Planting the seeds: Florida's ethanol industry hopes to be fully grown by 2008

By Susan Salisbury

Palm Beach Post Staff Writer

Sunday, July 09, 2006

There's gasoline, gasoline everywhere, but not a drop of E85 for South Florida cars to drink.

And it will stay that way for some time to come, even though elsewhere in the state, things are getting busier for ethanol and other alternative fuels.

On June 1, a new state law legalizing the sale of E85 — a blend of 85 percent ethanol and 15 percent gasoline — and biodiesel to the general public took effect. And late last month, Gov. Jeb Bush signed a $100 million energy act into law that is expected to increase the development of alternative energy.

Also, a Jacksonville oil company has announced plans to open an ethanol plant — which would be the third such plant in the works for Florida — and supply its gas stations in Jacksonville and Orlando.

For now, nothing but petroleum-based gasoline and diesel fuel is available at retail gas stations, although a handful of government users in Miami-Dade and Broward counties, as well as commercial truck fleets, use biodiesel. That's true even though local television viewers can see advertisements for GM flex-fuel cars that tout the benefits of ethanol.

Even lower blends, such as E10, with 10 percent ethanol and 90 percent gasoline, aren't available at Florida gas stations.

Change, however, is on the way during the next two years. The fact that the state as a whole is the nation's third-largest gas guzzler has not gone unnoticed.

"We have 37 new ethanol plants under construction in the U.S.," said Roger Listenberger, director of E85 fuel networking for the National Ethanol Vehicle Coalition, based in Jefferson City, Mo. "All those ethanol plants are looking at the Southeast. There is not a drop of ethanol down there. Within two years, you will see lots of ethanol."

The state's fuel regulations were updated after officials realized that biodiesel and E85 were not even included, said Matthew Curran, chief of the Bureau of Petroleum Inspection for the state Agriculture Department.

"We have had interest from retailers wanting to sell it," Curran said. "A lot of states have the product there. We don't. We wanted to have quality standards in place for when the product does get here."

A group of pioneers, from individual entrepreneurs to large diversified companies such as Jacksonville's Gate Petroleum Co., are working to make E85, E10 and biodiesel available to consumers.

Gate, which owns or supplies 300 retail gas stations, is waiting for an engineering cost analysis before making the final decision to build its own 30 million-gallon ethanol plant near White Springs west of Jacksonville. If the numbers aren't prohibitive, the company expects to begin construction late this year and start production by early 2008, said R.B. "Buzz" Hoover, president of Gate Ethanol LLC.

"We think it makes economic sense for us," Hoover said. "We can utilize a substantial amount of the ethanol that will be produced in the plant at our own retail operations."

Gate will concentrate sales of its ethanol blends at its stations in the Orlando and Jacksonville areas. It has no stores south of Sebring.

"Right now you can't get ethanol in Florida. The major oil companies have sucked all of it up elsewhere," Hoover said. "That situation will change.... We have had a number of calls from our current customers wanting to know when we would have E85."

Part of the reason for the lack of E85 in Florida is that in a state of 17 million residents, there are only 400,000 to 500,000 vehicles on the road here capable of using the blend, and many of those are in government fleets.

"Once E85 is readily available, people will be more inclined to purchase the vehicles. To a certain extent, it is the chicken and the egg," Hoover said. "But vehicles that can use E85 can also use regular gasoline. The vehicles don't cost any more. There is no downside to buying flex-fuel vehicles."

On the west coast, Tampa-based U.S. EnviroFuels LLC is planning an ethanol plant on 22 acres at Port Sutton, which is part of the Port of Tampa. That plant, and another planned at Port Manatee, will cost $75 million to $80 million apiece. Each will have the capacity to produce close to 50 million gallons a year, said Bradley Krohn, U.S. EnviroFuels' president and chief technical officer.

Krohn expects to have ethanol blends available for retail sale in 2007 in the Tampa area.

John Magwood, president and chief executive officer of 3-year-old First Coast Biofuels, a Jacksonville-based marketer and distributor of biodiesel and ethanol, is working with retailers who want to begin selling the fuels. Most are in the Jacksonville area.

