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A Petroleum Marketer's Guide to


									  Mid-Range Ethanol Blends
   to Blender Pumps, E85 &
A Petroleum Marketer’s Guide
     The Grassroots Voice of the Ethanol Industry
          A m e r i c a n C o a l i t i o n fo r E t h a n o l
           5 0 0 0 S . B ro a d b a n d L a n e , # 2 2 4
                   S i o u x Fa l l s , S D 5 7 1 0 8
                         (605) 334-3381
                     w w w. e t h a n o l . o r g

•Benefits of Ethanol Blender Pumps . . . . . . . . . . . . . . . . . . . . . 4

•Checklist of Key Factors to Consider. . . . . . . . . . . . . . . . . . . . 8

•Available Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

•Equipment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

•Best Practices for Success . . . . . . . . . . . . . . . . . . . . . . . . . 16

Today’s petroleum marketers – who find themselves at the center of hundred-dollar oil, high gasoline costs,
and consumers calling for change – can benefit from adding ethanol at their stations in two innovative ways:
installing blender pumps and retailing ethanol blends beyond 10%.

Used for years to blend and dispense unleaded and premium to give customers several octane choices,
blender pumps are now finding a home in the retailing of ethanol fuels, offering stations the unique
opportunity to offer mid-range blends between E10 and E85. The stations benefit from the blending economics
of higher-volume ethanol sales, and their customers enjoy this new array of fuel choices at the pump.

In this new application, blender pumps typically utilize two underground tanks, one containing unleaded
gasoline and the other containing E85. In addition to offering more traditional fuels such as no-lead, E10,
and E85, the fuel pump can also dispense a variety of mid-range ethanol blends – often E20, E30, and E40
– which are created by mixing the appropriate percentages of fuel from each underground tank.

A number of Midwestern gas stations have taken this unique approach to retailing ethanol fuels. Blender
pumps were first put into service during the spring of 2006 in the northeastern South Dakota communities of
Britton and Watertown. Since then other stations across South Dakota and Minnesota have installed blenders,
and petroleum marketers in other states are also looking into the opportunity.

With just one piece of equipment, a petroleum marketer can offer a variety of new fuels to customers and
these customers can select their preferred formulation with just the touch of a button. Even if a station doesn’t
wish to begin retailing these new ethanol fuels immediately, the infrastructure is in place for the future – which,
by all signs, is certain to include ethanol blends beyond E10.

     Ethanol Blender Pumps: How They Work
     A blender pump draws two fuels from separate storage tanks and mixes them together in various percentages to form a variety of
     fuel choices for the station’s customers. Any combination of fuels is possible, and most blending systems allow changes in the
     percentages for the seasonal blends of E85. In theory, a marketer could have straight unleaded and straight ethanol in the two
     tanks, offering nothing but a variety of ethanol blends in varying strengths.

     In the illustration below, the blender pump offers E30 and E85 in addition to no-lead and E10. Separate hoses for the “flex” fuels
     and for the standard fuels ensure that a customer who purchases a small quantity of a standard fuel would not receive a higher
     ethanol blend if there was residual fuel left in the hose from a previous sale. Ethanol blends over 10% are clearly lableled as “for
     flexible fuel vehicles only.”

                                                                                           Separate hoses for flex and standard fuels

                         E85 - 100% from Tank A

                                                                                        Unleaded - 100% from Tank B
    E30 - 35% from Tank A and 65% from Tank B
                                                                                          E10 - 12% from Tank A and 88% from Tank B
                Any blend over 10% is labeled
                “For Flexible Fuel Vehicles Only”

                      Tank A - E85                                                  Tank B - Unleaded Gasoline


                    ADDING UP THE BENEFITS:
              The Advantages of Ethanol Blender Pumps

Product Flexibility for a Changing Fuel Market
Why is it beneficial for stations to consider offering these mid-range ethanol blends? Though E10 is the most
predominant way for ethanol to be retailed today, new national renewable fuels targets are leading the way to
increased ethanol use and the approval of ethanol blends beyond 10%.

The new Renewable Fuels Standard passed in the 2007 energy
bill calls for 36 billion gallons of ethanol use by 2022 – a level                            Blender Pump Locations
that, for the first time, guarantees ethanol will comprise more than
                                                                                              •	A	list	of	current	blender	pump	locations		
10% of the nation’s gasoline supply. Higher blends of ethanol will
                                                                                                is	posted	on
be a reality for America’s future fuel market. E85 will certainly be a
part of this, as will mid-range blends between 10% and 85%. In                                •	To	add	your	station	to	the	list,		
fact, the wheels are already in motion today for E20, for example,                              contact	ACE	at	605-334-3381.
to be approved for use in standard, non-flex-fuel autos.

Installing blender pumps offers product flexibility – a valuable asset in today’s changing fuels market.
Station owners can use the blender pumps to dispense mid-range ethanol blends, or they also have the
option of retailing a more traditional slate of fuels like unleaded, E10, and E85.

