Mike Lewis, a Growth Energy member who owns Pearson Fuels in San Diego’s City Heights, is not giving up his plan to build a network of ethanol pumps despite being rejected by a regional agency.

A San Diego alternative fuels company is scrambling after ethanol politics sideswiped its efforts at securing millions in stimulus funds.
Pearson Fuels, based in City Heights, was behind an application for $11 million from the federal and state governments to subsidize construction of 55 ethanol pumps across California, including two in San Diego County.

But the regional agency in Los Angeles that would have received the money for the project voted last week to reject it, in part because its members don’t believe that ethanol is a worthy alternative to gasoline.

The rejection by the Southern California Association of Governments has meant big changes at Pearson, said owner Mike Lewis, who started the business when he built an alternative-fuel station in City Heights.

“The administrative assistant I had working here is running the cash register at the gas station today, the people at the gas station got their hours cut back immediately,” he said.

He said Pearson is still planning to expand its network of ethanol pumps in California, but the loss of the stimulus funding is a blow.

Lewis was going to use the money to install pumps for E-85 ethanol at existing gas stations. The fuel, 85 percent ethanol and 15 percent gasoline, can be burned in flex-fuel vehicles, hundreds of thousands of which have been sold in California in recent years.

Proponents of ethanol say it is better than gasoline because it is derived from plants or other renewable sources and pollutes less.

But opponents say it is bad for the environment because production of corn — the primary raw material — uses copious amounts of water and petroleum-based fertilizers and lots of energy is used to cook the corn and then distill the alcohol after fermentation.

Federal and state officials have decided to push for ethanol fuels to lower pollution and greenhouse gas emissions, plus reduce the use of foreign oil.

People need access to biofuels if they are to take advantage of their smog-fighting qualities, said Paul Webb, clean fuels officer for the South Coast Air Quality Management District.

Ethanol can’t be put in the pipelines that move oil and gasoline around the country, nor can it be sold out of the same pumps. So new pumps are needed.

But that wasn’t convincing to members of the Southern California Association of Government’s Regional Council, which is made up of elected officials from Los Angeles area municipalities and government agencies, including transit districts.

“I don’t think it’s feasible,” said Larry Nelson, a city councilman from Artesia, in Los Angeles County. “I don’t think it’s sustainable. I think it’s morally bankrupt,” he said.

Internal politics at the government association also complicated matters. Lewis took the lead in the grant applications, but the staff people he was working with hadn’t told the politicians at the organization about the application.

While oil companies and agriculture interests have fought over ethanol’s value at the national level for years, most local government debates have been the not-in-my-backyard variety concerning particular plants, said Matt Hartwig, a spokesman for the Renewable Fuels Association, a coalition of ethanol makers.

“It’s the only alternative to gasoline we have today,” he said. “Those drivers in Southern California who have a flexible-fuel vehicle, who would like to drive on ethanol, have just been told they’re not going to be given that opportunity. They’ve been told, no, we think you should use more gasoline.”

Stephen Mayfield, director of the San Diego Center for Algae Biotechnology at the University of California San Diego said ethanol is inferior to biofuels just around the corner because it requires new infrastructure and has less energy per gallon.

He co-founded a local company, Sapphire Energy, which is using algae to make fuels that have been tested in cars and airplanes. “They are indistinguishable from existing fuels,” he said. “(They go) into the same pipelines, to the same refineries. You would not notice one difference at the gas station.”

It’s not necessary, he said, to make massive changes in infrastructure if companies like his can take advantage of what’s already there, he said.

Lewis, whose Pearson Fuels was ready to build dozens of gas pumps, said the policy debate is valid, but the vote in Los Angeles was the wrong place to have it. (He did point out that the stations were planning to get ethanol distilled from old juice and soda, and then from agricultural waste, not corn.)

Federal and state policymakers have decided to back ethanol, Lewis said. His company was ready to put people to work building the stations.

Growth Energy Welcomes News of EPA Decision in RFS2

Following public statements to reporters by Lisa Jackson, Administrator of the U.S. Environmental Protection Agency, that grain ethanol would qualify as a low-carbon fuel for the entire 36 billion gallon benchmark under the newly-expanded Renewable Fuels Standard; Growth Energy CEO Tom Buis issued the following statement:

“This is great news for our country, because what Administrator Jackson is saying is that ethanol has a significant opportunity to make our nation more energy independent, invigorate our economy and clean our skies. As Administrator Jackson said herself, the best science proves that corn ethanol is a low-carbon fuel. She is to be commended with her conclusion in the Renewable Fuels Standard that ethanol plays an important role in securing our nation’s energy future and creating jobs.”

Buis singled out Jackson’s public comment on a conference call with reporters that full implementation of RFS would mean an additional $13 billion in farm income by 2022.

