Sep 18, 2005 - 06:01:31 CDT
The benefits of E-85 are obvious to corn farmers and ethanol producers, but for those buying the alternative fuel at the pump, the savings might not be as great as they think.E-85, made with 85 percent ethanol, is being promoted throughout the state as a cheaper alternative to traditional gasoline that helps the local economy and reduces the country's dependence on foreign oil.
The cost of E-85 in Bismarck on Thursday was $2.29 a gallon, which was about 18 percent cheaper than gasoline with 10 percent ethanol, and almost 20 percent cheaper than gas without ethanol.
But calculating the savings from using E-85 isn't as simple as finding the difference between the price of gasoline and the alternative fuel because cars that can run off of E-85 don't get as high of gas mileage as they do from straight gasoline.
According to the National Ethanol Vehicle Coalition, www.E85fuel.com, flexible fuel vehicles can experience a 5 percent to 15 percent drop in fuel economy.
Jocie Iszler, executive director of the North Dakota Corn Council and Corn Growers Association, said although vehicles don't get as good of gas mileage with E-85, the price difference makes up for the mileage loss.
However, as time goes by, the savings from using E-85 could shrink to nothing.
That's because a state subsidy of E-85 at the pump will disappear most likely by spring 2006.
According to the state Tax Department, a tax of 1-cent per gallon is imposed on E-85 sold to retailers and consumers. But after 1.2 million gallons of taxable E-85 are sold in the state, the tax will revert to 23 cents per gallon, which is what is currently charged on gasoline.
The tax reduction on E-85 was passed by the Legislature earlier this year to encourage the use of E-85.
According to the state Tax Department, 135,552 gallons of E-85 were sold in July. At that rate, the tax will expire in the spring or early summer of 2006.
Based on Thursday's price of gas and E-85, if the sales tax exemption was not in effect, E-85 would cost $2.51, which is less than a 12 percent savings over straight gasoline for that day.
Rep. Rick Berg, R-Fargo, a sponsor of legislation that included a reduction in taxes for E-85, said the plan was to create incentives for people to use E-85 without creating a dependence on a government program.
Berg said the plan has been extremely successful so far.
Although the price of E-85 will eventually increase, once it is taxed at a higher rate, Berg said people will still save money by using it.
"I think people are still going to get a tremendous price break by using E-85 even though they won't have the 21-cent reduction,"Berg said.
Cy Fix, the manager of Cenex stations in Bismarck, Mandan and Dickinson, said people are using a lot of E-85 even though some of the vehicles were not made for it.
Fix said people are mixing their own concoctions of an ethanol blend by using a combination of E-85 and straight gasoline.
"Iknow there are not that many flex fuel vehicles in Bismarck," Fix said.
Using E-85 in a vehicle that isn't designed for it can damage the engine.
There are only two E-85 pumps in Bismarck - one at Cenex on West Divide Avenue and another at Stamart on East Divide Avenue.
Fix said adding more E-85 pumps will depend on the price of ethanol, which he said has gotten out of line.
"They will get to the point where they will price themselves out of the market,"Fix said.
Fix said the oil industry is blamed for price gouging, but the ethanol industry is just as guilty.
The success of E-85 also will depend on how many flexible fuel vehicles are used.
Local car dealerships have seen an increased number of customers asking about E-85 vehicles, but so far there has not been a run on flex fuel vehicles.
"There hasn't been a huge demand,"Chris Davis, sales manager at Eide Ford, said.
Several companies offer E-85 vehicles, including Ford.
Mike Kahl, sales manager at Corwin Churchill Motors Inc., which sells Chrysler vehicles, said there has been more interest in the E-85 vehicles, but the dealership hasn't seen a big increase in sales of E-85 vehicles. Kahl said people are still buying SUVs despite the high gas prices.
"Ihaven't seen the panic like in the '70s and '80s,"Kahl said.
There are several Web sites that list E-85 compatible vehicles, including the North Dakota Corn Growers Association at www.ndcorn.com. Information on E-85 also can be found at goefuel.com.
Besides subsidizing E-85 and ethanol plants, the state also has had a hand in marketing E-85.
In May, Gov. John Hoeven became part of a marketing campaign to promote GoE, a brand of ethanol-blended fuel that is made in North Dakota.
General Motors also donated the use of an E-85 Chevrolet Avalanche for one year to the state. The donation is part of a campaign by GM and the Governors' Ethanol Coalition to promote the use of ethanol and to increase awareness of E-85 and flexible fuel vehicles. The vehicle will be used by the Corn Utilization Council, Department of Agriculture, the Agriculture Products Utilization Commission, the state office of Renewable Energy and Energy Efficiency and the governor's office to promote ethanol use in North Dakota.
North Dakota farmers and ethanol producers have a vested interest in promoting the use of ethanol.
According to the Commerce Department, ethanol plants in North Dakota use approximately 13 million bushels of corn grown by North Dakota farmers to produce 35 million gallons of GoE. According to the North Dakota Corn Growers Association, GoE production typically raises the market price for corn by 5 to 10 cents per bushel in the surrounding area and GoE production provides the third-largest in-state market for corn.
While using an E-85 vehicle might save a person some money, Iszler said it is good to use because it supports local economies and reduces the country's dependence on foreign oil.
"We all know that we need to do something to reduce our dependence on foreign oil, and this is probably the closest thing we've got,"Iszler said.
(Reach reporter Tom Rafferty at 223-8482 or tom.rafferty@;bismarcktribune.com.)
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