Year-round E15 sales could spark major growth at Iowa gas stations
July 24, 2019
Year-round E15 sales could spark major growth at Iowa gas stations
Chains say they are adding E15 pumps, but most stations don't offer it
E15 fuel, with a higher blend of ethanol, is sold at a station in Marion. (The Gazette)
It was just about two years ago that the only Casey’s General Store in the state to boast it sold E15 fuel was in the small Northwest Iowa community of Hinton.
That same year, Kwik Star began installing pumps for E15 — a fuel blend containing 15 percent ethanol often called Unleaded 88 at the pump.
Today, Kwik Star has 23 Iowa stations with E15 on tap, while Casey’s now sells it at 27 stores.
All told, the number of E15-compatible gas stations in the area still represents a fraction of the convenience stores in the market that sell gas. But the number of E15 pumps is growing.
For drivers, the availability of E15 is not inconsequential. According to the Iowa Renewable Fuels Association, E15, which can be used in any 2001 or newer vehicle, typically sells for 5-10 cents less per gallon than E10 blends — which is the standard 10 percent ethanol blend of gasoline sold in the United States.
E15 is roughly 40 cents cheaper per gallon than non-ethanol gasoline, the association reports.
Kwik Star operates more than 600 stores between Iowa, Wisconsin and Minnesota — stores are called Kwik Trip in the latter two states — and Casey’s has more than 2,000 stores across 16 Midwestern states.
“So we’ve ramped up fast, but we still have a long way to go to have significant market penetration,” said Nathaniel Doddridge, director of fuels with Casey’s.
With the U.S. Environmental Protection Agency’s approval in May of year-round E15 sales, officials with both gas station chains say they expect E15 sales — and the number of available pumps — to increase across the state.
Sales of the higher blend of corn-based ethanol had been restricted during the summer over air quality concerns. But to the delight of farmers — and the dismay of oil refiners — the EPA lifted the restriction, presumably boosting the demand for ethanol.
Doddridge said year-round E15 sales should help eliminate the uncertainty some customers may have felt about a fuel they could not buy during the summer.
“If this thing is ever going to be adopted the way we think it is, you have to be able to sell it all the time and get the customers comfortable,” Doddridge said.
Lucy Norton, managing director of the Iowa Renewable Fuels Association, said Iowa has seen the number of E15 pumps quadruple since 2016, with close to 200 stations currently providing the fuel.
“Many retailers have been waiting,” she said. “Now that it can be sold year-round, we think those who have been waiting and watching will start moving forward and taking the steps to put it into their stations.”
According to information provided by the Iowa Department of Agriculture and Land Stewardship, the Iowa Renewable Fuels Infrastructure Program — designed to assist fuel retailers convert equipment to dispense renewable fuels — has provided nearly $2 million in grants to E15 projects since funding for E15 began in 2016.
While there were only five projects funded in fiscal 2016 and 2017, projects grew exponentially to 18 in fiscal 2018 and 19 last fiscal year. On Wednesday, the program approved three projects for the current fiscal year, which began July 1.
“You can see interest jumped considerably by 2018 and continued on into 2019, and we do eventually expect an uptick above even these numbers in applications to fund E15 projects,” Paul Ovrum, administrator with the renewable fuels infrastructure program, said in an email.
The program will reimburse up to half the cost of a project with a three-year commitment to specific renewable fuels. A five-year commitment to store and sell renewable fuels could net a project up to 70 percent in reimbursements.
Norton said individual projects could get up to $50,000 in assistance through the program.
With year-round sales of E15 now a reality, Ovrum said he anticipates even more interest in the program, which has helped fiance more than 40 E15 projects over about the last four years.
“I think many if not most retailers are optimistic about the future of E15 and the program will see an increase in applications for funding for E15 retail projects,” Ovrum said.
However, adding E15 fuel capacity to an existing convenience store comes with a cost. The price tag ranges from a few thousand dollars up to six-digits, depending on the scope of work.
Norton said, for many convenience stores, adding E15 pumps can be relatively simple — with new signage, certification and basic hardware and components costing a few thousand dollars.
“It’s not going to be a dramatic, inconvenient overhaul to put in E15,” she said.
At Kwik Star, Jeff Reichling, general manager of fuel operations, said all the company’s E15 pumps have previously blended fuel shipped to the stations, which means less infrastructure investment required at the pump.
“We had invested in our own infrastructure in order to blend these types of products a number of years ago,” Reichling said. “That’s what allowed us to roll out as many stores as we had prior to any legislation changes.”
Doddridge said many of Casey’s E15 pumps have been a similar undertaking.
A more high-end project to add new blender fuel dispensers on site, to allow for the mixing of multiple fuel blends, could cost closer to $18,000 to $20,000, he said.
If an entirely new underground tank is needed, projects can surpass $100,000, he added.
Doddridge said most of Casey’s conversion projects involve pre-blended fuel. The company has committed to adding E15 pumps to all new stores.
The 60 E15 fueling sites announced earlier this year by Casey’s are a part of its 2018 pledge to install E15 at 500 sites in the coming years.
Dawn Carlson, president and chief executive officer of FUELIowa, a trade organization that represents the fuels industry, told The Gazette in May there is some concern in the market for small fuel retailers, who may struggle to afford major E15 upgrades and could lose customers to competitors.
Carlson said 85 percent of all retail fuel sites in Iowa — largely located in more rural areas — are incompatible with E15 or cannot prove compatibility, meaning they are prohibited from legally offering the fuel.
What’s more, Iowa offers up to 10 cents per gallon in refundable income tax credits to E15 retailers, which gives existing E15 retailers a leg up.
“For Iowa small-business owners competing against someone selling E15, the change will be immediate,” Carlson told The Gazette. “In this industry, street prices drive sales. The short-term impact of year-round E15 will hinge on whether the 10-cent advantage will put competing businesses who cannot sell E15 out of business. The long-term impacts remain to be seen.”
More Renewable Fuel Projects
The Iowa Department of Agriculture and Land Stewardship’s Iowa Renewable Fuels Infrastructure Program was designed to assist retailers in the conversion to renewable fuel sales. Since funding for E15 conversions began in fiscal 2016, nearly $2 million has been spent on projects. Here is a look at the number of projects funded each year:
Fiscal 2016 — 2
Fiscal 2017 — 3
Fiscal 2018 — 18
Fiscal 2019 — 19
Fiscal 2020 — 3
Fiscal 2020, which just started July 1, runs through June 30, 2020.
Source: Iowa Department of Agriculture and Land Stewardship
l Comments: (319) 398-8309; email@example.com