The conflict between the ethanol industry and the oil and gas sector ratcheted up this week when the Renewable Fuels Association asked EPA, DOE, USDA and the Federal Trade Commission (FTC) to launch a multi-agency investigation into "the oil industry's highly discriminatory and unlawful conduct . . . that is impeding the delivery of renewable fuels to the American marketplace."
A letter sent by the association to the agencies focuses on recent events at Zarco 66, a Lawrence, KS, fuel station that was the first marketer in the United States to offer E15, which the trade group says "illustrates just how far Big Oil will go to obstruct congressional purposes in enacting the [federal Renewable Fuel Standard, or RFS], limit the availability of renewable fuels in the American marketplace and, not coincidentally, bolster their campaign to repeal the RFS altogether."
The station, a ConocoPhillips franchisee, has a lengthy history of offering E85 (85-percent ethanol blend), using a blender pump that mixed the formula from two tanks, one carrying gasoline and the other straight ethanol. But the association says that because only certain vehicles can use E85, the oil industry viewed the station's sale of the high-ethanol blend as a "gimmick."
However, when Zarco 66 began offering E15, which can be used in any light-duty vehicle manufactured over the last decade, "the oil industry suddenly changed its tune."
The association charged that ConocoPhillips quickly threatened to terminate Zarco 66's franchise agreement and charge Zarco 66 hundreds of thousands of dollars in penalties unless Zarco 66 started offering "premium" gasoline - a fuel that would replace the ethanol housed in one of Zarco 66's fueling tanks, and a gasoline that is likely to result in far fewer sales than the ethanol blends that would be available if Zarco 66 maintained the current ethanol contents.
"For franchisees like Zarco 66, the message that the oil industry is delivering is loud and clear: Stop selling renewable fuels, or face the consequences," the RFA letter alleged."
The trade group says the oil industry is enforcing the unlawful act of "tying" agreements which violate Section 1 of the Sherman Antitrust Act.
"Here, the oil industry is forcing fuel stations to purchase and carry a product that they otherwise do not wish to carry (premium gasoline) as a condition for purchasing and carrying the tying product (regular gasoline)," the letter states. "Because franchisees are locked into franchise agreements (and such a lock-in effect is magnified when, as in the case of Zarco 66, the oil franchisor changes the terms of the relationship midstream), an oil franchisor holds appreciable economic power over the franchisee, which it is using to force franchisees to purchase premium fuel that they might not otherwise wish to carry."
The letter also alleges oil industry violations of the Gasohol Competition Act of 1980, which makes it unlawful to "unreasonably discriminate against or unreasonably limit the sale, resale, or transfer of gasohol or other synthetic motor fuel of equivalent usability."
The letter also charges the oil industry with violating the Petroleum Marketing Practices Act and ignoring the intent of the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007, which detail the requirements of the RFS.