Most gasoline sold in California contains 6% to 10% ethanol. E-85 is a blend of 85% ethanol and 15% gasoline. [image-nocss] More than 300,000 flexible-fuel cars in California can run on E85, a fact unknown to many of those cars' owners because most don't have a flex-fuel label.
The Sacramento air district received a $3.5 million grant from the state Air Resources Board to subsidize the 29 new E85 projects. Installing an underground storage tank and fuel dispenser typically costs about $175,000.
"There are not a tremendous amount of vehicles that can handle E85," said Walt Dwelle, managing general partner of Nella Oil Co. of Auburn, Calif. "If there's not a lot of demand, you don't want to spend that kind of money and have just a few gallons going through"
The government funding helps with the "chicken-and-egg" dilemma of not enough flex-fuel cars to support E85 demand and not enough E85 stations to increase demand for flex-fuel vehicles, he said.
Nella is adding E85 to its gas stations in North Highlands and Newcastle, Calif. It hopes to sell 30,000 gallons of E85 per month at each of its Sacramento stations. Nella owns one-third of the Calgren Renewable Fuels LLC plant in Tulare County, which makes 50 million gallons of ethanol per year.
Calgren markets its ethanol through Pacific Ethanol Inc. of Sacramento, and most ethanol used in this area is likely to come from Pacific Ethanol's Stockton plant or from the Midwest, said people familiar with the industry.
Michael Tooley, president of Tooley Oil Co. in Sacramento, said he hasn't had a lot of customers asking about E85 availability, according to the report. But he has heard from a couple of car dealerships looking for places to fill up their flexible-fuel cars.
Tooley Oil plans to add E85 at its Shell stations in El Dorado Hills, Roseville and West Sacramento.
"Once people start seeing it, I think it will generate some buzz," Tooley said.
Pearson Fuels Inc. of San Diego, which opened the first E85 station in California in 2003, plans to supply ethanol to three gas stations in Sacramento, Carmichael and Rocklin. The company also sells the fuel in Concord, Hayward and Carlsbad, and has a station ready to open in about a week in Oceanside.
When the projects are finished, the Sacramento region will have a higher concentration of E85 stations than any other part of the state. Michael Lewis, general manager of Pearson Fuels, said he thinks the Sacramento area's high concentration of state- and federal-government fleets populated with flexible-fuel vehicles offers great market potential for E85.
"The market for E85 depends on the price of gasoline," said Lewis. "In June at our station down in San Diego, we were selling 1,000 gallons per day or better. But it was $1 per gallon less than gasoline."
At the time it was outselling diesel at that station, he said. Now E85 costs $1 per gallon more than gasoline, and sales at that location have dropped to about 300 gallons per day.
Government regulations are expected to drive up the demand for ethanol. The U.S. Environmental Protection Agency's renewable fuels mandate requires an increase in the amount of ethanol used in the United States from 9 billion gallons this year to 10.5 billion gallons next year.
"I think when that starts to happen, prices for ethanol will normalize a bit," Dwelle said.
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