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Kansas Retail Ethanol Sales Have Increased

Posted on: Tuesday, 26 July 2005, 00:00 CDT

Jul. 26--KANSAS CITY, Mo. -- Proponents of ethanol are crowing that since Kansas passed a law ending a requirement that ethanol gasoline pumps be marked, retail orders have soared.

Industry officials project retail demand to rise 400 percent to 500 percent in Kansas, reflecting an increase from 5 million gallons last year to 25 million gallons this year. Contracts with fuel retailers have surged in Johnson County, where only a few gasoline stations even sold ethanol-blended fuel a year ago.

"There's been staggering demand for it," said Curt Wright, vice president of operations for Taylor Oil, which distributes fuel in the metropolitan area.

Overall figures for Kansas City are not yet available. But David Dykstra of Wichita-based United Bio Energy said demand in that city has jumped almost overnight from 1 million gallons a year to a projected 12 million gallons a year.

Demand began to build last winter when ethanol prices plunged and gasoline prices skyrocketed. But orders really took off in April after the labeling law passed in Kansas and has grown even stronger since July 1, when the law became effective.

Most Kansans may not even know they're using more ethanol. Under the law, retailers no longer have to alert consumers that some pumps contain a 10 percent blend of ethanol. It's up to retailers whether to use the labels.

Proponents of the change said many urban consumers mistakenly viewed the labels as warnings. They said the labels date back 30 years to a time when there were concerns about experimental "gasohol" blends and before fuel detergents.

"Basically it (labeling) was an outdated law," said Sue Schulte, a spokeswoman for the Kansas Corn Growers Association.

Virtually all automakers now warrant their vehicles for a blend of 10 percent ethanol, which proponents say burns cleaner than gasoline and has the potential to stretch American petroleum supplies.

Officials said getting rid of the fear factor encouraged more retailers to sell ethanol. They now have the flexibility to sell gas or a 10 percent ethanol blend, whichever they can buy more cheaply, giving them a competitive edge that may result in savings that are passed on to consumers.

Though the labeling bill easily passed the Kansas legislature, some critics still think consumers should be informed.

"I think people should know what they're buying," said Richard Haig, owner of Westside 66 in Lawrence, who put up a sign at his station that trumpets it still sells "100 percent" gasoline.

So far, such critics are in the minority.

But ramped-up demand also is pushing up ethanol prices -- though consumers can still get a 2 cent or more per gallon break at the pump on fuel containing ethanol. The increase in demand was so sudden the industry is struggling to build up supplies, causing temporary shortages and delays in shipping ethanol to terminals.

"We've seen demand increase by 400 percent in the last 60 days and we've had trouble keeping up," said Galen Menard, vice president of supply and trading for the National Cooperative Refinery Association in McPherson, Kan., one of the state's biggest fuel refineries and ethanol blenders.

Consider last year that the McPherson refinery blended only 20,000 gallons of ethanol a month. In June it blended more than 575,000 gallons. And Menard expects demand to continue growing, creating a dire need for more trucks and storage tanks.

Because of its composition, ethanol cannot be piped like petroleum. It has to be transported by rail or truck to terminals, where it is blended with gasoline. Menard said trucks often are waiting two and three hours in line to get ethanol at terminals because they are not equipped to handle the demand.

Despite supply problems, Kansas officials see nothing but an up side.

"We view this as good for Kansas," said Lee Allison, chairman of the Kansas Energy Council and director of Gov. Kathleen Sebelius' science and energy policy office.

Allison said heightened demand would spur ethanol production, which would help farmers who grow corn, sorghum and other grains from which ethanol is made, to generate more jobs and reduce transportation costs to consumers.

"People in the industry hoped for this," he said. "But it has surprised people outside the industry."

Some of these infrastructure problems could be addressed by new incentives contained in a proposed energy bill. The industry got a boost Monday when the Renewable Fuels Standard passed a U.S. Senate conference committee and went to the full Senate for a vote.

Backed by Sen. Jim Talent, a Missouri Republican, the standards call for boosting ethanol production to 7.5 billion gallons by 2012. That standard is 50 percent more than the House-passed energy bill.

In comparison, the ethanol industry last year produced only 3.4 billion gallons of refined ethanol from corn, sorghum and other grains. Kansas' seven plants can produce about 170 million gallons. Missouri's three plants make 105 million gallons. Both states have plans for new plants.

Ethanol became more attractive in February when gasoline prices rose. Part of the difference in price resulted from a 5.1 cents per gallon government subsidy for ethanol. But another reason was that there was a temporary oversupply. For a time, the wholesale price for ethanol was 60 cents below gasoline.

By the time the new labeling law took effect, demand in Kansas already had jumped, replicating increased demand in 11 other states that abandoned labeling requirements, including Missouri, that dropped labels three years ago.

Under the new Kansas law, labeling remains voluntary. But in western counties and agricultural areas of Missouri, Nebraska and Iowa, retailers say they will continue marking their pumps, because the 10 percent ethanol labels tend to attract more business, especially from farmers.

Some suburban consumers also say they look for the ethanol labels.

"Any place I can get it I buy it," said Bill Artman, a Shawnee photographer who travels a lot.

Soon that shouldn't be a problem.

Phillip Lampert, executive director of the National Ethanol Vehicle Coalition, which is based in Jefferson City, said a billion additional gallons will be available within the next 12 to 14 months from new ethanol plants. Lampert said that would help stabilize the market and drive prices lower.

Even so, some big gasoline retailers such as QuikTrip are watching whether the transportation and storage infrastructure can support the growth in ethanol consumption before they jump in and offer it.

"We want to make sure there is more than an adequate supply and more than an adequate infrastructure to support it," said Mike Thornbrugh, a spokesman for the Tulsa, Okla.-based convenience store chain.

"Right now we understand that isn't the case," he said.

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Copyright (c) 2005, The Kansas City Star, Mo.

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Source: The Kansas City Star (Kansas City, Missouri)

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