OPINION: Adding E15 into the mix: one retailer’s experience

By Cassie Mullen, director of market development at the Renewable Fuels Association | August 01, 2019

I recently had the pleasure of speaking with Nathaniel Doddridge, Director of Fuels for Casey’s General Store. He joined Casey's in August 2017 after spending 13 years at Murphy USA, where he spent a decade overseeing several facets of the fuel category, including pricing, supply and logistics. At Casey’s, he currently oversees the strategic direction of the fuel category which includes retail, procurement, transportation and commercial. Here’s part of our conversation about Casey’s experience with E15. We’ll be sharing more in the future.

RFA: Casey’s stores are often located in the same areas where our members produce ethanol and many of our supporters in agriculture proudly operate their farms. Has Casey’s support of E15 and home-grown ethanol had a positive reception from your communities and local customers? Is there any sense that they appreciate what you are doing in supporting our farmers and their efforts over traditional the traditional “big oil” model?

Nathaniel Doddridge: We have had a great reception. Being able to give back to the local community and actually contribute locally to the economy around us has been received very well. Because we were a little bit of a holdout for somewhat of a longer period of time, some of our competitors moved faster than us. So there's a lot of relief, I think, now from our communities. We've heard nothing but positive feedback from our customer base since our transition into the higher blends of renewables, whether that's ethanol or other biofuels.

RFA: To date, Casey’s has completed the addition of E15 at 125 of their locations, with plans for another 50-60 by the end of 2019. Have you ever come to an impasse where cost or something else was such an insurmountable barrier that you had to pass on your plans for adding E15 or E85?

ND: I will say there is an inflection point where there is a portion of our locations where there could be a more serious cost conversation; every dollar is always under scrutiny. So, there's always a little bit of justification needed there. But given what we've done and how much money we've spent, and how much it's really cost, the total of changing over has been pretty minimal. And we've actually been pleasantly surprised with that. With regards to our plans and what we have learned about conversions, we are excited about where we are from an infrastructure standpoint, because we do feel that we can ramp up pretty fast as we've been doing without finding that inflection point yet. But again, being a 50-year-old company, there are going to be those cases where we just can't do that, because it might take more of an investment. But we haven't found that inflection point yet.

RFA: Respecting that each site must be approached uniquely, when there are locations where the infrastructure is compatible—meaning tanks and lines and dispensers are able to handle E15 or E85 legally from a materials standpoint—what has your typical cost experience been? 

ND: Cost-wise, its ranges anywhere from a few hundred dollars for the certification and hanging hardware and things like that, to a couple thousand dollars. We haven't crossed into greater cost scenarios yet since we are focused on conversions and not new builds or full remodels. Certainly, that would change with a major project where we had to consider adding tanks are changing out dispensers. Because we are so committed, we have worked with some of our partners in the industry to lower some of those costs for us. But, again, we haven't gotten to the point where we feel like it's an investment that really is on anyone's radar.

Because we consistently examine our infrastructure and because we are so focused on safety and our customer experience, we are always evaluating aging equipment. Specific to adding E15 or E85, to date the cost is actually one of those things that is at the bottom of the list and doesn't get a lot of attention because it hasn't gotten to the point yet to where it's crossed into what I would classify as a substantial financial investment or one that cannot overcome the benefit of the conversion.

RFA: To that point, when Casey’s builds a new site or does a complete fuel remodel, do you find that the cost to install fully “future compatible” equipment for all blends of ethanol is a barrier or cause of concern?

ND: No, not currently under the modeling of new stores. You look at what it costs to set a store up for future blending capabilities and current blending capabilities. Those things are somewhat table stakes currently. We feel that that's the cost of doing business. Maybe we put an additional compartment in one of the tanks or it forces us to dig the hole a little bit bigger; there's a little bit of cost to that but at the end of the day, we need flexibility under the ground so that as the product changes at the dispenser, we can ensure our infrastructure underground has that same flexibility and we're not stuck in the same boat years from now. If the industry switches or things change a little bit, so can we. At the end of the day, it costs us several million dollars to build a new store and some of what we're doing with our infrastructure on fuel is really the cost of doing business and is really table stakes for us as we see it currently.

RFA: Casey’s has been very vocal about their commitment to adding higher blends of ethanol; can you touch on where you’re at today and what your future looks like?

ND: We currently have 125 locations selling E15 with another 50 to 60 under construction currently so by the end of our fiscal year which is April 2020, we will be right at 200 locations selling E15. As a matter of fact, as we speak, we're in the middle of converting seven locations in Indiana and one in Wichita so the ball is rolling, and we are right on track.

RFA: Will those locations that offer E15 carry E85 as well?  

ND: That’s a good question. The stores in Indiana will have both, but the Wichita location will be a preblended E15 product. The reason for one over the other at this point is mostly based on that fact that we are trying to cover a lot of ground and move this as fast as possible with the addition of E15. However, that doesn’t mean in sites where we don’t offer both, we wouldn’t reconsider that down the road as our presence in the market grows.

RFA: Was the recent RVP rule change a positive thing for Casey’s and how did it affect your plans for growth?

ND: Absolutely. It gives us a lot more flexibility. A lot of the challenge leading up to the one-pound waiver finally going away was getting consistent commitment from suppliers to sell product to us. We don't have a very sophisticated supply chain on the fuel side of our business yet, but as it was, we had to rely a lot on a lot of the mainstream assets, which includes some refiners. Getting them comfortable with selling us a pre-blended E15 year-round was just something that we could not get done [without the RVP waiver]. It is what it is; they wouldn't sell it in the summer. So now that that's gone away, we have a lot more flexibility.