After E15 drama, Kansas retailer sees new beginning
AWRENCE, Kansas -- Scott Zaremba's passion for pushing supply of alternatives--in this case, E15--has driven him to sever his relationship with his supplier of the past 25 years, Phillips 66. He stopped selling E15 this spring, and then decided to make a change: rebranding to his own flag, American Fuels, which debuts this week, and changing the name of his company from Zarco 66 to Zarco USA Inc.
It is a decision he said he believes will give him greater control over the destiny of his business and increase its competitiveness, and is the latest chapter in a story about the challenges of offering fuel alternatives.
In June 2012, the EPA approved E15 for use in FFVs, 2001-model-year and newer cars, light-duty trucks and medium-duty passenger vehicles and SUVs. The agency's approval came despite objections from some auto manufacturers and many fuel industry groups, concerned that liability and safety issues had not been fully addressed.
After Zaremba--president of the Lawrence, Kansas-based chain that also sells biodiesel and E85--began selling E15 at eight sites, Phillips 66 requested he make infrastructure changes or else it would end its contract with him.
"The rules were created to make it impossible for me to be able to do what I've been doing without a huge added infrastructure cost," he told CSP Daily News. His choices included selling E15 from a yellow hose, just like E85, which would hamper sales of that fuel; adding a separate dispenser; or paying a six-figure fee to break his contract.
"Now I'm not under the thumb of anyone telling me what we have to do," said Zaremba. "Just like any retailer across the country, being able to be in charge of your own destiny makes it much easier. … We have huge competitors. So when you try to compete with them on a one-to-one basis without being able to innovate or change, it's been very difficult.
"We have to carve out niches that set us apart."
Carving out a niche in ethanol blends relies heavily on educating the public, especially as bad press for E15 trickles out. Last November, AAA warned its members about potential damage to their vehicles if they misfueled with E15. "Anything that happens to your car, or your bumper falls off, it's something we did," Zaremba said. "It's because you use ethanol or biodiesel or stopped at one of our locations. They spin everything out to make it as negative as possible. The fear factor is great."
This is where Robert White comes in. Director of ethanol trade group Renewable Fuels Association, Washington, D.C., White routinely addresses the confusion among retailers surrounding mid- to high-range ethanol blends, most notably installation costs.
"We commonly hear someone throw out $200,000 to $300,000 to add E85 and in some cases E15," said White, who points out that more than 40 stations in nine states offer E15, with several soon to start--"none of which have come within a double-digit percentage point of that $200,000 to $300,000 mark."
Final costs depend on multiple factors, such as the station, existing fueling infrastructure, the franchise agreement, government incentives and more. Building a site from new? OK, six figures. Starting with existing infrastructure? Less than $10,000 is more realistic.
From the perspective of John Eichberger, vice president of government relations at NACS, ethanol's communication woes are partly self-inflicted by its own industry, which he believes has not done enough to educate end consumers about the fuel.
"The only thing consumers are hearing is 'Don't buy it,' and that's from the auto manufacturers and AAA," he told CSP Daily News. "If you want consumers to adopt a new fuel like E85, E30 or E15, you have to teach them why. You've not done one thing to build market demand. You assume you authorize it, we'll sell it, it'll be cheaper, people will buy it. It doesn't work that way."
For more on the challenge of balancing supply and demand for alternative fuels, see the October issue of CSP magazine.