Bismarck Tribune - North Dakota News - Low prices, tax breaks spur ethanol buying

Low prices, tax breaks spur ethanol buying

Jun 19, 2005 - 23:47:37 CDT

By DAVE KOLPACK, Associated Press Writer

FARGO -- Gas stations are expecting ethanol fuel sales to zoom when a state tax break takes effect next month, although backers of the alternative fuel are less sure if consumers will stick with it.

Retailers expect the cost of E-85, which is 85 percent ethanol and 15 percent gasoline, to be 70 cents a gallon cheaper than regular unleaded gas when the subsidy takes effect July 1.

It already costs about 50 cents less to buy a gallon of E-85 at the Cass County pumps that carry it. And at the start of next month, North Dakota's tax on E-85 will drop to a penny a gallon, while rising from 21 cents to 23 cents a gallon for other motor fuels.

Wallie Hardie, who raises corn near the Richland County community of Fairmount in southeastern North Dakota, says the difference will be appealing to people who have "flex-fuel" vehicles, which are capable of burning either E-85 or straight unleaded gasoline.

"I think it will really cause people to sit up and take notice," Hardie said. "A lot of people have flex-fuel vehicles and they don't even know it."

About 14,000 flexible-fuel vehicles are registered to North Dakota drivers, said Jocie Iszler, director of the North Dakota Corn Utilization Council.

Sales of E-85 have steadily increased in the Fargo area in the last few months, said Kent Satrang, manager of the Cenex stores in Fargo and Moorhead, Minn. He sold 20,000 gallons in May and expects to reach 100,000 gallons in July.

Ethanol, which is most often made from corn, is a fuel additive that helps gasoline burn more cleanly. Most service stations sell gasoline that has been blended with 10 percent ethanol, but few have offered E-85 until recently.

There are now E-85 pumps in Bismarck, Carrington, Devils Lake, Fargo, Oakes, Portland, Rugby, West Fargo and Valley City. Most are at Cenex cooperative stores. Pumps also are planned for Grafton, Minot and Rolla, Iszler said.

"I don't think that we understood E-85 was going to take off as quickly as it has," Satrang said. "We're getting in on those main arteries so you can fill up as you cross North Dakota."

Ford, GM, Chrysler, Mercedes, Mazda, Isuzu and Nissan all offer E-85 engines in certain models at no extra cost. Most have decals on their fuel doors indicating whether it can run on E-85.

Surveys have showed that price in the No. 1 factor when it comes to buying ethanol, Iszler said. The Legislature set aside $250,000 to finance the state tax subsidy on E-85 fuel, and the higher 23-cents-a-gallon tax will return when the money is exhausted. Iszler believes that will take about six months.

"We're hoping that by that time, we'll have enough consumers on board," she said. "With the price it's at now, the retailers are losing a ton of money by not carrying it."

About 3.4 billion gallons of ethanol were produced in the United States in 2004, up from 2.8 billion gallons the previous year. Ethanol plants continue to break production records every month, which has led to lower ethanol prices, Iszler said.

To attract motorists, E-85 needs to sell at a discount to gasoline because it has less energy value than petroleum-based fuel.

The federal government's mileage guide for 2005 vehicles, published by the U.S. Energy Department and the Environmental Protection Agency, shows vehicles equipped to run on either E-85 or unleaded gasoline getting 20 to 30 percent less mileage with ethanol.

Ethanol backers say the mileage difference is closer to 12 to 15 percent, because special equipment on flex-fuel vehicles helps to burn ethanol more efficiently. The federal government's ratings are based strictly on each fuel's energy value, said Ron Lamberty, vice president for market development for the American Coalition for Ethanol, a trade group based in Sioux Falls, S.D.

Ethanol also has environmental benefits, and allows an engine to run at lower temperatures, Lamberty said. Some of the complaints he has heard about fuel mileage have come from owners of large SUVs that are not known for their fuel economy, he said.

"I get people who call me and say, I just bought a flex-fueled Suburban, and it gets worse mileage when I use E-85," Lamberty said. "My first comment to them is, 'You didn't really buy a Suburban to get good gas mileage, did you?'"

Ken Kornkven, manager of a Cenex station in Portland, N.D., said some customers who can't use E-85 also support it simply because it's a renewable fuel.

"It's a feel-good thing," he said. "Even if they aren't using it they liked to see it being used."

North Dakota Tax Department figures show that ethanol-blended fuels accounted for a record 47 percent of sales in May, up from 38 percent in April. The state Commerce Department's energy office is also using a marketing campaign to push greater ethanol use.

As part of the initiative, a group of college students are traveling the state this summer in a vehicle festooned with a "GoE" logo, promoting ethanol and giving away free tanks of the blended fuel.

"I think a lot of people have heard of ethanol, but I don't know how many of them know the benefits," said Brent Klava, 21, a North Dakota State University student. "It's a win-win for everybody."

(On the Net: GoE fuel: http://www.GoEfuel.com; North Dakota Corn Growers Association: http://www.ndcorn.com.)

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Comments

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