In Kansas, Stronger Mix of Ethanol

Source: By MATTHEW L. WALD, New York Times • Posted: Thursday, July 12, 2012

Steve Hebert for The New York Times. Scott Zaremba, owner of Phillips 66 in Lawrence, Kan., which has begun offering regular cars fuel that is 15 percent ethanol.

LAWRENCE, Kan. — Intended as an additive to gasoline, ethanol in modern times was meant to stretch America’s fuel supplies, much as a cook uses chicken stock to increase the volume of a soup. By federal mandate, ethanol makes up about 10 percent of most fuel that motorists buy at the pump.

Unfortunately for ethanol makers, Americans are driving fewer miles and upgrading to more efficient cars — or to continue the analogy, eating less soup.

So ethanol makers want to change the longstanding recipe, trying to persuade gas stations and motorists to buy fuel that is 15 percent ethanol, or E15. And here, between a transmission shop and a Western clothing retailer, the first service station in the nation to offer the new blend for regular cars has just begun sales.

“I’m a firm believer that we have to do something. You can’t just sit there,” said Scott Zaremba, owner of the Phillips 66 station, which has 14 gas pumps and four for diesel that mix in soy biodiesel with the petroleum variety. “Being in the Midwest, offering renewables from ethanol and biodiesel fuel are just a natural fit for us.”

Mr. Zaremba and other ethanol advocates acknowledge that it will be difficult to persuade motorists to fill up with E15. Although the Environmental Protection Agency has approved the fuel for cars with a model year of 2001 and later, most major automakers are warning customers to stay away, saying they are unconvinced that it is safe for engines. And the modifications necessary for a gas station to offer E15 may cost tens of thousands of dollars — a steep deterrent to station owners who have no idea whether the fuel will appeal to customers.

Ethanol’s success — and its challenges — are in large part a result of conflicting federal mandates. In 2007, Congress decided to wean the country off gasoline by specifying how much “renewable” fuel, mostly ethanol, to require in the national fuel supply. Oil companies must blend ever-increasing amounts of ethanol into motor fuel or face possible penalties.

At the same time, the government is also requiring automakers to improve the fuel economy of new cars, reducing consumption of all fuels. By the 2025 model year, cars will have to go twice as far on a gallon as they do now.

Ethanol production has fallen sharply in recent weeks because of rising corn prices, and in the last few weeks, four plants with total annual production capacity of more than 350 million gallons have announced that they will close. Fuel ethanol deliveries were once expected to show steady increases, but the pace of growth has wavered with overall motor fuel sales.

“We should have seen it coming,” said Doug Sommer, the plant manager at East Kansas Agri-Energy, an ethanol producer in Garnett, a few miles south of here, that supplies Mr. Zaremba’s station.

Mr. Sommer’s plant, like many, is running below capacity. And as the price of corn, the main ingredient in ethanol, is pushed higher by drought, some ethanol makers are wondering if they will have to shut down. Mr. Sommer’s plant was processing 45,000 bushels of corn a day but is now down to 36,000.

The fuel makers say they are in their own bind.

“It’s the quintessential immovable object and the irresistible force,” said Charles T. Drevna, the president of the American Fuel and Petrochemical Manufacturers, a trade association. Fuel makers are supposed to use more ethanol in their blends, but carmakers say that if E15 damages engines, the repairs will not be covered by warranties. “What do you want us to do?” he said. “We can’t comply.”

Not so, say the ethanol manufacturers, which petitioned the E.P.A. to approve E15 for most cars. “The economics are so compelling right now, ethanol being about 90 cents cheaper than gasoline,” said Bob Dinneen, president and chief executive of the Renewable Fuels Association, a trade group.

He promised “meaningful savings at the pump” and predicted that when retailers like Mr. Zaremba’s station get going, competitive pressures will pull others along.

Some car experts say that the savings are illusory, because a gallon of ethanol has only about two-thirds as much energy as a gallon of gasoline, so it will take a car fewer miles on a gallon.

The ethanol industry had previously tried to expand ethanol demand by promoting E85, a fuel that is 85 percent ethanol. Although about 10 million newer-model cars on the road are capable of using E85, it has yet to catch on with gas stations or consumers.

Mr. Zaremba, who owns a chain of eight service stations with convenience stores clustered west of Kansas City, hopes E15 will be different. He says he is not selling oil, but “transportation energy,” and ethanol is the fuel of the future.

Mr. Zaremba has bypassed many of the technical issues surrounding E15 because he has pumps that the customer can use to select E10, E15, E30 or E85. He has been selling E15 for a while, but only this week began labeling it for use by ordinary cars, and not just “flex-fuel” cars that can use any mix up to 85 percent ethanol.

On Tuesday, the first day he was selling E15 more broadly, the price was $3.279, two cents a gallon less than standard fuel, or E10. He noted, however, that the E15 is 90 octane, compared with 87 octane for regular, which could be a big selling point in the future; to meet the new fuel economy standards, he and others predict, the auto companies will move to higher-compression engines, which will require higher octane.

Mr. Zaremba said the fuel was a way to further set apart his stations in a highly competitive market. (They are already distinguished by an “oasis” theme, which includes plastic palm trees and Jimmy Buffett songs playing in the convenience store.)

But on Day 1 of the E15 era, buyers were scarce.

Phillip Ferry, of Lawrence, noticed the E15 pump at Mr. Zaremba’s station after he had already, by habit, begun filling up his 2008 Toyota Yaris with regular fuel.

Next time, “I may try that,” he said approvingly. Mr. Ferry, a cost estimator at a Carstar body shop in Stilwell, Kan., said that ethanol was good for farmers, and that by buying E15, “we’re helping people who need the help.”

Debbie Konrade, of Berryton, Kan., who fills up her 2009 Range Rover two or three times a week on her commute to Kansas City, Mo., also pushed the button for E10. Asked about E15, she said, “my husband said, ‘Don’t put it in the car.’ ” Still, she said, the idea was interesting and she would ask the mechanic at the dealer next week, when she took the car in for an oil change.

Ms. Konrade probably will not get much encouragement. Automakers have been vocal in their opposition to E15. Some new Toyotas come with a gas tank cap embossed with “E15-E85” in inch-high letters with a red circle and slash through them. For years, Ford vehicles have come with a cap that warns against E20, because a few years ago Minnesota was considering authorizing that fuel. General Motors, Chrysler and nearly all the others also caution that using E15 may damage the car and will void the warranty.

“Our vehicles were designed to operate on E10,” said Cynthia Williams, environmental policy manager for Ford. “That’s what the consumer should be using.”

Still, pressure from the government and the ethanol industry to bolster consumption continues. The renewable fuel standard calls for the use of 15 billion gallons of conventional biofuels a year, most of which is ethanol, beginning in 2015, in addition to billions more gallons of fuel from cellulosic sources like corn cobs or wood chips. Government officials hope that some can be used in aviation or for home heating and that some biofuel is a drop-in substitute for gasoline.

Steve Gardner, the general manager of East Kansas Agri-Energy, said he was rooting for Mr. Zaremba and others who might follow the E15 road. While the fuel is a five percentage point increase in ethanol in the engine, it would mean a 50 percent bump for ethanol suppliers.

“He can advertise to consumers that this was grown down the road by Farmer Jones, and it’s supporting 38 jobs here in this county, and we’re not sending money to Venezuela and Iraq and God knows where,” Mr. Gardner said. “It’s win-win-win.”