Eric “Ric” Foster, Gardner, had to remove a sign he considers almost sacred from in front of his business Sunday night.
The yellow sign with red lettering announced that Foster’s Shell filling station on Main Street, E and J Food Mart, sold pure gas. “No ethanol. No alcohol,” the sign proclaimed to passersby.
“This is the first time I’ve ever sold ethanol blend,” Foster said.
There are no federal or state laws requiring Foster to sell fuel blended with ethanol, but recently revised Renewable Fuel Standards are squeezing oil companies to sell more and more blended fuel each year. This year, by federal mandate, oil companies must produce at least 19 billion gallons of blended fuel this year. By 2022, they’ll need to produce 36 billion gallons.
Foster and his desire to sell only pure gas is getting squeezed between federal mandates for blended fuels and tax credits. Thomas Palace, executive director of the Petroleum Marketers and Convenience Store Association of Kansas, said the scarcity of pure gas is really a fight between oil companies and fuel retailers over environmental and tax credits An environmental credit – renewable identification numbers (RIN) – is available to oil companies for every gallon of ethanol blend fuel sold. The RINs help the companies comply with the renewable fuel standards.
And then there’s the tax credit — specifically, a federal tax credit called a blender credit. It’s worth 4.5 cents per gallon of ethanol, and retailers who blend ethanol and pure gas at the pump receive the tax break. The credit can also go to oil companies when they sell blended fuel to retailers. Only one or the other is eligible for the credit.
Palace said that tax credit is valuable to gas retailers, because they can pass the tax break onto the consumer by lowering their fuel prices.
“More of the retailers in the state have found that the only way to compete with the station down the street is to blend their fuel,” Palace explained. “It’s all cost driven.”
Foster doesn’t want any part of the competition. Wednesday, a gallon of pure gas, 91 octane premium, at Foster’s station cost $2.99. Two doors down, a gallon of 91 octane, likely an ethanol-blend, costs $2.95. At Foster’s station, his ethanol blend 87-octane runs 40 cents cheaper than the pure gas. Ethanol is subsidized, so whether the retailer down the street buys pre-blended fuel or blends it at the pump, the gas is cheaper.
Pure gas gives drivers better gas mileage and cuts down on car maintenance expenses, according to Foster. That’s why he prefers to sell pure gas – even at a higher cost.
“Ethanol cheats the customer,” Foster said. “They get less mileage out of a gallon.”
There is evidence to support his claims.
Per unit, ethanol contains less energy than gasoline, and the popularity of pure fuel is rising. For example, in 2008 the Edmond, Okla. Police Department started fueling its fleet of vehicles with pure gas. A popular website created in 2009 boasts thousands of hits each month and lists stations where ethanol-free gas is available.
In the meantime, oil companies have a vested interested in only selling fuels that are pre-blended. In addition to mandates requiring more blended fuels, the oil companies can reap the tax credits if they only offer pre-blended fuels to their consumers.
That’s the problem Foster ran into this summer. He’s under contract to purchase gasoline from an oil company that is only selling pre-blended lower octane low-vapor grades to its Kansas City area retailers.
Foster hopes he’ll be able to set out his “no ethanol, no alcohol,” sign in September, when low-vapor fuel is no longer required in the metro.
Fuel retailers in the five counties that make up the Kansas City Metropolitan area – including Johnson County – face a summer mandate that requires low-vapor gas be sold at the pumps from June 1 to Sept. 15. For now, Foster is still able to sell premium grade pure gas. But he’s worried the oil companies may do away with that as well when the summer fuel mandate expires for the year. They could also opt to sell pure gas in lower grades to retailers again, but Foster isn’t so sure that will happen.
“They could shut it all down come Sept. 15,” Foster said.
While the number of ethanol-free users appears to be growing the list of available retailers is shrinking. Foster says in part, because suppliers and retailers are subsidized by the federal government to use ethanol-blended fuels.
“They’ve taken an industry out there and tell you that you have to buy that industry’s product no matter what. I’m still fuming,” Foster said.
Foster likened the situation to TV sales.
“I don’t know how many different brands of TVs there are, but it’s like the government coming in and telling us, ‘We only want you to buy this kind of TV set,’” Foster explained. “I’m still screaming and trying to come up with ideas of what the heck to do.”
To that end, he’s contacted legislators and media outlets, including the Kansas City Star, trying to find a way to continue to sell the product his customers have come to expect at his pumps.
Palace said last year, his association tried to push legislation in Kansas that would force refiners to offer pure gas, Of course, he explained, they could continue to offer blended fuel as well.
“It passed the Senate, but we never got it moving in the House,” Palace said.
Pure gas is always available at the gas terminals where fuel trucks pick up fuel for gas stations, because blended fuels can’t be pumped through the pipelines.
A pure gas demand from all consumers in the state of Kansas probably would not be enough to influence federal policy or to get the oil companies to offer it to local retailers
“In the grand scheme of things, we’re pretty small,” Palace said. “Our blended product in the state of Kansas amounts to eight-tenths of one percent of all sold nationwide.”
That’s less than 1 percent. And the demand for pure gas from retailers is limited, Palace explained. Many retailers are fighting to retain the ability to garner the blended fuel tax credit – but not to make pure gas available at their pumps. There were only two retailers in Johnson County, including Foster, who sold only pure gas prior to June 1.
Foster believes the federal subsidies for ethanol coupled with stricter renewable fuel standards are simply an ethanol industry bailout.
“We as Americans, some of us do not choose to buy their product,” Foster said. “We’ve been subsidizing their product for 20 years and they’re still not making any money. It looks like they’ve back-doored us.”
Mandates, tax credits put squeeze on Gardner gas purist