Friday, July 3, 2009

Fuel Feud Brewing

Battle Over Who Can Blend Ethanol Might Impact Consumers at the Pump
By Ken Whitehouse
April 20, 2009

Legislation winding its way through the Tennessee General Assembly could have a big impact on you at the gas pump.

The bill (SB 1931/HB 1517) requires all oil refiners to make unblended products available to distributors or retailers who wish to blend their own ethanol fuel. What could be the basis of the fight? One side says it is about competition and the other says it’s about product integrity.

But the real reason could be that there is a federal tax credit that is now 51 cents for every gallon of ethanol that is blended with gasoline.

State Sen. Jamie Woodson (R-Knoxville) is one of the main sponsors of the bill, which she says will create competition in the marketplace. Woodson said she was made aware of the issue by the Tennessee Fuel and Convenience Store Association.

“Instead of eight companies doing the blending,” Woodson said, “there could literally be 20 different companies. That competition is good for consumers and prevents Tennessee farmers from being shut out of the process of ethanol production.”

Mike Williams, a former state representative now representing the Tennessee Petroleum Council, says the legislation is completely out of bounds.

“We strongly oppose this unneeded and unnecessary legislation,” Williams said. “Among the many problems we have with the bill is that it is in violation of the Lanham Act.”

The Lanham Act defines the statutory and common law boundaries to trademarks and service marks.

Williams warned that consumers would feel the impact if the legislation passes, noting that, “prices are set by supply and demand and rarely do you raise costs to a company that are not passed along and impact the consumer.”

There is a lawsuit that both sides of this debate will be watching closely. The National Petroleum Institute and the National Petrochemical and Refiners Association have filed suit against the state of North Carolina, where legislators enacted similar legislation into law last year.

They contend that the North Carolina statute conflicts with at least three federal laws, stating in their lawsuit that it is “contrary to the federal renewable fuel program” that “expressly leaves to refiners the choice of whether and how to blend gasoline with ethanol.”

Their lawsuit also contends that the North Carolina law is “contrary to federal trademark law because it forces refiners to cede control over the manufacturing of their trademarked products to distributors and retailers” and that it “removes a valid basis – product adulteration – for terminating or non-renewing a franchise agreement.”

Asked about how the North Carolina case might impact her bill, Woodson said “This legislation will meet all judicial tests.”

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