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Lawrence gas station owner gets caught up in national battle with Big Oil over future of ethanol

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Being a pioneer in a new industry can be a bit like taking a ride in my old F150: It can get mighty bumpy, and you’re wishing you would have known beforehand that the brakes sometimes don’t work.

Scott Zaremba, owner of the Lawrence-based Zarco 66 gasoline and convenience store chain, has been a pioneer in the industry of E15 ethanol. As we’ve previously reported, Zaremba’s Zarco chain became the first in the country to sell the E15 product, which is gasoline that contains 15 percent ethanol rather than the more standard blend of 10 percent ethanol.

According to an article this week from the news organization Reuters, Zaremba is finding out how rough the ride can be in the E15 industry. The article paints a picture of some of the largest companies on the planet — oil companies like Exxon, Chevron, BP, and Phillips 66 — taking aim at the E15 industry. Zaremba and his Zarco stations, apparently, have become one of the first targets.

Phillips 66 has sent Zaremba a new set of regulations on how he must sell the E15 product in order to stay in compliance with his marketing contract with Phillips 66. The end result has been Zaremba stopped selling the E15 product at his stations last month. It is estimated there are now fewer than 30 stations nationwide that sell the product.

The new protocols would require Zaremba to add special yellow hoses to all his pumps to dispense the E15 product. Previously, Zarco dispensed the product through the same hose that carried traditional unleaded gasoline, which has up to 10 percent ethanol in it.

Zaremba said adding the hoses would cost several hundred thousand dollars. In the Reuters article, Phillips 66 officials said the change is about ensuring motorists know that they are buying a different product than traditional gasoline. The article notes that use of E15 can void the warranty of many vehicles that are older than 2013 models.

But Zaremba told me he’s convinced the new regulations are part of an effort by Big Oil to nip the E15 trend in the bud. Zaremba said the stakes are significant for Big Oil because E15, if widely adopted, could reduce the oil company’s market share in the gasoline industry by 5 percent. In addition, it would create new competitive pressures that, in theory, would help control the upward price pressures in gasoline.

“I’ve had people complain to me for 40 years about the price of fuel,” Zaremba said. “I tell them we need to find something different. That is what we’re trying to do.”

Zaremba, who also is an advocate for biodiesel, compressed natural gas and other fuel alternatives, said he knows ethanol has received some negative publicity because of the impact it may have on the country’s food supply and the amount of water it takes to produce.

But he said the potential is strong for ethanol to be produced from other nonfood-producing crops, if the ethanol market can withstand the negative publicity that he believes is being generated by the Big Oil companies.

Zaremba, who is the president of the state’s petroleum marketers association and also an officer with the national trade group, said the figures he’s seen indicate the big oil companies will spend tens of millions of dollars this year lobbying against the E15 product.

“I understand what is going on,” Zaremba said. “If you were making a billion dollars a quarter, would you want some little guy from Kansas trying to change your dynamic? Of course you wouldn’t. Would you try to create every negative article you could to protect your product? I bet you would.”

As for the future of E15 in Lawrence, Zaremba said he’s not sure at the moment. He said he hasn’t yet filed any legal action against Phillips 66, but said he’s still crafting a strategy that would allow him to resume selling the product at some point.

“When you are the first, it is never easy,” Zaremba said. “That’s where we are right now. But I chose this path because I believe we have to do something different.”

Comments

flloyd 2 years, 2 months ago

I ran a tank of E15 in my Flex Fuel Chevy truck and it ran like crap. I went from 16 mpg to 10 mpg with that tank. Honestly, my truck did not run the "right" for the next 40,000 miles after running one tank of the E15 through it.

gccs14r 2 years, 2 months ago

Should have changed the fuel filter.

somebodynew 2 years, 2 months ago

E-15 may not be the answer, but this highlights one of the main problems with why we are still so dependent on Big Oil. If there are alternatives out there, Big Oil tries (and has the $$$$$) to make it difficult or impossible to succeed.

boltzmann 2 years, 2 months ago

anyone know why changing out a few hoses at a few gas stations would cost "several hundred thousand dollars"?

