On Tap

FROM THE FEBRUARY ISSUE: Retailers preparing for year-round E15 have options for pumps, financing and marketing.
By Matt Thompson | January 23, 2019

Gasoline retailers spend a fair amount of time making sure their pumps fit their customers’ needs—needs that might be changing, with the U.S. Environmental Protection Agency expected to extend the Reid vapor pressure (RVP) waiver to E15, hopefully before next summer’s driving season. Retailers will have to decide not only if they will offer the blend, but how they’ll dispense it.

For those who have already added the blend to their product mix, the most widely chosen option has been blender pumps that combine E85 with E10 to produce blends like E15. But Mike O’Brien, vice president of market development for Growth Energy, says there are other choices. “As of late, Kwik Trip, Casey’s and Cumberland Farms, for example, will be selling a preblended E15, where they put E15 in an existing tank and dispense it through existing dispensers. So, we’re starting to see that part of the market as well.”

Nathaniel Doddridge, director of fuels for Casey’s General Store, says preblended E15 can be added without a large capital expenditure. “That was one of the big concerns, is how do we get someone who’s selling us on the gasoline side of it to be OK with selling us a little bit more ethanol?” Doddridge says. “We’re seeing more and more fuel suppliers who are selling a preblended E15.”

That isn’t to say Casey’s is unhappy with the blender pumps all of its E15 sites currently use. Doddridge says the blenders have been effective. “Maybe E15 was hot today, but we do want that flexibility,” he says, adding that the pumps can blend up to E30, should more mid-level blends take off within the industry.

Equipped for success
Danny Seals, product marketing manager for retail dispensers at Gilbarco Veeder-Root, a fuel dispenser supplier, says the company offers a number of pump options for E15. He also says the demand for blenders has been steady in recent years. While there hasn’t yet been an increase in demand for blender pumps following President Donald Trump’s RVP waiver extension announcement, he says Gilbarco is keeping a close eye on market trends.

Scott Negley, director of products for Wayne Fueling Systems, says other issues are top of mind for many retailers. “The focus for retailers right now is probably more around making sure they get ready for the upcoming payment security—EMV chip and PIN mandates—that will be taking effect, and making sure that they comply.”

While payment compliance is the focus now, Negley says it presents an opportunity for retailers to expand their offerings. “I’ve told my friends in the ethanol segment, ‘This is an opportunity if you’re a retailer. Whether it’s in your short- or long-term plans to upgrade to a higher ethanol classification from a fuel offering standpoint, now’s the time to do that because you can cover both elements in one changeover. You can get compliant on payment while making sure you meet your future fuel needs.’”

Seals says the equipment’s Underwriter Laboratories listing is important in retailers’ pump decisions. “The three levels of ethanol UL has developed standards to test to are E10, E25 and up to E85,” he says. “Gilbarco has approvals for hydraulics to support all three levels.” Ensuring equipment is compatible with blends higher than E10 is important because the corrosiveness of those fuels could lead to equipment damage. So, Seals says, retailers generally spend considerable effort making sure the pumps they choose have the UL listings that meet their needs.

Negley agrees, adding, “Everything that we make now from a retail, and even for that matter, most of our electronic fleet dispenser products, is UL listed for up to E25 as standard,” he says. In addition, he says Wayne has options that are UL listed at E85. “If you buy one of our blenders, we have the capability to provide a retailer maximum flexibility to offer whatever fuel grades out of whatever hoses he prefers to use.”

Further thought should be given to the pumps’ design, to help prevent misfueling, Seals says. “With these types of dispensers, there are multiple hoses and selecting the correct grade and hose when filling up can be a concern,” he says. “Another consideration for retailers is to select the correct hanging hardware for the fuel offerings they want to dispense.”

And retailers who want to offer E15 next summer driving season shouldn’t delay making those decisions. “From Gilbarco’s perspective, the dispensers capable of delivering ethanol content greater than 10 percent are within our standard lead time, so retailers should keep that in mind,” Seals says. “I think site designs and approvals should be considered soon due to the permitting process for a site.”