It is certain that ethanol blends beyond 10% will be an option for American motorists in the coming years.
Blender pumps allow petroleum marketers to be ready today, while retaining the flexibility to make the
decisions on fuel offerings when the time is right for them.

     Mid-Range Ethanol Blend Formulations
     Percentage of each base fuel needed to create mid-range blends

                         E85 + Unleaded                                                       E85 + E10
          	          Class	1	     Class	2	       Class	3	               	          Class	1	        Class	2	         Class	3
          E10	       12/88	       13/87	          13/87	                E10	       0/100	           0/100	          0/100
          E20	       24/76	       25/75	          27/73	                E20	       13/87	           14/86	          15/85
          E30	       35/65	       38/62	          40/60	                E30	       26/74	           29/71	          31/69
          E40	       47/53	       50/50	          53/47	                E40	       40/60	           43/57	          46/54
          E50	       59/41	       63/37	          67/33	                E50	       53/47	           57/43	          61/39

     Class 1, Class 2, and Class 3 refer to the different seasonal E85 mixtures required in D 5798-99. Class 1 contains 85%
     denatured fuel ethanol, 80% in Class 2, and 75% in Class 3. The percentages are rounded to the nearest whole number,
     since most pump controllers can be adjusted in increments of 1%.

Ethanol Blending Economics

As ethanol prices have become more attractive, marketers are “doing the math” and recognizing the
bottom-line advantages that can be gained by adding ethanol to their product mix.

Prior to the blender pump, most retailers had been limited to buying E10 at the rack and accepting whatever
price the supplier wanted to charge for the pre-blended product. In some markets, oil companies were selling
rack E10 as a midgrade, pricing it 4 to 7 cents higher than straight unleaded gasoline. Meanwhile, retailers
could obtain pricing information on ethanol and unleaded, and when they blended the product prices together
on paper, they found out that the oil companies’ pre-blended E10 prices didn’t add up.

Taking a pencil to rack prices for gasoline and ethanol and calculating the cost of E10 had many marketers
fuming. In some markets, 10 to 12 cents per gallon could be saved on E10 if a marketer obtained gasoline
and ethanol separately. Since a gallon of E10 contains only a tenth of a gallon of ethanol, that 10 to 12 cent
markup on the finished product translates to a markup of over a dollar on the ethanol portion of the mix.
There had to be better way for station owners to share in the opportunity ethanol provides at the pump.

Enter the blender pump.

     Blender Pump Cost Calculations: Ethanol Less Than Gasoline

                                      Prices         NL        E85           E10       E20         E30        E40       E50
         Gasoline                     3.0000	      3.0000	 0.4500	          3.0219	 2.6098	 2.2321	 1.8200	 1.4079
         Ethanol                      2.6500	          	     2.2525	        0.3244	 0.6487	 0.9461	 1.2704	 1.5948
         Product Cost                              3.0000	 2.7025	          3.3463	 3.2586	 3.1782	 3.0904	 3.0027
         Fed Tax - Gas                0.1840	      0.1840	 0.1840
         Fed Tax - Ethanol            -0.5100	         	     -0.4335
         State Tax                    0.2500	      0.2500	 0.2500
         TOTAL COST                                3.4340	 2.7030	          3.3463	 3.2586	 3.1782	 3.0904	 3.0027

The chart above is an example of prices obtained at various blend levels by combining unleaded gasoline
and E85. Note that there are no taxes listed under the various blends, since the taxes have already been paid
on the two base fuels. This fact – that these blends are merely mixtures of two other fuels that have already
been taxed – is a key factor in many states’ laws. Most states allow blending of two tax-paid fuels with no
additional tax payable, but some insist that each fuel has its own rate and are concerned that greater use of
ethanol will reduce that state’s tax revenue.

In this scenario, ethanol is priced lower than gasoline, and VEETC – the Volumetric Ethanol Excise Tax Credit –
is shown with the other tax lines. The credit is currently* 51 cents per gallon of ethanol, and in this instance,
the E85 is true E85, containing 85/100ths of a gallon of ethanol and receiving 85% of the tax credit allowed
on a gallon of blended fuel. (*At press time, VEETC is 51 cents per gallon, but Congress is considering a
provision in the 2008 Farm Bill to reduce the credit to 45 cents per gallon beginning in 2009.)

“The math” also works when ethanol is priced higher than gasoline. In the chart below, a scenario is shown
where the ethanol price is higher than gasoline – it is clear that the blending economics still favor higher
blends of ethanol.

