Minnesota sales of the high-ethanol gasoline blend called E85 have dropped dramatically.
New data from the state Commerce Department showed a 26 percent decline in E85 sales last year, to 14.7 million gallons, compared with 2011.
For the state's gasoline retailers, it represented the weakest sales of the corn-based fuel since 2005, and only the second time the annual E85 volume has dropped in 17 years of usually steady growth.
Experts blamed the decline largely on the narrower spread between the price of E85, which contains 85 percent ethanol, and standard motor fuel, which is 10 percent ethanol.
The price differential is important, because ethanol has less energy than gasoline, resulting in a 15 percent to 20 percent drop in mileage when drivers fill up with E85.
"We've had a fairly small price differential between gasoline and E85," Robert Moffitt, spokesman for the American Lung Association's Clean Air Choice, a group that promotes ethanol use said Thursday. "Many E85 customers are sensitive to price. When the price difference goes down, they stop buying.''
The Commerce Department said the E85-to-gasoline price differential has shrunk because of drought-related increases in the cost of corn, which brought higher ethanol prices. The loss of a federal tax credit at the end of 2011 also affected prices, the department said.
In recent weeks, E85 has sold at a 12 percent average discount to regular E10 gasoline in Minnesota, according to E85Prices.com. E85 can be used only in Flex Fuel vehicles designed for the higher blend, and the fuel was sold at just 343 stations statewide at the end of 2012.
That represented a slight drop in the number of retail stations selling E85, down from 357 in 2011, the Commerce Department reported. The loss of E85 retailers was partly offset by an increase in stores installing blender pumps offering a range of mid-ethanol blends such as E30. Higher sales of those blends were not enough to offset the 2012 decline in E85, however.
But E85 may still have a future. Kelly Marczak, who directs the association's clean fuel and vehicle program, said 10 more Twin Cities stations began selling the fuel this year.
David Shaffer • 612-673-7090 @ShafferStrib
