FTC to Review Charges that Oil Industry Blocking Use of Ethanol

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By Christopher Doering

The Federal Trade Commission said it would look into charges by Midwest lawmakers that oil companies are pressuring gas stations to limit consumer access to renewable fuels.

Earlier this week, U.S. Sens. Chuck Grassley and Amy Klobuchar released a letter asking the Justice Department and Federal Trade Commission to investigate possible anticompetitive practices by the oil industry. They cited several cases in which retailers were pressured into not carrying fuel with higher ethanol blends.

While the FTC stopped short of opening up a formal investigation, Chairwoman Edith Ramirez vowed to "make every effort" to find and prosecute actions that violate anticompetitive rules or statutes overseen by the agency.

"I can assure you that we will evaluate the information you have provided and the concerns you have expressed under pertinent antitrust standards," Ramirez said in the letter to Grassley dated Aug. 19. "Protecting American consumers from anticompetitive or fraudulent practices in the energy sector has long been one of our most important responsibilities," she said.

The Iowa Republican, along with Klobuchar, a Minnesota Democrat, told the regulatory bodies that they have seen reports of some gas stations being required to sell higher-grade gasoline, using a pump that could offer renewable fuels. With many stations having only two fuel tanks, the station would have to install costly new infrastructure to sell the higher blends of ethanol.

"I'm pleased to see the Federal Trade Commission is taking steps to investigate whether certain practices by oil companies may be impeding competition," Klobuchar said in a statement. Grassley said Thursday he looked forward to the FTC's findings into the allegations.

The ethanol industry, which has long complained about questionable tactics used by oil companies to protect their market share, welcomed the review.

"As an industry there is absolutely no question that they are employing anticompetitive practices; now that does not necessarily mean they are illegal. That's for the Justice Department and FTC to find out," said Monte Shaw, executive director of the Iowa Renewable Fuels Association.

Shaw pointed to efforts used by the oil companies to suppress ethanol use including what he termed a "bogus study" that showed fuel containing 15 percent ethanol would hurt cars as well as lawsuits that have tried to overturn approval of E15 by the Environmental Protection Agency.

A spokesman with the American Petroleum Institute said the allegations are "a distraction from the fact that the (Renewable Fuel Standard) is broken. It hasn't helped clean the air and could be very harmful to consumers."

Lawmakers in Washington have proposed legislation that would change or repeal the Renewable Fuel Standard, but any effort to make significant change appears difficult.

The Renewable Fuel Standard (RFS), an eight-year-old law that requires refiners to buy alternative fuels made from corn, soybeans and other products, calls for 16.55 million gallons of ethanol, most of it made from corn, to be blended into the fuel supply in 2013. The congressional mandate, for now, calls for 18.15 billion gallons in 2014, but the EPA has said levels laid out by lawmakers in 2007 are unrealistic and may need to be reduced.

As consumers drive less and cars become more fuel efficient, refiners have said it is becoming increasingly difficult to meet the congressional mandates under the 10 percent ethanol blend rate -- an issue known as the blend wall. Motor gasoline contains 10 percent ethanol.

Ethanol producers have charged the oil industry is avoiding the use of the higher blends to protect its market share. They also downplay efforts to attack the safety of ethanol, pointing to a series of studies by the EPA and others showing no damage by E15 to car engines.

The ethanol industry estimated that 30 stations offered the E15 blend this spring, including six in Iowa. The Hawkeye State, the largest U.S. maker of ethanol, produced 3.7 billion gallons during 2012 across 41 plants.

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