     Blender Pump Cost Calculations: Ethanol More Than Gasoline

                                      Prices         NL        E85           E10       E20         E30        E40       E50
         Gasoline                     2.5000	      2.5000	 0.3750	          2.5819	 2.2298	 1.9071	 1.5550	 1.2029
         Ethanol	                     2.6500	          	     2.2525	        0.3154	 0.6307	 0.9198	 1.2352	 1.5505
         Product Cost                              2.5000	 2.6275	          2.8973	 2.8606	 2.8269	 2.7902	 2.7535
         Fed Tax - Gas                0.1840	      0.1840	 0.1840
         Fed Tax - Ethanol            -0.5100	         	     -0.4335
         State Tax                    0.2500	      0.2500	 0.2500
         TOTAL COST                                2.9340	 2.6280	          2.8973	 2.8606	 2.8269	 2.7902	 2.7535


Research Shows the Potential of Higher Ethanol Blends
Even though automakers today certify non-FFVs for up to 10% ethanol fuel, a body of research is building to
show the promise of blends beyond E10 in standard vehicles.

The “Optimal Ethanol Blend-Level Investigation,” released in late 2007, found previous assumptions about
ethanol’s fuel economy penalty to be incorrect. Instead of ethanol’s lower energy content translating to lower
fuel economy, the research strongly suggests that there is an “optimal” blend of ethanol and gasoline – likely
E20 or E30 – at which cars get better mileage than predicted on a BTU basis, and in some cases even better
mileage than on straight gasoline.

The study tested a variety of ethanol blends, from
straight Tier 2 gasoline up to 85% ethanol, on                              Key Findings:
four vehicles: a Toyota Camry, a Ford Fusion, a                             •	 Ethanol’s	energy	content	was	not	found	to	be	a	
flex-fuel Chevrolet Impala, and a standard non-flex                            direct	predictor	of	fuel	economy.
Chevrolet Impala. BTU-content calculations would
                                                                            •	 E20	and	E30	ethanol	blends	outperformed	gasoline	
predict the vehicles’ fuel economy to go down as                               in	fuel	economy	tests	for	certain	autos.
the ethanol content goes up. Not only did all four
                                                                            •	 Standard,	non-flex-fuel	vehicles	operated	well	on	
vehicles achieve better fuel economy than these BTU
                                                                               ethanol	blends	beyond	10%.
calculations predicted, but an ethanol blend actually
outperformed gasoline in three of the four cars.                            •	 Vehicle	emissions	met	EPA	requirements	and	were	
                                                                               improved	in	key	areas.
E20 and E30 offered the best fuel economy in these
tests. In both the Ford and the Toyota, E30 offered a
1% mileage increase over gasoline – significant because the vehicles actually traveled more miles on 30%
less gasoline. In the flex-fuel Chevy, E20 offered a sizeable 15% fuel economy improvement over gasoline.
The non-flex Chevy more closely followed the BTU predictions for fuel economy, but there was a noticeable
jump in mileage at E40, suggesting that this may be the “optimal” blend for this vehicle.

The research also showed the three non-flex vehicles to operate well on ethanol blends above, and in some
cases well above, E10. No fault codes were displayed in the Ford until it reached E50 and in the Chevy and
Toyota until they reached E70, demonstrating that standard, unmodified vehicles may be able to run on much
higher percentages of ethanol than currently covered by automakers’ warranties.

Emissions results for the ethanol blends were also favorable for nitrogen oxides, carbon monoxide and
nonmethane organic gases, showing an especially significant reduction in CO2 emissions for each vehicle’s
“optimal” ethanol blend (E20 for the flex-fuel Chevy, E30 for the Toyota and Ford, E40 for the non-flex Chevy).

The investigation was co-sponsored by the American Coalition for Ethanol and the U.S. Department of Energy.
Additional research is underway. More details may be found on ACE’s website,

      Projected Results: Highway Fuel Economy Calculated Using Btu Value
          30.00                                                               Toyota Camry
                                                                              Ford Fusion
                                                                              Chevrolet Impala (non flex fuel)
                                                                              Chevrolet (flex fuel)


               Gasoline	 E10	       E20	     E30	      E40	 E45	 E50	              E60	 E65	 E70	       E80	 E85
              Gasoline	                                 Fuel

          Actual Results: Highway Fuel Economy Improvement
          Demonstrated with E20, E30 vs. Gasoline

                                                                  Tier II
                                +1%                               E20             +15%                             +1%





                           Toyota                 Chevrolet                     Flex-Fuel                   Ford

              Miles per $30                  NL       E10          E20         E30       E40









                  Toyota              Chevrolet      Flex-Fuel	Chevrolet                 Ford                Average

The state of Minnesota has also conducted testing on higher blends, specifically on E20, in preparation for
the possible increase of its ethanol requirement from 10% to 20%. A law passed in 2005 calls for ethanol
to comprise 20% of the state’s gasoline use by 2013, and the state is in the process of applying for a waiver
from the U.S. EPA so that E20 may be allowed as an approved fuel.

Released in early 2008, results of year-long research on 40 pairs of standard vehicles show that
increasing the amount of ethanol from 10% to 20% does not present problems for current vehicles or fuel
dispensing equipment.

