Photo: Rick Schwarck
By selling direct to fuel retailers, at least two ethanol producers in Iowa (Absolute Energy, St. Ansgar; and Siouxland Energy, Sioux Center) have been passing RIN savings to consumers, thus reducing what consumers pay at the pump for ethanol blends. At the same time, they are helping to improve retailer margins.
Note: A RIN (renewable identification number) is a credit earned by an ethanol blender that can then be sold on the open market to oil refiners which use the credits to comply with the federal Renewable Fuel Standard (RFS), reports the Iowa Renewable Fuels Association (IRFA).
Siouxland Energy told the IRFA that it is passing RIN savings to the consumer, and is making E85 prices quite attractive. “I think ethanol plants are growing tired of watching a middleman pocket the RIN value to the detriment of consumers,” said Tom Miller, commodity manager, Siouxland Energy.
Absolute Energy has been selling E85 direct for about two and one-half months to retailers within 100 miles of its St. Ansgar facility on the Iowa-Minnesota border. “Sales of E85 and E30 have exploded,” says Rick Schwarck, president and CEO, of the farmer-owned Absolute Energy. (E85 and E30 are allowed to be used only in flex-fuel vehicles at this time.)
Since adding blender pumps and offering ethanol blends (including E85, E30 and E15) in April, sales at the Fast Stop retail station in Cresco, IA, have climbed 20 percent. While fuel prices vary with the RIN price, consumers have been able to save as much as $.60 per gallon over fuel from oil terminals, says the station’s owner, Dave Sovereign, who also is a board member of Absolute Energy and Golden Grain Energy, Mason City, IA.
Schwarck pointed out that yesterday in St. Ansgar, E10 was running motorists $3.789 per gallon versus E85 at $2.589 per gallon--a $1.20 per gallon difference. Those kinds of fuel savings may prompt more consumers to purchase a flex-fuel vehicle.
Selling ethanol direct, however, requires a high level of commitment and investment. Absolute Energy has taken on all of the RIN reporting, as well as licensing, permitting and blending equipment. Since it does not make non-ethanol blend stocks, it must also pay for hauling them to its production plant, Schwarck says.
For the Fast Stop retail station in Cresco, offering the ethanol blends has been seamless, Sovereign says. He believes that other retail fuel stations and oil companies “have to be taking notice.” It helps, however, that Fast Stop is a Growmark franchise, and Growmark is renewable fuels friendly, Sovereign adds.
Like what you're reading? Subscribe to Farm Industry News Now e-newsletter to get the latest from our bloggers and more straight to your inbox twice weekly.
Also drawing notice is recently approved legislation in Iowa (H.F. 640) that prevents oil refiners’ supply agreements from limiting the ability of local retailers to offer the ethanol and biodiesel blends they choose. Biofuels Digest reports that the provision “was based on a law enacted in South Dakota in 2011 and addresses specific, anti-competition provisions from actual refiner supply agreements.”
Schwarck says this does not apply to existing contracts, but rather to future contracts. Even so, this will mean that refiners will not be able to restrict where retailers buy their renewable fuels in the future.
“The importance of E85 and E30 cannot be understated,” Schwarck says, pointing out that just a one percent E85 market penetration would provide a home for 410 million bushels of corn. “And we haven’t even started talking about E15 or E30,” he says.
With the price difference between ethanol blends and straight unleaded gasoline, consumers are paying more attention at cost per mile than miles per gallon, Sovereign says. He adds that when consumers save at the pump, they have more money to spend in their local communities. “Agricultural producers and consumers are supporting each other, one gallon at a time.”
PLUS - You might also like: