Ethanol exempt from Wisconsin mark-up law

By | October 02, 2006
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Wisconsin Gov. Jim Doyle ordered in August that the state Department of Agriculture, Trade and Consumer Protection can't punish gas station owners who offer ethanol-blended fuel at low prices, declaring that ethanol blends are not subject to the state's minimum mark-up law.

Low E85 and E10 fuel prices at Badger State Ethanol's gasoline retail facility, dubbed "Smart Station," located outside its ethanol production plant in Monroe, Wis., sparked an investigation, according to plant President and General Manager Gary Kramer. When E85 prices dipped down to $2.10 per gallon over the Memorial Day weekend, a competing gas station owner in town complained that Badger State Ethanol was in violation of the law, Kramer said.

The Wisconsin minimum mark-up law, implemented in the 1930s, was intended to prevent large wholesalers from underselling smaller service stations and forcing them out of business by setting a minimum price at which motor fuels can be sold. According to the law, wholesale distributors must add a 3 percent increase when selling to fuel retailers, and fuel retailers must then add a 6 percent increase before selling to consumers. This has artificially inflated the cost of ethanol-blended fuels, however, which are not specifically mentioned in the law.

There is a $2,000 fine associated with each day a company is in violation of the minimum mark-up law, meaning Badger State Ethanol was facing a four-day, $8,000 fine if it was found to be in violation, according to a letter Kramer received from the state, he said.

"How can you have the petroleum industry setting the price of ethanol?" Kramer rhetorically asked. While Badger State Ethanol wanted to continue to sell its E85 for less, the company was told it had to raise the price to $3.10 per gallon based on the established state fuel price, Kramer said.

It was not long before a media frenzy ensued. Coverage began locally and spread nationally, even gaining attention from CNN, Kramer said. When Gov. Doyle caught wind of the investigation, he immediately ordered that ethanol be excluded from the mark-up law to avoid future confusion, according to a press release from Doyle's office.

Doyle has positioned himself as a strong advocate of renewable fuels through his Promoting Our Wisconsin Energy Resources (POWER) Initiative to promote energy independence. He also supports a new national energy policy with a focus on energy independence and $1 million in new funding for renewable energy grants.

"I want to send a clear message to producers and consumers of ethanol that the state of Wisconsin will not do anything to artificially drive up the price," Doyle said in a press release issued Aug. 8. "More and more drivers are turning to ethanol-based fuels because they are cheaper, and that is a trend we want to continue."

Now that Badger State Ethanol can legally sell its fuel at the prices it wants, the company has seen positive financial results, Kramer said as he noted a line of cars waiting at each of the Smart Station pumps visible from his office window.
"Our sales went up 400 [percent] to 500 percent, and it's pretty much a traffic jam down there continuously," Kramer said. "When it hit the newswire, people reacted by bringing their business to us."