"They want to do the right thing. They are interested in offering a new product," Magwood said.

Jim Robertson, president of Fort Lauderdale-based BioFuels America, which he started two years ago, sells biodiesel, including poultry fat, beef tallow and soy and palm oils, to wholesalers.

"There are no gas stations selling retail biodiesel south of I-10," Robertson said. "The wholesalers and distributors I sell it to deliver it to some of their marine, fleet and municipal customers. It is just not at the retail level yet."

Jim Smith, president and chief executive officer of the Florida Petroleum Marketers and Convenience Store Association in Tallahassee, said that several of his North Florida members sell biodiesel fuel at the retail level, but none sell ethanol blends.

That's because it can cost $60,000 to $70,000, or possibly more, for a gas station to buy the stainless steel storage tank and special dispensing equipment E85 requires.

"You can't just put E85 in a regular storage tank and run it through a regular dispenser. It eats up everything," Smith said.

In addition, it would take 14 to 18 weeks to deliver the tank, and getting the permits for installation could take months, depending on how quickly local governments act, he said.

Smith said the demand for E85 isn't sufficient yet, and most of the flex-fuel vehicles in Florida are government fleet vehicles.

That's the case in Jacksonville, where a city-owned E85 pump serves about 30 government vehicles and a biodiesel pump provides fuel to almost 500 diesel trucks, including trucks at the Jacksonville Electric Authority, said Dave Schmidt, the city's fuel supervisor.

The city and the power company made the move to the alternative fuels two years ago in order to avoid air pollution fines under federal air-quality rules, Schmidt said.

"When the B99, which is liquefied soybeans, comes in, it smells like McDonald's. It is almost the quality of cooking oil," Schmidt said.

So far, only 16,000 gallons of E85 have been used over the two years, while the biodiesel usage is 7,000 gallons a week, Schmidt said.

Most experts believe that as quickly as interest in alternative fuels is growing, it won't be long until the average Floridian can buy E10, E85 or biodiesel at the pump. They point to the Florida Energy Act as a sign that Florida is taking the issue seriously. The act provides a $100 million strategy, including grants, rebates and tax incentives, to diversify the state's energy use, including $7.5 million to stimulate investment in ethanol production.

"Florida is really investing in alternative fuels for the first time. I think we are getting to the point where you will see more demand," said Julia Cope, Miami-based director of the Broward County Community Transportation Initiative.

The combination of environmental and energy security concerns, coupled with the increase in the price of gas, are coming together to make alternative fuels happen here, Cope said.

Biodiesel users include the Fort Lauderdale-Hollywood International Airport, where shuttle buses and trams that service the parking lots run on biodiesel, and Florida Power & Light Co., which also uses some biodiesel, Cope said.

With both ethanol blends and biodiesel, there are supply and demand issues, she said.

"If you get more people using it, including government, there will be more supply," Cope said. "There is a lot of demand around the country. They are having to ramp up production. We are still not there. It will take a while."

Rick Eaton is executive vice president of TransMontaigne, a Denver-based firm that operates fuel terminal and storage facilities at six of Florida's ports. His company has a biodiesel tank at Port Everglades.

"You will see biodiesel at retail truck stop locations first, then service stations," Eaton predicts. "It's difficult. In general, Florida lacks an infrastructure. That's the biggest problem. You lack production in ample quantities."

Companies such as Houston-based food distributor Sysco Corp. are taking the lead. The company, with a fleet of 6,000 trucks nationwide, has 500 trucks using a blend of 5 percent biodiesel and 95 percent diesel fuel. Of the 500 trucks, 300 are based at Sysco's Florida operations in Riviera Beach, Miami and Ocoee.

"We have been using the biodiesel for nine months," said Terry Taylor, Sysco's senior director of national purchasing in Houston. "We think it's the right thing to do — anything we can do to help take the pressure off of some of the imported oils.

"Our plans are to expand the use of biodiesel as it becomes available in the marketplaces," Taylor said. "It's not as available as we would like it to be."


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