Second Blender Pump Offered in Missouri

Offering drivers in the Kansas City area more choices at the pump, Temp Stop in Lee's Summit is now the second fueling station in Missouri to install ethanol blender pumps. The new pumps installed last week offer three blends of ethanol as well as two grades of conventional gasoline.

"With the addition of these blender pumps, consumers can seize the opportunity to utilize a homegrown, renewable fuel," said Bradley Schad, Missouri Corn associate director of ethanol blends. "Not only does ethanol burn cleaner than gasoline, it helps reduce our dependence on foreign oil and keeps U.S. dollars here at home."
Located at 100 SE Todd George Road in Lee's Summit, the blender pumps at this Temp Stop location allow drivers to fill up with E20 (20 percent ethanol, 80 percent gasoline), E30 (30 percent ethanol, 70 percent gasoline), E85 (85 percent ethanol, 15 percent gasoline), 87 octane gasoline or 91 octane gasoline.

"We're proud to be part of this movement to promote a cleaner environment," says Terry Green, CEO of Temp Stop in Lee's Summit. "Together with our fuel supplier, Carter Energy, we're making E20, E30 and E85 available to our customers and offering them more choices than ever before when it comes to refueling their vehicles. These blended fuels give them a way to join the 'green' movement, too."

The Temp Stop blender pumps are part of a pilot program with Missouri Corn and the Missouri Department of Agriculture Division of Weights and Measures. Each blender pump pulls from two underground tanks, one with unleaded and one with ethanol. A dispenser then blends the appropriate percentages of the two fuels to create any fuel blend of ethanol from 20 to 85 percent. Although all gas-powered engines can utilize E10 (10 percent ethanol, 90 percent gasoline), ethanol blends higher than 10 percent are currently approved for use in Flex Fuel vehicles only.

"Additional blender pump locations are currently in development," said Schad. "We look forward to offering consumers across the state the same opportunity to choose what they put in their tank."

MO Alt Fuel Tax Credit Now Defined

Missouri’s alternative fuel infrastructure tax credit is now defined easily in a website sponsored by the Department of Natural Resources (DNR). Retailers can take advantage of this credit in the taxable years between Jan. 1, 2009 and Jan. 1, 2012.

The Missouri tax credit is allowable on top of the income tax credit offered by the Federal Government in the amount of 50 percent up to $50,000 of the total cost of the project. Qualifying retailers can receive a state tax credit of 20 percent up to $20,000 of the total cost of the project. According to the website, DNR states that the cumulative amount of tax credits which may be filed for by eligible applicants claiming all credits authorized will not exceed the following amounts:

In taxable year 2009 – $3 million.
In taxable year 2010 – $2 million.
In taxable year 2011 – $1 million.

Gen. Clark Applies Tough Tactics for Ethanol Industry

Retired Gen. Wesley Clark makes no apologies for leading a group that applies bare-knuckled advocacy to advance ethanol production.
Clark, the co-chairman for Growth Energy, spoke candidly with The Hill hours before the Environmental Protection Agency announced new rules favorable to the ethanol industry.

A key part of the ruling was a victory for Growth Energy and Clark, and the aggressive lobbying and public relations they’ve employed over the past year.

“You realize that at a certain scale, you have to deal with new forces that you didn’t see before,” he said in an interview Wednesday.
“The ethanol industry really is sort of stepping up to the bar and saying we are no different than any other industry group,” added Clark, who ran for president in 2004.

“We have got to help people understand what the industry needs because it has to be dealt with in certain ways that are conducive to its growth and development, otherwise it won’t develop. It s no different than the oil industry the aviation industry, every one of these industries is the same,” he said.

EPA’s rule concludes that corn-based ethanol generally meets greenhouse gas standards in a 2007 law, stepping back from a draft last year that found otherwise.

Growth Energy waged an aggressive battle alleging that EPA was giving far too much weight to emissions from land-use changes in other countries linked to expanded U.S. ethanol production.

The issue has been at the center of battles over ethanol policy. Over the past two years the unwieldy phrase “international indirect land-use change” has become improbably common in energy and climate change debates.

The group, which formed in late 2008, has also pushed hard for EPA to allow higher amounts of ethanol in gasoline than the current 10 percent level; it wants EPA to allow blends of 15 percent, or E-15. EPA, in response to a Growth Energy petition, strongly suggested it would allow levels above 10 percent late last year but has not made a final decision. Growth Energy has also battled livestock and grocery industry groups that allege ethanol production has driven up food prices.

Ethanol producers already had a well-established voice in Washington when Growth Energy came along: a trade group called the Renewable Fuels Association. But several ethanol companies – including POET, the nation’s largest producer – felt more needed to be done.

