Tennessee state lawmakers have worked out a compromise between Valero Energy Corp. and Tennessee fuel wholesalers over a biofuels-blending bill that had led the largest U.S. refiner to consider shutting down its 195,000 bpd refinery in Memphis, Tennessee.

Emily LeRoy, a spokeswoman for Tennessee Fuel and Convenience Store Association, which represents wholesalers, told DTN that the deal was reached over the past couple of days at the urging of Tennessee House Speaker Kent Williams.

“Speaker Williams was very instrumental in bringing the parties together to agree to this compromise that everybody can live with,” LeRoy said.

LeRoy, who has been working closely with lawmakers pushing for the biofuels bill, said the compromise offers Valero some leeway, but the refiner would still have to provide unblended gasoline and diesel to wholesalers.

DTN couldn’t confirm the details with Valero as calls to the San Antonio-based refiner weren’t immediately returned.

However, local reports said a Valero executive informed Shelby County state legislators about the deal on May 27.

LeRoy said the compromise was reflected in an amendment to an ethanol bill currently being considered by the state Legislature.

The initial bill sought to force gasoline producers such as Valero to make unblended gasoline and diesel available to wholesalers, who, respectively, would then blend gasoline and diesel with ethanol and biodiesel before they are sold to the public.

Valero is the only oil refinery in Tennessee, and provides most of the fuel sold in the western part of the state, so the bill essentially targeted the refiner.

The wholesalers want to blend the fuels themselves so they can reap the economic and tax benefits of the federal biofuels law. They argue they had been doing that until several months ago when Valero changed course and started to only offer ethanol blended gasoline.

In early May, Valero threatened to shut down the Memphis refinery in Memphis if state lawmakers advanced the bill into law.

The refinery employs about 310 people, according the company’s website, and so a shutdown of the plant would mean job losses.

In a letter to Tennessee Gov. Phil Bredesen, Valero said the proposal to require the refinery to allow "our wholesale customers to blend ethanol into gasoline made at the refinery" would require capital expenditures of between $130 million and $150 million.

“Coupled with the current economic downturn, this makes no economic sense for the refinery, and the expenditure would cause Valero to seriously consider closing the plant,” company spokesman Bill Day told DTN at the time.

Day added that in order to make gasoline on demand for wholesalers to do their own blending, the Memphis refinery would need to have separate storage and pipeline systems for ethanol-blended fuels and conventional unblended fuels.

LeRoy said today that the amendment, which is being finalized by legislators, will be voted on next week in both the House Budget and Finance Committees. If passed, as is expected, the Senate will then take up the measure before the end of June.