Negley also says timing is important. While an upgrade from an E10 to an E25 compatible system may be relatively minor, adding E85 is a larger task, requiring a complete teardown of the pumps and equipment. Retailers should also be aware of the availability of technicians to do the work. “In their region, the amount of available bodies or technicians who are going to be out there to do the work may be allocated for some of these other payment initiatives and such,” Negley says. “That will be a consideration.”

Buying In
Ron Lamberty, executive vice president of the American Coalition for Ethanol, says misinformation swirls around what it costs retailers to add E15 to their stores. “It’s not costly to do E15. It does cost a little bit more if you want to do flex fuel, but it’s an opportunity and the guys who see it first are going to do well.” He adds that, for some retailers, the cost of adding E15 is little more than changing decals.

Seals says retailers say the cost is high, but the return is, too. “For our customers, the cost of adding the equipment to offer greater than 10 percent ethanol is pretty well-known. The retailers doing it have been able to capture the value of the ethanol offerings and see a reasonable payback.”

Financial assistance for retailers to add higher blends is available. According to the U.S. Department of Energy, Iowa, Indiana, Minnesota, Nebraska and South Dakota offer retailers some assistance—either loans, grants, or tax credits—to install blender pumps. O’Brien says state corn grower associations often have funding available, adding that Growth Energy helps retailers locate the appropriate sources.
“In addition, there is, at times, Prime the Pump funding available for the larger initiatives that cut across multiple states and there are some basic criteria that the retailer has to meet to become eligible for it, and ultimately the Prime the Pump board decides who they give grants to and under what terms,” O’Brien says. In 2018, Growth Energy announced it had commitments from retailers to offer E15 at 2,800 locations by 2021 through its Prime the Pump campaign.

On the federal level, assistance is available through the U.S. Department of Agriculture’s Rural Energy for America Program. The program is geared toward ag producers and small businesses in rural areas and can help cover the cost of installing flex fuel or blender pumps through grants or loans.

Many Miles
O’Brien says E15 has already proven itself a viable product for retailers, and it’s a blend consumers often choose, when it’s available. “We do track sales of E15 and how the marketplace is shaping and, based on the sales data that we recently tracked, drivers have surpassed another billion miles with E15, bringing the total miles driven to more than 6 billion in the U.S.,” he says. “Once consumers try E15, they come back and buy more E15 and because of that, the amount of usage of E15 is growing exponentially.” The number of consumer E15 transactions has topped 1 million, he adds.

“The initial wave of demand will pick up out of the retailers that we’re seeing, both in terms of their summer sales, as well as the number of sites, and with that we’ll start seeing some of those other retailers that have been waiting for RVP relief get into the fray because of the competitive landscape,” O’Brien says.

But while adoption of E15 could grow once the RVP waiver is approved, some markets might not experience rapid growth of the blend, or the widespread installation of blender pumps. In Michigan, ethanol producer Carbon Green Bioenergy LLC partners with retailers on branding and marketing ethanol. Carbon Green has its own ethanol brand—Yellow Hose—which offers E85 directly to retailers, but it also uses the Unleaded88 branding, developed through Prime the Pump, for E15. Carbon Green has its own on-site fueling station that offers several blends, including E15. When the fueling station was initially installed, Carbon Green told Ethanol Producer Magazine the intent was to increase interest among retailers in installing blender pumps.

Carbon Green’s efforts have continued to generate some interest in higher ethanol blends, but Gabe Corey, commodities and risk manager for Carbon Green, says most of the retailers it works with are backed by petroleum companies. “The obstacle again has been with the branded gasoline stations,” he says. “We’ve seen more willingness to offer E85 than to put in blender pumps to offer different level blends, just because of the branding requirements.”

While the branded retailers may not be progressive E15 adopters, Doddridge says change within the industry often comes from the smaller retailers. “I’ve always said that the retailers out there that force things to change are not necessarily the Shells, the Exxons, the Marathons of the world. They’re big retailers and do a fantastic job, but normally the small, local, regional retailers like a Casey’s or a Kwik Trip or a RaceTrac or even a Murphy’s, those are the guys who have been the first movers and those are the guys, I think, that will force the change in the industry.”

Author: Matt Thompson
Associate Editor,
Ethanol Producer Magazine