What's the Alternative?
As chicken-and-egg dilemma challenges growth, alternative fuels try to find a foothold.
“We took the stance that in every market we’re going to bring a station to, we will host an educational seminar,” says Hirschboeck. Attendees learn the basics of natural gas and safety considerations, can examine NGVs and hear about Kwik Trip’s experiences with its own fleet, and learn more about the retailer’s infrastructure plans.
Ultimately, Kwik Trip feels sure of the fuel itself. “I can lock in pricing for six years right now on a set quantity. That’s unheard of with gasoline and other petroleum products, being able to lock down a price point with that much time,” says Hirschboeck. “It really shows there is confidence in the marketplace.”
Kwik Trip also sells E85 at several locations, but since the end of the Volumetric Ethanol Excise Tax Credit (VEETC), a federal credit that discounted the fuel by more than 38 cents per gallon to keep it competitive with regular gasoline, the company has seen volumes declining [CSP—Feb. ’12, p. 36]. With that in mind, does Kwik Trip see the long-term case for E85?
“I don’t know 100% of that answer and where the future will take us,” says Hirschboeck, who could not comment on company plans to expand E85, which maintains a small—but passionate—consumer base. “At the end of the day, with alternative fuel, you still have to get back to the dollars and cents of it. If it makes sense for the consumer to commit to that, especially from a business perspective, then they’re going to do it.”
The Fear Factor
Zaremba’s passion for pushing supply of alternatives—in this case, E15—has driven him to sever his relationship with his supplier of the past 25 years, Phillips 66.
In June 2012, the EPA approved the ethanol blend for use in FFVs, 2001-model-year and newer cars, light-duty trucks and medium-duty passenger vehicles and SUVs. The agency’s approval came despite objections from some auto manufacturers and many fuel industry groups, concerned that liability and safety issues had not been fully addressed. After Zaremba began selling E15 at eight sites, Phillips 66 requested he make infrastructure changes or else the company would end its contract with him.
“The rules were created to make it impossible for me to be able to do what I’ve been doing without a huge added infrastructure cost,” he says. His choices included selling E15 from a yellow hose, just like E85; adding a separate dispenser; or paying a six-figure fee to break his contract. He stopped selling E15 this spring, and then decided to make a change.
“I’m in the process today of rebranding my locations,” he explains, pointing out that he also has changed the name of his company from Zarco 66 to Zarco USA Inc.
“Now I’m not under the thumb of anyone telling me what we have to do,” says Zaremba. “Just like any retailer across the country, being able to be in charge of your own destiny makes it much easier. … We have huge competitors. So when you try to compete with them on a one-to-one basis without being able to innovate or change, it’s been very difficult.
“We have to carve out niches that set us apart.”
He also agrees that education is key in erasing negative perceptions about high ethanol blends. Last November, AAA warned its members about potential damage to their vehicles if they misfueled with E15. “Anything that happens to your car, or your bumper falls off, it’s something we did,” he says. “It’s because you use ethanol or biodiesel or stopped at one of our locations. They spin everything out to make it as negative as possible. The fear factor is great.”
This is where Robert White comes in. Director of ethanol trade group Renewable Fuels Association, Washington, D.C., White routinely addresses issues surrounding mid- to high-range ethanol blends, most notably installation costs.