A federal judge has rejected a lawsuit by the American Petroleum Institute that sought to invalidate North Carolina’s “ethanol blending” statute, which is similar to a 2009 law passed by the Tennessee legislature. API has also filed a legal challenge to the Tennessee law.

“This decision validates the actions taken last year by the Tennessee General Assembly to retain broad-based biofuel blending,” said Emily LeRoy, executive director of the Tennessee Fuel and Convenience Store Association, which pushed for passage of the Tennessee law.

The group also plans to file a “friend of the court” brief supporting the law in the pending Tennessee legal challenge.

The North Carolina and Tennessee statutes basically declared that gasoline retailers and wholesalers can mix ethanol with gasoline themselves rather than have major refineries do the work. Through contracts and otherwise, the big oil companies had been pushing to keep blending operations to themselves.

API, representing major oil refineries, contended in the Tennessee lawsuit that state statute runs afoul of the commerce clause of the U.S. Constitution as well as trademark law and the Renewable Fuels Standards Act, which requires the companies to sell a calculated amount of ethanol.

Similar arguments were rejected by U.S. District Court Judge Louise W. Flanagan in the North Carolina case in a decision earlier this month.

Says LeRoy: “We hope that the case in Tennessee will produce a similar decision to keep biofuel blending open to all participants.”

“While we welcome all participants and competitors into the renewable fuel marketplace, we do not believe that any business class should be able to establish a monopoly,” she said. “It is clearly in the best interest of the consumer to have multiple types of competitors engaged in blending. It brings fuel flexibility and better pricing to the public.”

The issue is whether an independent ethanol producer that produces fuel ethanol in the State of Florida has a legal right to be a blender of fuel ethanol with unblended gasoline, and receive the $0.45 per gallon Blender’s Tax Credit, when the fuel ethanol and unblended gasoline are blended in the State of Florida if such independent ethanol producer has been licensed or authorized by the Department of Revenue as a blender.

Relevant Federal Legislation
A. The American Jobs Creation Act of 2004
On October 22, 2004, President Bush signed into law the American Jobs Creation Act of 2004 (P.L. 108-357).

Effective January 1, 2005, the American Jobs Creation Act of 2004 established a new system for federal taxation of ethanol blends. The major changes are as follows:

• Eliminates the reduced rate of excise tax for gasohol blends containing 10%, 7.7%, and 5.7% ethanol, and instead, provides a 51 cents-per-gallon excise tax credit for each gallon of ethanol blended with gasoline. The new excise tax credit system is called the “Volumetric Ethanol Excise Tax Credit” (VEETC). In January, 2009, the excise tax credit was reduced to 45 cents-per-gallon for each gallon of ethanol blended with gasoline.
• Requires blenders to pay the full rate of tax (18.4 cents per gallon) on each gallon of a gasoline-ethanol mixture, but currently provides a 45 cents-per-gallon tax credit or refund for each gallon of ethanol used in the mixture.
• Allows blenders having excise tax liability to apply the excise tax credit against the tax imposed on the gasoline-ethanol mixture. For blenders having limited or no motor fuel excise tax liability, a refund may be claimed. IRS is required to provide refunds within 45 days, or if a claim is filed electronically, the refund must be paid within 20 days, or interest will accrue.
• Deposits all gasohol excise taxes into the Highway Trust Fund, and pays for the credit out of the General Fund.

B. Internal Revenue Code
Excise Tax. Section 4081 of the Internal Revenue Code of 1986, as amended (the “Code”), imposes an excise tax on the removal of a taxable fuel from a refinery or terminal, entry of a taxable fuel into the United States, and sale of a taxable fuel, not previously taxed upon removal or entry. “Taxable fuel” for this purpose includes gasoline, diesel fuel and kerosene.

Excise Tax Credit. Section 6426 of the Code creates a credit against the excise tax on taxable fuels. The excise tax credit is generally available to any person that blends alcohol or biodiesel with taxable fuel in a mixture. To qualify for the credit, a qualifying mixture must either be sold by the producer to a buyer for use by the buyer as a fuel or be used as a fuel in the trade or business of the producer.