Dan Klamet 2 years, 2 months ago

Do remember this is the oil industry we're talking about. These "hoses" also include all the underground pipework and storage tanks.

Chad Lawhorn 2 years, 2 months ago

My understanding is it is not so much changing out a hose. It is figuring out how to add a hose to a pump system. That may require new pumps, or certainly some significant modifications. Thanks, Chad

Pr0digy 2 years, 2 months ago

Chad from the sounds of it it isn't just changing a hose but that the E15 has to be on a separate pump system http://my.chicagotribune.com/#section/-1/article/p2p-76240484/

Dale Stringer 2 years, 2 months ago

From what I've seen, most stations are using pumps with a single hose to dispence the different octanes and don't have the capability to add a second hose. Therefore new pumps most also be purchased.

blindrabbit 2 years, 2 months ago

Gasoline containing ethanol took a big hit because of it's reliance on corn as it's feedstock. Corn production for ethanol is not cost effective, many other crops have much more cost effectiveness including sugar cane waste (bagasse), sugar beets as well as others such as switchgrass.

Clickker 2 years, 2 months ago

First of all, it doesnt cost near as much to change out hoses as Mr. Zaremba states. Second, without subsidization ethanol wouldnt even be on the radar screen...who wants to pay more for worse gas mileage? Oh, the good news is that our food costs have risen to help this situation out.

Chad Lawhorn 2 years, 2 months ago

I guess I didn't write this very clearly. It is not about changing from a black hose to a yellow hose. It is about having a separate hose for the E15 product to ensure that the E15 produt is not dispensed out of the same hose as the E10 or traditional gasoline products are. His stations sell both traditional unleaded and E15. Thus, the issue isn't changing the color of a hose. It is modifying pumps to accommodate another hose. Hope that helps explain it better. Thanks, Chad.

jackpot 2 years, 2 months ago

Some of the pumps need to have three hoses. 1 for gas, 1 for diesel and 1 for E-85. So a lot of cost to add a new tank pipes and pumps.

Pr0digy 2 years, 2 months ago

Chad this is why I really respect and take the time to read your articles. You take the time to clarify your stories and do so in a respective matter.

otto 2 years, 2 months ago

anyone know why changing out a few hoses at a few gas stations would cost "several hundred thousand dollars"?

When your pumps mix the % of ethanol and gasoline and then dispense it.

gccs14r 2 years, 2 months ago

They don't blend at the dispenser. Now that there are multiple ethanol blends, that would be the sensible thing to do. Instead, it is blended at the refinery (you hope) or blended as it is dumped into the storage tank (so-called splash blending), the latter of which can lead to an inconsistent mix.

Dispenser blending would require a separate ethanol tank and pump, and plumbing to each dispenser, then a certified blending valve in each dispenser to add the amount of ethanol specified to the gasoline stream. That could let a customer dispense E100, though, which could be useful for folks willing to make serious performance mods to take advantage of it.

otto 2 years, 2 months ago

http://www.ethanol.org/index.php?id=91

Ethanol blender pumps are key to the retailing of these fuels of the future. Used for years to blend and dispense types of diesel fuel or grades of gasoline, blender pumps are now being used to blend gasoline and E85 to make a variety of mid-range blends such as 20%, 30%, or 40% ethanol.

Randall Uhrich 2 years, 2 months ago

Flex-Fuel and E-15 have been nothing but false promises from the start. Ethanol is not as efficient as producing power as gasoline, so vehicles get lower mileage. This makes the cost to the motorist is actually higher. The price of E-15 could never be lower without ethanol subsidies paid by taxpayers. The yellow hoses are only part if the cost for a whole separate delivery system at the pump. Otherwise, you could just paint the hoses yellow.

