Pump Mandate Riles Retailers

Feb 26, 2021  | 5 min  | Ep4628

Iowa accounts for 25 percent of the nation’s ethanol production.

A plan by the state’s governor is looking to expand market share, but it could come at a cost to those on the front-lines of fuel distribution.

Peter Tubbs reports.

Dan Moellers, CSOI Corp:“So at this location, it would require a total upgrade as far as tanks, lines and dispensers. So I'm looking at putting in a, actually I'm going to upgrade it, in the spring so it's, a, it's right. A little over, uh, $450,000. So it's about, you know, right out a half, a million dollars to do the upgrade here and I'll be putting in three gas dispensers and one diesel here.”

Dan Moellers owns gas stations in 10 Iowa towns and is looking at an expensive upgrade path at his stations in Newton, Iowa. Each pump currently dispenses both gasoline with ethanol and gasoline without ethanol, and are being upgraded with new infrastructure that would accommodate E15, gasoline blended with up to 15 percent ethanol. 
But a bill working its way through the Iowa legislature would require almost all of the gasoline pumps in the state of Iowa to be E15 compliant by 2026, changing the plans of this station and requiring hard choices for fuel retailers across the state.
The biofuels industry believes the upgrade costs will be justified by increased sales volumes of renewable fuels.
Monte Shaw, Iowa Renewable Fuels Association:“It's going to be great for the farmers, it's going to be great for biofuels producers, but it would be great for consumers. Right now, only 250 out of 2,400 stations give you the option of E15, which is higher octane for your car, but lower cost for your wallet. Um, why wouldn't we want every Iowan to be able to go to a gas station and find E15.” 
The Iowa bill includes $7 million dollars in grants each year that will pay up to 70 percent of the costs to upgrade infrastructure at retailers, an increase from the current $3 million dollars per year.
Monte Shaw, Iowa Renewable Fuels Association: “Right now we have more requests for grants than we have funds to cover. So we needed to find a way to dramatically increase the amount of funding going into that grant program.” 
A study commissioned by the Iowa Renewable Fuels Association estimates that converting almost all of the 13,000 gasoline pumps in the state to E15 will sell an additional $50 million dollars of wholesale ethanol per year, increasing production a little less than one percent annually. Fuel retailers believe the costs of the upgrade could run as high as a billion dollars statewide.
Monte Shaw, Iowa Renewable Fuels Association: “So there's been a lot of numbers thrown out that are just quite frankly, hogwash. If a retailer wants to move to E15, they may choose to replace a lot of equipment, but let's not confuse that with what they would be required to replace in Iowa. The fire Marshall took UL guidance, Underwriters, Laboratory guidance, and approved all of our dispensers to dispense E15. You do not have to replace the dispenser to dispense E15.”
Dan Moellers, CSOI Corp: “Yeah. I'm not sure where they're getting their information from, because I flat out, you know, this site, you're, you're close to half a million dollars because the tanks aren't compatible, the piping, the dispensers are not. So it's definitely, you know, that billion dollar number that's been put out there.”
The conflicting figures may also affect consumer options at the pump. The bill up for consideration in the Iowa House would limit the availability of gasoline without ethanol to a single pump per location, which may encourage station owners to stop selling the product at some locations rather than devote an underground tank to a single pump. The large estimates of upgrade costs may result in stores that sell low volumes of gasoline to pull out their pumps, or to close all together. 
A proposed change to the Iowa tax credit structure currently utilized by gasoline retailers only provides credit for biofuel sales above a new benchmark that could free up tax dollars for more infrastructure grants. Federal and state grants will help finance upgrades at this station and another in Newton that sits next to Interstate 80, but grant dollars may fall short of the price needed for a rapid, state-wide upgrade. 
If the bill becomes law, the mandate would  increase at diesel pumps to B20, a blend of 80 diesel fuel and 20 percent soy diesel. The move would results in a  production increase of roughly 10 percent over five years. 
Retailers have been shifting to E15 slowly, mostly as new stations have been built across the state. Most are aware that gasoline sales peaked in 2007 nationally, and were flat in the five years before the COVID-19 pandemic reduced consumer driving habits. Based on costs and the new normal in usage, most retailers would prefer a slower transition that meets market demands.
Dan Moellers, CSOI Corp: “So, uh, so the E10, you know, is, is approved. Uh, you know, the jumping of that, [E15] just a whole new ball game. And the E10, you know, it's 87 percent of what we sell today is an ethanol blended product. So, I mean, it's working, you know, uh, people, you know, buy that it's less expensive, uh, and worked well on the vehicle.”
For Market to Market, I’m Peter Tubbs

Producer contact peter.tubbs@iowapbs.org

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