“There is no question that some of our opponents caused some damage, and that is the real reason that Growth Energy was founded -- to answer some of these critiques in a more forceful and continuous way,” said Nathan Schock, Director of Public Relationsfor POET.

Clark, in the interview, repeatedly steers his comments back to what he calls the national security and economic case for ethanol.

He calls it a jobs-heavy way to help erode reliance on imported oil, which costs the U.S. hundreds of billions annually. Clark says U.S. military entanglement in the Middle East is fueled by the nation’s dependency on oil imports. He notes U.S. imports from Venezuela for good measure.

“If we go to E-15, which I think we will, we have taken the equivalent of Hugo Chavez out of U.S. imported oil dependence,” he said. “But you could go a lot further than that.”

The ethanol business has bounced back in recent months after a couple of tough years that saw multiple bankruptcies, including large producer VeraSun’s collapse in 2008.

But a lot is riding on the EPA decision – allowing E-15 would push back the “blend wall,” or point at which the 10 percent limit prevents further mixing of ethanol into gasoline. “There is just so much entrepreneurial energy waiting on this decision,” Clark said.

He illustrates the issue this way: “I talked to a guy at Goldman Sachs who says I’ve got $6 billion – I’m looking for something to invest in, he says I can’t find anything to invest in America, nothing gets any decent returns,” he said.

Shell and Cosan JV - An Alternative Fuels Major

Shell and Cosan have signed an agreement to form a $12 billion joint venture that could be an alternative fuel major in the future. The joint venture, with assets from both companies, will be focused on the production of ethanol, sugar and power, and the supply, distribution and retail of transportation fuels.

This JV will be a significant retail fuel marketing player in Brazil with around 4500 fuel retailing outlets. In addition to this, the JV will also be one of the largest alternative fuel producing companies in the region. It remains to be seen if this JV will also operate outside Brazil, although the demand outside the US and Brazil is limited for now.

In 2008, Brazil produced 6.47 billion gallons which represents 37.3% of the world's total ethanol used as fuel (Source: Wikipedia). The world Ethanol production as per Renewable fuels association was 17 billion gallons in 2008 - a sharp growth over 13 Billion gallons in 2007. U.S. has been the largest producer of ethanol at 9 billion gallons in 2008 with a consumption of 9.6 billion gallons.

The business divestiture into a JV allows management focus that is necessary to grow a niche business with dynamics different from the overall operations of Shell. Also, with Cosan's expertise on Ethanol as a fuel and Shell's financing powers, the business could grow at a much faster pace than it would with both companies operating independently.

As alternative fuel takes center stage over the next few decades, conventional fuel is likely to lose market share to alternative fuels. Already some countries have taken up ethanol-blending with gasoline (up to 5%) and as the shift towards alternative fuels grows the business for the JV will grow, especially if this JV also operates outside Brazil. A win-win for both Shell and Cosan shareholder's in the long-run.

New and Renewed Growth Energy Market Development Members

We would like to thank these organizations for their continued support of Growth Energy:

Member Spotlight: Zarco 66

Scott Zaremba, President and CEO of Zarco 66 Earth Friendly Fuels is an avid supporter and believer in green sustainable energy and a member with Growth Energy Market Development.

Zarco 66 Earth Friendly Fuels is a family owned business, started by Scott’s Father in 1968. Started as a tank wagon supplier, hauling fuel to farmers 41 years ago. Many decades have evolved into several retail locations, which were opened in 1988. Currently, there are two blender pump locations in Ottawa and Lawrence Kansas, that offer E20, E30, E50 and E85.

The entire concept of transportation of energy being supplied and a sustainable win in our communities is the entire reason Zarco 66 took the initiative and installed mid level blends at two of the retail locations. According to Zaremba, “By using alternative fuels we are creating more local jobs, supporting our local communities, securing our energy independence and impacting our environment more positively- ethanol is greener, cleaner and burns clearer.”

One of the challenges Zarco 66 has faced is dispelling all of the myths regarding mid to high level blends of ethanol. Zaremba mentioned he attempts to personally talk to each customer about the benefits of ethanol. “It starts with us, once you’ve explained the benefits of ethanol and dispel the myths you have a customer for life.”

New E85 and Blender Pump Stations

As of this publication, there are 2,101 E85 stations. Below is a listing of those opened since our last publication.

IMPORTANT NOTE: Growth Energy and our partners have established a financial assistance fund that may be accessed by retail sites to assist with offsetting a portion of the cost of installation of new flexible fuel pumps. Rather than just talk about them, we're going to assist with paying for them! Our primary objective is to assist with the installation of systems that will dispense E10, E20, E30 and E85. To discuss the availability of the program and your interest in participation, please contact Phil Lampert at Plampert@growthenergy.org or 573-635-8445 ext. 11.