E15 fuel stock problem stymies Linn Co-op's desire to be first

MARION - The Linn Co-op Oil Co. in Marion had hoped to be in the first wave of fuel retailers to offer E15 for non-flex fuel vehicles.

That's now in doubt, co-op officials said Monday, blaming "big oil" for failing to supply the summer gasoline blend stock it needs to sell the fuel to non-flex fuel vehicles.

The co-op expects to be able to offer E15 ethanol, recently approved by the Environmental Protection Agency for vehicles 2001 and newer, at a price five cents per gallon less than E10.

Sales would increase the demand for ethanol at a time when the industry is struggling, with some plants closed and many others operating below capacity.

"We'd like to save our customers money," said Linn Co-op Service Manager Jim Becthold. "We'd like to help our farmers out."

The co-op already sells E15 and E85 ethanol blends for flex-fuel vehicles, and received a letter of approval from the EPA in mid-June to allow it to sell E15 to 2001-later non-flex-fuel vehicles.

Unfortunately, the gasoline pipeline terminals serving Iowa haven't supplied the type of summer gasoline formulations that the EPA requires to blend E15 from June 1 through Sept. 15.

E10 does not require the special blend stock in the summer because it has received a partial waiver of volatility standards. The standards were introduced to reduce ozone buildup due partly to evaporation of gasoline during fueling.

Monte Shaw, the executive director of the Iowa Renewable Fuels Association, said E15, if anything, is more deserving of a waiver than E10, because it helps combat ozone more. He said oil companies don't want retailers to use higher ethanol blends because it reduces the amount of petroleum byproducts they buy.

"The oil companies are taking advantage of that volatility cap," Shaw said. "They're taking advantage of that quirk."

Neither the Iowa Renewable Fuels Association nor Linn Co-op had made direct requests to specific oil companies to supply the summer gas blend stock. Shaw said the Iowa Renewable Fuels Association had communicated about the issue with the pipeline companies that ship gas to Iowa.

Trade associations for the renewable fuels and petroleum industries also have communicated about the need, Shaw said.

Linn Co-op plans to begin offering E15 for mainstream vehicles after the summer volatility standards fall away in mid-September.

Shaw said the best hopes ending the summer stalemate are for Congress or the EPA to equalize the summer volatility standards for E10 and E15 by June 1, 2013. Barring that, he hoped at an independent refiner not affiliated with one of the major oil companies might step forward to supply the summer blend stock to Iowa.

Summer gas blend stock is available in Chicago, Kansas City and other large metro areas with ozone attainment problems. Shaw said shipping the summer blendstocks in from Kansas City would have added 17.5 cents per gallon in transportation costs. As a result, E15 would have cost about 12.5 cents more per gallon than E10 rather than five cents less.

Judy Hagan of Marion was fueling up her Honda minivan at the co-op Monday morning. Hagan likes using E10 in her van but was reserving judgment on E15.

"I'd give it a try," she said, indicating that fuel economy results would be part of her final judgment.

The American Petroleum Institute did not respond to a request for comment on questions about summer blendstock availability in Iowa.