Tennessee’s Renewable Fuels Blending Act Under Fire

The American Petroleum Institute is fighting the Tennessee Renewable Fuels Blending Act, set to begin Jan. 1, the Tennessee Business Journal reported.

The legislation, which passed 88-5 in the state House and 28-1 in the state Senate this year provides Tennessee businesses with a greater chance to profit from renewable fuels and requires petroleum refiners and suppliers to sell gasoline and diesel fuels that have not been blended with biofuels, but that are suitable to be blended with them.

Some oil company suppliers apparently started preventing Tennessee businesses from blending ethanol in 2008 and instead sold only pre-blended products, which shifted some profits from certain Tennessee petroleum wholesalers to out-of-state suppliers, according to the state’s fiscal analysis.

“It was just to give some flexibility to the marketplace,” said Rep. Charlie Curtiss, D-Sparta. “We’ve got oil wholesalers in the state that have been blending for years.”

The American Petroleum Institute, represented locally by Bass, Berry & Sims,  filed a lawsuit Friday in the U.S. District Court for the Middle District of Tennessee, saying the act conflicts with federal law and violates the Commerce Clause of the U.S. Constitution.

According to the Tennessee Business Journal the lawsuit claims that the act: Interferes with refiners’ and suppliers’ ability to assure compliance with federal renewable fuel production mandates; interferes with the right of trademark holders to be the sole producer of products sold under their trademarks and exposes refiners to liability if wholesalers commit blending errors; violates the Commerce Clause by discriminating against and burdening interstate commerce.

“Tennessee is not an island,” said Mike Williams, executive director of the Tennessee Petroleum Council, which is the state office of the American Petroleum Institute. “If there are different products required at in-state terminals as opposed to out-of-state terminals, it can put our in-state terminals at a disadvantage.”

On the other hand, Emily LeRoy, executive director of the Tennessee Fuel and Convenience Store Association, countered that major oil suppliers that are trying to compete unfairly. “Wholesalers in Tennessee made a significant investment in biofuels blending long before big oil decided to enter the blending market,” she said in a statement. “Local fuel distributors and convenience store owners developed the biofuels market place and customer base in Tennessee, spending millions of dollars on infrastructure. While we welcome big oil as a player and competitor in the biofuels blending business, we do not feel that they should have exclusive rights to blend. It is uncompetitive and bad for the consumer.”

Valero Energy Corp. was involved in drafting the final version of the legislation. Valero warned that an earlier version of the bill could have forced the company to close a refinery in Memphis, but amended the final version to avoid that.

“I’m mystified as to why big oil would decide to file suit after coming to the table and participating in a total rewrite of the bill,” LeRoy was quoted as saying.

Valero spokesman Bill Day said that while the bill became one the company could live with, “it’s still a bill we’re not in love with.”

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