New Missouri ethanol mandate kicks in quietly

Wednesday, January 2, 2008

The fuel pump at the local convenience store probably doesn't include a notice, but every gallon dispensed in Missouri must now include a 10 percent ethanol blend.

Under a law passed in 2006, Missouri became the third state in the nation to require that gasoline include at least 10 percent ethanol. The only exception is when the cost of unblended gasoline is lower than the cost of fuel that includes ethanol, and most retailers have already been selling the blend, said Jim Maurer, a partner in the Rhodes 101 chain of convenience stores in Southeast Missouri.

"The mandate says that we have to have it in there as long as it is still cost-effective," Maurer said. "From our perspective, there is no change."

At current prices, the ethanol blended fuel is about one cent per gallon cheaper than unblended gasoline, Maurer said. That savings is passed on to customers in the form of a lower pump price, he said, because Rhodes 101 has a fixed mark-up from the wholesale price.

The fuel pumps at Rhodes 101, however, don't notify customers that they are using fuel blended with ethanol. "There used to be you had a 10 percent blend sticker," he said. "There are no markings that I can think of right now. It is so common now."

Steve Smith, a fuel customer at an MFA Break-Time convenience store in Jefferson City recently selected regular 87-grade octane, thinking he was filling his sport utility vehicle with ethanol-free gasoline.

"I don't buy super unleaded, knowing that it's ethanol," Smith said, citing a general apprehension about how ethanol could affect his vehicle.

But Smith was buying ethanol-blended gasoline and had unknowingly done so numerous times before. Although many pumps don't proclaim it, almost all the gasoline sold in Missouri has contained a 10 percent ethanol blend for at least the past several months. Because ethanol is cheaper than traditional gasoline, most of Missouri's gas stations quietly made the switch months in advance.

Like Smith, "most consumers in the state of Missouri have been using E-10 for months and probably don't know it," said Ron Leone, executive director of the Missouri Petroleum Marketers and Convenience Store Association. "That's why we anticipate the January 1 transition to be a nonevent."

Growing presence

Ethanol-blended gasoline has become increasingly common nationwide.

Part of the reason rests with a federal standard for alternative-fuel production. More than half the states now also have joined the federal government in offering incentives to ethanol producers or retailers. And because it burns cleaner than petroleum, ethanol-blended gasoline now is the norm in numerous cities facing Environmental Protection Agency mandates to improve their air quality.

Yet 14 states have no requirement for gasoline pumps to be plastered with ethanol labels, according to the American Coalition for Ethanol. Missouri repealed its labeling requirement in 2002 -- four years before passing the law that mandated ethanol in gasoline by 2008.

The Break Time convenience store, where Smith filled up, has voluntarily sold ethanol-blended gasoline for years and until recently had posted an ethanol label over its 89-octane gasoline. Many motorists thought that was the only grade of gas containing ethanol. In reality, all the pumps dispensed an ethanol blend, and even the 87-octane button likely supplied an 89-octane ethanol blend. Break Time stores are owned by MFA Oil Co., a major distributor of ethanol.

"We have had no problems with ethanol," said MFA Oil President Jerry Taylor. "It's, in our judgment, actually a better product -- it's higher octane, burns cleaner and helps engines last longer."

Fuels containing an 85 percent ethanol blend have been shown to result in lower gas mileage for vehicles. But a 10 percent blend should have only a negligible effect on gas mileage, said Chad Tharpe, a Break Time station manager.

Federal standards

The federal renewable fuels standard called for oil companies to buy 4.7 billion gallons of ethanol and biodiesel in 2007. Oil companies are expected to use about 7 billion gallons, but ethanol plants have produced about 7.5 billion gallons, said Gary Marshall, chief executive officer of the Missouri Corn Growers Association.

That oversupply, combined with government tax incentives for ethanol, has caused ethanol-blended gasoline to be about 5 to 10 cents cheaper per gallon at the retail level than traditional gasoline.

That proved to be large motivator for Missouri gas stations to make the ethanol switch ahead of the mandate. The new law includes an exception automatically suspending the ethanol mandate anytime the price of ethanol exceeds that of traditional gasoline.

By this fall, 85 percent to 90 percent of Missouri gas stations already were selling ethanol blends in their regular unleaded gasoline, said Ron Hayes, the fuel quality program manager for the Missouri Department of Agriculture.

That came as quite a surprise to Smith, who thought he had been avoiding ethanol. Realizing that he actually had been using ethanol, Smith didn't point to any particular troubles.

"I don't know that it matters," said Smith of Jefferson City. But "it would be nice to know that."

Southeast Missourian business editor Rudi Keller contributed to this report.

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