Through a broad range of weather conditions, E20 performed well in tests of drivability, providing the
desired power and performance similar to that of E10. Lab tests evaluated the effect of E20 on the materials
commonly found in conventional vehicle fuel systems, including various metals, rubbers, and plastics.
Test results indicate that E20 is compatible with these systems. Emissions results have not been published
as of this writing.

To complete the application process for a waiver for E20 to become an approved fuel, EPA requires more
testing to determine the long-term effects of a 20% ethanol blend on automobile and small engines.
Additional research is planned so that these approvals processes may continue forward.


                      FACTORS TO CONSIDER:
                           A Checklist of Important Items

   3      The Legality of Mid-Range Blends
          The sale of mid-range blends between E10 and E85 is legal because they are covered under EPA’s
          emissions certification for Flexible Fuel Vehicles.

          While some states still debate the legality of mid-range blends on the federal level it is indeed legal
          today to sell blends of ethanol beyond 10% – as long as the fuels are clearly labeled for use only in
          Flexible Fuel Vehicles (FFVs).

                                                              Automakers currently certify all makes and models
“...such blends are covered under the                         to operate on up to 10% ethanol. E85 is an
 emissions certification for an E85 FFV                       alternative fuel for use in Flexible Fuel Vehicles,
                                                              which are designed to run on gasoline or any
        and are thus not prohibited...”
                                                              ethanol blend to up 85%. As for mid-range ethanol
                                                              blends such as E20, E30, and E40, the U.S.
                                                              Environmental Protection Agency has stated that
                                                              their sale is indeed allowed for fueling FFVs.

                                                              When asked by the South Dakota Petroleum
                                                              Marketers Association for clarification on the legality
                                                              of retailing these mid-range blends, the agency
                                                              weighed in on the matter in a November 2006
                                                              letter from Margo Tsirigotis Oge, Director of EPA’s
                                                              Transportation and Air Quality. The letter stated:

                                                              “With respect to the sale of blends such as E20 and
                                                              E30 for use in FFVs, such blends are covered under
                                                              the emissions certification for an E85 FFV, and thus
                                                              are not prohibited under the Clean Air Act. I am not
                                                              aware of any federal law that prohibits sale of such
                                                              blends for use in FFVs.”

          Most branded oil companies will have rules about the marketing of flexible fuels. They may require
          different labels – which, as mentioned in this publication – is a good idea. However, under provisions
          of the Energy Independence & Security Act of 2007, a branded supplier can’t prevent a station owner
          from installing a renewable fuel pump, converting an existing tank to hold renewable fuel, nor keep
          them from advertising the sale of renewable fuels. Station operators can also purchase renewable fuels
          from persons other than the franchisor, display advertising signs, put flex fuel prices on the price sign,
          and accept credit card payment for the fuel.

   3      Issues of Liability

          Clearly identifying mid-range ethanol blends as “For Flex Fuel Vehicles Only” and dispensing them from
          a separate “flex fuel” hose are best practices to follow.

          Proper labeling of pumps – clearly identifying products as “For Flex Fuel Vehicles Only” – should
          insulate a marketer from customer claims of misfueling non-flex-fuel vehicles with ethanol blends
          higher than 10%. While nothing can stop a person from filing a claim, properly labeled and clearly
          differentiated products should eliminate concerns that such a claim would be successful. Much like
          a person who accidently puts diesel in a gasoline vehicle and vice versa, easily identified differences
          between products will protect the marketer.

          In addition, “flex fuels” and “standard fuels” should be dispensed from separate hoses. If all products
          are dispensed from a common hose, it is possible for a residual amount of a higher ethanol blend to
          be dispensed into the fuel tank or container of a customer who selected gasoline or E10 for purchase.
          While a hose full of E85 is unlikely to cause any serious problems, even in a small engine designed
          for gas and E10, having separate hoses for flex fuels and standard fuels should eliminate the
          possibility of a claim.

          Some state departments of Weights and Measures have indicated that they will prevent marketers from
          selling the E30 blends until such time as there is an ASTM specification for E30. These departments
          need to be reminded that the product marketed as E30 is actually a blend of E85 and Unleaded
          (or E10) – both of which have ASTM specifications that can be tested by pulling samples from the
          respective products tanks. E30 is no more a separate product than the fuel that is created when #1
          and #2 diesel fuel are blended together. There is no ASTM specification for #1 1/2 diesel fuel, and the
          same rules should apply for gas/ethanol blends. With a blender pump, there is no E20, E30, or E40
          on site – the product is created by the customer at the point of purchase.

   3      Fuel Taxes

          Your E85 distributor can pass on the
          blender’s credit, or you can become the
          “blender of record” and apply for the credit
          directly through a 637M license from the IRS.

