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Blender pump program to benefit flex-fuel vehicle owners, gas retailers

Wednesday, November 26, 2008 | 12:00 p.m. CST; updated 8:47 p.m. CST, Wednesday, November 26, 2008

COLUMBIA — With the push of a button, some Missouri drivers will soon be able to blend varying grades of ethanol and gasoline mixtures at the pump. With the push of that same button, some Missouri fuel retailers will receive a healthy profit for each gallon of ethanol they blend and sell.

For now, the ability to blend on site will be restricted to two or three fuel retailers selected to participate in a blender pump pilot program overseen by the Missouri Department of Agriculture Weights and Measures, Ron Hayes, program director for Weights and Measures, said.   

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A general interest shown by several local retailers and its close proximity to the ethanol plant in Laddonia has put Columbia in contention for being one of these sites, Gary Clark, director of marketing development for the Missouri Corn Growers Association, said.    

“Columbia is definitely on the list,” Clark said.

Spearheaded by the Corn Growers Association, the pilot program is intended to address issues such as financing, infrastructure, quality control and safety. Once the issues are resolved, official state blender pump guidelines will be established and the program will be made available to all Missouri retailers, Hayes said.  

“A year from now, we could put this on a full-scale basis,” Clark said.  

One station in St. Joseph has already begun the required infrastructure upgrades, but Clark is unsure how far they have progressed. St. Joseph is also home to LifeLine Foods, an energy efficient corn milling cooperative that also produces ethanol and joined the effort several months ago.

Pilot sites must have a high number of flex-fuel vehicles, or vehicles that can run on gasoline or ethanol-based fuel, in the area. A high density of flex-fuel vehicles is necessary for the pilot program to be tested since blends higher than E10 are federally restricted to flex-fuel vehicles. Missouri has between 139,000 and 140,000 flex-fuel vehicles, Clark said.

For Missouri’s flex-fuel vehicle owners, the sudden availability of mid-grade ethanol blends will allow them to fully capitalize on the functionality of their automobiles.

They will be getting a comparable amount of mileage compared to regular unleaded (E10) and still save a noticeable amount of money, said Marc Lewis, director of sales and marketing for LifeLine Foods.

As a result of the Missouri Renewable Fuel Standard enacted Jan. 1, all “regular unleaded” gasoline is already a blend of 10 percent ethanol and 90 percent regular unleaded gasoline.  

For standard vehicle owners, blending on site does not mean that the price of E10 will be lowered.

According to a Google map created by the American Coalition for Ethanol, as of Nov. 22, 86 blender pump locations existed in the United States. Kansas, whose blender pump regulations are being mirrored by the Missouri pilot program, has three gas stations with blender pumps.

By participating in the blender pump program and acquiring the necessary blending license, retailers can take advantage of a federal tax incentive commonly referred to as a “blender’s credit.” This provides a 51-cent credit – 46 cents beginning Jan. 1 — for every gallon of ethanol blended and sold on site.    

To receive the blender’s credit in full, separate tanks containing fuel ethanol, which is 98 percent ethanol, and pure regular unleaded must be used. 

Because many branded stations have pre-existing contracts with wholesalers, some retailers may have to continue to use preblended E85 and E10 to create the varying mid-level grades on site. Wholesalers would then have to be – and often are – willing to pass along a portion of their blender’s credit to the retailer. 

“It really boils down to the situation with the station and the agreement with the supplier,” Clark said.

Separate from the blender’s credit, retailers can depend on a state tax credit effective Jan. 1 that reimburses retailers for the tanks, new pumps and other costs associated with blending on site. The tax credit provides up to 20 percent of the costs, up to $20,000 for the conversion.

The state credit supplements a federal tax credit available under the Energy Policy Act of 2005 that covers 30 percent of the cost for installing an alternative fuels system, up to $30,000.

"In most cases, they would be installing new blender pumps or retrofitting an existing pump,” Clark said.

Gilbarco is one company that supplies pumps that meet pilot program regulations and has served as a reference on logistics and pricing. Gilbarco pumps can cost as much $25,000 with additions like flex-fuel options and credit card readers, David Zumbaugh, area sales manager for Gilbarco, said.

In addition, the ability to store high concentrations of pure ethanol may require some retailers to replace their current tanks with new tanks capable of containing the high alcohol fuel, which is corrosive.

Once pumps are installed, one concern is that, either by consumer or mechanical error, a higher-than-federally-sanctioned blend of ethanol ends up in a standard vehicle’s tank. 

“Blender pumps must address the hose issue,” Hayes said. “There will be no nozzle sharing with blends over 10 percent.”

Another issue Hayes will be paying close attention to is the actual blend ratios. While pumps equipped to blend regular and premium do so at a 50/50 ratio, ethanol blender pumps blend at varying consistencies. 

“The dispenser has to blend much richer on one side and leaner on the other if the ratios are going to be adequate,” Hayes said.

For drivers inexperienced with ethanol, labeling is vital.

“That is why we work with the Ethanol Promotion and Information Council – so that everything about the blends and the pump is well labeled,” Lewis said.

MFA Oil, which owns 76 Break Time convenience stores throughout mid-Missouri, has had E85 pumps installed in stations since 2003. Still, Katelyn Schenewerk, who has worked previously as a cashier at a Columbia Break Time gas station, had customers accidentally filling their standard vehicles with E85.

“It’s not pretty,” Schenewerk said. “The car has to be towed.”

Establishment of blender pump guidelines and the subsequent revenue loss for Missouri wholesalers does not seem to be a concern for companies like Fuel Marketing Corp. Besides the fact that it already passes along the blender's credit to certain retailers, the credit is insignificant compared to profits from its more lucrative operations, Erik Montgomery, a member of Fuel Marketing's operations team, said. 

“I don’t have a preference either way,” Montgomery said.

When asked if the blender pump program had a successful future considering current economic fuel trends, Hayes remained hesitant to predict the future.

“We are being encouraged to allow this to happen ‘cause (Corn Growers) have a big belief that this will help their industry,” Hayes said. 

While Clark emphasized that the program would provide more options for consumers, he did not deny the program’s ability to help the ethanol industry.

“It definitely is a way to try to move the extra volume of ethanol,” Clark said. 

Official blender pump guidelines will not make blender pump installation mandatory for all Missouri retailers. For those who find the price too high or infrastructure replacement too much of a burden, participation is voluntary. 

“It definitely will always remain the retailer’s choice,” Clark said.


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Comments

Edwin BEUSSINK February 19, 2009 | 7:20 p.m.

It's been two months and no blender pumps have been installed in Missouri under the pilot program. In the mean time Kansas approved blender pumps and several are now on the Missouri border. The same with Iowa. Please get an update on this story.

(Report Comment)
Mark Foecking February 19, 2009 | 8:09 p.m.

"“We are being encouraged to allow this to happen ‘cause (Corn Growers) have a big belief that this will help their industry,” Hayes said. "

This is all that corn ethanol is about. It's about turning a barrel of oil into a barrel of ethanol, and a few extra bucks for some corn farmers. It takes food out of people's mouths and perpetuates our dependence on foreign petroleum. It is not a solution to our fuel problems, and should be phased out as fast as possible.

DK

(Report Comment)
Charles Dudley Jr February 20, 2009 | 3:56 a.m.

>>> It takes food out of people's mouths. <<<

How so Mark. Please explain to us all here how that can be with millions of acres of unused farm lands sitting idle that can be used and farmed if needed.

Just curious here.

(Report Comment)

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