Relevant Florida Statutes
206.01 Definitions. – As used in this chapter:
(1) “Department” means the Department of Revenue.
(30) “Blender” means any person who blends any product with motor or diesel fuel and who has been licensed or authorized by the department as a blender.

286.29 Climate-friendly public business. – The Legislature recognizes the importance of leadership by state government in the area of energy efficiency and in reducing the greenhouse gas emissions of state government operations. The following shall pertain to all state agencies when conducting public business:
(5) All state agencies shall use ethanol and biodiesel blended fuels when available. State agencies administering central fueling operations for state-owned vehicles shall procure biofuels for fleet needs to the greatest extent practicable. (emphasis added)

526.202 Legislative findings. – The Legislature finds it is vital to the public interest and to the state’s economy to establish a market and the necessary infrastructure for renewable fuels in this state by requiring that all gasoline offered for sale in this state include a percentage of agriculturally derived, denatured ethanol. The Legislature further finds that the use of renewable fuel reduces greenhouse gas emissions and dependence on imports of foreign oil, improves the health and quality of life for Floridians, and stimulates economic development and the creation of a sustainable industry that combines agricultural production with state-of-the-art technology.

526.203 Renewable fuel standard. -
(1) DEFINITIONS. – As used in this act:
(a) “Blender,” “importer,” “terminal supplier,” and “wholesaler” are defined as provided in s. 206.01.
(b) “Blended gasoline” means a mixture of 90 to 91 percent gasoline and 9 to 10 percent fuel ethanol, by volume, that meets the specifications as adopted by the department. The fuel ethanol portion may be derived from any agricultural source.
(c) “Fuel ethanol” means an anhydrous denatured alcohol produced by the conversion of carbohydrates that meets the specifications as adopted by the department.
(d) “Unblended gasoline” means gasoline that has not been blended with fuel ethanol and that meets the specifications as adopted by the department.
(2) FUEL STANDARD. – Beginning December 31, 2010, all gasoline sold or offered for sale in Florida by a terminal supplier, importer, blender, or wholesaler shall be blended gasoline.
(3) EXEMPTIONS. – The requirements of this act do not apply to the following:
(a) Fuel used in aircraft.
(b) Fuel sold for use in boats and similar watercraft.
(c) Fuel sold to a blender. (emphasis added)

526.207 Studies and reports. -
(1) The Florida Energy and Climate Commission shall conduct a study to evaluate and recommend the life-cycle greenhouse gas emissions associated with all renewable fuels, including, but not limited to, biodiesel, renewable diesel, biobutanol, and ethanol derived from any source. In addition, the commission shall evaluate and recommend a requirement that all renewable fuels introduced into commerce in the state, as a result of the renewable fuel standard, shall reduce the life-cycle greenhouse gas emissions by an average percentage. The commission may also evaluate and recommend any benefits associated with the creation, banking, transfer, and sale of credits among fuel refiners, blenders, and importers. (emphasis added)
(2) The Florida Energy and Climate Commission shall submit a report containing specific recommendations to the President of the Senate and the Speaker of the House of Representatives no later than December 31, 2010.

526.302 Legislative findings and intent. – The Legislature finds that fair and healthy competition in the marketing of motor fuel provides maximum benefits to consumers in this state, and that certain marketing practices which impair such competition are contrary to the public interest. Predatory practices and, under certain conditions, discriminatory practices, are unfair trade practices and restraints which adversely affect motor fuel competition. It is the intent of the Legislature to encourage competition and promote the general welfare of citizens of this state by prohibiting such unfair practices.

Market Reality
Currently, oil companies refuse to sell unblended gasoline to prospective independent ethanol producers in Florida. As a result, the sole beneficiaries of the 45 cents-per-gallon blender’s tax credit are the oil companies, blenders affiliated with oil companies, and oil company shareholders. The farmers/landowners, independent ethanol producers and consumers never realize any benefit from the blender’s tax credit; rural economic development is ignored; and U.S. jobs are not created.

