Another day, another disingenuous ad from Fuels America. The latest absurdity claims that EPA’s proposed rule implementing the 2014 RFS will deal a fatal blow to the nascent cellulosic biofuels industry. The problem? EPA actually proposed raising the cellulosic mandate from 6 million gallons in 2013 to 17 million in 2014. Of course, these numbers are still way too high, as the cellulosic industry produced about 84 thousand through the first six months of 2014. That equates to an annualized rate of 168 thousand gallons. Where does Fuels America expect obligated parties to buy this phantom fuel if the standards are raised further?
Rather than addressing these facts head on, Fuels America opts to place the blame at the feet of refiners, erroneously declaring that “oil companies largely control retail fueling infrastructure through a complex maze of contracts with distributors that often restrict the sale of alternatives.” The fact remains that 95 percent of gas stations are independent businesses, and more than half of gas stations are unbranded with no ties to refiners whatsoever. It’s hard to discern from where Fuels America derives its claim that refiners “largely control” these stations.
Moreover, as a general matter, franchisees are free to sell higher ethanol blends. Nothing in the typical franchise agreement or anywhere else prohibits them from doing so. Franchisees merely need to make the necessary investment in equipment and infrastructure to sell the higher ethanol blends, and they are free to make these decisions based on their own competitive decisions and the demands of the marketplace.
In fact, a series of laws exist that protect the ability of franchisees to make the decision to sell renewable fuels, including the Gasohol Consumption Act and the Petroleum Marketing Practices Act (PMPA). The PMPA in particular protects both franchisees and franchisors by ensuring that franchisors have two grades of gasoline being sold while barring a franchise agreement that prevents franchisees from carrying higher ethanol blends as a third grade of fuel, thus ensuring a franchisee’s ability to make the investments needed to store and sell higher ethanol blends. And there is a good reason for these completely voluntary franchise arrangements- the franchisee gets the benefit of using a trusted brand, stable contractual prices for fuels, and marketing help. Of course, the franchisor gets to sell its product. Those franchisees that don’t believe the arrangement is in their best interest are generally able to leave the contract and sell unbranded fuel (as some have). This type of contracting and competition is the cornerstone of a market economy.
The Fuels America lobby knows all this, so why the false advertising? We can only speculate that it’s because they know consumers don’t want higher ethanol blends, whether it’s because of the lower fuel economy or potential to void their engine warranties. In fact, the trade associations that represent fuel retailers recently wrote to the Administration reiterating that higher blends aren’t selling and laying out the prohibitive costs for small business gas station owners. When you don’t have the facts on your side and you haven’t won consumers’ hearts and minds, your last resort is to set up a boogeyman and attack it. We’re happy to oblige Fuels America, but it’s a tired tactic.
Meanwhile, EPA recognized these challenges in its proposed rule and took responsible steps to avert some of the most egregious short term impacts of the RFS. Last week, EPA transmitted the final rule to OMB for interagency review—let’s hope it continues to recognize reality, rather than Fuels America’s hysterics.