The Hill

July 16, 2014

By Sens. Chuck Grassley and Amy Klobuchar

It’s vacation season across America. That means family road trips are underway and the traveling public is paying even closer attention when they pull up to the pump.

America’s road warriors have long cherished affordable gas prices. Today’s drivers also value clean-burning fuel choices that help the environment and boost America’s energy independence.

Look back four decades through the rearview mirror.

History shows how the 1973 oil embargo exposed the economic risks and geopolitical vulnerabilities associated with perilous dependence on foreign oil. While gas shortages roiled consumers, the embargo gripped the U.S. economy and foreign policy with steep consequences.

Since then, policymakers have worked to bring greater stability to U.S. energy security, through the creation of the Strategic Petroleum Reserve and more domestic production, conservation (fuel economy standards) and diversification, including incentives for homegrown, clean-burning, renewable biofuels.

Most recently, Congress created the Renewable Fuel Standard (RFS), in 2005, to promote the development and use of domestic renewable biofuels. We also supported the law’s expansion in 2007 to bring 36 billion gallons of renewable fuels online annually by 2022.

The federal law has helped to displace oil imports, increase domestic energy security, create jobs in rural America, curb pollution with cleaner-burning fuel and lower prices at the pump for consumers. Pure and simple, the RFS is good for America’s energy, as well as its environmental and economic stability.

In recent years, Congress also has enacted provisions to promote the installation of blender pumps at gas stations nationwide, providing consumers with a greater choice of fuels.

Still, the nation’s energy policy is running into some bumps in the road. For starters, the Environmental Protection Agency last fall pitched a misguided proposal to greatly reduce the RFS for fiscal 2014. The proposed rule would lower the volume targets for advanced biofuels from 3.25 billion gallons to 2.2 billion gallons. This proposal is causing uncertainty that could scare off future investments in this promising, innovative industry.

Biofuels also are facing stiff resistance from Big Oil. This time, it’s not OPEC putting a stranglehold on the marketplace. It is instead the powerful oil industry that, reports show, is blocking the pipeline for biofuels to get to market.

Last fall, we asked the Department of Justice and the Federal Trade Commission (FTC) to investigate possible anticompetitive practices by the oil industry. We shared concerns we heard that oil companies allegedly are mandating retailers carry and sell premium gasoline, which prevents the retailer from selling renewable fuels without installing expensive infrastructure upgrades. By forcing a franchisee to carry premium gasoline as a condition of carrying regular gas, the oil company may be using its economic power to leverage unreasonable, discriminatory arrangements that are in violation of federal laws. The Department of Justice and the FTC responded with assurances that they are taking steps to identify, prevent and prosecute practices in the petroleum markets that violate anticompetitive or fraudulent business practices.

It’s a long-standing tactic for these big international oil companies. On the one hand, Big Oil argues that the RFS is broken because the industry says it can’t mix the higher blends. On the other hand, those same companies appear to be doing everything they can to prevent any widespread investment in infrastructure by their franchisees and smaller stations that are buying and selling their gasoline.

Big oil companies can cry crocodile tears, but it’s their self-inflicted actions that are standing in the way of meeting the requirements of the RFS, not ethanol producers. Big Oil can’t argue it should be repealed because it doesn’t work when Big Oil is the one responsible for ensuring that consumers don’t have the choice for higher ethanol blends.

That’s why we kindly suggest the decision-makers at the Justice department and the FTC take a close look at a recent investigative study conducted by the Renewable Fuels Association. Its fact-finding analysis shows how oil companies appear to be blocking the sale of greater volumes of renewable fuels through bullying business tactics. Big Oil likes to say it has no control over what’s offered at the pumps of retail gas stations and franchisees — but the facts say otherwise.

The report’s “Consumer Choice Report Card” shows less than 1 percent of branded stations offer E15 or E85. Specifically, of nearly 48,000 retail gas stations carrying a “Big Five” oil company brand, fewer than 300 offer E85 or E15. That flunks any reasonable standard of fairness in the marketplace. The report flushes out fuel supply contracts, franchise agreements and other documents that show how Big Oil flexes its authority to undermine the sale of E85 and E15 renewables.

