State cars use E10 no matter what the price

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By NANCY HICKS / Lincoln Journal Star

Driving has been even more expensive this summer for the fervent  fans of ethanol, the folks who always fill up with an ethanol blend no matter the price. That includes state government. 

For much of the past five years, E10 ethanol blend has sold for less than regular unleaded across the state.

But the two fuels reversed positions in early spring. And at many stations, E10 blend was selling for about a dime a gallon above unleaded regular for much of the spring and summer.

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(LJS File)

(LJS File)

The E85 blend also climbed to above $3 a gallon: It was $3.79 a gallon at one Lincoln station for a while.

And the state paid $3.17 a gallon for E85 several months ago, the last time it bought it in bulk, said Steve Sulek, administrator for transportation services.

That’s expensive for a fuel that generally cuts efficiency by 8 percent to 20 percent.

In fact, Gov. Dave Heineman  put saving money above promoting economic development when E85  hit a summer high last month.

Nebraska corn is used to make ethanol, which is then used to make the blends that state leaders have historically promoted.

Heineman’s administrative services staff sent a memo reminding employees who drive the 690 state-owned flexible fuel cars that they should buy whatever is cheapest between E10 and E85.

Though the memo is not that specific, employees can take into account the lower fuel economy  for E85 blend when buying gas, Sulek said.

However, the governor stuck to the state’s 26-year-old ethanol-only policy.

Governors since Charles Thone in 1980 have required employees who drive cars in the state fleet to always use an ethanol blend, no matter the price.

Only the Nebraska State Patrol is an exception to the ethanol blend-only  rule — an exception carved out in state law. 

So the patrol, which tells troopers to buy the cheapest gas, saved about $22,000 for the four months when E10 pump prices were generally a dime more than regular.

The rest of state government  would have likely saved about $20,000 this summer if employees had switched to regular gasoline.

But this issue goes beyond money, said a governor’s spokesman.

“The governor is committed to ethanol and is committed to the good it does our rural communities,” said spokesman Aaron Sanderford.

“It is impossible to ask folks to use ethanol  unless you lead by example. And state government has been leading by example for more than a quarter of a century,” Sanderford said.

Ethanol production is a growing business in Nebraska. By the end of the year, Nebraska will have 12 plants producing just more than 650 million gallons of ethanol, said Todd Sneller, administrator of the Nebraska Ethanol Board.

Currently, about 250 million bushels of Nebraska corn is used by the ethanol industry, he said.

That pricey ethanol blend trend apparently has changed at pumps in the eastern part of the state.

And by last week, a number of Lincoln stations had switched their pricing, so E10 blend was a dime a gallon less than regular.

On at least one corner, competing stations had opposite pricing schemes: one with E10 a dime higher, the other a dime lower.

“It is crazy,” Sneller said.

There’s no explanation why neighboring stations would have opposite pricing strategies.

In fact, it’s difficult to determine how E10 is priced.

The general surge in E10 pricing above regular unleaded at the pump this spring was tied, at least psychologically, to a high demand for ethanol, he said.

Demand increased when  several northeast states substituted ethanol for  MTBE — a product that caused groundwater pollution — as a “clean air” octane booster.

The spot market, where about 5 percent to 15 percent of ethanol is sold for quick delivery, reflected that demand when it rose to its highest price ever, above $4 a gallon and, in one case, to $5.09, Sneller said.

The highest spot market price in Nebraska was $3.81 a gallon, he said.

However, many oil companies and petroleum product marketers  bought most of the ethanol they used this summer by contract, six months or a year ago, at a fairly low price — often under $2 a gallon.

In general, E10 pricing is based on marketing and pricing and profit strategies, Sneller said.

So E10 pricing doesn’t always correspond to the cost of purchasing the pure ethanol itself plus the federal tax break.

E10 has a 5.1 cent a gallon federal tax break; E85 enjoys a 43 cent break, usually taken at the wholesale level.

In fact, the recent dime spread between  E10 and unleaded — either way —  doesn’t reflect the actual difference in price, Sneller said.

In some states, E10 is marketed and priced as a midlevel blend and always sold at a higher price than regular no matter the cost, said Tim Keigher with the Nebraska Petroleum Marketers.

Iowa marketers have chosen to price the blend at less than unleaded gasoline “to get people to buy it,”  said Dawn Carlson, president of the Petroleum Marketers and Convenience Stores of Iowa.

Reach Nancy Hicks at 473-7250 or nhicks@journalstar.com.

Understanding ethanol

E10 — A blend of 10 percent ethanol and 90 percent gasoline, often marketed as unleaded plus, super unleaded or regular with ethanol. It is the mid-level octane option between unleaded and premium gas. 

E85 — A blend of 85 percent ethanol to 15 percent gasoline  that can be used in some newer vehicles. It generally reduces fuel efficiency by 8 percent to 20 percent, but with some new cars there is no difference.