Station in the fast lane with alternative fuels
With his blue button-down shirt, neat khaki pants and rimless glasses, Mike Lewis doesn’t look like much of an evangelist.
But that’s what he is: an advocate for alternative fuels -- and their profit-pumping potential.
Lewis is co-owner of Pearson Fuels, a gas station on El Cajon Boulevard just east of Interstate 15 that sells biodiesel, two kinds of natural gas, vehicle-grade propane and ethanol alongside the usual pumps for gasoline and diesel. Pearson also has six bays for charging electric cars, but they have been little used since 2004, after major automakers pulled the plug on electric vehicles.
While other businessmen keep sports trophies or bronze paperweights on their desks, Lewis adorns his with samples of biodiesel in plastic soda containers.
“You see how there’s no sediment in this one?” he said, picking up a bottle and holding it up to the light to admire it the way a sommelier would regard a nice Bordeaux. “This is a very clean-burning fuel.”
These days, the 42-year-old entrepreneur is most enthused about ethanol, a high-octane fuel usually derived from corn and other grains.
Gasoline remains the station’s bestselling fuel, but ethanol has been running a close second as drivers search for something cheaper to power their rides. On a recent Wednesday, Lewis sold 1,281 gallons of ethanol compared with 1,835 gallons of regular-grade gas.
Like most independent gas station owners, Lewis has been struggling as soaring fuel prices have put the brakes on retail sales and pumped up wholesale fuel prices faster than he can pass them on.
What keeps his station afloat is its growing ethanol business, which has better and more-reliable profits. Gasoline sales at the station have dropped by more than half -- from 250,000 gallons a month in 2005, when gas prices were less than $2.50 a gallon, to about 120,000 gallons a month this year.
Ethanol has become a larger part of the mix, thanks to customers like Jesse Garcia.
At $3.69 a gallon, ethanol cost 83 cents less than Pearson’s lowest-priced gasoline, saving Garcia $13.45 on the 16.2 gallons he poured into his mirror-black 2008 Chevy Avalanche, which has a FlexFuel engine that can burn either ethanol or gasoline.
“With the way the economy’s going, I figure this can help me save some money,” said the 29-year-old Navy petty officer as he filled up while on his way to visit his family in Los Angeles.
It’s this kind of calculus that fuels Lewis’ fervor for ethanol.
As a young man, Lewis, who has a bachelor’s degree in finance from Ohio State University, yearned for a life on Wall Street. He signed up on a whim for a job interview on campus with Ford Motor Co., just so he could practice for the interviews he really cared about -- the ones with New York investment banks.
Ford flew him to Detroit and put him up in a fancy hotel, and within days, Lewis signed on with the car company as a factory representative. After about three years, he came to San Diego to live aboard a boat and work for Pearson Ford, a local dealership where he ran the service and repair shop.
Lewis began talking with the dealership’s owners, John McCallan and Gary Hertica, in 1997 about selling alternative fuel vehicles with an eye toward future days when oil would be in short supply. Six years later, the three cut the ribbon on a Ford-franchised showroom that sold 14 models of alternative fuel cars, a repair and service shop for those vehicles and the Pearson Fuels station.
Dubbed the Regional Transportation Center, it had a nonprofit education operation to teach schoolchildren about global warming and alternative fuels. It was the nation’s first ethanol station open to the public and the first station to sell biodiesel fuel in San Diego. Lewis even sold the world’s first hybrid sport utility vehicle, a Ford Escape powered by gas and an electric battery, in September 2004.
The future looked bright. Then Ford and other car manufacturers killed the electric car, and just as quickly as the signs went up, the lights went out on the ambitious $15-million project.
What remains today are the fuel station and the education center, which continues to be funded by state grants and private donations. The center so far has hosted 28,000 San Diego schoolchildren, all ferried there on a natural-gas-powered bus.
Lewis and his partners have struggled to pay the bills by leasing out office space to a local high school, a credit union and other tenants.
Last year, he came up with another idea.
There were hundreds of thousands of cars in California capable of burning both ethanol and gasoline, but only one ethanol station open to the public at that time -- Pearson Fuels. He persuaded the state and the U.S. Department of Energy to contribute $1.5 million to a project to help build more ethanol pumps around the state.
Lewis used the money to sign up 12 independently owned gas stations to install ethanol tanks and pumps. The grant money would subsidize anywhere from half to all of the cost for equipment and installation, which ranges between $90,000 and $165,000 a pump.
In return, the state would increase the availability of an alternative fuel. Lewis, who would take care of the paperwork and permits, would get contracts to sell ethanol to the stations.
The first station to take advantage of this plan opened last month in Carlsbad. Lewis hopes to open one new ethanol-dispensing facility a month until the end of the year.
He said he was motivated not by eco-altruism but the sheer business opportunity.
“I didn’t get into this thinking of myself as an environmentalist,” said Lewis, who reasoned that fossil fuels would eventually run out, creating demand for alternative fuels.
California is home to about half a million cars that can burn ethanol, but there are few ethanol pumps to serve those vehicles. And automakers are continually cranking out more ethanol-compatible cars, thanks to federal incentives.
“There are a lot of chickens running around,” or cars that can run on ethanol, Lewis said in the homey accent of his native West Virginia. “And now we just need to make the eggs. I think we have the right product at the right time with the right business model. The potential upside is massive.”
For now, Lewis is happy just that his station is still in business -- two other stations within a mile of his have shut down in the last year.
Although the numbers aren’t finalized, June looks to be the station’s first profitable month in two years.
“If it is, it will be because of ethanol,” which has a higher profit margin, he said.
As Lewis headed back to his office after giving a tour of his fuel pumps, he bent over to pick up a shiny penny on the ground.
Pocketing the coin, he said, “I’m going to need every one of these I can get.”