Not a single drop of fuel ethanol is produced in the State of Florida. One reason for the lack of development of a fuel ethanol industry may be attributed to the fact that oil companies, or affiliates of oil companies, currently have a monopoly on blending fuel ethanol with unblended gasoline in Florida. This monopoly is apparently supported by the Florida Energy & Climate Commission (“FECC”) which recently rejected a proposal by an independent ethanol producer to use variable blending pumps in Florida.

If independent ethanol producers are able to be blenders of fuel ethanol and unblended gasoline, and thereby receive the 45 cents-per-gallon tax credit, small-capacity ethanol producers would be able to enter the market. The result would be fair and healthy competition in the marketing of ethanol blends, broad-based rural economic development and job creation for Floridians.

Independent ethanol producers in Florida clearly have the legal right, and must be assured the availability of unblended gasoline, to blend fuel ethanol and unblended gasoline to receive the 45 cents-per-gallon blender’s tax credit and be cost-competitive. The State of Florida has the resources to be the leading producer of advanced biofuel in the nation. At this point, the state merely lacks the political will to ensure fair and healthy competition in the marketing of ethanol blends.

Battle over who can blend ethanol might impact consumers at the pump

By Ken Whitehouse

www.nashvillepost.com

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.” 

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

By Ryan C. Christiansen

Ethanol Producer Magazine

July, 2009

Petroleum marketers in the southeastern U.S. are supporting efforts to force oil refiners to supply them with unblended gasoline so that the marketers can choose to blend ethanol into the gasoline themselves.

According to petroleum marketing groups, their inability to obtain unblended gasoline from refiners is a growing problem. “It’s being clamped down,” said Sherri Cabrera, vice president of the Petroleum Marketers Association of America, a federation of 47 state and regional trade associations representing approximately 8,000 independent petroleum marketers nationwide. “We’re seeing just more and more refiners offering [unblended gasoline] less and less.”

The issue so far appears to be most prevalent in the southeastern U.S., where North Carolina, South Carolina, Tennessee and Georgia have all either pursued legislation or passed laws to address the issue.

In South Carolina, legislators passed a law in June 2008 which required oil refiners to supply marketers with unblended gasoline. The law was bundled with provisions for sales tax exemptions for energy efficient products and for a sales tax holiday for firearms. The American Petroleum Institute and BP Products North America Inc. sued, claiming the law violated the “one subject” provision in the state constitution which states that “every act or resolution having the force of law shall relate to but one subject, and that shall be expressed in the title.” The state’s Supreme Court agreed. In May 2009, the court repealed the law.

Meanwhile, legislators in Tennessee pursued similar legislation this spring. Petroleum refiner and marketer Valero Energy Corp. reacted by threatening to shut down its Memphis, Tenn., refinery, claiming the company would need to spend up to $150 million over two years for new equipment to comply with the proposed law.

In North Carolina, the National Petrochemical & Refiners Association, a lobbying group of which Valero is a also a member, sued the state for passing a law that requires refiners to sell unblended gasoline to marketers, allowing marketers to be “blenders of record” and obtain federal tax credits for blending ethanol into gasoline. The NPRA said North Carolina’s law “conflicts with federal law by preventing entities with a federal obligation to blend renewable fuels from doing so, and by requiring them to sell unblended fuel to entities that are not obliged by federal or state law to use renewable fuels.”

Cabrera said petroleum marketers have a lot invested in tanks and infrastructure for blending ethanol with gasoline. “Refiners have tried to lock their business partners—petroleum marketers—out of the option to do that,” she said. “So some states have come in to say to refiners, ‘we’re going to make you do the right thing and work with your marketer business partners.’”

The ethanol industry is supportive of petroleum marketers and their efforts to secure ethanol blending opportunities. “In the history of ethanol, there have always been a number of petroleum marketers that want to do their own splash blending,” said Greg Krissek, board member of industry group Growth Energy. “Where this is an issue for petroleum marketers, we would be supportive of them wanting to have the clear, unblended streams.”

Krissek said the ethanol industry can be a partner in the effort to ensure marketers continue to have ethanol blending opportunities. “In a number of states, you have plants that have good relationships with the petroleum marketing organizations,” he said, “and this is an area where we can probably work together.”

