The Land of Sweetness

FROM THE NOVEMBER ISSUE: When unbranded E15 takes volume away from oil companies, oil company fuel slates will have to add E15. That’s when it’s going to be the land of sweetness.
By Ron Lamberty | October 17, 2017

A few months after the initial E15 waiver was granted, I was speaking at the Nebraska Ethanol Board’s “Emerging Issues Forum” in Omaha about remaining steps to getting E15 into the marketplace when an audience member asked me to predict when we would see widespread E15 in stations. I was certain it wouldn’t happen quickly, but didn’t want to be the wet blanket. I repeated points from my presentation about roadblocks, but when it was apparent the crowd knew I was tap-dancing to avoid answering the question, I said, “The ethanol industry isn’t suddenly going to be the land of sweetness and light because EPA approved E15. Petroleum marketers aren’t going to call and beg us for E15. There’s a lot of work to do.” 

Somehow, a news story about the conference reduced my answer to “it’s not going to be the land of sweetness,” which sounds stupid, and I’m almost sure I didn’t say it. Colleagues and friends enjoyed taunting me about that phrase, and some still occasionally ask me about the far-off and mystical land called “sweetness.”

What I meant to say was: “I do not believe our adversaries will beckon us to come, along with our E15, and abide with them forever in the land of sweetness and light.” And even if some reporter was so taken with my eloquence that he or she somehow wrote down a dumb thing I don’t think I said, most of the conference attendees had been around ethanol long enough to remember getting E10 into the last U.S. unblended markets, and knew E15 faced a similar uphill climb.

Recent developments are encouraging, and E15 wholesale availability is improving along with retail. With many of the nation’s most respected convenience store retail chains now offering E15, and with one of the nation’s largest pipeline companies offering preblended E15 at its terminals in one state, petroleum retailers who have ignored or resisted E15 are asking questions. E15 is a real product now, not a theory or gimmick, and it gets “realer” as stations unveil new ethanol blend fueling infrastructure, courtesy of the U.S. Department of Agriculture’s Biofuels Infrastructure Program. Station owners who scoffed at USDA-BIP and the idea of adding E15 and flex fuels, are realizing they will have to scramble to catch up with their more forward-looking competitors.

They’ve got to catch up, because in addition to shiny new equipment and improvements in E15 availability, “the math” of higher ethanol blends is more attractive than it has been in some time. Crude oil and gasoline prices have risen faster than ethanol prices, and as retailers learn about RIN values and no longer fear them, RINs are being used to gain market share—at improved margins. Retailers losing those gallons and profits now have decisions to make.

Heck, get Reid vapor pressure reform done and it’s off to the races. Right?

Necessary and helpful, yes. But one-third of stations in the country (stations in RFG areas) can offer E15 year-round right now, and most don’t. Why not?

Branded petroleum supply contracts don’t allow it, and it costs a lot to get out of those contracts. Oil companies point out they only own 2 percent of stations, and say retailers don’t want E15. They’re less forthcoming about controlling the E15-less fuel slate at 60 percent of stations utilizing 10-year contracts with confiscatory buyout clauses.

But even the contract headlock isn’t hopeless. Retailers didn’t add E15 because pipeline terminals had it. Pipeline terminals have E15 because retailers are selling it. When unbranded E15 takes volume away from oil companies, oil company fuel slates will have to add E15. That’s when it’s going to be the land of sweetness.

Author: Ron Lamberty
Senior Vice President
American Coalition for Ethanol