Retailers shrug off worries about E15 and expand offerings

Source: Marc Heller, E&E reporter • Posted: Sunday, October 23, 2016

If more ethanol in gasoline damages cars, that’s not scaring Sheetz Inc. The gasoline station and convenience store chain plans to offer E15 at more locations in 2017 — and it’s not alone.

Retailers are slowly expanding offerings of E15, a higher-ethanol alternative that has sparked a vigorous public relations battle between renewable fuel advocates and petroleum companies. Amid the dueling statements and news releases about ethanol’s risks and benefits, some retailers and people in the industry have reached a sobering conclusion: Maybe E15 fuel isn’t that big a deal.

“The vast majority of people do not seem concerned at all about E15,” said Bill Mayer, a spokesman for Sheetz, based in Altoona, Pa. Cars built after 2001 — an ever-growing majority of vehicles on the road — don’t generally have problems with the higher-ethanol fuel, which does carry risks for older cars, and only a handful of customers appear to have strong views one way or the other, he said.

To Robert White, vice president for industry relations at the pro-ethanol Renewable Fuels Association, the bad blood boils down to a sliver of business. “It’s 5 percent market share; it’s nothing more than that,” he said.

At 15 percent ethanol and 85 percent gasoline, E15 is a jump from the 10 percent ethanol, or E10, fuel that accounts for 90 percent of gasoline in the United States. Its octane boost gives engines a little more kick, and it’s often a few cents cheaper per gallon than E10, making it an easy choice for consumers able to find it at about 100 stations nationwide where it is offered.

Sheetz plans to add E15 at 10 locations in Virginia in 2017, doubling the number where it’s offered in that state. The company participates in a U.S. Department of Agriculture program to encourage installation of higher-ethanol blender pumps, and officials plan an announcement in Manassas, Va., on Wednesday.

Another retailer, Kum & Go, based in Iowa, plans to expand offerings after watching sales far exceed expectations during a recent promotion, a spokeswoman said. And the first U.S. retailer to offer E15, Zarco 66 in Lawrence, Kan., said the fuel accounts for more than a third of sales volume, after four years on the market.

“As more education gets out, the more impact we have,” said Scott Zaremba, Zarco’s owner and an E15 booster (Greenwire, April 8, 2013).

Because ethanol is derived mostly from grain corn grown in the Midwest, farm groups rally behind it. But the benefit of E15 to farmers is modest, according to the Food and Agricultural Policy Research Institute at the University of Missouri. Researchers there in 2009 projected that corn plantings would increase by less than 1 percent in response to E15 appearing on the market — and that was based on overly optimistic assumptions about the amount of E15 that would become available, said Jarrett Whistance, FAPRI’s program leader for biofuel market and policy analysis.

E15 faces some high hurdles. EPA forbids its use in boats, motorcycles, lawn mowers and similar equipment with small engines, as well as in buses and heavy trucks, citing corrosive effects of the fuel in engines not designed to take it. Manufacturers of such equipment sometimes void warranties if E15 has been used.

Retailers who sell E15 can have trouble obtaining liability insurance in the case of misfueling, an issue that boating and motorcycling associations have seized on in pushing Congress to scale back the renewable fuel standard. That’s especially risky in situations where a single pump dispenses multiple fuels from the same hose, although those make up a fraction of gas stations, and EPA requires labels on the pumps to warn consumers to be aware of what they’re dispensing.

“Other than a small fuel pump label, consumers have no idea what this new fuel is and its impact on their engines and proper use,” said Nicole Vasilaros, vice president for federal and legal affairs for the National Marine Manufacturers Association.

Small retailers, already pushed out of the profitable market for renewable fuel credits called renewable identification numbers, or RINs, have little incentive to expand into higher ethanol, said Bill Douglass, chairman of the Small Retailers Coalition, a group critical of the RFS.

“I would go to it if I could get the RIN,” Douglass said. “I don’t have any legal protection, and I don’t have any economic protection.”

Advocates for E15 say the challenges are overblown. At least one motorcycle manufacturer, Indian Motorcycle, makes a model called the Scout that’s designed to use up to E15, according to the owner’s manual. A company spokeswoman didn’t return a message seeking comment.

The misfueling insurance issue hasn’t come up, Zaremba said, because none of his customers have complained about damage or poor performance. “On paper, there is a liability issue. In the real world, there isn’t,” he said.

Don’t look for a surge of E15 anytime soon, or for its gradual expansion to reverse, people in the industry say. The RFS calls only for gradual increases in renewables, and U.S. EPA doesn’t always reach those targets in setting fuel volume levels, based on expected market conditions and other factors. The agency has proposed renewable fuel levels of 16.28 billion gallons in 2014 to 18.11 billion gallons in 2017, with a final rule likely in the next few weeks.

In addition, the price difference between E10 and E15 hasn’t been big enough to build strong consumer demand for it or for E85, used in flexible-fuel vehicles, EPA said.

“The low number of retail stations selling these higher level ethanol blends, along with poor price advantages for these higher level blends compared to E10, a limited number of FFVs, and ineffective marketing of these fuels represent the biggest challenges to the continued growth of the supply of ethanol as a transportation fuel in the United States,” EPA said.

Still, Kum & Go, the Iowa-based retailer, figures E15 has a future as one more choice drivers can make among a mix of fuels, said a spokeswoman, Kristie Bell. The company sells it at 90 locations and plans to continue installing E15 pumps at new stores and at already-existing ones where warranted, she said.

“We know that people are often hesitant when it comes to trying something different in their car, but once they try a new fuel like E15 and have good results, they are willing to switch,” Bell said.