Option to choose ethanol-free gasoline diminishing

Wednesday, May 26, 2010 | 9:09 p.m. CDT

GARDNER, Kan. — Eric "Ric" Foster, the owner of a Gardner gasoline station, doesn't like ethanol. No, that's not quite right. He despises the stuff.

A sign in front of the station alerts motorists that his gas contains no ethanol, and in case you miss it, an electronic sign in the window boasts of the station's ethanol-free fuel.

For 16 years, he has taken pride in saying he has never knowingly sold a drop of ethanol.

But those days appear to be over if he wants to stay in business. His supplier recently told him that if he wanted to sell regular gas — by far the most popular grade — it would be E-10 or nothing.

"It's not right," said Foster. "I'm going to fight this tooth and nail."

The long goodbye for ethanol-free gas may be in its final stretch. It will snare dealers such as Foster and an unknown number of consumers who say they prefer pure gas, in part, because it delivers better fuel mileage and is worth it even if it costs more.

Many of them also think their engines have easier starts and are smoother running with ethanol-free gas, even though there are studies that show E-10 should not be a problem for most vehicles.

Ethanol blends, mainly E-10, now account for an estimated 80 percent of sales nationwide. With more ethanol being produced each year, it is a sure bet that pure gas is on the endangered list.

"I will never say never, but in the future we're going to pretty much be saturated with ethanol," said Al Manato, manager of fuel issues for the American Petroleum Institute, a trade group representing oil companies.

The federal Renewable Fuel Standard has in the last few years required rising amounts of ethanol production. It calls for even more, until by 2022 it requires 36 billion gallons of biofuels per year, nearly triple the current amount.

The ethanol industry, among other things, has been pushing to raise the 10-percent ethanol limit for most cars and trucks to find a place for the additional product.

But putting ethanol in gas that's currently sold without it is part of the strategy as well. The federal mandate has teeth to make it happen with fines for refiners that don't blend enough ethanol.

Foster, a Shell dealer, never worried about getting ethanol-free gas in the past, but Shell and other refiners are increasingly closing the option.

In an e-mail, a Shell spokeswoman said that in the Kansas City area, the company was not selling much gas without ethanol. And, she said, it needs to further increase the amount of ethanol it sells.

"For us to meet our extensive obligation under this mandate, we will need to blend essentially all of our gasoline with ethanol in the relatively near future," said Karyn Leonardi-Cattolica.

Shell uses the Magellan wholesale gas terminal in Kansas City, Kan., to distribute fuel. Because ethanol can't be sent by pipeline, it is blended at the terminal by Magellan. It can offer ethanol blends or clear gas. But "demand for our ethanol blending services are up in 2010 over 2009," said Bruce Heine, director of government and media affairs for Magellan.

Some fuel retailers and distributors are turning to state legislatures to keep the clear-gas option open.

Kansas does not require that refiners offer pure gas. A measure that would have required refiners to continue offering pure gas failed in the Legislature this year. The American Petroleum Institute and refineries in the state lobbied against it.

Missouri continues to require that pure gas be offered by refiners. But Missouri also mandates that retailers sell regular and mid-grade ethanol blends when they are cheaper than pure gas.

Ron Leone, executive director of the Missouri Petroleum Marketers and Convenience Store Association, said some retailers were finding a niche market for premium fuel without ethanol.

Much of the pressure to ensure that pure gas can be bought at wholesale terminals comes from distributors who deliver fuel to retail stations. If the distributors buy clear gas and blend in the ethanol they can get a tax credit.

But pressure also comes from retailers such as Foster.

Tom Palace, executive director of the Petroleum Marketers and Convenience Store Association, said he continued to hear complaints about not being able to buy pure gas in Kansas. His group is considering whether to ask the Kansas Legislature to take up the issue again.

Demand for blends especially has soared when they are cheaper than pure gas. That has been the case in Kansas.

For instance, at Foster's E&J Food Mart, regular fuel on a recent day was $2.88 a gallon. But down the block, a station was selling a regular ethanol blend for $2.73. With consumers typically looking for the cheapest price, that is an effective draw.

But Foster gained a following, in part, by pointing out that pure gas gets better mileage. A gallon of E-10 has about 3 percent less energy than a gallon of pure gas. Many of his customers, such as Diane Smith, are convinced the improved mileage is even higher.

"This is where we buy our gas even if it is higher," she said.

When Foster was first told that by June 1 he would have to start buying E-10, he was convinced he could not do it. He said he would close the store before selling any ethanol or keep it open selling premium fuel. He is told that higher-priced premium will still be available without ethanol — long enough to sell the business.

He said he still didn't think it was right and wondered whether the government should be sued for requiring ethanol in fuel. But as he has talked to his customers about what is happening, he has considered the once unthinkable. They tell him that if they have to buy E-10, they would prefer to buy it from him.

"If you can't keep them happy, why be in business," he said.


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