Monday, September 11, 2006

Fill Up on Corn if You Can

August 31, 2006
Fill Up on Corn if You Can

SPRINGFIELD, Ill. — Standing next to his pickup truck at a service station here, Robert Beck squeezed a yellow nozzle and filled up with the corn-based fuel blend of 85 percent ethanol and 15 percent gasoline that car companies, farmers and politicians alike love to promote as a way out of America’s oil addiction.

Mr. Beck, an agronomist who travels throughout the Midwest, likes the idea of E-85, as the fuel blend is known, because it is made mostly from a domestic crop. But he still finds that buying the fuel is almost more trouble than it is worth.

“Everyone talks about it, but exactly where is it?” he said. “You have to have more fuel out there for consumers to buy.’’

That could take a while.

To assess just how efforts to help E-85 catch on were going, a New York Times reporter, accompanied part of the time by a photographer, drove through the region where its popularity is greatest. They found that despite all the good will toward ethanol, success is far from assured.

The fuel does have plenty of powerful supporters. General Motors used the Super Bowl this year to kick off its “Live Green, Go Yellow” campaign to encourage Americans to buy vehicles that can run on either E-85 or conventional gasoline. Ford Motor and VeraSun Energy, the second-largest ethanol producer after Archer Daniels Midland, christened 300 miles of highway from Chicago to St. Louis the “Midwest Ethanol Corridor” in a marketing campaign that began in June.

But it also has plenty of drawbacks. Most oil companies want nothing to do with E-85, which they see as a money-losing alternative to their own petroleum-based products. Without help from the oil industry or a lot more flexible-fuel cars on the road, gasoline retailers are hesitant to install the expensive pumps, which can cost up to $200,000 with a new underground storage tank.

“There is no way E-85 can survive on its own without massive government subsidies at the state and federal levels,’’ said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation, an energy consultancy in New York.

Many drivers whose vehicles can run on ethanol will not buy E-85 unless it is markedly cheaper than regular gasoline, which has not always been the case. Part of the reason is basic economics: E-85 delivers only three-quarters as much energy per gallon as gasoline, meaning drivers will have to fill up their tanks more often if they choose to use the fuel.

More than 850 service stations now carry E-85, an increase from 350 since the beginning of 2005, but the fuel is still unavailable at most of the 169,000 stations in the United States. Sales are so slim that some retailers count their regular E-85 customers on one hand.

Customers like Mr. Beck, who want the fuel, struggle to find it: in Illinois, 135 stations carry it, but in neighboring Missouri only 54 stations have E-85 pumps. Kansas has 13.

None of this has discouraged E-85’s supporters, who are relentlessly pushing to expand use of the fuel, which already benefits from a tax credit of 51 cents a gallon for producers of all forms of ethanol.

And in states like Illinois, the country’s second-biggest corn producer, after Iowa, politicians are lining up state financing to subsidize the installation of pumps at service stations, while offering rebate incentives to customers who use the fuel.

“E-85 is really I-85 — it’s about energy independence,” said Daniel Yergin, chairman of Cambridge Energy Research Associates, an energy consultancy.

But that dream remains far out of reach. For one thing, E-85 barely exists outside the Corn Belt. You cannot fuel up on it in New York or New England. California has only one station.

And even in Chicago, at the entrance to the ethanol corridor, it was hard to find a flexible-fuel car for the road trip. When Janet Conlon, a travel agent from Garber Travel, contacted four major rental car agencies, none said they had such cars available.

“Nobody had a clue what I was talking about,” Ms. Conlon said. The Times ended up renting a flexible-fuel Chevrolet Impala from a company affiliated with General Motors.

At the first stop, Becker’s Hotrod BP in Dwight, Ill., 75 miles south of Chicago, E-85 was selling for $2.70 a gallon, 50 cents cheaper than the station’s regular unleaded.

Four years ago, the Illinois Corn Growers Association approached Phillip E. Becker, the station’s owner and a longtime gasoline retailer, with an offer to pay to install an E-85 pump, an investment of about $100,000. Because the alcohol in E-85 corrodes traditional gasoline storage tanks, a new underground one was necessary, along with special fuel lines and a special dispenser.

Mr. Becker, wanting to help local farmers, accepted the deal, agreeing to sell the E-85 at no profit for at least five years so he could offer it at a price lower than gasoline.

“I am selling this at cost as a good-will thing,” Mr. Becker said. The E-85, he said, also helps bring passengers into his store for sodas and collectible toy cars, and into an adjoining Burger King, in which he has a business interest. But without the help of the growers’ association, he said, he probably would not have made the investment.

Mr. Becker has enjoyed the local celebrity his E-85 pump has brought him. Officials from the state of Illinois have even shot photos there for postcards that are placed in the vehicles of state employees, urging them to stop at Becker’s.

E-85 sales at his service station, though, have proved erratic. They rose as high as 9,000 gallons a month in September last year when gasoline prices climbed over $3 a gallon, widening the spread with ethanol prices. But in July, Becker’s pumped only 3,010 gallons of E-85, after gasoline prices dropped and ethanol prices rose.

Mr. Becker said he had “four really good customers,” two of them believing so strongly in E-85 that they traded in their vehicles for flexible-fuel ones. “E-85 is all they burn, no matter what the price is,” he said.