Tellingly, according to the report, independent stations are four to six times more likely to offer E85 and 40 times more likely to offer E15 than stations selling a “Big Five” oil brand. It would be foolish to view these findings as a fluke. Facts are hard to fabricate.

America has mapped out a long-term strategy to pump up competition in the transportation fuels sector, secure innovative, cleaner renewable fuels to protect the environment and boost more domestic oil production to help immunize the economy and consumers from dependence on foreign oil.

Let’s not let Big Oil spoil the route to greater, cleaner energy independence. U.S. energy security is not for sale. It’s time to hand over the keys to consumers and let renewables and traditional fossil fuels compete side by side at the pump.

Ethanol Producer Magazine

July 16, 2014

By Holly Jessen

When Charlie Good, mechanic and owner of Good & Quick in Nevada, Iowa, started preparing to add E15 to his product offerings at his independent gas retail store, he noticed his contract with ConocoPhillips said he couldn’t sell anything with an ethanol content higher than E10. He called his supplier and was told he’d have to either wait several months, until his contract was up, or pay $30,000 to get out of it. In the end, Good negotiated an agreement that he would put his own canopy up and just fly the ConocoPhillips flag for the remainder of the contract.

Good sees absolutely no downside in letting his ConocoPhillips contract run out and going with an unbranded fuel supplier. Still, he admits it was a difficult decision. “I’m not going to lie to you and tell you I wasn’t afraid of doing this,” he said. “… I know how the big boys can eat you up if they want to.”
Nationwide, there are 135,000 retail gas stations, with 84,000, or 63 percent, under single ownership, says Mike O’Brien, vice president of market development for Growth Energy. And, unbranded or independent retailers, some of which are under single ownership and some that are not, are starting to offer E15. Over time, this will give those companies a competitive advantage and, eventually, force major oil brands to start selling it, he adds.

Good agrees, saying that offering alternative fuel blends is a way for independent retailers to survive and excel against oil majors by finding a niche. “I don’t believe you will see Casey’s or Kum & Go or any of these majors adapt to these fuels, until the public demands it,” he says, naming his two competitors in Nevada.

Since his central Iowa gas station switched to an unbranded fuel, there have been no problems with fuel quality and Good is so confident there won’t be, he 100 percent guarantees the fuel. So far, the only complaint Good has received is that that store no longer takes ConcoPhillips credit cards. Other than that, his customers couldn’t seem to care less that the canopy no longer displays the name of an oil major. “Brand loyalty means nothing now,” he says. “It’s all about what it’s going to cost me.”

In fact, the end of May, Good had sold nearly 7,000 more gallons of fuel as compared to the same time last year. “The big mistake that I made was, I only put one blender pump in,” he says, adding that although he spent half a million dollars updating his station he wishes he had found the extra money to make all three of his pumps blender pumps. In all, 15 to 20 percent of his fuel sales is ethanol.

There are other benefits. He’s spending 2 to 7.5 cents less a gallon on unbranded fuel stock and saving significantly on credit card fees. His new supplier charges him a 1.7 percent fee on credit card payments from customers, down from 3 percent, his previous rate, saving him about $3,000 in one recent month.

Detour Ahead
Good isn’t the only retailer encountering pushback from big-name petroleum distributors attempting to limit retailers’ options when it comes to selling ethanol blends, says Robert White, director of market development for the Renewable Fuels Association. That’s been true for E85 but it’s particularly been an issue with E15. “The majors, at least until they feel a pinch from competitors, are pretty much either requiring that they put in all new equipment, label it to the nines, which would basically scare off any reasonable person, or they can’t put it under their canopy at all.” 