          In the two underground tanks used with
          blender pumps, some marketers have
          questioned whether to use E85 or 100%
          fuel ethanol in the ethanol-containing tank.
          In most cases, the reason for considering
          starting with E100 is to obtain the ethanol
          blender’s credit directly. While most
          marketers have been able to get an E85
          distributor to pass on the VEETC credit, using
          E100 and obtaining the credit directly is indeed an option. Keep in mind that regular reporting and
          increased bookkeeping responsibilities are required for those who are considered “blenders” of ethanol
          and gasoline.

          In order to apply directly for the VEETC credit for blending ethanol, a marketer must obtain a 637M
          license from the IRS. The “M” designation is commonly referred to as the “blender’s license.”
          When filing IRS form 637, many applicants are confused by the designations AL (alternative fuels)
          and AM (alternative fuels mixtures). Those are not the designations needed to be considered a
          blender by the IRS. According to IRS instructions, “alternative fuel does not include ethanol, methanol,
          biodiesel, or renewable diesel.” 637M is the required tax license for blenders of ethanol.


                             A Checklist of Important Items

    3       Renewable Identification Numbers (RINs)

            Marketers who wish to be considered the “blender of record” in order to own RINs for resale must
            register with EPA. Sign up at and check “Register or
            Update a Gasoline / Ethanol Facility.”

            Those buying denatured fuel ethanol to become a “blender of record” must also register with EPA to
            track Renewable Identification Numbers (RINs), which the agency calls the “currency of the renewable
            fuels program.” Under the Renewable Fuels Standard, refiners and importers are required to buy a
            certain amount of ethanol each year. RINs are the way those “obligated parties” show that they have
            purchased the required amount. Quarterly reports and an annual attest audit are required for those
            who register to be blenders and track RINs.

                                                                                     Because refiners and importers
                                                                                     are required to have RINs, they
                                                                                     will have some actual value; that
                                                                                     value will change depending
                                                                                     on availability of ethanol. At the
                                                                                     time of writing this publication,
                                                                                     “public” trading of RINs has just
                                                                                     begun, with transactions being
                                                                                     completed at values of a few
                                                                                     cents per RIN. Obviously, volume
                                                                                     would be the most important
                                                                                     factor to consider when
                                                                                     weighing whether potential RIN
                                                                                     profits would offset increased
                                                                                     bookkeeping and auditing costs.

                                                                                        While the bookkeeping and
                                                                                        reporting can be complicated,
                                                                                        registration is not. Simply go
                                                                                        to this link on the EPA website,
                                                                                        fuelsregistration.htm, and check
            the box for “Register or Update a Gasoline/Ethanol Facility.” The necessary form will then pop up on
            screen; fill it out using all capital letters. After submission, a signed printed form must also be mailed
            to EPA. Instructions are included on the site.

    3       Inventory Reconciliation

            Multiple tanks and dispensing combinations may require changes to how the station tracks
            fuel inventories.

            Keep in mind that inventory reconciliation using two tanks and up to five different dispensing
            combinations can become complicated. A station may have to make some changes in how it
            tracks its fuel inventory. Most point-of-sale systems that support blender pumps will also provide
            the appropriate information for balancing inventories, but in some cases those reports have to
            be activated.

    3       Fire Code / UL Rules

            Check with your local fire marshal about requirements for using UL-approved ethanol pumps.

            Nearly all tanks and lines are approved by Underwriters Laboratories (UL) for use with E85.
            Steel tanks are approved, but some older fiberglass tanks may not be. Check with the manufacturer to
            be certain.

            Originally, blender pumps – and all E85 pumps, for that matter – were installed using standard
            gasoline pumps. According to Underwriters Laboratories, no complaints have been filed and no
            failures have been noted in installations using standard pumps to dispense E85 and other
            mid-range blends.

            Even so, Underwriters Laboratories decided that a standard was needed and developed one.
            Unfortunately, this new standard adds several thousand dollars to the cost of a pump, and
            many cities, counties, and states require that only UL-listed pumps be used to dispense fuel.
            Some jurisdictions have made exceptions for E85 and blender pumps, some don’t use UL as the
            standard, and some have shut down E85. It’s a good idea to check with your local fire marshal to
            determine what the regulations are in your area.


4 Seasons Cooperative pioneers the use of ethanol blenders

4 Seasons Co-op in Britton, South Dakota installed blender pumps at its gas station in March 2006
and now offers ethanol blends E10, E20, E30, E40, and E85. According to General Manager Dave
Andresen, beyond E10, E30 is “hands down” the most popular ethanol blend with the co-op’s
customers, many of whom have reported that they experience no mileage penalty when using E30.
This, along with the typical 30-cent price differential between regular fuel and E30, makes E30 a
popular choice with the station’s customers.

Since installing the blender pumps, the station’s total ethanol sales are up 47%, with most of that
increase coming from the sale of the mid-range ethanol blends.

