If a man's influence can be measured by the enemies he makes, then Michihiro Kanahama is successful. In four years, he has angered fuel companies, got into a tax dispute with the government and started an environmental debate over vehicle emissions.
The fuss began when the 45-year-old entrepreneur started a fuel company in Tokyo. His product: an alcohol-and-gasoline mixture he calls Gaiax. Sometimes called gasohol, it is cleaner than pure gasoline. And that is Kanahama's appeal to consumers. 'The fuel is a big hit with Japanese consumers because it's safe and cleaner for the environment,' Kanahama says. 'I have succeeded more than I ever expected.'
The gasoline industry is not a haven for do-it-yourself entrepreneurs, but Kanahama is convinced he has found a marketing niche for his company, Gaia Energy Inc. Considering the humble origins of his business, it is a triumph that his business has survived.
In 1996, Kanahama quit has job as a computer engineer and started his business after attending a conference on pollution. 'I couldn't believe that the technology for gas hadn't changed for 50 years,' Kanahama says. 'The earth is so old, but the pollution was only created in the last 100 years and most of it was caused by gas.'
He spent the next two years testing fuel mixtures in his garage. 'I purchased a lot of different substances and put them into my motorcycle,' Kanahama says. 'It took me a while, but I never once thought of giving up.'
When he found a combination that did not create black smoke, he sent it to a government testing organization. It was approved. Then he struggled to find $90,000 and hired a Singapore refinery to produce his fuel.
To market the fuel, he formed his company in 1997. Then he started selling the fuel to gasoline stations. Gaia is the old Greek word for Earth, a term favored by ecology groups. Kanahama thought the term appropriate for his fuel.
The fuel is 54 percent alcohol and 46 percent gasoline, with a 98 octane rating. Kanahama says his formula eliminates the bad effects of gasohol, such as rubber damage, metal corrosion and poor fuel economy.
'It's safe for automobiles and can be used without any renovation work on the vehicle,' he says.
Spokespeople for Toyota Motor Corp. and Nissan Motor Co. Ltd. declined to comment on the effects of Gaiax fuel on their vehicles.
But Gaiax's impact on pollution has drawn considerable public attention. Television programs on NHK, TV Tokyo and Nagoya TV have staged exhaust tests. They confirmed that carbon monoxide and hydrocarbon levels in exhaust could be greatly reduced by mixing Gaiax with gasoline. A nonprofit environmental testing firm also showed the fuel to have low levels of pollutants. Japan's environmental protection agency has not tested the fuel.
KEEPING UP APPEARANCES
Today, 150 stations sell Gaiax, with new operations scheduled in Hokkaido. City buses also use Gaiax. The company has $4.2 million in cash, a distinct improvement over Kanahama's original $90,000 investment. And though his business is tiny by oil industry standards, Kanahama keeps up appearances.
The windows of Kanahama's office offer a commanding view of downtown Tokyo's pricey Ginza district. A big television screen is at one end of the office; a large desk is at the opposite end. With his black wavy hair and round, boyish face, he looks younger than 45. Despite his confident air, he smokes throughout the interview. And a closer look at Kanahama reveals a man under stress: There are dark circles under his eyes. He seems preoccupied by his tax dispute with the government. He repeatedly moves the discussion back to his tax troubles.
In January 2000, the Ministry of the Interior ruled that Gaiax should be subject to the kerosene and light oil tax. Gaia is fighting the ruling, and a citizens' group supports Gaia. The group may take the issue to court. If Gaiax is taxed too heavily, Kanahama fears it might become too expensive for consumers. And that could be the end of his enterprise. Despite the fuel's environmental credentials, the main reason for Gaiax's popularity is price. Gaiax costs about ¥93 per liter, including taxes. By comparison, regular gasoline costs about ¥105 per liter. Premium gasoline costs up to ¥120 per liter.
The dispute centers on a 1956 law that calls for taxation of light oil. Anyone receiving light oil from a refinery, an importer, or a wholesaler is subject to this tax, says Ryu Kumasaka, assistant manager of the local government tax bureau. After the government imposed a tax, Gaia 'rallied against the government by saying this tax shouldn't apply to them,' Kumasaka says. 'This has been their strategy since they realized the tax applies to them.'
On any environmental issue, 'the government is made to look like the bad guy,' grumbles another government official, who asks not to be named.
In this dispute, the oil industry is quiet. Maeda Mitsuyuki, a spokesman for Exxon Mobil Corp., says refineries are not pressuring the government. While Mitsuyuki argues that Gaia should pay the tax, he says retailers and dealers are upset. 'It was pretty embarrassing that Gaiax's gas was so much cheaper,' he says.
Environmentalists support Gaia. Bill Stonehill, a Tokyo expert on alternative energy for New Scientist magazine, says Gaia is produced in Singapore so Japanese car drivers are not dependent on the Middle East. 'Gaiax, despite being expensive for what it is, is a flower trying to push its way through the concrete,' Stonehill says. 'Let's wish them luck.'
ENERGY POLICY IS A `MESS'
Stonehill says the tax dispute is another aspect of Japan's energy policy, which he called a 'mess.' Citizen coalitions have forced the Ministry of Economy, Trade and Industry to scrap its energy plan and start over, he says. 'Even more importantly, several foes of atomic energy now sit on Japan's new energy committee, leaving many observers to wonder whether the ministry will be able to come up with a plan at all.'
Meanwhile, Kanahama is negotiating with senior Canadian government officials to sell his fuel there. Gaiax may come to North America.
E-mail writer Catherine Makino at [email protected]