Provided by the Society of Independent
Gasoline Marketers of America

Anti-boutique fuels bill introduced in Congress

In late September of this year, Reps. Roy Blunt, R-Mo., and Paul Ryan, R-Wis., introduced H.R. 5165, a bill to amend the Clean Air Act to reduce the proliferation of boutique fuels.

While it was clear that the legislation would not be acted on in the current Congress, the bill's introduction nevertheless represented a significant milestone. This is one of the first times that Congress has given some serious attention to an issue which Society of Independent Gasoline Marketers of America feels strongly about, with a bill we strongly support. The issue is now "teed up" for consideration in the next Congress, no matter the outcome of this month's election (which had not yet taken place at the time of this writing).

All four major national marketer groups -- SIGMA, National Association of Convenience Stores, National Association of Truck Stop Operators and Petroleum Marketers Association of America -- have signaled their support for the bill. Refiner companies appear to be split between support, opposition and (rarely) neutrality.

The bill has three major provisions. First, it would allow the Environmental Protection Agency to formalize a process whereby waivers from boutique fuel mandates could be formally adopted during supply emergencies. Marketer groups have long complained that no formal process is in place. That situation has created inequities at times -- not all market participants are given equal notice and decisions are sometimes made on the basis of incomplete information because not all market participants are consulted. An additional problem is that, currently, EPA "waivers" are not really waivers from the rules, they are "enforcement discretions" -- meaning that marketers are still technically in violation of the regulations when they sell non-conforming fuel, and EPA merely promises it won't prosecute those violations. This leaves the possibility of potential liabilities down the road for companies that, in good faith, respond to the "enforcement discretion" in order to meet the public's critical fuel supply needs. It will be much better to have the clarity that comes with an official waiver of the rules, rather than mere non-enforcement of the rules.

The second major provision of this bill would be to restrict the ability of EPA to approve new fuel formulations as part of air quality State Implementation Plans. As currently drafted, EPA could not approve a new fuel formulation for use in a specific geographic area unless that fuel formulation was already approved for use in another area within the region (on a PADD by PADD basis -- the nation is divided into 6 Petroleum Administration for Defense Districts). We believe this provision -- intended as a temporary "fix" of the problem of proliferating boutique fuels -- would at least keep the problem from getting worse in the short run. Such a stopgap measure is important to have in place during the currently underway SIP development process by states responding to the new 8-hour ozone standard.

Finally, the bill would require a study by EPA that would focus on ways to "... develop a Federal fuels system that maximizes motor fuel fungibility and supply, preserves air quality standards, and reduces motor fuel price volatility that results from the proliferation of boutique fuels. ..." Proponents of the legislation look to this provision to ultimately point the way to a long-term solution to the problem of boutique fuels, without pre-judging what that solution would be.

In addition to Reps. Blunt and Ryan, a bipartisan group of original co-sponsors included Reps. Sandlin, D-Texas, Mark Green, R-Wis., Northup, R-Ky., Mike Rogers, R-Mich., Petri, R-Wis., Sensenbrenner, R-Wis., Kirk, R-Ill., Ney, R-Ohio, Kevin Brady, R-Texas, English, R-Pa., Aiken, R-Mo., Wicker, R-Miss., Duncan, R-Tenn., Bonilla, R-Texas, Stenholm, D-Texas, Shadegg, R-Ariz., and Herger, R-Calif. Additional co-sponsors are signing on; Reps. Sessions, R-Texas, and Lucas, D-Ky., became co-sponsors on Oct. 6 and more have probably been added since.

It's always risky to predict what will happen in Congress; anything is possible until it adjourns sine die. The current Congress is coming back for a lame duck session in November. Having said that, it is widely believed that comprehensive energy legislation is "dead" in this Congress, and that the next Congress will start the process over again. If that assessment is correct, the Blunt-Ryan Boutique Fuels bill is likely to be considered as an important part of such an overall energy bill during 2005.