            Close-up view of the blending selection control panel at 4 Seasons Co-op in Britton, SD


                                    DIVIDING THE COST:
                                            Ava i l a b l e I n c e n t i v e s

       The Federal Tax Credit
       Under the Energy Policy Act of 2005, fueling stations are eligible to claim a 30% federal income tax credit
       for the cost of establishing alternative fueling infrastructure, including E85 and ethanol blender pumps. Other
       fuels eligible include natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas,
       hydrogen, or biodiesel blends of at least B20.

       The maximum tax credit is $30,000 for the cost of installing clean-fuel vehicle refueling property to be used
       in a trade or business of the taxpayer or installed at the principal residence of the taxpayer. The 30% credit is
       effective for property placed in service after December 31, 2005 and before January 1, 2010.

       To claim the infrastructure tax credit, consult Internal
       Revenue Service (IRS) Form 8911, which may
       be found online at under “For
       Petroleum Marketers.” Owners who install qualified
       refueling property on multiple sites may utilize
       the credit for each property; see IRS Form 8911
       instructions for definitions of qualifying property
       and the value of the credit.

       Grants for Renewable
       Fuel Infrastructure

       The 2007 energy bill established a new Renewable
       Fuel Infrastructure Grant Program in which the U.S.
       Department of Energy is authorized to make grants
       available to assist retail and wholesale fuel dealers
       with E85 infrastructure or blender pumps.

       The grants can provide assistance totaling up to
       33% of the cost to install, replace, or convert fuel
       equipment, or $180,000 for a combination of
       equipment at any one retail location. The DOE must
       adopt rules for the program by 2009. This grant
       program is subject to annual appropriations from
       Congress. The American Coalition for Ethanol will
       post details of the grant program on its website,, as soon as they become available.

             State Incentives

             Several states have established incentives for stations to convert or install retail fuel dispensing
             equipment for ethanol blends. For more details on the states’ programs listed on this map,
             visit and select “Ethanol Stats & Laws” at the bottom of the homepage.

               1 Georgia – E85 grant program                           5 Michigan – E85 matching grants

               2 Idaho – E10, E85 matching grants                      6 New York – E10 and E85 grant program

               3 Iowa – E85 incentives                                 7 Ohio – E85 grant program

               4 Maine – E85 pump conversion program                   8 Indiana – E85 grant program

                                                                       9 Tennessee – E85 grant program





                                                                         for the most current list of
CASE STUDY #2                                                            ethanol infrastructure incentives.

Sioux Valley Cooperative & CHS develop protocols for dispensing
mid-range blends

In April 2006, Sioux Valley Co-op installed blender pumps at its main Watertown, South Dakota
station and began retailing E20 and E30, in addition to no-lead, E10, and E85. The Gilbarco
dispensers were installed through supplier WestMor Industries of Morris, Minnesota. Sioux Valley’s
other two Watertown locations also now have blender pumps, as well as its station in
neighboring Webster.

Glacial Lakes Energy LLC, the locally owned ethanol plant in Watertown, was instrumental in
supporting the installation of ethanol blender pumps in its local community.

General Manager Gary French notes that while E10 is still the highest volume fuel, E30 continues to
gain in popularity. Since the blenders were installed, their unblended gallons continue to decrease and
their blended gallons continue to increase.

From the experience gained with installing its first blenders at Sioux Valley Co-op, CHS developed
standard protocols for dispensing mid-range ethanol blends at its Cenex-brand stations. In a
November 2007 letter to station owners, CHS notes the importance of having a dedicated hose for
flex-fuels and standard fuels:

“CHS supports Cenex Branded
Marketers offering alternative fuels
at retail sites for flex fuel vehicles.
It is important to CHS that the
retail customers receive the fuel
they are expecting, so preventing
any consumer confusion or
misleading consumers as to
the appropriateness of using
alternative fuels in their vehicles is
important. The use of a dedicated
dispenser or dedicated hose for
an alternative fuel is a must.”
                                                Sioux Valley Co-op & CHS blender pump control panel in Watertown, SD


                             EQUIPMENT MATTERS

    Most fiberglass fuel storage tanks are compatible with ethanol blends. According to the Fiberglass Tank and
    Pipe Institute, some older single-wall fiberglass tanks may not be appropriate for fuel ethanol concentrations
    of greater than 30 percent. Double-walled fiberglass tanks and piping should be fine for higher ethanol
    blends, but it is safest to ask the tank manufacturer to verify the suitability of any fiberglass tank or piping
    before switching to E85 or other ethanol blends beyond E10.

    There are no known compatibility issues with steel tanks and E85 or other mid-range ethanol blends. On its
    website, the Steel Tank Institute states: “Steel Tank Institute labeled steel underground and
    above-ground storage tanks, when used for the storage of ethanol-based fuels, have exhibited no detrimental
    structural or permeation issues. STL does recommend that tank owners implement a maintenance program for
    all tanks and associated equipment.”