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

By Seanna Adcox, Associated Press Writer

USA Today

June 26, 2008

COLUMBIA, S.C. — South Carolina fuel distributors must have access to pure gasoline needed to make their own ethanol blends under a law that supporters say is first in the nation and will save customers at the pump.

Industry experts say other states could enact similar laws. More than a dozen states, largely in the South, will likely consider such legislation next year, said Daniel Gilligan, spokesman for Virginia-based Petroleum Marketers Association of America.

But oil companies moved quickly to stop it here and vow to do so elsewhere: They filed a lawsuit in the state’s Supreme Court on Thursday — one day after the measure became law — claiming it violates the state constitution.

Supporters say oil companies want to sell the gas pre-blended so they can keep federal ethanol credits, which can top 8 cents a gallon, and prevent competition from distributors who would pass some of those savings onto customers.

The new law requires oil companies to offer raw gasoline to South Carolina distributors so they can blend it themselves into E10, or 90% gasoline and 10% ethanol.

Distributors began pushing for the law after BP surprised them this spring with a letter denying them the ability to blend the product themselves. Other oil companies began to follow suit.

“What the oil companies attempted to do is a travesty to the consumers of South Carolina,” said Sen. Greg Ryberg, R-Aiken, a former fuel distributor and gas station owner. “I have never seen such an unfair pricing strategy. By blending it and selling a blended product, they’re trying to take what should belong to the retailer.”

Oil industry advocates deny the accusations and say the law will result in higher gas prices.

The lawsuit, filed by American Petroleum Institute and BP Products North America Inc., argues the law would prevent refiners from complying with federal law that requires annual increases in ethanol use from 9 billion gallons by the end of this year to 36 billion gallons by 2022.

The law “will likely require BP Products to change the manner in which it had planned to comply with federal mandates,” the company claims in the suit. Failure to meet the mandates could bring daily penalties of $32,500.

The suit asks the court to prevent the law from being enforced pending a decision.

“In light of the legal challenge, we won’t be offering unblended gasoline at our terminals and have no comment,” said BP spokesman Scott Dean.

An executive for American Coalition for Ethanol agreed suppliers are under certain mandates but said that doesn’t mean they can completely shut out market competition.

Even before the tax credits, ethanol is cheaper per gallon than gasoline. But where oil companies have sold only pre-blended fuel, they’re not passing along the savings, said Ron Lamberty, a vice president of the South Dakota-based group.

“We want to stop the big oil takeover of ethanol,” Lamberty said. “We need an independent product to keep the refiners honest. If they buy ethanol and overcharge, it hurts our sales.”

Fuel suppliers contend South Carolina’s law is illegal because it was tacked on in late May to an unrelated bill establishing sales tax holidays.

Senate President Pro Tem Glenn McConnell warned legislators as they overrode Gov. Mark Sanford’s veto Wednesday that it violated the single-subject rule and would end up in court. The state Supreme Court has previously struck down such “bobtailing” measures, most recently last week.

“This was the clearest example of bobtailing I’ve seen in 18 years here,” said Rep. Doug Jennings, D-Bennettsville.

Supporters of the law said they didn’t have time to get a separate bill through legislative committees after BP’s letter to distributors. If the state Supreme Court strikes the measure down, the distributors and retailers are ready for round two.

“We will have bill ready to go before the session opens in January,” said Sam Bell, president of Echols Oil Co. and the South Carolina Petroleum Marketers Association. “I hope the oil companies work with us over the next few months to come up with something that will work. That would be the smart thing.”

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

*SB 1931 by *Woodson, Burchett, Ketron, Overbey, Gresham, Herron, Ford, O., Marrero B, Burks. (HB 1517 by *Curtiss, Sargent, Williams, Hensley, Eldridge, Hawk.)

Trade Regulation – As introduced, requires suppliers of gasoline products to make such products available to wholesalers in a condition that allows the wholesaler to blend it with ethanol or other biological products. – Amends TCA Title 47, Chapter 25.

