Zarco 66

Zarco 66

Insight: Ethanol lobby sees red over a yellow gas hose in Kansas

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By Cezary Podkul

NEW YORK (Reuters) – At a handful of gas stations in eastern Kansas, the intensifying fight between major oil refiners and the ethanol industry over the future of America’s fuel supply has found a new focus: the color of the gas hose.

Scott Zaremba, owner of Lawrence, Kansas-based Zarco USA, says he is being forced by his main fuel supplier, Phillips 66, to stop sellinggasoline blended with 15 percent ethanol, the maximum level currently allowed for use in normal car engines but higher than the 10 percent norm.

Zaremba, the first retailer in the country to sell the so-called E15 fuel, has found himself caught in a fierce market-share battle between ethanol makers and oil companies that is also being fought in the courts and in the U.S. Congress.

On April 1, Zaremba received a notice from Phillips 66, the nation’s third-largest refiner, that he could no longer sell the E15 fuel from his regular black fuel hoses, as he had been selling it since last July.

Instead, any gasoline with more than 10 percent ethanol has to be served from a separate, yellow hose, according to a copy of the Phillips 66 guidelines seen by Reuters. The aim is to distinguish E15 from other Phillips 66-branded gasolines with 10 percent or less ethanol.

He has other options, but they aren’t cheap – or very feasible. For example, it would cost $100,000 to $250,000 to install new stand-alone gas pumps for E15, Zaremba said. Or he can always pay a $412,000 fee to Phillips 66 to break his marketing contract – expensive options that have so far kept him in compliance with the Phillips 66 guidelines, the only way he said he could.

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