Darin Schlapia, the branch manager of Creston Farmer’s Co-op in Iowa, encountered difficulty when he attempted to negotiate a brand agreement with Cenex for a new Farmer’s Co-op location, which will be built in Mount Ayr, Iowa, this fall. Even though Cenex markets ethanol and distillers grains and recently acquired a 133 MMgy ethanol plant in Rochelle, Ill., its contract requires gas retailers offer at least two different grades of gas, E10 and straight gas with no ethanol content. In order to sell E15 and other higher blends, as the co-op planned, the gas station would have had to add additional equipment. Schlapia knew from sales numbers at the Farmer’s Co-op station in Afton, Iowa, that the cooperative would sell more gallons of fuel if it offered E15 and other ethanol blends instead of ethanol-free gas. “Afton sells regular 87 gasoline and we might sell 50 gallons a day at the most,” he says, adding, for comparison, that the store could sell about 600 gallons of E10 in the same day. “People are definitely choosing the higher ethanol blends. To spend that much money on equipment, just to have another grade of gasoline, was not economical.”

The Mount Ayr station will still purchase its fuel from Cenex but, because it’s not a Cenex branded station, it isn’t allowed to display that logo anywhere. Schlapia is disappointed in the Cenex stance on E15 and thinks it needs to be re-evaluated. And yet, he understands that the company is trying to make sure all Cenex branded stations have a consistent offering of the same fuels, he says.

In Kansas, Scott Zaremba says Phillips 66 created new rules designed to keep him from selling E15 after he’d already moved forward with becoming a registered E15 retailer. The oil company told him he had to sell E15 on a yellow E85 hose, which actually goes against U.S. EPA requirements for selling E15 to heritage vehicles. So he paid $380,000 to get out of his contract and changed the name of his seven gas stations from Zarco 66 to Zarco USA. “They told me if I used anything with 66 in my name they’d hang me out to dry,” he says.

The move was well worth it, in his opinion. “We have to be able to sell whatever products we want out of our retail facilities that we own and we operate,” he says. “… They were just trying to dictate what was going to happen at the facility and we weren’t going to let them.”

In Minnesota, the Minnesota Service Station & Convenience Store Association is working with independent retail stations to band together under one logo and the name Minnoco. So far, four retailers in the Minneapolis, St. Paul area have joined, says Lance Klatt, executive director of MSSA. Although selling alternative fuels isn’t a requirement for Minnoco retailers, most are doing just that. With the help of various funding sources, including Growth Energy, the Minnesota Corn Growers, Minnesota Department of Agriculture and Minnesota Lung Association, Minnoco retailers have received financial support to install equipment to sell E15 and other higher ethanol blends. That’s a big draw for retailers who might not be willing to take a chance on E15 otherwise, Klatt says. 

Retailers have responded enthus-iastically, appreciating the opportunity to bring new fueling options to their customers and make their own decisions on how to run their business. Klatt expects there will be 25 Minnoco stations offering E15 and higher ethanol blends by November. “Right now we feel like it’s the most sought after image in the Minneapolis marketplace,” he says, adding that retailers like the look of the logo as well as the opportunity to manage their own brand.

Of those stations already signed up, 15 or 20 percent of their sales are E15, E30 and E85. That’s driving increased fuel sales to current and new customers. There’s also work being done in cooperation with the Minnesota Pollution Control Agency and the Minnesota Agriculture Department to possibly launch E15 statewide, labeling it as the new midgrade fuel, he says. 

Read the original story here : E15 Retailers Get Creative

Reuters

July 9, 2014

By Ayesha Rascoe

Two U.S. farm-state Senators on Wednesday urged federal regulators to investigate allegations raised by a biofuel trade group that the oil industry uses "strong arm tactics" to prevent widespread use of higher blends of ethanol in gasoline.

A report from the Renewable Fuels Association this week said major oil companies have discouraged the sale of ethanol at levels of 15 percent per gallon (E15) and 85 percent per gallon (E85) at retail stations, by using distribution contracts that make it expensive or nearly impossible for franchises to offer the blends. (RFA report: bit.ly/1mIvQi9)

Senators Amy Klobuchar, a Democrat from Minnesota, and Chuck Grassley, a Republican from Iowa, said on Wednesday that the report bolstered the case for the Federal Trade Commission to evaluate whether the oil industry has engaged in anti-competitive practices.

