Eric “Ric” Foster had to remove a sign from the front of his Gardner business Sunday night. It’s a sign Foster considers almost sacred.
The yellow sign with red lettering announces that Foster’s Shell Station, E and J Food Mart, sells pure gasoline. “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 federal renewable fuel standards require oil companies to sell more blended fuel each year.
By 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’s desire to solely sell pure gas is sandwiched between federal mandates for blended fuels and tax credits. The squeeze is making it difficult for Foster to obtain the product he prefers to sell.
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, called renewable identification numbers (RIN), is available to oil companies for every gallon of ethanol blend fuel sold The RINs help companies comply with renewable fuel standards.
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 lowering 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.
Tuesday, a gallon of pure gas at Foster’s station cost $2.69. Two doors down, a gallon cost $2.51. 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
There is some evidence to support his claims, and there are pure gas fans willing to pay extra for pure gasoline.
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 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 fuel, the oil companies reap tax credits if they only offer pre-blended fuels to their consumers.
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.
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. For now, he is still able to sell premium-grade pure gas. But he’s worried the oil companies may do away with that option when the summer fuel mandate expires for the year. Oil companies 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. In part, Foster said, that’s because suppliers and retailers are subsidized by the federal government.
“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,” he said.
Foster compared 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, Foster has contacted legislators and media outlets, seeking to continue selling the product his customers expect at his pumps.
Palace said last year, the Petroleum Marketers and Convenience Store Association of Kansas tried to push state legislation forcing refiners to offer pure gas. Of course, Palace explained, they could continue to offer blended fuel as well.
“It passed the Senate, but we never got it moving in the House,” he said.
Because belnded fuels can’t be pumped through the pipelines, pure gas is always available at gas terminals, where fuel trucks pick up gas for delivery to stations. However, a pure gas demand from all consumers in the state of Kansas probably would not be enough to influence federal policy or to get 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 – not to make pure gas available at their pumps.
There were only two retailers in Johnson County, including Foster, who sold
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.”