Fiscal Summary

(CORRECTED) Increase State Revenue – Exceeds $100,000 Increase State Expenditures – Not Significant

Bill Summary

This bill requires all refiners, suppliers and permissive suppliers in this state to make available to any wholesaler all grades of gasoline, including regular, premium and midgrade, and all grades of diesel available at the terminal in such condition that such wholesaler may blend ethanol or other biological products to create those grades of petroleum products generally available for sale by retailers in this state. In addition, gasoline products must be made available with detergent additives in sufficient concentrations such that after the addition of ethanol, the final product meets or exceeds the Lowest Additive Concentrations as required by the United States environmental protection agency (EPA).

Under this bill, any contract between a wholesaler and a refiner, supplier, or permissive supplier executed or renewed on or after the effective date of this bill that forbids, limits or restricts a wholesaler’s ability to blend petroleum products, would be void as against public policy.

A “permissive supplier” is any person who is not subject to the general taxing jurisdiction of this state, but who:

(1) Is a position holder in a federal qualified terminal located outside this state;
(2) Is registered for transactions in taxable motor fuels under federal tax law in the bulk transfer/terminal distribution system; and
(3) Acquires products in such out-of-state terminals from position holders in transactions that otherwise qualify as two-party exchanges.

ON APRIL 16, 2009, THE SENATE ADOPTED AMENDMENT #1 AND PASSED SENATE BILL 1931, AS AMENDED.

AMENDMENT #1 specifies that the provision whereby any contract between a wholesaler and a refiner, supplier, or permissive supplier executed or renewed on or after the effective date of this bill that forbids, limits or restricts a wholesaler’s ability to blend petroleum products, would be void as against public policy applies to “any term or provision” contained in any such contract.

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

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Session 118  -  (2009-2010)
H 3707 General Bill, By T.R. Young, Cato, Cobb-Hunter, Toole, Ott, Cooper,
Gambrell, Bowen, Agnew, McLeod, J.H. Neal, Gunn, Hayes, Stewart, Thompson,
White, Duncan, Moss, H.B. Brown, Knight, Frye, Spires and Neilson

Similar (S 0612)

 A BILL TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION
 39-41-235 SO AS TO REQUIRE MOTOR FUEL TERMINALS TO OFFER FOR SALE PRODUCTS
 THAT ARE SUITABLE FOR SUBSEQUENT BLENDING EITHER WITH ETHANOL OR BIODIESEL; TO
 PROHIBIT A PERSON OR ENTITY FROM TAKING AN ACTION TO DENY A MOTOR FUEL
 DISTRIBUTOR OR RETAILER FROM BEING THE BLENDER OF RECORD; TO REQUIRE MOTOR
 FUEL DISTRIBUTORS, RETAILERS, AND REFINERS TO UTILIZE THE RENEWABLE
 IDENTIFICATION NUMBER; AND TO DECLARE VIOLATIONS AN UNFAIR TRADE PRACTICE.

View full text
   03/11/09  House  Introduced and read first time HJ-12
   03/11/09  House  Referred to Committee on Agriculture, Natural
                     Resources and Environmental Affairs HJ-13
   03/26/09  House  Member(s) request name added as sponsor: Duncan
   04/21/09  House  Member(s) request name added as sponsor: Moss,
                     H.B.Brown
   04/22/09  House  Member(s) request name added as sponsor: Knight
   04/22/09  House  Committee report: Favorable Agriculture, Natural
                     Resources and Environmental Affairs HJ-5
   04/23/09  House  Member(s) request name added as sponsor: Frye,
                     Spires, Neilson
   04/23/09  House  Requests for debate-Rep(s). Cobb-Hunter, Hiott,
                     Umphlett, Duncan, Jefferson, Sandifer, Ott,
                     Sellers, MA Pitts, Crawford, Erickson, Gambrell,
                     Cooper, Skelton, Mitchell, TR Young, JR Smith,
                     and DC Smith HJ-245

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

SESSION 2007

SESSION LAW 2008-222

SENATE BILL 1339

AN ACT to require suppliers that import gasoline for sale in this state to offer gasoline for sale to a distributor or retailer that is not preblended with fuel alcohol and that is suitable for subsequent blending with fuel alcohol and to provide that contract provisions that restrict or prevent distributors or retailers from blending gasoline and fuel alcohol are void.

