Renewable Reservations

Miller raises retailer concerns regarding E15 in House subcommittee testimony

WASHINGTON -- Convenience store retailers, who sell 80% of the country's motor fuels, want the opportunity to sell more renewable fuels, but they need help from Congress to do so, said NACS Chairman Jeff Miller yesterday in testimony before the House Energy & Commerce Committee's Subcommittee on Energy & Power.

Click herefor Miller's full written testimony. And click here for additional testimony.

"We support the use of renewable fuels and are working hard to expand their use with the motoring public," said Miller, who is president of Norfolk, Va.-based Miller Oil Co. But before retailers add new fuels such as E15 they have to carefully examine concerns related to potential costs, liability concerns and customer demand.

"Choosing to sell a new fuel is very different than choosing to sell a new candy bar. As new fuels come onto the market, we want to have a reasonable expectation that we will be able to generate a return on our investment and have the option to sell them while being in compliance with all laws and regulations. But to do this, we need your assistance," said Miller.

Using E15 as an example, Miller highlighted several of the issues retailers face when considering whether to sell a new fuel.

The cost associated with compatibility is the first major concern, noted Miller. When new fuels are sold, all related fueling equipment must be listed by Underwriters Laboratories (UL) as compatible. Because UL will not re-certify any existing equipment, even equipment that is technically compatible with the new fuel, a retailer's only legal option is to replace dispensers--at a cost of roughly $20,000 per unit.

Further, underground storage equipment must also be replaced if it is not UL-certified.

"Once I crack open concrete my costs could easily exceed $100,000 per location, which now gets us up to about $200,000 in pump and tank costs. So offering E15 could become very expensive," said Miller.

A second retailer concern is related to misfueling, he said. Under the U.S. Environmental Protection Agency's partial waiver, only certain engines are authorized to fuel with E15. Vehicles manufactured before 2001 and all off-road use engines--lawnmowers, leaf blowers, etc.--are not included in this partial waiver and retailers could be exposed to claims related to damage from misfueling.

"So how do I prevent the consumer from buying the wrong fuel? If I don't, I could be fined or sued under the Clean Air Act. Or, if using the wrong fuel causes engine problems, I could be sued by the consumer or word could spread that my fuel damages engines, hurting my reputation," said Miller.

Another liability concern relates to the potential that E15 could later be called a defective product.

"What if in the future E15 is determined defective? There is significant concern that such a change in the law would be retroactively applied to anyone who manufactured, distributed, blended or sold the product in question. We have experience with this situation and it is a major concern," said Miller.

Third, he said, there is the question of customer demand.

"It is important to note that (E15) is the first fuel transition in which no person is required to purchase the fuel--so there are no assurances of consumer demand," said Miller. "It is also important to remember that E15 is approved by EPA for only certain vehicles and that the auto manufacturers do not support this decision. So, it is almost impossible for me to evaluate consumer demand."

Miller suggested several steps Congress should take to help retailers lower the cost and potential risks of new fuels entering the marketplace: Authorize an alternative method for certifying retail equipment. In 2010, Reps. Mike Ross (D-Ariz.) and John Shimkus (R-Ill.) introduced H.R. 5778 to accomplish this task. Ensure that retailers who comply with EPA's labeling regulations cannot be held liable for self-service customer misfueling of non-approved engines, a provision included in H.R. 5778. Provide regulatory and legal certainty that compliance with current laws and regulations will protect retailers from retroactive liability should the laws and regulations change. Support the development of vehicle and infrastructure-compatible fuels--also known as drop-in fuels.

"If Congress takes these actions to lower the cost of entry and to remove the threat of unreasonable liability, more retailers may be willing to offer a new renewable fuel. The market will then be able to determine the fate of new fuels," Miller concluded.