U.S. senators urge probe of report that oil companies blocked ethanol

Washington | Reuters — 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 per cent per gallon (E15) and 85 per cent per gallon (E85) at retail stations, by using distribution contracts that make it expensive or nearly impossible for franchises to offer the blends.

Senators Amy Klobuchar, a Democrat from Minnesota, and Chuck Grassley, a Republican from Iowa, said Wednesday the report bolstered the case for the U.S. Federal Trade Commission (FTC) 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 antitrust panel, said in a statement.

The Renewable Fuel Standard (RFS) 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 per cent 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 U.S. Environmental Protection Agency (EPA) 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.”

— Ayesha Rascoe reports on U.S. energy policy for Reuters from Washington, D.C.


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