels.

“My kids have grown up in the industry with me, and so they understand the dynamics that go on and they understand the challenges that we’re meeting every day,” he said. “They know what they need to do and where they need to be and what they think is right for those of us in the community and the country.”

As soon as his two teenage children learn how to drive, Zaremba plans on sending them to their high school in cars that promote E15, too.