Senators want probe into ethanol limits

Source: Written by Christopher Doering, Argus Leader • Posted: Wednesday, August 21, 2013

Grassley, Klobuchar say oil companies might be blocking blend access

WASHINGTON — Sens. Chuck Grassley of Iowa and Amy Klobuchar of Minnesota asked the Justice Department and Federal Trade Commission on Tuesday to investigate possible anti-competitive practices by oil companies that might be limiting consumer access to renewable fuels.

In a letter to Attorney General Eric Holder and FTC Chairwoman Edith Ramirez, the lawmakers told the Obama administration that the review was necessary to address “reports indicating that oil companies may be undermining efforts to distribute renewable fuels, including higher ethanol gasoline blends.” South Dakota, the country’s fifth-largest renewable fuels producer, generated more than 1 billion gallons of ethanol last year.

“We are writing to express concerns that oil companies are engaging in anticompetitive practices aimed at blocking market access for renewable fuels,” Grassley, a Republican, and Klobuchar, a Democrat, said in the letter. “We urge you to investigate these allegations and, if true, whether they violate the nation’s antitrust laws.”

Grassley is the top Republican on the Senate’s Judiciary Committee while Klobuchar is chairwoman of the panel’s antitrust subcommittee. The lawmakers said in the letter there have been a handful of examples where the oil industry might have gone too far in flexing its muscle. Some gas stations are being required to sell higher-grade gasoline, taking away a pump to offer renewable fuels. In another case, they said an oil company is alleged to be using its franchise agreements to preclude franchisees from offering higher level ethanol blends to their customers.

The Renewable Fuel Standard, a law that requires refiners to buy alternative fuels made from corn, soybeans and other products, calls for 18.15 billion gallons to be blended into the nation’s gasoline supply in 2014 — a figure that will rise to 36 billion gallons by 2022. The eight-year-old law was put in place to help reduce U.S. dependence on foreign energy.

But ethanol groups and lawmakers representing states such as South Dakota, where the fuel is produced, have expressed concern that the oil industry has been reluctant to embrace higher ethanol blends, such as E15, a fuel that contains 15 percent ethanol, because they don’t want to risk losing business. Most motor fuel today contains 10 percent ethanol.

Producers of the corn-based fuel welcomed the investigation.

“As a fuel station owner, every time I hear some Big Oil mouthpiece saying we should ‘let the market decide’ how much ethanol is used, I think of these kinds of restrictions the oil companies have been jamming down station owners’ throats for decades, making sure only one decision is possible — oil,” said Ron Lamberty, a senior vice president with the American Coalition for Ethanol, based in Sioux Falls.

A spokesman with the American Petroleum Institute, which represents more than 500 oil and natural gas companies, said the organization is reviewing the letter.

Oil groups such as API and car manufacturers have said they are reluctant to back E15, citing damage they say will occur in automobile engines and lawsuits that would follow. Last week, they asked the Obama administration to lower the amount of ethanol that must be blended into the U.S. gasoline supply in 2014.

In their request, the groups warned a failure to lower the mandate would result in “severe economic harm” to consumers and the U.S. economy. The damage would come from a breach of the so-called “blend wall” — a level where refiners must include more ethanol into the country’s fuel mix than can be blended in at a 10 percent threshold accepted in all cars and trucks. The challenge for refiners is that consumers are driving less and vehicles are becoming more efficient, meaning less fuel with ethanol is being used.

The EPA recently has indicated a willingness to cut the country’s renewable fuels quota in 2014. In setting the final volume requirements for 2013 earlier this month, the agency acknowledged the levels currently in place are unrealistic and might need to be reduced.