ACE’s New E15, Flex Fuel Retailer Roadmap

The biggest question to answer for most petroleum marketers about E15 is how will it help them make more money. This article appears in the October print issue of Ethanol Producer Magazine.
By Ron Lamberty | September 16, 2016

With high-profile convenience store chains announcing the addition of E15 and flex fuels to their traditional fuel slates, other chains and individual station owners increasingly are looking for  information to explain why the big guys are making the move. Until now, the answer they’ve been given usually has been a description of a program that helps pay for new fuel dispensing equipment.
Meanwhile, ethanol supporters have asked (usually in frustration) why any petroleum marketer would pass up new, state-of-the-art dispensers for 25 cents on the dollar. Well, they take a pass because “new pumps” isn’t the business they’re in. They sell fuel and other stuff people buy when they’re getting fuel. 

Think about it. Whatever business you’re in, if someone offered to provide you with nearly free new equipment to grow, build or sell a product you’ve never grown, built or sold before, don’t you suppose you’d hesitate, and ask a few questions? Wouldn’t your “sounds too good to be true” alarm be going off?

Ultimately, the question is, “How would this help me make more money?” That’s the question most petroleum marketers eventually ask about E15 and flex fuels. They have many other questions about equipment, permission, customers and demand. But the bottom line is, always, the bottom line.

The American Coalition for Ethanol’s “E15 and Flex Fuel Retailer Roadmap” was created to address those marketer questions. It’s called a roadmap because, unlike a GPS with turn-by-turn instructions, this guide is similar to the maps service stations used to provide for customers. Those roadmaps showed main highways and county roads in each state, with more detailed inset maps of larger cities. After choosing a destination, people would explore different routes to get there. Every retail station owner’s journey is different, and the roadmap is a reference to help identify routes they can take to E15 and flex fuels, if they decide to go there.

The first section addresses the why and why not of new ethanol blends. It compares the E15 and flex-fuel marketplace to common options such as diesel and premium. (Hint: Those options aren’t as common as folks think.) It also provides vehicle warranty info and dispels myths about equipment requirements and liability risks. It also goes through important components of the math of E15 and flex fuels, such as blending economics, octane, increased customer counts and inside sales, and renewable identification number (RIN) credit values.

The back section of the roadmap covers the how-to of adding E15 and flex fuels. Again, not in step-by-step fashion—it’s a general look at E15 and flex-fuel requirements, with instructions on where to find more detailed information. We show how blender dispensers work, cover U.S. EPA and Federal Trade Commission rules on E15 and flex-fuel equipment compatibility, pump labeling, and what it takes to sell legal E15.

Because the single most important factor in successful E15 and flex-fuel retailing is the ability to obtain E85 or E98 at prices that reflect RIN values, the roadmap includes a list of ethanol producers, highlighting those selling E85 or E98, with or without RINs, directly to marketers and retailers.

Finally, the meat of the roadmap is the middle section, with state-by-state vehicle and driver statistics, rules and regulations, financial incentives for retailers and a statistical profile of E15 and flex-fuel availability and opportunity in each state. Those stats are combined to create an informal back-of-the-napkin pro forma for a fictional station in that state that adds E15 and flex fuels and performs as well as average existing E15 and flex-fuel retailers, or up to the level of the highest performing flex-fuel retailers currently in the market. Ultimately, that’s what retailers really want to know before making any switch.

 
Author: Ron Lamberty
Senior Vice President
American Coalition for Ethanol
605-334-3381
rlamberty@ethanol.org