The General Assembly of North Carolina enacts:

              SECTION 1.  Article 3 of Chapter 75 of the General Statutes is amended by adding a new section to read:

“§ G.S. 75‑90.  Availability of gasoline suitable for blending with fuel alcohol; blender of record.

(a)       The following definitions apply in this section:

(1)       Blender. – Defined in G.S. 105‑449.60.

(2)       Distributor. – Defined in G.S. 105‑449.60.

(3)       Fuel Alcohol. – Defined in G.S. 105‑449.60.

(4)       Gasoline. – Defined in G.S. 105‑449.60(15)a.

(5)       Retailer. – Defined in G.S. 105‑449.60.

(6)       Supplier. – Defined in G.S. 105‑449.60.

(b)       A supplier that imports gasoline into the State shall offer gasoline for sale to a distributor or retailer that is not preblended with fuel alcohol and that is suitable for subsequent blending with fuel alcohol.

(c)       The General Assembly finds that use of blended fuels reduces dependence on imported oil and is therefore in the public interest. The General Assembly further finds that gasoline may be blended with fuel alcohol below the terminal rack by distributors and retailers as well as above the terminal rack by suppliers and that there is no reason to restrict or prevent blending by suppliers, distributors, or retailers. Therefore, any provision of any contract that would restrict or prevent a distributor or retailer from blending gasoline with fuel alcohol or from qualifying for any federal or State tax credit due to blenders is contrary to public policy and is void. This subsection does not impair the obligation of existing contracts, but does apply if such contract is modified, amended, or renewed.“

SECTION 2.  This act becomes effective when it becomes law.

In the General Assembly read three times and ratified this the 14^th day of July, 2008.

                                                                    s/ Beverly E. Perdue

                                                                         President of the Senate

                                                                    s/ Joe Hackney

                                                                         Speaker of the House of Representatives

                                                                    s/ Michael F. Easley

                                                                         Governor

Approved 6:50 p.m. this 17^th day of August, 2008

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

Battle over who can blend ethanol might impact consumers at the pump

By Ken Whitehouse

www.nashvillepost.com

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.”

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

John M. Urbanchuk

Director

LECG LLC

November 18, 2008

The federal tax incentive has been responsible in large part for building an American ethanoli ndustry that has generated an estimated $33.4 billion (2008$) in tax revenue for the federal government and nearly $17 billion (2008$) of additional tax revenue for state and local governments since 1978, reduced America’s tab for imported oil by $97.5 billion, helped reduce farm program payments by more than $3 billion annually since 2006, and put some $66 billion more into the pockets of Americans in the form of increased household income. By contrast, the federal government has spent just $30.4 billion in the form of the partial exemption for ethanol from the federal excise tax on motor fuel. All told, the return on investment (ROI) for each dollar expended in the form of the federal tax incentive for ethanol use is nearly 5 to 1. 1

History of the Federal Tax Incentive for Ethanol Use

The first federal tax incentive for ethanol was a 40 cents per gallon exemption for ethanol from federal excise taxes on motor fuel enacted as part of the Energy Policy Act of 1978. Between 1978 and today the tax exemption has ranged between 40 and 60 cents per gallon. In its current form, the exemption is the Volumetric Ethanol Excise Tax Credit (VEETC) that was created by the American Jobs Creation Act of 2004. The VEETC replaces previous federal ethanol excise tax credits and provides blenders with a federal tax refund of 51 cents per gallon of ethanol on each gallon of ethanol blended with gasoline. Under provisions of the 2008 Farm Bill, the tax exemption will drop to 45 cents per gallon in 2009. The excise tax exemption plays an integral role in supporting investment and development in ethanol production facilities, next generation ethanol technologies, and the significant growth in the industry.

The Role of the Federal Tax Incentive for Ethanol Use

Between 1986 and 2006 the spot market price of ethanol in Midwest markets averaged 129.6 cents per gallon while the average price of regular gasoline at Gulf Points was 72.6 cents per gallon. Over this period ethanol was 57 cents per gallon more expensive than gasoline.2 During this 20-year period the ethanol excise tax exemption averaged 55.1 cents per gallon reducing the difference between spot market ethanol and gasoline to 1.9 cents per gallon.

