Blending Compromise

June 10, 2009


Blending Compromise
Valero, Tennessee wholesalers working out gasoline, ethanol deal

NASHVILLE, Tenn. -- A Valero Energy Corp. executive told Shelby County's state legislators Wednesday it has reached a compromise with Tennessee fuel wholesalers over an ethanol-blending bill that Valero had said threatened to shut down its Memphis refinery. According to The Commercial Appeal, the compromise would avert the need for a $130 million retrofitting of the refinery.

Last month, Valero's Memphis public affairs manager, Lisa Wheeler, told legislators that the company could not spend that amount on the Memphis plant and that "it could close if the bill passes."

"It looks like those concerns will be alleviated and that will help assure the long-term viability of the refinery," Valero spokesperson Bill Day told Reuters. Valero and the wholesalers did not disclosed the details of the compromise.

Wholesalers have pushed for the bill, which would have required them to blend ethanol with the gasoline and get the tax credit that Valero now earns for adding the ethanol, said the news agency.

Wheeler updated the Shelby delegation Wednesday, the Appeal said, after Valero and the Tennessee Fuel & Convenience Store Association met to work out differences on the bill sought by the association. It is essentially a fight between oil companies and Valero on one side and fuel wholesalers and ethanol producers on the other, over which segments of the industry reap the economic and tax benefits of changes in federal biofuels law.

The original bill, which passed the Senate, requires the Memphis refinery and fuel terminals in Nashville, Knoxville and Chattanooga to make fuel products available to wholesalers without ethanol blended in so the wholesalers can blend it themselves, the report said.

Wheeler said the meetings yielded a compromise amendment, "and if we can get the amendment on, the $130 million would not have to be spent. We are not in love with the bill, but the amendment addresses our immediate $130 million concern. If we can't get the agreed amendment on, we'd prefer that the bill be killed."

The bill is awaiting review in a House subcommittee, where House Speaker Pro Tem Lois DeBerry (D) will try to attach the amendment next week, said the report.

Emily LeRoy, executive director of the association, said distributors have blended ethanol and biodiesel for years. "They have made a serious investment over the years in blending, storage and retail facilities. "So when major oil companies started cutting wholesalers off from unblended products, that was a concern to us. We feel that multiple companies competing in the biofuels marketplace is good for everybody."

Valero has the only oil refinery in Tennessee and provides most of the fuel sold in West Tennessee. It has a capacity of 195,000 barrels per day (BPD) of light, low-sulfur crude oil. The company has sought to sell the refinery because it does not fit its preference for units near major bodies of water over which a wide variety of crude oil grades can be delivered by tanker, said Reuters. Ethanol attracts water and cannot be shipped through pipelines. It is splash blended at terminals and then placed in tanker trucks.

Like all refiners, Valero is contending with reduced consumer demand for motor fuel due to the recession.

The Greater Memphis Chamber of Commerce asked Shelby lawmakers to try to kill the bill outright. "This is not just a Valero issue. The refinery supplies the airport, and the airport supports about 220,000 jobs in the region. It could also affect the quality of gasoline put in people's cars," Pamela Marshall, the chamber's vice president for public policy and community affairs, told the delegation, the newspaper said.

Wayne Young
404-310-4086 Phone
770-689-0458 Fax

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