Drivers in the Twin Cities were the first required to fill up with ethanol in 1991. It was a seasonal requirement to decrease carbon monoxide levels in the winter months and satisfy federal air quality standards. Minnesota lawmakers went a step further in 1997 and required that all pumps sell a 10 percent ethanol blend.
Ralph Groschen with the Minnesota Department of Agriculture remembers lobbying the legislature.
"There were some legislators in this state who really didn't think too much of me as we were working through this because I was at times leading the charge," Groschen says.
Opponents of ethanol argued it wasn't proven technology and would ruin cars. Groschen says those lawmakers just didn't want to hear about how ethanol can be good for the environment. He says lawmakers are saying something different now.
"I've got to grant you one thing, it's been a heck of an economic development program. I guess I feel I don't care why you love us, just so you love us," Groschen says.
He credits Minnesota's ethanol requirement with the boom in the ethanol industry. Dozens of plants have gone up in the Midwest to meet the increased demand. Groschen says now that the growth in demand in Minnesota has flattened, it's time for lawmakers to come up with new policies to help the industry continue to grow.
Minnesota will require a 20 percent blend by the year 2013. That transition will be easier to achieve if more people are using E-85, the gas blend with the most ethanol. But to use it requires an altered vehicle known as a flex vehicle and those cars aren't selling the way ethanol supporters had hoped.
Now ethanol may be sold in a new way. Border States Cooperative has some unique gas pumps at several of its convenience stores in South Dakota and Minnesota.
Mel Domine, general manager of Border States Co-op, describes what's called a blender pump.
"This black hose dispenses E-10," Domine explains. "That's the only thing it dispenses and that's for any vehicle that pulls up to this pump. That has to be separate from the yellow hose that can do all other blends."
The other blends available at this blender pump are E-20, E-30, E-50 and E-85. A computer calculates the different blends by combining E-10 and E-85. If you select one of the higher blends you'll pay less per gallon. On this day E-10 costs $3.09, E-20 is 11 cents less, the 30 percent blend is $2.87 and down the price goes until you pay 60 cents less per gallon for E-85. The pumps have only been operating a few weeks so Domine doesn't have figures on how many people use the blended fuel. Domine chooses E-20 or E-30 for his non-flex vehicle. He says those are the best bargains.
"We have yet to prove out what's going to be the most economic blend, but it looks like it's going to be in that E-20/E-30 range where the advantages of the alcohol in the fuel are an increase to economics of that fuel and it isn't a big drop in mileage," he says. "So you get maybe 15 or 20 cents a gallons off but you don't lose a lot of mileage. Well, that's the best blends to be using."
As oil prices reach a record $100 a barrel, Domine believes more and more people will look at ways to reduce fuel expenses.
There's an effort in Congress to increase the number of gallons required to be blended with ethanol. Ethanol amendments were added to the energy bill and the farm bill but both bills are in political gridlock.
While corn-based ethanol has been the only alternative fuel widely available, Brian Jennings, executive vice president of the American Coalition for Ethanol corn is a commodity competing with oil and gasoline. Jennings supports using other renewable resources like switch grass to make ethanol.
"Today we have ethanol producers experiencing a margin squeeze and that's where the price of corn is on the rise, yet the price of ethanol is on the decline," he says. "This is territory our industry has experienced before. Maybe not at this scale."
Jennings says the ethanol industry is still working through growing pains. To fully develop, suppliers will have to work on the demand side of the equation as hard as the supply side of the equation.