The American Petroleum Industry, a lobbyist for nearly 60 of the largest U.S. oil and gas companies, claims individual filling station owners and auto makers play a greater role in the proliferation of biofuels pumps across the nation than do oil companies.

The API’s remarks come during a conference call with journalists ahead of a hearing today at which executives from the oil and gas industry will stand before a House committee to discuss the current state of oil and gas prices, oil company profits and the need for clean, renewable fuels to ease demand for oil and cut greenhouse gases.

In a recent speech, General Motors Corp. Chairman and CEO Rick Wagoner said just 1% of the nation’s 170,000 filling stations offer a biofuels mixture, such as E85 – a blend of ethanol and gasoline.

“We’re doing a lousy job as a nation in making E85 available to our customers,” he says in a keynote address to the National Automobile Dealers Assn. meeting in San Francisco last month.

The GM chief suggests government regulation as one possibility to grow the number of E85 stations, saying as few as 15,000 would go a long way to slashing emissions.

As many as 9 million E85-compatable vehicles are on U.S. roads, according to industry estimates.

But API President and CEO Red Cavaney says the slow growth in E85 pumps is not the fault of his industry, as oil and gas companies account for just 10% of the nation’s retail filling stations. The remainder is in the hands of small business owners, who face investing $20,000 to $200,000 to accommodate biofuels.

“They are the ones making the day-to-day determination as to whether demand for E85 is sufficient (to) make whatever investment they might need,” Cavaney tells Ward’s, noting it’s a significant commitment. The demand for biofuels nationwide just isn’t there, he insists.

Ward’s data shows 604,149 flex-fuel engines were installed last year. accounting for just 4.0% of the 16.4 million vehicles sold.

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GM says it presently offers 11 FFVs in the U.S. and 20 globally and expects to see an industry total of 2 billion FFVs on the road by 2012.

Taken together, the introduction of GM, Ford Motor Co. and Chrysler LLC vehicles capable of running on biofuels over the next 10 years could displace 22 billion gallons (83 billion L) of gasoline.

If all U.S. vehicle makers made that commitment, 37 billion gallons (140 billion L) of gasoline could be saved, GM says. That’s four times the amount of oil the new federal fuel-economy standards could achieve, and the estimate doesn’t consider carbon-dioxide emissions that would be slashed, GM claims.

“Detroit has talked about increasing significantly their production of E85 (vehicles) going forward, but right now you’re talking about a very, very small amount of the national fleet of vehicles that can actually (use) E85, so (the investment) would make no sense for a small businessman,” Cavaney says.

However, federal and state grant money is available that significantly can defray those costs, says Karl Doenges, president of Clean Fuels Distribution, a supplier of alternative-fuels distribution equipment.

API’s Cavaney suggests auto makers also look to their dealer network for help in growing biofuels availability, noting dealers should make use of gasoline pumps at their facilities to start filling new cars with E85.

GM already is headed in that direction. Last week, Classic Chevrolet/Hummer in Grapevine, TX, opened Classic Clean Fuels, an E85, E10 and biodiesel filling station. The nine pumps cost the nation’s No.1 Chevy dealer roughly $500,000.

“We sell a lot of trucks capable of running on alternative fuels like E85, and even though there has been some increased availability, we saw a need for more E85 pumps,” says Charles Martin, general manager-Classic Chevrolet/Hummer. “This was the right thing for us to do for our customers.”

The dealership also is converting its own pumps to accommodate biofuels, which means all vehicles sold will start with a tank of E85.

GM helped promote the local event by sponsoring E85 for $0.85 a gallon, or roughly $1.88 below the local average of $2.74 a gallon. The auto maker has sponsored similar price cuts at a number of E85 stations across the U.S. in recent months. The promotion at Classic Chevrolet sold 3,200 gallons (12,113 L) in two hours.

Larry Burns, GM vice president of research and development and strategic planning, says there’s no telling where the dealer initiative might lead.

“This signals that GM and our dealers are trying hard to give our customers choices.”

The auto maker also has taken an expanded role in the production of E85 by recently purchasing an undisclosed equity stake in Chicago-based Coskata Inc., a biology-based, renewable-energy company.

GM says the goal is rapid commercialization of a unique technology that affordably and efficiently produces second-generation, cellulosic ethanol from almost any renewable source, including wood, garbage, manure, old tires and factory waste, rather than food-based crops such as corn and sugarcane.

Additionally, the partnership includes joint research and development into emissions technology and investigation into making ethanol from GM’s factory waste and non-recyclable vehicle parts.

Cavaney says the oil and gas industry has done its part, as well. He points to the amount of ethanol the industry has added to its gasoline over the last two years of the renewable-fuel standards.

“(The amount added) is just off the charts,” he says, adding that a concentration of E85 filling stations and refineries in the Midwest reflects where most FFVs are built and, therefore, where biofuels’ demand is the greatest.

Citing a recent study form the American Automobile Assn., API Chief Economist John Felmy says biofuels, such as E85, cost more than gasoline.

The national average for a gallon of gasoline on March 30 stood at $3.28, he says, and adjusted for its lower energy content, a gallon of E85 costs $3.58. “That’s another issue that has to be factored into the discussion,” he tells Ward’s.

However, GM’s partner, Chicago-based Coskata Inc., says its “breakthrough” next-generation ethanol will cost $0.50 to $1.50 less a gallon at the pump than gasoline, and that will drive consumer demand.

“It costs $1.90 to $2.00 to produce a gallon of gasoline, compared with under a $1.00 per gallon to make Coskata’s cellulosic ethanol,” Coskata President and CEO William Roe said in January.

At the hearing in Washington today, executives also are expected to defend record profits of oil and gas companies amid soaring gasoline prices. API contends oil and gas companies’ earnings rank alongside others in the Dow Jones Industrial Average index.

In his conference call, Cavaney addresses a recent claim from the Consumer Federation of America that the oil and gas industry has sought consolidation, such as the creation of ExxonMobile and Chevron/Texaco, to cut excess capacity and keep supplies tight and gas prices high.

Cavaney describes the oil and gas industry as a global market that requires big companies. “If these companies were not large, did not have scale, the U.S. consumer could be worse off than they are today.”

In response to high gasoline prices, the API points to the price of crude oil, which on March 28 stood at about $2.51 a gallon. Add in a $0.47 federal tax with refining and transportation costs, and the price per gallon of gasoline quickly reaches its current level, the lobby group says.

jamend@wardsauto.com