E-85 On Verge Of Explosive Growth: 2,000 New Stations Next Year

Tax incentives for alternative fuel refueling infrastructure granted in the Energy Policy Act of 2005 will lead to the development of 2,000 new E-85 ethanol stations, nearly a 400 percent increase, in the next year alone, a leading proponent of the fuel says.  

E-85, a blend of 85 percent ethanol and 15 percent gasoline, is suddenly enjoying an exploding base of support. Domestic automakers find it a low-cost public relations fix to a perception they are unmindful of the environmental and national security consequences of their vehicles, as concern over petroleum use becomes more of a buying factor in the market. Environmental activists see it as a way to reduce greenhouse gas emissions. And even national security conscious neo-conservatives see it as a route to reduce dependence on foreign oil.

From an industry that was comprised of fewer than 200 E-85 stations only a few years ago, proponents say their “home-grown” fuel is on the verge of explosive growth. New stations are increasing by orders of magnitude in just one year,  a top official with the Missouri-based National Ethanol Vehicle Coalition (NEVC) indicated. There have been 288 E-85 pumps added this year alone, raising the number of stations offering the fuel to nearly 600, the source said. About 170 of these stations are located in Minnesota, which has mandated the use of 10 percent ethanol in all gasoline sold in the state. It has EPA permission to increase the mandate to 20 percent.

The number of new E-85 stations still puts the fuel a long way from the 170,000 stations in the U.S. where gasoline is available. The stations will, however, help refiners meet another provision of EPACT'05, the requirement they blend 4 billion gallons of renewable fuel next year, increasing to 7.5 billion by 2012. While the number of stations are experiencing rapid growth, major oil companies have yet to embrace the fuel, according to ethanol industry sources.

Next year alone, when the tax incentive portion of EPACT'05 takes effect, that number is expected to increase by 2,000 new pumps, the NEVC official said. Title XIII of the energy law provides for as much as $30,000 per station in tax incentives and applies to “property put in service after December 31, 2005.” The provision remains in effect for four years, through Dec. 31, 2009.

A “large percentage” of the new stations will be situated in the Midwest, where the preponderance of the existing ones are located, the E-85 proponent concedes. He added though, the hope is to expand aggressively in the Upper Northwest, where there is a substantial agricultural presence. There are also plans to penetrate the Northeast, where there are currently no E-85 pumps, the official added.

In addition to the energy security and environmental benefits of E-85, it is also cheaper than gasoline in many cases, even after taking into account a fuel economy penalty of between 10 percent and 15 percent because the energy density is less than for gasoline. On the other hand E-85 is 108 octane. Volvo has a car on the market in Europe that has been tuned to run on E-85, taking advantage of the higher octane, while avoiding the fuel economy hit, sources say.

There are currently 4 million so-called flexible fueled vehicles (FFVs) capable of burning E-85 on U.S. roads today. Both Ford and General Motors have announced plans to increase production. This really just means adding a $100 oxygen sensor in the fueling system. Environmental groups, while many support ethanol, criticize a loophole in federal fuel economy regulations whereby automakers are able to earn credits for building FFVs even though most of them never run on E-85.

A bill was introduced in the U.S. Senate Thursday (Nov. 10) by Sen. Richard Lugar (R-IN) that would eliminate this loophole as well as mandate the production of more dual-fuel vehicles.