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Tuesday, Feb 27, 2024

Following Plan, Entrepreneur Selling Alternative Fuels

A banner above the Pearson Regional Transportation Center showroom on El Cajon Boulevard advertises space for lease and a phone number that rings to General Manager Mike Lewis’ cell phone.

Five years ago, Lewis expected to be selling alternative fuel Ford automobiles out of the dealership, which is also an alternative fuels station.

However, the California Air Resources Board’s 2003 decision to relax its zero-emission mandate taught Lewis a valuable lesson. “Be careful about investing money in a government induced market,” he said at a recent presentation.

“Ford lost hundreds of millions of dollars. As soon as the guidelines were changed, the market was gone,” he said.

Today, Lewis doesn’t sell any cars. Government grants subsidize rent on the empty showroom and help keep the doors open.

Lewis is manager and part owner of San Diego-based Pearson Fuels, which is a partnership with Pearson Ford. He has seven employees: six who run the gas station that sells 10 different alternative fuels, including biodiesel, propane and ethanol, and one who runs the education center for the bus loads of students who come every afternoon.

“This is not a viable business model by itself,” said Lewis, 42. “I’m not a big fan of demonstration projects.”

A Business Is Born

Yet from the rubble of best laid plans, Lewis has found a business model: installing Pearson-branded E85 ethanol pumps at profitable gas stations throughout the state.

With a permit and grants from the California Air Resources Board, Lewis says he can finance the installation of ethanol tanks and pumps at gas stations, which costs $100,000 for new stations and up to $200,000 to add tanks and infrastructure at existing stations.

Lewis serves as a consultant for stations, applying for their grants and permits and handling their paperwork.

In return, the stations agree to buy ethanol exclusively from him for 10 years. Lewis says his margins are a little better than wholesale gasoline sellers, which is about 14 cents a gallon this year.

He has signed up 17 service stations in California and plans to open 75 locations in four and a half years.

“We expect that we’ll be more than half of all of the ethanol stations in California,” he said by phone from a groundbreaking in Perris last week.

“I’m a businessperson,” Lewis told a group of clean fuel advocates recently. “If I can help the world by doing good things that make a profit, to me that’s better than mandates.”

Pearson Fuels is on pace to open six locations this year, including two in North County.

85 Percent Ethanol

Bressi Ranch Fuel Mart in Carlsbad held a ribbon cutting last week for Pearson’s E85 ethanol, which is 15 percent gasoline and 85 percent ethanol.

Owner Fred Reed, who opened the station in July, says ethanol will become more popular as new flex-fuel vehicles that can run on both gas and ethanol become commonplace.

“By 2010, there’s going to be tons of vehicles that will use E85,” Reed said. “Congress has mandated that all of the major car manufacturers build E85 (flex) vehicles. So when those become prevalent on the roadways, our volumes go up.”

Ethanol costs about 30 cents less than gasoline at the moment. But when gas prices spike, ethanol stays steady, Lewis says.

“In July, when ethanol was $1 less per gallon, we sold 38,000 gallons out of one station and one pump,” said Lewis, who does not disclose revenue figures. “This month it’s dropped a bit as the price of gas has dropped.”

Ethanol burns cleaner, but gets less mileage per gallon. It can be produced from a number of organic sources, but in the United States, it comes mainly from corn , which in recent years has been linked to a run-up in global food costs.

“I think ethanol gets a bad wrap because of the Farm Bill and the Iowa Caucus convincing the government to grow corn,” Lewis said. “It’s not the best way to make ethanol.”

The same amount of sugar cane, for example, produces twice the ethanol of corn, he says.

Reed says that until he met Lewis, he wasn’t aware of any E85 distributors in the state.

“The major brands don’t offer E85,” he said. “But Mike was able to get the grant money in consideration of the fact he had already gotten through the permit process to open his (station).”

Ahead Of Its Time

In 2003, the Regional Transportation Center was hailed as the gas station of the future. It was the state’s first ethanol station, San Diego’s first biodiesel station and the county’s first dual pressure compressed natural gas station. Pearson featured San Diego’s largest electric vehicle charging facility, the county’s first propane vehicle fueling station, and was the first local independent station to offer ultra low sulfur diesel.

The showroom contained 13 alternative-fuel vehicles made by Ford, but then came the decision by the state to relax the zero-emissions mandate, and: “A year later we had zero alternate fuel vehicles,” Lewis said.

He attempted to open a Kia dealership in 2007, but that closed in December.

The building was empty until the arrival of some display alternative fuel cars a month ago, he says.

Pearson still garners worldwide interest from policymakers, students and entrepreneurs wanting information on alternative fuels. Lewis says he could spend the rest of his career responding to public speaking invitations.

“I avoid it like the plague. I need to be applying for permits; I need to be doing this,” he said, pointing to fuel pumps outside the showroom. “Every public speaking engagement is taking me away from what I need to do to get throughput.”


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