Joe Berns 2 years, 2 months ago

True, while having a higher octane than regular gas, you don't get as much bang for your buck as you do with straight gasoline, however, the price is also cheaper. For me to make it worthwhile to run E85 in my truck that is equipped to do so (a 2005 model vehicle), the price difference has to be greater than 26% since that is the mpg difference I see using gasoline over E85.

melott 2 years, 2 months ago

I tried E15 once. Terrible gas mileage. Never again.

Scott Morgan 2 years, 2 months ago

After working in the industry for a couple decades, I have no doubt Mr. Zaremba is correct regarding the costs to fulfill yet another stupid D.C. regulation. Over regulations are not only adding to the cost of fuel, but running the small taters out of the field.

For those over 50, ask yourself this question. Was it better when a mom and pop gas station was available?

The goofy idea storage tanks had to be buried (no storage above ground) ran a majority of owners out of business.

Happens all the time, an owner receives a pc. of mail telling him or her they are going to shell out more money to meet the latest standards.

deec 2 years, 2 months ago

The D.C. has nothing to do with it. Big oil is the one forcing the changes.

"Phillips 66 has sent Zaremba a new set of regulations..."

GUMnNUTS 2 years, 2 months ago

You can go to Westside 66 on sixth street for FREE full service and 100% ethanol free gas.

bad_dog 2 years, 2 months ago

Look at their price per gallon and tell me how you figure that is free full service.

Armstrong 2 years, 2 months ago

Here's what most people don't know about ethanol. Not all but many major chains who sell E15 ( won't mention the name but one would be kwik to recognize them) buy from a ethanol manufacturer the mixes ethanol with "bad gas" meaning you couldn't even run a lawn mower with that gas. The mixture is rich enough that is makes your engine combust. One more fact about ethanol, you get less mileage out of a tank as well therefore what you saved at the pump will only need to be replaced sooner. A side effect from ethanol production, the groceries you buy are going up in cost as ethanol manufacturers are buying the same product to make their fuel.

Liberty275 2 years, 2 months ago

"The mixture is rich enough that is makes your engine combust."

Iron won't burn.

Ricky_Vaughn 2 years, 2 months ago

Not that I'm on Big Oil's side, but using food (corn) for gas is a bad idea.

Currahee 2 years, 2 months ago

Ethanol is not the way. In my ford focus during the winter I got 13mpg. Besides, what's needed to grow corn? That's right.... water! EVs are going to be the future once people find out how to make fusion plants that create net energy.

parrothead8 2 years, 2 months ago

If you're getting 13 mpg in a Focus, you have other issues than the fuel you're using.

I have a Focus that's almost 10 years old and I get 25+ mpg year-round using the ethanol fuel. That's with almost no highway driving...all city miles.

oldvet 2 years, 2 months ago

He has a contract but he is not in compliance with the contract. The other company informs him of this and states what he must do to be in compliance of the contract he signed. That's the way business runs when you enter into contracts with another party - you have to abide by that contract until it expires or you end the contract. He exercised one of his options (quit selling E15) to remain in compliance.

parrothead8 2 years, 2 months ago

Of course, they changed some of the rules of the contract after he signed it, but that doesn't matter, right?

jafs 2 years, 2 months ago

If true, then they breached the contract if he didn't agree to the changes in writing.

Liberty275 2 years, 2 months ago

Gasoline is not corrosive, in fact it makes a suitable lubricant for some applications. Alcohol is corrosive, hygroscopic, has no lubrication ability and has fewer BTUs/gal. When the fuel pump on you car needs to be replaced because it was not designed to handle ethanol, keep that in mind while your mechanic hits your credit card for the $800.

Ethanol does make a great fuel if the parts are designed to use it correctly. It raises the octane to the point you can run 14+ to 1 compression which in turn creates more power per CID. Of course, since ethanol has fewer BTUs, it takes larger injectors to get enough fuel so you don't go lean, detonate and burn pistons.

Ethanol is a good example of taking a great technology and misusing it for silly ideology. Also, burning your food is dumb.

Joe Berns 2 years, 2 months ago

The fuel pump in my vehicle is designed to handle both gasoline and ethanol. Some might say burning a non renewable resource, i.e, oil, is dumb, while it is super easy to plant a new crop of corn.

