The Tennessee General Assembly is working through a bill that would require refiners and major product suppliers to provide unblended gasoline and diesel fuel to the state in order for wholesalers in Tennessee to blend ethanol and biodiesel into the fuel, officials said.
The bill, sponsored in the state Senate by Sen. Jamie Woodson, the speaker pro tempore, passed April 16 with one dissenting vote, and is now working its way through the state House of Representatives.
The House Commerce Committee considers the measure this week with the bill now expected to be enacted into law by the end of May, said Lee Harrell, an aide to Woodson.
The bill requires suppliers of gasoline and diesel to make such products available to wholesalers in a condition that allows the wholesaler to blend it with ethanol or other biological products.
The bill has the support of the Tennessee Fuel and Convenience Store Association, which sought help from state lawmakers with their claims that they have been cut out of the ethanol blending market.
Emily LeRoy, a spokeswoman for the association, told DTN that wholesalers controlled the blending market until the middle of last year when major gasoline suppliers started blending ethanol into gasoline on their own.
By blending themselves, suppliers are able to capture a federal fuel tax subsidy, which was reduced from 51cts gallon to 45cts on Jan. 1. Additionally, suppliers are collecting renewable fuel credits known as Renewable Identification Numbers that obligated parties—refiners, importers and blenders—under the Renewable Fuels Standard must report to the Environmental Protection Agency quarterly and annually to show compliance with the RFS.
As a result, wholesalers have seen their margins shrink, saying that they are unable to benefit from the 45cts a gallon tax credit for blenders.
“This bill was passed in response to far reaching and swift changes from major suppliers regarding the ability for wholesalers to access unblended fuels,” said Harrell.
LeRoy said wholesalers in Tennessee, have been blending biofuels for many years, and have put in place distribution infrastructure and consumer based for biofuels.
“And then months ago, they started to cut us out of the biodiesel and ethanol blending market,” LeRoy said. “Our point is that we must be allowed to sell ethanol also because we have built the consumer base and our members are better placed to pass on the tax credit to the consumer at retail stations.”
LeRoy said wholesalers want access to unblended product at terminals so they can blend it themselves. She said wholesalers could pass on 5cts to 10cts more to the consumer than oil companies and other major suppliers if they were allowed to blend ethanol into gasoline.
State officials argue that denying wholesalers access to the blending market amounted to stifling competition.
“To allow only the major suppliers to capture unblended product would reduce the number of suppliers of blended fuel from around 100 to about 8,” said Harrell.
He added, “The intent is to make sure that unblended product is available which ensures competition, supports the consumer and increases the opportunity for Tennessee products to be utilized in the blending process.”
Besides access to the blending market, LeRoy said the bill would also help reduce the price for blended product paid at the terminal by wholesalers by about 10cts gallon.