"This new report underscores the need for the FTC to look into these allegations, and I will continue pushing to ensure that consumers have access to the cheaper, cleaner fuels they deserve," Klobuchar, who chairs the Senate Judiciary Committee's antirust panel, said in a statement.

The Renewable Fuel Standard requires increasing amounts of ethanol and biodiesel to be blended into U.S. fuel supplies through 2022.

Higher blends of ethanol at the pump are needed to avoid the so called "blend wall," the point when federal law will require the use of more ethanol than can be absorbed at the 10 percent per gallon level that dominates U.S. gasoline stations.

Oil companies, who have long called for repeal of the biofuel mandate, say retailers have been reluctant to sell E15 due to concerns that it could harm engines in older vehicles, and that consumer do not want to buy the product.

Without infrastructure to accommodate the widespread sale of E15, refiners have said they would be forced to sell less gasoline or export more refined products to meet the law's requirements.

Klobuchar and Grassley have pressed the FTC for almost a year to probe whether oil industry practices regarding ethanol violate antitrust laws. It is unclear if the agency has taken action on the matter.

The RFA report found that independent, or unbranded, retail gas stations were four to six times more likely to offer E85 and 40 times more likely to carry E15 gasoline than stations associated with major oil company brands.

“Big oil interests can’t argue for repeal of the RFS because it doesn’t work when they’re the ones responsible for ensuring that consumers don’t have the choice for higher ethanol blends," Grassley said.

He also blasted the Environmental Protection Agency for a draft plan that would slash 2014 biofuel use targets in light of the looming blend wall, saying the agency had "fallen for Big Oil's rhetoric."

Read the original story here : U.S. Senators Press Probe Of Report That Oil Companies Blocked Ethanol

See also:

RFA Scores Retailers For E85, E15 Offerings ; Big Oil Gets An 'F'

RFA Report Details Big Oil's Tactics In Preventing E85, E15 Sales

Des Moines Register

July 7, 2014

By Christopher Doering

The ethanol industry Monday urged a federal regulator overseeing the nation's railroads to provide relief for shippers of the renewable fuel who have faced delays.

Growth Energy, which represents ethanol manufacturers, told the Surface Transportation Board that producers of the renewable fuel should be given the same relief that the agency provided to grain shippers in June.

Last month, the STB ordered Canadian Pacific Railway and BNSF Railway to provide the agency an update on their plans to reduce the backlog of grain cars across their networks -- a step welcomed by agricultural groups concerned that farmers could struggle to get their crops to market this fall.

In a letter sent Monday to the STB, Tom Buis, chief executive with Growth Energy, said with more than 61 percent of all ethanol delivered by rail, it is "imperative that these issues be directly addressed and given the same priority as grain shipments."

Buis said immediate action was necessary to "ensure that railroads improve their service." Ethanol supplies were squeezed and prices soared earlier this year, he noted, because of the inability to get rail cars to ship their product. Many ethanol producers were forced to reduce production because they had no place to store the fuel.

Dennis Watson, a spokesman with the STB, said the agency had received the letter but had no comment on it. The agency, he said, is constantly reviewing all commodities shipped by train and the service the rail companies are providing.

In recent months, BNSF and Canadian Pacific have come under fire from shippers, Washington lawmakers and the STB itself for shortages and delays in delivering rail cars to farmers, ethanol plants and grain elevator operators. The rail system in much of the western Corn Belt has been slowed by a plentiful 2013 harvest, higher coal and oil volumes, and the extraordinarily long, cold winter that reduced the size and speed of trains that operated.

Ethanol cannot be shipped through gasoline pipelines because of its corrosive properties, leaving movement of the flammable liquid to trains and trucks, often through densely populated residential areas. As ethanol production has grown, more of it must be shipped outside of the Midwest where much of it is produced, forcing makers of the renewable fuel to depend more heavily on railroads.

The corn-based fuel is a small but growing commodity for railroads, with ethanol shipments commanding just over 1 percent of total carloads moved by train annually, according to the STB. In 2011, 32 percent of U.S. ethanol shipments originated from Iowa, the country's biggest producer of the corn-based fuel.

Read the original story here : Ethanol Industry Asks For Relief From Rail Delays