Liberty275 2 years, 2 months ago

It's nice that you can afford a late model car designed to handle ethanol. The guy driving the 92 Subaru isn't so lucky. That's his problem, so you don't worry about it.

As for planting corn, it is easy. It's when you start watering the crop that it isn't so easy. It's not your water, right?

You are all set. Your car is unaffected by ethanol (outside of the hygroscopic aspect) and you don't have to help drain the aquifer for fuel. Somebody else will handle that for you. Your a lucky person.

gccs14r 2 years, 2 months ago

The same thing happened when lead was phased out in 1995. Folks with 60s-era cars (and earlier) had to run an additive or have their heads redone.

The automakers have known this day was coming for a long time and should have already had compatible components in place. I'm annoyed that my '04 Camry is not E-85 compatible when my '01 S-10 was.

Liberty275 2 years, 2 months ago

The easiest way of replacing the fuel pump on your S10 is by pulling the bed.

Unleaded fuel is different than ethanol. Burning ethanol has no upside, but burning leaded fuel will foul your catalytic converter. Catalytic converters do a nice job of cleaning the CO (unlike CO2, CO will kill you, dead) , unburned hydrocarbons and oxides of nitrogen which are mostly responsible for smog.

Also, I don't think there is any additive to remove ethanol from gasoline or reduce the negative effects of it's use. People had the chouce of using an additive during the unleaded switchover. If I have the choice to buy gas with minimal ethanol, I won't care how much E85 you buy.

An interesting sidenote, back in the 80s I made really good money getting people's cars through Florida's emission testing. I've probably done more to clean up the environment than all of you combined. I find that amusing.

gccs14r 2 years, 2 months ago

Why would I have needed to remove the fuel pump?

Ethanol has a higher antiknock rating than gasoline has. If you can raise your effective compression ratio, you can make up some of the BTU losses.

Ethanol can be removed by adding water (settles to the bottom) but the quality of the remaining fuel is suspect.

Yes, because points, plugs, condenser, cap, rotor, wires, and a new air filter are so difficult to install.

Liberty275 2 years, 2 months ago

"Why would I have needed to remove the fuel pump?"

GM cars have weak fuel pumps, at some point you will need to change it. I was just offering some advice on the easiest way of doing it.

So with the water removing the ethanol, how much water do I need to add to the fuel tank?

"Yes, because points, plugs, condenser, cap, rotor, wires, and a new air filter are so difficult to install."

That's funny. All these years later and I still have a dwell meter. Emissions were a lot harder back in the 80s. A well-trained monkey could tune up a car, but those electronically controlled carburetors were a little more complex. That's why I made good money finishing the job shadetree amateurs started but couldn't finish. With no gas analyzer, they were shooting in the dark.

Nowadays you just go to Autozone, they read the code with their gizmo and sell you the new part on the spot.

thinkagain 2 years, 2 months ago

The modified corn grown today shouldn't even be considered food for consumption. It is better used as fuel. Those of you who feel like fossil fuels are a never ending commodity should look for stories of what happened when water wells went dry in the past.

Liberty275 2 years, 2 months ago

The problem isn't that we think or feel fossil fuels are a neverending commodity. The problem is there is enough left to use until people that drive something other than a god-awful econobox, and that don't want to give up that car they wanted as a kid and finally were able to buy. The left is callously trying to walk over that dream-come-true by doing everything it can to dry up the supply of fuel these cars require.

Seriously, you can't wait 20 years until I die before taking away one of the few things I actually like?

gccs14r 2 years, 2 months ago

Seriously, you're going to be around for another 20 years and don't want there to be a sustainable economy and ecosystem for the duration? Besides, if you're young enough to think you have 20 years left, you probably actually have 40 years left.

You're not so special. Think about the guys who had L-88 Corvettes, ZL-1 Camaros, or LS-6 Chevelles. No one carries 105-Octane fuel any more.

Liberty275 2 years, 2 months ago

You can buy 105 from the machine shop, but it's more economical to retard the timing than pay $10/gallon unless it's track day.

