Analysis: High-ethanol gas - Not coming to a pump near you

Wed Nov 27, 2013 5:17pm EST
 
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By Michael Hirtzer

CHICAGO (Reuters) - A month ago, Steve Walk was on the brink of deals to sell two big oil refiners some of his company's specialized oil pumps, which serve up fuel that is 85 percent ethanol, a biofuel made mostly from corn.

Walk's company, Protec Fuel, sells and installs the equipment needed to dispense so-called E85. The deals would have nearly doubled Protec's business, he said. The number of stations across the United States dispensing E85, which is a rarity despite the growing use of biofuels, would have jumped by 10 percent.

But those deals are on hold after the U.S. Environmental Protection Agency's proposal earlier this month to slash the minimum volume of ethanol to be used in the country's gasoline supply next year. The surprise move by the Obama administration marks a retreat from the 2007 Energy Independence and Security Act meant to push increased sales of biofuel. The proposal could be approved following a 60-day period for public comment.

"It was just starting to get to the point where oil companies were saying, 'Fine, we'll start putting in alternative fuels,'" Walk, vice president of Protec Fuel in Boca Raton, Florida, said of deals he had in the works to build or retrofit pumps at some 450 stations.

"Now, those conversations have gone by the wayside. It's not canceled, but it's on hold."

For Walk, an estimated $5 million in potential revenue hangs by a thread. But his stalled deal is just one example of the blows suffered by the nascent E85 industry, which has relied heavily on the road map laid out in the federal Renewable Fuel Standard (RFS) program.

The regulation, supported by two U.S. presidents and designed to promote vehicles running on homegrown biofuel, could be slashed for the first time.

While still vital to the $131 billion farm economy, ethanol is less of a priority in Washington as declining fuel demand, lower energy costs and booming North American oil production result in waning support for a biofuel program tied to becoming less dependent on foreign oil.   Continued...

 
E85 ethanol fuel is shown being pumped into a vehicle at a gas station selling alternative fuels in the town of Nevada, Iowa, in this December 6, 2007, file photo. REUTERS/Jason Reed/Files