Alternative Fuels Gain Support

August 26, 2005
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GRAND RAPIDS — Spurred by gas prices that have risen nearly $1 since the beginning of the year, members of the Michigan House Tuesday took steps to relieve the pain at the pump.

Both House Republicans and Democrats voiced support for proposed legislation that would encourage greater production and use of biodiesel and ethanol-blended fuels and pointed to alternative fuels as a way to decrease dependence on foreign oil.

“We’re in the middle of the biggest run in oil and gasoline prices we’ve ever seen,” stated Rep John Espinoza, D-Crosswell, one of the lead sponsors of a six-bill package that calls for tax credits for alternative fuels and other incentives to encourage the use of biodiesel as well as ethanol-blended gas. “It’s time to take action to address the problem and ensure our long-term energy needs are met.”

The Democratic package of bills proposes legislation that would give tax credits to gas retailers and fuel blenders that invest in the production of alternative fuels, would require that all gasoline sold in Michigan consist of at least 10 percent ethanol, and would establish a 5 percent biodiesel blend requirement for diesel fuel. 

Members of the house also noted that the promotion and production of alternative fuels could give Michigan farmers an economic boost since biodiesel can be made from soybeans, as well as other vegetable oils, and ethanol is made from corn.

Rep. Neal Nitz, R-Baroda, chair of the House Agriculture Committee, vowed last week to introduce a bill that would establish tax exemptions on biodiesel and ethanol-blended fuels.

Tom Fehsenfeld, president of Crystal Flash Energy, thinks those kinds of incentives are useful, particularly with a fledgling new industry.

“Fuels that come from agricultural products is really a new industry for our country and it probably needs a helping hand to bring it along because it’s competing with a really well-entrenched petroleum industry that’s operating with a lot of assets,” he said.

“The petroleum industry’s cost of operations is low because it’s been around for over 100 years. So with a new industry, it really does help to have encouragement from government programs.”

Crystal Flash Energy (CFE), one of the state’s largest suppliers of energy-related products and services, became the first West Michigan supplier to offer a biodiesel blend at its station at 1754 Alpine Ave. NW in August 2003. The company’s SoyDiesel XS is a blend of 20 percent soy and 80 percent premium diesel.

Within eight months of introducing SoyDiesel XS, CFE had sold nearly 1.5 million gallons through pump and wholesale delivery, which was about double what Fehsenfeld had anticipated. And CFE has expanded its customer base considerably since last year, he said.

At the time CFE introduced SoyDiesel XS, a 20 percent biodiesel blend was running about 12 to 15 cents more per gallon than conventional diesel fuel. But a federal tax subsidy initiated Jan. 1 helped bring the price of biodiesel in line with that of conventional diesel fuel. The tax subsidy is $1 per gallon for blended soy products, based on the soy portion of the blended gallon. A 20 percent blend, for example, gets a 20-cent subsidy on the entire gallon, a 40 percent blend gets a 40-cent subsidy on the gallon, and so forth.

“Basically the producers of soy diesel have adjusted their prices so when we take that 20 cents a gallon off, it just brings it down to the price of regular diesel,” Fehsenfeld explained.

The federal incentive was set to expire in 2006, but Congress just extended it through 2008.

Fehsenfeld said CFE continues to have good luck with SoyDiesel XS and responses from customers have all been positive. The West Michigan farming community has been particularly receptive to the product, he said. Even in an environment of unprecedented fuel prices, the soy diesel portion of CFE’s business is growing in comparison with conventional diesel fuel sales. The great majority of SoyDiesel sales are to farms, municipalities and universities, he said.

Meijer Inc. began offering a B-20 biodiesel fuel at its gas station on

Carpenter Road
in Ypsilanti and its station on
Saline Road
in Ann Arbor six months ago. Gerry Graham, Meijer’s fuel buyer, said the Meijer biodiesel is priced the same as regular diesel even though biodiesel costs the company more.

He said Meijer has had numerous inquiries about the product and a lot of people have asked whether it’s going to be offered at other Meijer stations. Meijer is going to offer the product for one year and see how it goes, he said.

“There’s been so little experience with biodiesel around here that we didn’t know what to expect of sales. That’s why we’re doing the test,” Graham said. “I thought it would really take off because of the fact that it’s substituting for imported oil. The volume of biodiesel sales and regular diesel sales are about the same right now.”

CFE’s vision is to generate 30 percent of its profits from alternative energy sources, said Jeremy Whiddon, the firm’s new product developer.

A couple months ago CFE began offering a gasoline with a soybean oil-based additive called SoyUltra that’s said to improve fuel economy in any gasoline engine.

“We thought it was a natural fit and an extension of what we’re doing with soy biodiesel,” Whiddon said. He’s seeing consumers use the product in all types of vehicles, from lawnmowers to Mini Coopers to trucks.

According to Fehsenfeld, there’s a documented savings of 3 percent to 5 percent in terms of miles per gallon for the product, so that somewhat balances out the higher cost.

“One of the things that’s unfortunate with the crazy pricing on gasoline is that SoyUltra really works best in a mid-grade or premium fuel, and that’s where we have put it,” Whiddon added. “But because of the high prices of fuel, my suspicion is that a lot of people have probably cut back from using mid-grade and premium fuels and have gone to using only the regular 87 octane fuel.”

Regardless, SoyUltra seems to have created a bit of a buzz and Crystal Flash is getting a lot of inquiries about it, Whiddon said. He said extensive testing by an independent testing laboratory found that the friction modifiers inside the soy oil-based additive coat the engine walls and valves and provide 40 percent more lubricity than ordinary gasoline. That makes the engine run more efficiently, improves fuel economy and reduces maintenance problems, he explained.

Most gasoline additives are chock full of detergents; the additive cleans out the engine over a course of time, which, in turn, improves engine performance, he said.

“But with the friction modifier that’s in an additive like SoyUltra, you can actually get fuel economy improvement the first time you fill up your tank. That’s one of the most appealing things about it to us. The other thing is that it has a little bit of soy diesel mixed in it that adds extra lubricity, which is a boon to the engine, fuel lines and so forth.”    

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