I already do a lot to stop pollution and I'll continue for the next 20 years. I'll keep my car though. 8-10 MPG gets pricey, but I drive it instead of the Subaru any time I can. And I love my Subaru, just like the ads say.

Liberty275 2 years, 2 months ago

We work close to home, go on vacation less, keep the check engine light in our cars off, don't litter or dump toxic fluids, switched all non-dimming lights to CFL. We mostly reduce our own pollution now. Back in the 80s I did it for thousands of people in a state that would not let you drive your car if the emissions were too high.

How about you?

patkindle 2 years, 2 months ago

whether you like E 85 or not hardly anyone but fools buy gas because it is Phillips bp or whatever very few use the oil credit car, so that isn't a seller scott knows he doesn't have to brand with 66 and they may not want him anyway he can rebrand, or private brand if he wants, he just doesn't get the funny money they offer put up or shut up,

CountyResident 2 years, 2 months ago

I have owned a flex-fuel vehicle for over 5 years. I have never had any problems with peformance. I use E-85 when it cost me less per mile to operate my vehicle. I use gasoline when it is lower per mile than E-85. Yes, I do get less miles per gallon with E-85 than gasoline. But, depending on the cost of corn, I have paid about .60 cents per gallon less than the price of unleaded gasoline. With that much of a spread, it is cost effective to use E-85. Lately, E-85 has been only about .20 cents per gallon less than gasoline. Becasue of this narrower spread, I am now using gasoline.

Matthew Herbert 2 years, 2 months ago

25% reduction in mileage = not worth it in my 2012 Ram truck

Marty_McFly 2 years, 2 months ago

Gas will be a thing of the past sooner than you know it.

Ockhams_Razor 2 years, 2 months ago

Until and when the US government starts converting a "deaths into gallons" equivalent death tax, all this other discussion is kind of extraneous.

And when I see all these Democrat "true blue" women from Johnson County driving to Topeka to protest the Holcomb power plant (or other such topics) in their 8 mpg super-SUVs, with yellow magnetic signs of "support for the troops, when their children will never be subject to the draft, I just want to vomit all over I-70.

They have not connected the dots on fuel consumption/CO2 , fuel consumption/war.

ifxstuf 2 years, 2 months ago

What I don't understand is why so many people think that using corn for ethanol raises the price of food. The corn mash that has had the alcohol removed from it is turned into cattle feed. They feed it to feedlot cattle and to dairy cows. Also, the ethanol plant I worked at a few years ago used sorghum most of the time. So, maybe the "higher food prices" things is one of the big oil BS stories. Chances are the high price of fossil fuels is why grocery prices are higher. They have to burn the fuel to produce food and burn the fuel to ship it to the stores.

dirt 2 years, 2 months ago

Biodiesel voids your warranty on your vehicle's motor costing thousands in repairs! Steer clear!

kansanbygrace 2 years, 2 months ago

I use the NO Ethanol gas from our local station as often as possible. My mileage when I use it is several miles per gallon better, making the extra 4 or 5 cents a gallon a net savings of about 30. cents per gallon used.

The corn or milo mash has very little good nutrient left, though yes, it is fed to CAFO beef and pork. The commodity price responds to the demand for more corn, sorghum, etc. which explains the tie between more ethanol/ less food/more expensive food.

I haven't seen any analysis that actually demonstrates that ethanol mix yields cleaner exhaust. I'd be interested to read the studies.

ifxstuf 2 years, 2 months ago

The only "nutrient" that is gone is the starch. All the protein, fiber and fat is returned to the distilled mash before it is dried as DDG or sold as DDGS. The nutrients are actually condensed making the DDG or DDGS a good addition to any feed mixture.

blindrabbit 2 years, 2 months ago

oletimer: Miss full service stations, try New Jersey and/or Oregon. Both states require that attendants pump fuel but for different reasons. New Jersey law was enacted because of liability insurance issues after a couple of customer caused pumping accidents; Oregon requires as an attempt to preserve jobs.