    Tank Preparation

    To prepare underground tanks to store ethanol-blended fuel, care must be taken to eliminate water and
    remedy any causes of water buildup in tanks that will be used for ethanol-blended gasoline. Relatively small
    amounts of water in tanks can lead to phase separation. Your tank and lines must be clean because E85 will
    “clean out” any remaining sludge from storage of gasoline and diesel fuel. Either of these factors are rarely a
    concern when converting tanks that had previously held ethanol-blended gasoline.

    Once the original cleaning is complete, good housekeeping will eliminate most potential problems. In addition
    to regular leak detection, be sure to check gaskets, fill caps, and tank lids, and remind transport drivers of the
    importance of replacing all of them correctly when making fuel deliveries. Periodic maintenance checks can
    help prevent leaks and component failures. If using an older dispenser, it is advisable to check them on a
    monthly basis regardless of what fuel is used.

    E85 dispenser failures are almost unheard of, but fuel contamination problems have been reported with
    various ethanol blends. In nearly every case, the cause of the problem was found to be poor tank cleaning
    or a failure to use the proper filters, nozzle, or hose. E85 fueling systems should use non-aluminum nozzles,
    1- or 2-micron dispenser filters, and an alcohol-compatible (e.g. Teflon-coated) hose.

    Tank Cleaning Methods

    If an existing underground tank that stored another type of fuel will be converted to store E85, the tank
    should be carefully cleaned. Storing gasoline underground causes some particulates to settle out and form a
    petroleum sludge; introducing alcohol into the tank without cleaning it will place this sludge into suspension
    and lead to serious problems with vehicle drivability.

    There are several methods that can be used to clean the tank. Using a “filter agitator” device lowered into the
    tank moves the product and allows a filter to catch any suspended particles. The tank can also be cleaned
    by physically entering and steam cleaning it. A robotic cannon can liquefiy the sludge so it may be pumped
    out and disposed. Or a chemical cleaner may be placed in the tank to clean the walls, and any remaining
    particulates may then be pumped out. With any of these methods, consult with a certified and bonded
    company familiar with cleaning petroleum storage tanks.

    Switching a Tank to E85 Storage

    The preferred method for switching a tank from storing straight gasoline to storing an ethanol blend is to drain
    the tank and pump any water from the bottom of the tank until it is completely empty, and then adding the
    new E85 product. When E85 is dropped in the tank, it should be filled as close to capacity as possible to
    minimize the effect of any small amounts of water that may remain.

    An alternate method of switching a tank from gasoline to E85 storage would be to blend the existing gas with
    sufficient volumes of ethanol to bring the overall mixture up to the proper percentage of ethanol. For example,
    if a 10,000-gallon tank contained 1,000 gallons of unleaded gasoline, 7,650 gallons of straight ethanol and
    350 gallons of gas (about an E95 blend) could be added to a delivery of to bring the entire tank’s contents
    up to meet the spec for a “Class 1” E85 blend.

    As always, care should be taken to remove any water from the tank bottoms, and the tank should be filled
    as close to capacity as possible to minimize the effect of any small amounts of water that may remain. Be
    sure to label pumps appropriately, indicating the proper octane of the blended fuel, and placing any decals
    required by state motor fuel regulations.

    With either method, some marketers take the intermediate step of adding a small amount (500 -1,000
    gallons) of an E10 blend to the tank so that any remaining difficulties will be discovered using a smaller
    amount of fuel which responds more quickly to excessive water or sludge remaining in the tank.


    Blender pumps and E85 dispensers are available from a variety of manufacturers. Check with your equipment
    supplier for more detailed information. Any fuel above E15 is considered a “flex fuel,” so the infrastructure
    needs to be compatible with E85.

    The two largest manufacturers of fuel dispensers in the U.S. – Gilbarco and Dresser Wayne – do offer blender
    pumps built to dispense a variety of ethanol fuel formulations. Both manufacturers’ pumps have Weights &
    Measures approval and are awaiting E85-compatibility approval from Underwriters Laboratories.

    In early 2008, Gilbarco introduced 3+0 and 3+1 blender pumps designed to blend ethanol or biodiesel with
    standard fuels. The blenders are part of its Encore® S product line. For more information, visit www.gilbarco.

    Dresser Wayne also offers ethanol blender pumps in a variety of configurations. Its Ovation dispenser unit has
    a flex-fuel option with stainless steel construction and other E85-compatible materials. For more information,

    The blender option typically adds $1500 to $2500 to the cost of a fuel dispenser. Currently a UL flex-fuel
    design pump will cost an additional $8700. Representatives from the equipment companies expect that
                                         the UL add-on cost will come down as blender pumps become more
                                         commonly used by the industry.


                                                                     Minnesota stations see dramatic
                                                                     increase in E85 volumes

                                                                     Gas stations in Minnesota have also
                                                                     realized increased ethanol sales volumes
                                                                     due to the installation of ethanol blenders.
                                                                     E85 suppliers have indicated that stations
                                                                     which have replaced standard E85 pumps
                                                                     with blender pumps have seen dramatic
                                                                     increases in their E85 sales volumes – two-
                                                                     to three-fold increases, or sometimes more,
                                                                     due to the popularity of mid-range ethanol
                                                                     blends with consumers.

