South Carolina passes law to allow local distributors to blend ethanol, capture tax credit, pass savings to consumers

In South Carolina, state lawmakers passed legislation over a gubernatorial veto requiring oil companies to provide pure gasoline to state-based distributors, saying that local companies would capture the ethanol tax credit and pass the savings on to consumers. “What the oil companies attempted to do is a travesty to the consumers of South Carolina,” Sen. Greg Ryberg, R-Aiken told the Associated Press. “I have never seen such an unfair pricing strategy. By blending it and selling a blended product, they’re trying to take what should belong to the retailer.”

The legislation stems from action this spring by BP, confirming to distributors that all gasoline would be sold to them on a pre-blended basis.  Reacting to the news, BP file suit in state court, saying the legislation was unconstitutional and saying it would not comply with the law while it was in the courts. The company faces penalties of up to $32.500 per day for non-compliance.

The fight has erupted in April between the S.C. Petroleum Marketers Association and major oil companies over who blends ethanol and receives a 5.1 cent per gallon tax credit.  “This 5 cents a gallon is crucial to the survival of the smaller petroleum marketers here in the state,” Sam Bell, president of the SCPMA, told groupstate.com. “That’s a nickel that allows us to be competitive and goes back into our businesses and to our employees, and it stays in South Carolina’s economy. The big oil companies are going to take that away from us and it’s going to end up in London, Houston and The Netherlands.”

Meanwhile, a research analyst from Newedge said that “data show ethanol blending inching closer to saturation”. The report said that 92% of East Coast gasoline produced in March contained ethanol, with the Midwest at 82 percent. The Gulf Coast, where blending is at 14 percent, is the only region that could show a dramatic increase in ethanol consumption without a breakthrough past the ethanol, E10 blend wall.

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