Charlie Bannister 2 years, 2 months ago

I have worked in the oil industry for many years. I read all the comments on here and some were quite accurate, some not so much. When ethanol first started being used a little back in the 70's I thought it was a good thing. Especially for farmers and this state in particular. As time has gone on and mandates have been put into place in some states for ethanol usage, there has definitely been a correlation between the mandates and the rapid rise in food prices. When roughly 40% of the corn crop goes into ethanol this is not surprising. As one person has already stated, ethanol is very corrosive. If your vehicle is designed for it (flex fuel), then no problem. However to go to E15 right now would be a mistake. Unless you have a flex fuel vehicle the cars are for the most part just not designed for it. Not to mention that small engines (mowers, weed trimmers, etc) should not have ANY alcohol in them at all. Now get ready. Starting probably late summer or early fall you will be hard pressed to find a non blended (straight gasoline) product. Unless you want to use premium, which is really better in small engines (mowers, etc) anyway. But make sure it is not an ethanol blend. Some stations sell straight premium and some have it with 10% ethanol. The problem in Kansas is the stations don't have to tell you if it has ethanol or not. Overall I think ethanol is not a good idea, but I am not saying that because of my job. Oil is going to be with us for a long time. I could tell you a lot more but this is getting long. Hope it helps some of you folks.

Larry Sturm 2 years, 2 months ago

while we are at it B P needs to change their diesel dispenser to green like all the rest of the oil companys. I got caught i put 10 gal of gas in my F350 before I realized I had the wrong dispenser.

Bike 2 years, 2 months ago

Does anyone know how well Zarco's wind turbine works? Spins fast! Is it hooked up to produce electricity or just there for looks?

Liberty275 2 years, 2 months ago

I looked last time we were getting BBQ and I didn't see any wiring. I think it's for looks. It lends just a little Googie to the architecture.

jafs 2 years, 2 months ago

As far as I know, it produces electricity.

Why don't you call Zarco and ask the owner?

Charlie Bannister 2 years, 2 months ago

Laredo the same thing happened to a friend of mine. Filled his Duramax pickup clear full with gasoline before he realized what he had done. It was at a BP station in Ottawa. Had to have truck towed and fuel tank drained. Expensive mistake. Would have even been more expensive if he had tried to start it. If a diesel engine starts with gasoline in it you most likely will not be able to shut it off, as it will begin a very destructive internal detonation process that will literally melt your engine.

ICUNVME 2 years, 2 months ago

I'm expecting a request being made of the city to pay for all of it with the city pulling out it checkbook no questions asked. Then of course paying for the "unexpected" costs a few months later.

purplesage 2 years, 2 months ago

Alcohol is a corrosive fuel. I was surprised to learn that it is blended into the fuel at most gasoline stations WITHOUT telling the consumer. know there are a few stations around that advertise something to the effect of "pure gasoline." That's what I always thought I was buying unless I bought the mid-grade stuff that jacks up the octane, but drops the mileage, witht he addition of ethanol. Yes, it does increase food costs - a greater problem globally where starvation is a daily reality. And, it also takes traditional fossil fuel to produce. If my memory is correct, it takes more than a gallon of fossil fuel to produce a gallon of the ethanol. The government subsidizes it, so when it gets sneaklly included in your regular unleaded fuel, there's a kickback to station owners. KS law allows up to 10% without labeling. How about truth in advertising?

If you have had trouble with your small engines - like the primer bulb rotting out and leaking - the ethanol is the culprit. It seems like such a good idea until all the evidence is on the table.

ifxstuf 2 years, 2 months ago

I keep reading comments on how ethanol raises food prices. Please read the abstract page of this report, it sums things up very quickly.

http://www-wds.worldbank.org/external/default/ WDSContentServer/IW3P/IB/2013/05/21/ 000158349_20130521131725/Rendered/PDF/WPS6455.pdf

melott 2 years, 2 months ago

Which stations in Lawrence, if any, sell pure gasoline (no ethanol)?

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