E85 is on the rise
Editor's Note: This is the first in a four-part series this week on the renewable fuel industry. Tomorrow, learn what researchers are doing to expand ethanol production.
SIBLEY, Iowa -- People driving flexible fuel vehicles these days are cashing in on the savings when they pull up to the pump. E-85, a gasoline blended with 85 percent ethanol, is -- in some communities -- 45 cents less per gallon than regular unleaded gasoline.
The price difference has created demand for flex-fuel vehicles, as well as for more pumps that carry E-85. Increasing the number of E-85 pumps, however, is a costly venture -- one that won't pay off dividends until more flexible fuel vehicles are driven off the assembly line and into a consumer's driveway.
According to recent data, less than 1 percent of the nation's gas stations are equipped to sell E-85, a product derived from corn grown in fields across the Midwest.
Brian Dreesen, manager of Osceola County Co-op Oil in Sibley, has many requests for E-85. While the potential sales of the corn-derived fuel may not cover the investment right now, Dreesen said offering the renewable fuel is the right thing to do.
"On the cooperative side, it's in our best interest to promote farmers as much as possible," he said. The cooperative is in the process of getting E-85 in Sibley, but Dreesen said they won't have it for sale until 2007 at the earliest.
"The main challenge is to have the system that can handle E-85," he said, adding that the State of Iowa has placed regulations on gas stations because of the fuel's corrosiveness to certain kinds of metal. "You have to make sure your current underground pump is compatible to E-85."
The pumps at the cooperative aren't compatible, and that means installing a new system, from the underground storage tank to a new line and pump dispenser. The cooperative, along with other gas stations in the state, are hoping to receive financial assistance through state-offered grants to help pay for the technology.
Mandate versus choice
While Minnesota has had an E-10 mandate since 1995, Iowa -- the largest producer of ethanol in the country -- has not required its consumers to use an ethanol-blended fuel.
"I think our biggest holdup is our representatives and congressmen," Dreesen said. "They strongly feel that they don't want to mandate what Iowa residents use. They still believe in popular choice."
Though the Iowa Legislature failed this year to pass an ethanol mandate, Iowa's governor never suggested implementing one, according to Sen. David Johnson, R-Ocheyedan. Instead, their focus has been to create incentives for gas stations to sell ethanol-blended fuel.
"We are the only state where you can buy 89 octane (blended with 10 percent ethanol) cheaper than you can buy 87 octane fuel," Johnson said, adding that by offering consumers a choice at the pump, Iowa is just 35 million gallons short of what it would sell with a statewide E-10 mandate.
As for E-85, the state ranks third in the nation with 41 available pumps. That compares to No. 1-ranked Minnesota with 203 pumps.
Johnson said he was surprised Iowa has as many pumps as it does, and said that figure is sure to increase. Iowa has approved $14 million of funds over the next three years to offer fuel retailers up to $30,000 in grant funding -- available on a first-come, first-serve basis -- to either install or convert pumps to E-85.
"We think this is so important that we ought to assist the retail industry to build that infrastructure that we need," said Johnson, who serves as co-chair of the senate ag committee.
In addition to grants, Iowa has introduced tax credits and competitive pricing for consumers who purchase E-85 and biodiesel.
"We need to get (biofuels) into the marketplace," Johnson added. "We're doing a great job making it."
To increase ethanol's presence and preference among consumers, Johnson said Iowa has adopted a renewable fuel standard. As such, the goal is to have 10 percent of the fuel sold in the state by 2010 to be renewable fuel; 15 percent by 2015; and 25 percent by 2020.
"I think we can get to E-20 someday," Johnson said. "This is a work in progress."
On Minnesota's heels
Iowa may not have the ethanol mandates, nor sell as much blended fuel as Minnesota, but Johnson said they are working hard to catch up.
"The Renewable Fuels Association considers Iowa's package of legislative initiatives to be the most aggressive in the country," Johnson said.
While that may be true, Minnesota hasn't sat back on its laurels by any means.
Richard Peterson, a rural Butterfield farmer and member of both the Minnesota Corn Growers Association (MCGA) and Corn Research and Promotion Council, said the state organizations continue to push for more E-85 pumps. That's in addition to the E-20 mandate legislators approved in 2005 and set to take effect Aug. 30, 2013.
Ethanol has made headlines in Minnesota since the late 1980s, when the corn growers lobbied for funding at the Capitol.
"The whole thing was the corn growers," Peterson said. "When we got our checkoff passed, we decided we wanted to push ethanol in this state."
Over the years, MCGA has spent a considerable amount of checkoff dollars on the promotion of ethanol. Peterson believes the organization has received a lot of bang for its buck.
"It's cost us a lot of checkoff dollars, but again, it's a way to expand the uses of corn -- it helps (create) ethanol plants, helps rural communities, plus it gives us clean air. It's a win-win situation."
Early on in the fight for ethanol usage in Minnesota, Peterson said the American Lung Association partnered with MCGA -- a move that has been good for both organizations.
"Now, with E-85, they administer the program, but we as corn growers fund it," he added.
As the top state in the nation when it comes to the number of E-85 pumps, Peterson said MCGA is still far from where it wants to be.
"At one time, we said we needed 800 pumps and, basically, if we put one in every town, that's a realistic figure," Peterson said. "There's a lot of flex-fuel vehicles that could be running on E-85 that are probably in an area where they don't have it available. We've got work to do yet."
Americans consume 21.6 million barrels of gasoline a day, while at the same time producing a mere 5.1 million barrels, according to Dreesen.
"We need to reduce our foreign oil dependency and what better way to use a homegrown product that our local farmers' produce," Dreesen said. "Ethanol and biodiesel will not (eliminate) our dependency on foreign oil, but it sure will help us."