The farmers continue to champion their project. In June, they parked a small 1940’s-era corn wagon at a highway ramp near Mr. Becker’s stations to advertise the E-85 price. General Motors included him in a recent regional promotion in which the company gave away $1,000 in free fuel — E-85 or gasoline — to purchasers of flexible-fuel vehicles.

The three-month promotion, however, did not help overall sales at nearby Tyler Chevrolet/Buick, said Byron Moore, the new-car sales manager. At best, it may have caused some buyers already set on certain truck models to choose the flexible-fuel engine to grab the free fuel.

But Mr. Moore said he doubted the buyers would actually fill up on E-85 very often, because “the word is out” that the fuel offered less mileage per gallon than gasoline. Ethanol is made up mostly of alcohol and yields less energy.

Mr. Becker said he saw E-85 sales slip when the price got to within a dime of gasoline. Mr. Beck, the E-85 customer in Springfield, said he had decided that E-85 was worth buying for his Ford truck only if the price was at least 30 cents lower than gasoline.

Volatile ethanol prices in recent months, driven by a regulatory change that has led to its increased use as a 10 percent additive in more states, have stymied the goals of E-85’s supporters. The National Ethanol Vehicle Coalition, a lobby group founded by corn growers, had estimated the number of stations would grow to 2,500 this year. Now, the coalition is willing to settle for 1,200, said Michelle Kautz, a spokeswoman for the group.

Still, the buzz over E-85 is growing — where it is available. Further south along Interstate 55, Theresa Kight, a cashier at a Qik-n-EZ in Normal, Ill., said more customers were asking about the station’s E-85 pumps. “A lot of them that are interested buy it just to support the farmers,” Ms. Kight said.

Outside the station, though, Kevin Hart, a heating and air-conditioning service contractor, was fueling up his van on gasoline. “Using more E-85 won’t solve the problem” of too much oil consumption and too little conservation, he said. “People will just think they are helping the environment, so now ‘I can burn more fuel.’ ’’

But the owners of Qik-n-EZ said they believed in E-85’s potential to diversify the country’s fuel sources — and help the Midwest’s economy. Grady Chronister, the president and founder of the company, said the stations, which get all their ethanol from VeraSun, were selling the E-85 very close to cost.

“This is not a product that warrants the financial investment at this time,” said Mr. Chronister, who added that his family owns farms that grow corn, giving them extra incentive to support E-85. “But we are glad we did it. We are in favor of alternative energy forms, especially those produced here in the United States.”

Along the ethanol corridor very few people were actually buying E-85. At a Qik-n-EZ in Springfield, there was a 45-minute wait before the first customer, Mr. Beck, arrived to refuel his 2006 Ford F-150 truck at the lone E-85 pump set well away from the four rows of gasoline pumps.

After buying his truck in April, Mr. Beck discovered only two months ago that it was dual-fuel. In the past, most drivers did not even know they had flexible-fuel vehicles because the car companies did not bother to tell them and the engines are virtually indistinguishable.

But from now on, “we’re going to do more to let people know what they have,” said Susan Cischke, vice president for environmental and energy engineering at Ford. She said Ford marked its flexible-fuel vehicles on the hood and fuel cap.

American automakers hope to double annual production of flexible-fuel vehicles, to two million, by 2010. There are now about 5 million on the road, out of 238 million total vehicles.

Detroit has much to gain from producing E-85-ready vehicles. In addition to acting as a positive diversion from their broader financial problems, the flexible-fuel vehicles help them meet federal standards for average fuel economy without having to build far more expensive hybrid cars.

But car companies bristle at the notion that they alone can make E-85 a national or even regional success. “This is a bigger problem than one industry can solve,” Frederick Henderson, the chief financial officer at General Motors, said recently.

Major oil companies, which own fewer than 10 percent of the country’s gasoline stations, say they will not stand in the way of retailers who want to put in E-85 pumps. But they will not help, either.

That has placed the burden on the states where E-85 is linked with the success of ethanol. This year, Iowa, the country’s biggest corn producer, began giving its retailers a 25-cent-a-gallon credit for selling E-85 and is providing up to half the cost of installing E-85 pumps. The governor of Illinois, Rod R. Blagojevich, just proposed spending $30 million to add 900 pumps over the next five years, a sevenfold increase.

At the retail level, however, the effort to trumpet E-85 is inconsistent at best. Mr. Beck said he found the Springfield station only after doing some research, because the E-85 Web site run by the National Ethanol Vehicle Coalition lists pumps only by city, with a limited mapping function that fails to show drivers their location in relation to each other.

Unlike the standard gasoline pumps, the E-85 pump at the Qik-n-EZ did not take credit cards, forcing Mr. Beck to stand in line for 15 minutes behind customers buying beer, cigarettes and lottery tickets.

“You would think it would be as easy as buying fuel,’’ he said, “but it is a pain in the fanny.”

And there is no room for error when trying to drive only on E-85. Do not leave Emporia, Kan., for instance, without fueling up a nearly empty tank first. Otherwise, somewhere on the Kansas Turnpike the fuel gauge needle goes below empty.

What then? Turn off the air-conditioning, coast part of the way in neutral and, finally, a service station — the only one for another 30 miles — has gasoline. But no E-85.

Copyright 2006 The New York Times Company


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