Falling gas prices open loophole in Missouri law

By Erin Voegele | January 03, 2009
Web exclusive posted Dec. 8, 2008 at 10:13 a.m. CST

The falling price of gasoline is making it possible for many Missourian fuel retailers to bypass the state's renewable fuels standard and supply customers with standard gasoline instead of E10.

Missouri's standard, which was enacted Jan. 1, 2008, requires E10 to be sold when the price of the fuel is the same or lower than the price of unblended gasoline. Premium gasoline and blends of ethanol incorporated into E85 are exempt from the standard.

According to Ronald Leone, the Missouri Petroleum Marketers & Convenience Store Association's executive director, the price trigger contained within Missouri's fuel standard is beneficial in a number of ways. "[The price trigger] protects the consumer from higher than necessary pump prices, and at the same time it increases the use of renewable fuels," he said.

"For the consumer, it ensures that they are always purchasing the lowest priced fuel possible," Leone said. It also ensures small business owners and retailers are able to remain competitive with Missouri's boarder states, which don't have any ethanol standards or mandates. It also benefits those in rural areas of the state. "We are producing and selling much more renewable fuels than we did before," Leone said.

The price trigger takes affect at the terminal level. This means that it can only be enacted if the price of standard gasoline at the terminal is less expensive than E10. The number of retailers that take advantage of the price trigger will ultimately depend on the economics in every terminal. "I guarantee that if the unblended fuel is cheaper, my members are pulling it and selling it." Leone said. "If it's more expensive, they are not. While I can't say categorically that everyone in Missouri is now using unblended fuel, I do think the economics are such that more are starting to use unblended fuel."

However, this price trigger is not available in all areas of Missouri. Reformulated gasoline (RFG) must be used in the St. Louis metropolitan area. Leone said under the Clean Air Act the U.S. EPA requires all fuel sold in the St. Louis metro area, which is classified as an RFG area, to be E10 at all times. In addition, while many retailers in other areas of the state may currently be selling unblended fuel, the situation is likely to be temporary. Once the price of ethanol drops below the price of gasoline, the standard will once again take effect.

Eight other states - Hawaii, Iowa, Kansas, Louisiana, Minnesota, Montana, Oregon and Washington - have enacted biofuel standards or mandates. The Louisiana and Oregon programs also include price provisions.

According to the American Coalition for Ethanol, Louisiana's renewable fuels act calls for ethanol to comprise two percent of total gasoline sales within six months of when ethanol production from state-produced feedstocks reaches 50 MMgy. The act prevents implementation of the ethanol requirement from taking effect until the average wholesale price of Louisiana-produced ethanol is equal to or below the average wholesale price of regular unleaded gasoline in the state for at least 60 days. A three-member task force meets to review wholesale price data. If the task force finds ethanol prices to be more expensive than wholesale regular gasoline for a period of 60 days, the renewable fuels mandate would not be enforced.

In Oregon, legislation requires gasoline sold within the state to contain 10 percent ethanol three months after in-state ethanol production reaches 40 MMgy. The governor may suspend the standard for up to 90 days if compliance with the standard would be technically or economically infeasible or a significant risk to public safety. Suspension would be limited to counties east of the Cascade Mountains' summit and could be extended for an additional period of not more than 90 days.