Ethanol, refiners united in support for E15 liability bill

Source: Biofuels Digest • Posted: Friday, April 20, 2012

Members of the House Energy and Commerce Subcommittee on Environment and Economy were treated to a rare moment of solidarity between ethanol and petroleum industry groups during a hearing held April 19 as Bob Dinneen, president and CEO of the Renewable Fuels Association, and Charles Drevna, president of the American Fuel & Petrochemical Manufacturers, both testified in favor of the Domestic Fuels Protection Act of 2012.

H.R. 4345, introduced March 30 by Reps. John Shimkus, R-Ill., Mike Ross, D-Ark., John Sullivan, R-Okla., and Collin Peterson, D-Minn., would relieve retailers from potential liability issues related to the use of federally approved fuels such as E15 and would relieve some of the regulatory burden related to storage and dispensing equipment used for those fuels. The RFA, AFPM and the National Association of Convenience Stores all spoke in favor of the bill, stating that it will allow retailers to provide consumers with the alternative fuels necessary to meet the renewable fuel standard (RFS).

“The Domestic Fuels Protection Act rests on a simple premise: if a new fuel has been approved by EPA, if equipment used by retailers to store and dispense a new fuel meets specifications, and if retailers properly inform customers regarding the approved uses of a new fuel, then retailers, fuel producers and other stakeholders should not have to be concerned about defending meritless lawsuits,” Dinneen said in written testimony. “The RFA supports the Domestic Fuels Protection Act because it is consistent with the goals of promoting energy independence through the increased use of renewable fuels as outlined in the [Energy Independence and Security Act of 2007].” If passed, the bill will help to eliminate technical barriers and speed the entrance of new fuels to the market, he said.

Drevna said AFPM supports the bill because it will help refiners comply with increasing RFS mandates. “With rising mandates and falling demand, refiners are placed in a situation of being required to increase ethanol content in a shrinking volume of gasoline,” he told the committee. “All parties in the transportation fuel supply chain need to know they will not face a blizzard of unwarranted litigation simply for complying with the law that Congress deemed necessary. The Domestic Fuels Protection Act provides such certainty.”

John Eichberger, vice president of government relations for NACS, told committee members that more than half of the 121,000 conveniences stores that sell fuel are single-store companies, not controlled by major oil companies as many believe. These mom and pop stores take the decision to offer a new fuel very seriously and will hesitate to do so unless they can be certain consumer demand will provide a reasonable return on their investment, he said. “NACS members are not beholden to any specific product – they simply desire to sell what the customer wants to buy provided it is lawful and, hopefully, profitable to do so,” he said. “As new fuels come onto the market, our members want to have the legal option to sell these fuels if their customers wish to buy them.”

The Domestic Fuels Protection Act of 2012 addresses liability concerns for retailers and, therefore, the NACS fully supports the legislation, he said. Without Congressional approval of dispensing and storage equipment for new fuels such as E15, retailers who want to sell that fuel may be required to replace dispensers and underground storage tanks at great expense, simply because they were installed prior to 2010 and therefore are not certified by the Underwriters Laboratories for ethanol amounts greater than 10 percent, he said. The average cost of a retail motor fuel dispenser is approximately $20,000 while a new underground storage tank can easily cost more than $100,000. Therefore, NACS members support the bill because they believe some of the currently installed equipment at retail stations is compatible with other fuels and can be safely used to store and dispense those fuels. “If their equipment is compatible, they see no reason why they should be required to incur significant expense to replace it,” he said. Additionally, without H.R. 4345, retailers could be held liable for consumer misfueling at a cost of $37,500 per day per incident, he said.

A number of committee members expressed support for the bill, but a few pointed to potential consequences regarding certain gasoline additives, expressing concern that the legislation would also protect petroleum interests from being held liable for environmental damage caused by tank leaks.

Ranking Member Henry Waxman, D-Calif., used his time to rail against every aspect of the bill, claiming that it would remove all liability for harm caused by any of the 1,500 registered fuels and nearly 7,500 registered fuel additives because the current bill is fuel agnostic, but he also does not necessarily favor narrowing the scope of the bill to focus on any particular fuel or additive. “To have this committee pick and choose among the 9,000 fuels and fuel additives, providing liability protections for some and not others, sounds like the ultimate case of the government picking winners and losers,” he said. “If we exempt all of these 9,000 fuels and fuel additives, we’re not picking winners and losers, but we’re picking losers. If we pass this law, we’ll remove the incentive for responsible corporate behavior.”

Waxman went on to accuse the ethanol and petroleum groups of supporting the bill as a protectionist measure. “The only thing these trade associations could agree to is to shield themselves from any liability and shift the cost of harm from their product to the consumers,” he said. “This is not going to solve problems. It’s only going to enhance our problems.”

Those in favor of the bill repeatedly stated that the legislation wouldn’t exempt parties from legal action stemming from negligence on their part, but would merely streamline the regulatory hurdles preventing them from complying with the existing RFS. Shimkus noted that he plans to modify the bill so that pending lawsuits regarding environmental damage caused by methyl tertiary butyl ether (MTBE) will not be affected.

Through testimony and committee questioning, the RFS was clearly demonstrated to be the underlying driver for the creation of H.R. 4345. The need to comply with the RFS can also be credited for the fuel groups’ unanimous support of the bill. However, testimony from the RFA and AFPM hinted at the ongoing battle over whether that policy should continue to remain in effect.

Drevna said his group will support H.R. 4345 “as long as the RFS remains the law of the land and our members must comply with its requirements.” He reiterated the group’s position against subsidies and mandates and said AFPM continues to question “the workability, structure, and unintended consequences of the existing RFS.”

Dinneen, however, cited statistics showing that ethanol production has reduced oil imports, improved rural economies and lowered gas prices for consumers, adding, “Simply put, the RFS has worked. … It is the RFS and U.S. produced ethanol, now the lowest cost motor fuel in the world, that has driven our nation toward a more secure energy future.”