"Right now, you have to be pretty green to use E85," Ed McClure, CEO of Marion, Ind.-based McClure Oil Corp., told the Indianapolis Business Journal. McClure sells E85 at its stations in central and northern Indiana and said sales have "definitely slowed down."
In the report, the newspaper notes that an Indiana state fund supporting an 18-cent-a-gallon tax credit for gas stations selling E85 ethanol [image-nocss] was exhausted in the first three months of the state's new fiscal year, showing strong interest by retailers in early 2008.
Now, the timing for the alternative fuel couldn't be worse. Gasoline prices have plummeted to around $1.50 a gallon from $4-plus this summer, making E85 and its inherently lower fuel economy less attractive to retailers and motorists, the report said.
Even though many stations in the Indianapolis area sold E85 at a nickel a gallon cheaper than gasoline in December, E85's lower fuel economy meant the actual cost to the motorist could be 50 or 60 cents more per gallon than gas.
That's in stark contrast to June, when gas prices soared to $4.19 a gallon. Then, E85 could be had for 30 cents a gallon less than gasoline even after accounting for its lower fuel economy.
"In June or July, we could sell E85 blindfolded,"said Jim Gentry, fuel purchasing manager for Greenfield-based GasAmerica, which operates more than 80 stations and was among the first to sell E85 in the Indianapolis area. "Back in the summer, we didn't need the 18-cent [state tax] credit."
The tax credit enacted in 2007 helped spur a dramatic increase in the number of stations selling E85. It's offered at 121 stations across the state, up from just one in Terre Haute in 2005.
The tax credit grew out of state bill that set aside a half cent from each bushel of corn sold, raising $3 million annually for corn research and promotion.
Up to 25 percent of that is used for a retail tax credit and to promote the availability of E85, a blend of 85% alcohol/15% gasoline. The $500,000 in the state's ethanol tax credit account was exhausted just three months into the 2009 fiscal year that started July 1.
"We blew through that money," said Kellie Walsh, executive director of the Central Indiana Clean Cities Alliance, a federally funded program that's helped encourage the use of alternative fuels. "I am anxious to see whether gasoline prices dropping has our flex-fuel customers continuing with E85 or if they're going back over" to gasoline.
Walsh and gasoline stations that have signed on to sell E85 have grown accustomed to these wild cycles in ethanol relative to gasoline. She expects gasoline prices to rise again in a matter of months. Also, as far as she can tell, no stations have pulled their E85 pumps or switched them to gasoline or other fuels.
Not that station owners don't have that option.
"If E85 went away, we could use it for another product," said McClure, whose stations sell nine kinds of petroleum products his company blends. "We haven't given up on it."
Neither has GasAmerica. It recently installed E85 pumps at new or remodeled stations in Anderson and Fortville. "That being said, that's not to say it's the smartest business decision at this point in time," Gentry said.
It's already a rough period for the state's burgeoning ethanol refining industry, which took off like wildfire in recent years with a flurry of new construction and plans for even more plants.
Rising corn prices during the year and a temporary glut of ethanol amid an overbuilding of plants helped crush profits of refiners. Some have filed for bankruptcy and have slowed construction of new plants in Indiana and other states.
The gold rush was fueled by a demand for ethanol as a replacement for the fuel additive MTBE, which was banned for environmental reasons. In 2006, President Bush signed legislation requiring fuel producers to supply at least 36 billion gallons of the renewable fuel ethanol by 2022.
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