Minneapolis Star Tribune, MN
10-04-06
Flex-fuel dilemma: Putting pumps where the cars are
Star Tribune Staff
When Falena Gaughan went shopping for a new car this year, she said the
salesman warned her that a flexible-fuel version would get worse mileage when
running on a mixture of gasoline and ethanol known as E85.
So Gaughan bought a Chevy Impala with a standard gas engine. But General
Motors sent her a $1,000 cash card anyway for her to use at stations that sell
E85. Gaughan said she offered to return the card, but the dealer told her to keep
it, noting that the card can be used for gas.
But Gaughan, who lives in Utica, Ill., said the closest E85 station is about 25
miles away.
"So even if I had wanted an ethanol vehicle, it wouldn't be cost-efficient for me to
drive 25 miles just to fill my gas tank up," she said.
Gaughan's case illustrates two problems with E85: In most places, it's hard to
get, and consumers often shun it because the blend's lower price seldom offsets
its lower mileage. As a result, the vast majority of flex-fuel vehicles run on
gasoline.
But E85 is a good deal for U.S. automakers. By putting flex-fuel engines in sportutility vehicles, minivans, pickups and powerful sedans, they can take advantage
of federal credits for selling "alternative fuel vehicles." Those credits enable
Detroit to marketing a fleet of vehicles that would otherwise fail to meet federal
fuel-efficiency standards.
The Union of Concerned Scientists charged in a report last year that the Big
Three automakers had used the flex-fuel "loophole" to avoid $1.6 billion in fines
since 1998. "The promotion of flex-fuel technology is, at best, a cynical marketing
ploy rather than an energy-benefiting piece of technology," said David Swenson,
an economist at the Iowa State University.
The Sierra Club and some other environmental groups say sales of flex-fuel
vehicles actually exacerbate global warming and the nation's dependence on
foreign oil, because very few owners use E85, and because the sales of such
vehicles enable Detroit to keep selling gas guzzlers.
Nationwide, more than 5 million vehicles are built to run on E85, but only about
one of every 240 retail fuel stations carries it. Texas had the most flex-fuel
vehicles as of Dec. 31, the latest data available, with more than 354,000,
according to the Alliance of Automobile Manufacturers, a trade association. But
the state has just a dozen E85 pumps open to the public, according a
Department of Energy database. Florida, with about 272,000 flex-fuel vehicles,
just opened its first public E85 pump Sept. 13.
Minnesota has the most public pumps, 262. That's about a third of the 755 public
pumps nationwide. Yet the state has about 2 percent of the nation's flex-fuel
vehicles.
As oil prices soared this summer, so did Minnesota's E85 sales. Stations sold
11.7 million gallons of E85 through August, 2.7 times the volume sold in the
same period last year, according to the Minnesota Department of Commerce.
Sales could be even better.
Many service stations have contracts with oil companies that prohibit any
competing fuels from being sold alongside the supplier's brands. Some say these
contracts have blocked wider E85 distribution.
Jim Nichols, a farmer from Lake Benton and a former Minnesota state agriculture
commissioner, said persuading a service station to sell E85 "is like trying to sell a
Whopper in a McDonald's."
Gov. Tim Pawlenty said his office is crafting legislation to prohibit future contracts
that constrain E85 sales.
That doesn't mean consumers will line up to buy it. At stations where E85 is
available, sales are growing, but remain tiny, according to the National
Association of Convenience Stores. The group told Congress this spring that
fewer than 5 percent of the vehicles can use E85, and substantially fewer than
that do so.
Even state employees don't buy much E85, despite an executive order that
Pawlenty signed two years ago mandating the use of clean fuels, like ethanol,
whenever feasible. State records show six of 10 vehicles managed by the state's
Travel Management Division can use E85, but it accounted for just 2.1 percent of
the fuel the division bought last year.
The Minnesota Department of Transportation (MnDOT) fleet of nondiesel
vehicles is more specialized, and just 22 percent can use E85. Still, records show
that E85 accounts for just half of 1 percent of the agency's fuel purchases from
January 2005 through June of this year.
Mark Toso, a hydrogeologist at the Minnesota Pollution Control Agency, objected
when the agency sent a reminder in June saying employees were required to use
E85. Toso noted in an "all-staff" e-mail that the fuel is less efficient than
conventional gasoline, "which significantly increases operating costs."
Jeff Buss, mobile sources coordinator for the agency, responded that "we have to
balance somewhat competing factors," including benefits to the local economy
and the reduction of oil imports.
How many miles per gallon are consumers giving up by using E85? That
depends on location and time of year. But the Department of Energy said this
summer that Midwest consumers should multiply the price of E85 by 1.41 to
compare it with gasoline on an energy-equivalent basis.
Using that formula and Minnesota Department of Commerce sales data, the Star
Tribune found that the adjusted E85 prices averaged 19 percent higher than 87octane unleaded through August of this year, when the energy-adjusted average
price of E85 was $3.51 a gallon and gas cost $2.94. (Because all Minnesota
gasoline contains 10 percent ethanol, the formula might slightly inflate the
difference here.)
Despite the higher cost, the state is committed to increasing the numbers of flexfuel vehicles in its fleet and its use of E85, said Tim Morse, director of the state's
Travel Management Division. "E85 use by state government is expected to
nearly double in calendar year 2006," he said.
The state is on target for meeting that goal, but it still won't amount to much. The
division's E85 use in the first half of the year measures just 2.7 percent;
MnDOT's share in the same period accounted for 0.8 percent.
In an interview, Pawlenty threatened to discipline anyone who was knowingly
violating his E85 order. "It's not just a feel-good proclamation," he said. "That has
the force and effect of law."