Without the excise tax credit gasoline blenders would have little or no economic incentive other than the octane value to blend ethanol. Without this important incentive it is unlikely that the ethanol industry would have been able to compete with MTBE as an oxygenate to meet the carbon monoxide and RFG requirements of the Clean Air Act of 1990. However, between early 2007 and the fall of 2008, spot market ethanol prices were typically lower than wholesale gasoline prices, meaning a large amount of ethanol was being voluntarily blended as a relatively low-cost supply extender. The price differential, which sometimes reached as high as $1 per gallon, encouraged voluntary splash-blending and pre-blending and helped ethanol enter into new markets. Because of the price spread between ethanol and gasoline, E10 blends often retailed for 8 to 10 cents less per gallon than regular unleaded during this period.

The Economic Benefits of the Federal Tax Incentive for Ethanol Blending

The economic benefit of the ethanol excise tax credit can be estimated by examining the contribution of the ethanol industry over the period the excise tax credit has been in place. The benefits of the ethanol excise tax credit since its inception in 1978 include:

• More than 53 billion gallons of ethanol have been produced, or about 1.2 percent of all the motor gasoline sold over this period. (In 2008, ethanol represents 7% of the nation’s gasoline supply.)

• The total volume of ethanol produced over the past three decades displaced nearly 1.9 billion barrels of imported crude oil (the amount of crude required to produce the ethanol equivalent of 34.9 billion gallons of gasoline) valued at $97.5 billion (2008$).

• The combination of spending for annual operations, ethanol transportation, and capital spending for new ethanol plant capacity added $228 billion to the nation’s Gross Domestic Product (GDP) by 2008.

• New jobs are created as a consequence of increased economic activity caused by ethanol production. The increase in economic activity resulting from ongoing production and construction of new capacity supported the creation of more than 210,000 jobs in all sectors of the economy. (Note: After 2006, this calculation includes only those gallons produced above the mandated levels as established first in the Energy Policy Act of 2005 and revised in the Energy Independence and Security Act of 2007. By comparison, the ethanol industry helped create 238,000 new jobs in 2007 as a result of the 6.5 billion gallons produced.)

• Increased economic activity and new jobs result in higher levels of income for American households. The production of ethanol put an additional $66.2 billion (2008$) into the pockets of American consumers since 1978.

• The ethanol industry has paid for itself since the inception of the excise tax credit. The combination of increased GDP and higher household income generated an estimated $33.4 billion (2008$) in tax revenue for the federal government and nearly $17 billion (2008$) of additional tax revenue for state and local governments since 1978. The estimated cost of the ethanol tax credit over this same period was $30.4 billion (2008$).

Consequently, the ethanol industry generated a surplus of about $3 billion for the Federal treasury over the past three decades.

• The excise tax credit also has saved taxpayers money by reducing farm program outlays through higher prices for corn. Recent research published at Iowa State University estimated that the federal government saved $3.45 billion in 2007 alone because it was not making loan deficiency payments, as it was in 2005 and 2006.3 Loan deficiency payments were established in 1985 as a way to protect farmer income when prices for commodities such as corn were abnormally low. Since 1998 the loan deficiency payment program has cost taxpayers more than $29 billion. USDA estimates that when loan deficiency payments are warranted due to low prices, every $0.10 per bushel increase in corn prices saves about $1 billion in loan deficiency payments.

1 The calculation is a result of the sum of the increase in federal, state and local tax revenues, reduction in oil imports, and farm program payments compared to the total amount spent in the form of the ethanol tax incentive.

2 In 2007 and 2008 crude oil and gasoline prices soared to record levels. While ethanol prices also increased they were generally below gasoline prices for most of the period.

3 “Ethanol Subsidies: Are they a Plus or a Minus?” The Farm Gate. October 21, 2008. University of Illinois Extension. http://www.farmgate.uiuc.edu/archive/2008/10/ethanol_subsidi.html.

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.