    A blender pump located in Montevideo, MN


                          SUBTRACTING RISK:
                             Best Practices for Success

Employee Knowledge
Gas station employees are the front line for communicating with the public, and therefore are critically
important to the successful retailing of mid-range ethanol blends. Because automakers’ warranties have not
yet changed to cover the use of ethanol blends beyond E10 in non-flex-fuel vehicles, it is imperative that
employees know, understand, and communicate this fact:

Blends of ethanol beyond 10% are for use in Flexible Fuel Vehicles only.

Unless and until approved by the federal government, employees must never recommend that customers try
these mid-range ethanol blends in standard vehicles. Station management should make every effort to ensure
that employees understand the importance of following these protocols.

Promotion & Marketing Ideas

Being the first station in your area to install blender pumps and retail a new variety of ethanol fuel choices is
a great opportunity for good publicity and earned media. The stations that have installed blenders and offered
these new mid-range fuels have experienced positive attention as a result. Don’t overlook the public relations
element and miss out on the chance to promote your new slate of green fuel choices.

                        1.	Post	the	new	ethanol	blends	on	your	price	sign
                        Promote these new fuel options by including them in your price sign along with your
                        traditional fuel choices. The cost-effectiveness of ethanol will get motorists’ attention.

                               2.	Notify	your	local	media
                               Alert your local media that you will be installing this new type of infrastructure
                               and offering a unique variety of fuels. Earned media is a very effective –
                               and cost-effective – way to promote your station and draw in new and repeat
                               customers. If you’d like assistance with alerting your local media and pitching
                               the story, contact the American Coalition for Ethanol’s communications team.

Often there are local organizations supportive of ethanol that are willing to assist with station promotions.
For example, check with your state Corn Growers Association or local Lung Association or Clean Cities
Coalition to see if a mutually beneficial partnership could be formed.

                                      3.	Use	attractive	decals	on	the	pumps
                                      Remember to clearly label these new fuel choices, and do so with
                                      attractive decals. Contact the National Ethanol Vehicle Coalition
                                      ( or the Ethanol Promotion and Information Council
                                      ( for your ethanol pump sticker options.

       ICM “Flex Station” Concept

       Ethanol process design company ICM, Inc. has developed a “flex fuel station” concept that it
       hopes to implement in its headquarters city of Colwich, Kansas. The “power of choice” aptly
       describes the variety of ethanol blends available at the station, as noted on its price sign.


                             THE BOTTOM LINE:
                     Real Wor ld Exper ience & Solutions

What Station Owners are Saying:
Dave	Andresen,	General	Manager	-	4	Seasons	Cooperative	•	Britton,	South	Dakota
“While we do not recommend the blends for non-FFVs, we are giving customers a choice. I honestly think
blender pumps should be in every state... I believe this, in a couple of years, could sweep the nation.
This is ethanol’s time.”

Gary	French,	General	Manager	-	Sioux	Valley	Cooperative	•	Watertown,	South	Dakota
“I was in the process of putting in dispensers so we could have E85. Instead of putting those in, we put in
blender pumps... Let the customer decide. Let it be their choice.”

What Policymakers are Saying:
U.S.	Senator	John	Thune,	(R-SD)
“It is important that the federal government look at expanding consumer access to ethanol by studying and
approving higher blends of ethanol for use in non-flex-fuel vehicles.”

U.S.	Senator	Byron	Dorgan,	(D-ND)
“With blends above 10 percent, we can achieve significant opportunities to reduce air pollution and to
increase gas mileage.”

What Government Officials are Saying:
Tom	Dorr,	USDA	Under	Secretary	for	Rural	Development
“It’s pretty clear from this study [the Optimal Ethanol Blend-Level Investigation] that one of the things we
absolutely have to do in the Administration is hasten the intermediate blend wall testing issue and resolve
that quickly.”

Andy	Karsner,	U.S.	Department	of	Energy	Assistant	Secretary
“Our addiction to oil, our access to oil, is not going away, even though our sources are depleting and our
possibility of getting at them more economically and with greater security are eroding beneath us.”

What Consumer & Environmental Groups are Saying:
Dr.	Mark	Cooper,	Consumer	Federation	of	America
“This [looking to mid-range ethanol blends] is exactly the kind of long-term, out-of-the-box thinking we need
so that we can address the three fundamental issues – consumer pocketbook, national security, and the
environment. That will get us a solution quicker and cheaper than the path we’re currently on.”

Brett	Hulsey,	Better	Environmental	Solutions
“Ethanol blends reduce cancer-causing benzene, heart attack-causing soot pollution, and deadly carbon
dioxide. Moderate ethanol blends can be delivered to existing vehicles with existing infrastructure, so we can
make immediate reductions in carbon dioxide and other emissions without waiting for next generations.”


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