The Wyoming Oil Embargo of 2012

By Ron Lamberty | June 12, 2012

At some point over the past several months, consumer complaints about gasoline purchased at stations in eastern South Dakota led to the discovery that 85-octane gasoline was being sold in those retail stations—labeled as 87-octane gasoline, and in some cases, 89-octane, E10 gasoline. When the state weights and measures department investigated the complaints, most of the violators responded essentially with a statement of “Oops! Sorry!” and continued to sell the suboctane fuel by relabeling their pumps with the correct lower octane number. They told weights and measures that they didn’t see any reason they couldn’t sell 85-octane gas, even though they were outside the area where 85 octane is legally sold under something called “de-rating,” which allows lower octane fuel at higher elevation.

To provide offenders with the “reason they couldn’t sell 85-octane gas,” the state reviewed its regulations, and found something even more interesting. It turns out that even the higher elevation, western third of South Dakota, where stations have been selling the 85-octane gasoline for decades, is supposed to sell gasoline with a minimum octane of 87. The state weights and measures department responded to that discovery by informing petroleum marketers and oil companies that it would begin to enforce the correct regulations.

So just add 10 percent ethanol to the 85 octane gas, and it will have an octane rating above 87, right? Nope. A few months ago, some of the refineries quit making a straight 85-octane regular unleaded gasoline, and their primary product now is an 82-ish octane base fuel which they then blend with 10 percent ethanol to get an 85 octane E10. Adding 10 percent more ethanol to that E10 would make it E20, which can’t be used legally in standard cars (and we know how oil companies feel about replacing gas—even low-octane stuff—with more ethanol). 

Refiners claim they made the change to offset the cost of the renewable fuels standard, conveniently leaving out the fact that because ethanol costs less than gas, E10 made with the 85-octane straight gas they were previously making would actually save them six to ten cents. The truth is that making 82-octane is more profitable, and doing so gives the refiner control of ethanol blending. The oil companies now consider the straight 85-octane gas they made for more than 40 years a “boutique” fuel—and say it would be too costly to make it for legal sale in South Dakota.

There was no contrition or offer to find solutions that would provide consumers in the state of South Dakota with the type of fuel required by law. The oil refiners’ response was quite different from their very public hand-wringing over the rollout of exhaustively tested E15. They didn’t express concerns about automobile and small engine warranties. They didn’t ask for more testing. They didn’t seem concerned about liability for damage that could happen to engines that were fueled with this noncompliant, untested, illegal fuel. Instead, Rocky Mountain oil companies offered their version of a waiver request: Make 85-octane legal, or we won’t supply South Dakota stations.

Yep. Their solution to ongoing violations of the law is to demand the state change the law so that what they are doing becomes legal. Or else. It was further suggested that 85 octane gasoline should be “legal,” not only in the area it was mistakenly allowed previously, but throughout the state.

Unfortunately, that is exactly what the South Dakota Governor’s office has proposed, and even more unfortunately, the practice of selling illegal, suboctane fuel in South Dakota will be allowed to continue while comments are accepted for 90 days. In effect, this “Wyoming Oil Embargo” has already given Rocky Mountain refiners the ability to sell illegal fuel in all of South Dakota all summer. And when drivers report bad mileage, poor performance and increased repairs from this substandard fuel, ethanol will be incorrectly blamed, just as it has been blamed nationwide as refiners reduce the octane and quality of the fuel they blend with ethanol.

The most disappointing aspect of this situation is that if South Dakota wanted to create its own fuel regulations, it was in a perfect position to counter this oil refiner, manufactured shortage by declaring E15 legal in all vehicles. Refiners’ response to such a ruling would have been quite interesting—and probably very instructive.

Author: Ron Lamberty
Senior Vice President,
American Coalition for Ethanol
(605) 334-3381
rlamberty@ethanol.org