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Broad-Based 'Fuel Stations' Could be Valero's Future

Valero Energy Corp. is planning for the gasoline station of the future to transform into a broad-based multi-fuel station with natural gas, ethanol and perhaps even electricity fueling facilities, along with gasoline and diesel. Ethanol's E85 fuel mixture is already being offered at several Valero stations and is planned to be offered in all new facilities.

A peek at the future was given by Valero CEO Bill Klesse on Thursday in response to questions at the company's annual shareholders meeting. There are no specific plans for multi-fueling capability on a widespread basis beyond a new station being developed near Valero's San Antonio headquarters, a company spokesperson subsequently told NGI.

The refining/marketing company said it is prepared to add natural gas fueling capability at its new Texas stations if there is sufficient market demand, according to Klesse, who outlined the plans for the one San Antonio facility in response to a shareholder question. "In certain markets they're already consuming natural gas in vehicles."

Valero is operating natural gas fueling facilities at some of its stores in Colorado, so with sufficient market interest Klesse sees the same thing happening in Texas. Again, he is only talking about new stations potentially. Retrofitting existing stores is not cost-effective, according to the company spokesperson.

Nevertheless, Valero, as an independent refiner, is opening up a path which combination major producer/retail gasoline marketers have avoided like the plague.

Klesse said the first station offering natural gas fueling in Texas will be near the company's headquarters. In addition, when there is sufficient land, Valero may also add electric recharging facilities for the electric vehicle (EV) market. Klesse, however, is less enthusiastic about EV recharging because he sees the electric transportation sector as "problematic."

Valero now produces ethanol and sells E85, along with gasoline, at five of its Texas retail facilities, and it has committed to offering the ethanol-gasoline mixture in all other new stores that it opens.

In new facilities it makes sense to plumb them for a variety of alternative fuels, Klesse told shareholders. But even for E85, the cost is prohibitive for retrofits. An ethanol mixture pump added to an existing store costs $100,000, Klesse said.

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