Petroleum Institute challenges Tennessee renewable fuels law

By Erin Voegele | December 09, 2009
Report posted Dec. 22, 2009, at 3:32 p.m. CST

The American Petroleum Institute is challenging a state law in Tennessee that would require refiners and suppliers of gasoline and diesel to sell unblended fuels. A lawsuit filed by the API on Dec. 18 in the U.S. District Court for the Middle District of Tennessee claims that the Tennessee Renewable Fuels Blending Act of 2009 violates several federal laws.

The Tennessee Renewable Fuels Blending Act, which became state law in mid-2009 and goes into effect Jan. 1, 2010, requires refiners, suppliers and permissive suppliers of gasoline and diesel in the state to make unblended gasoline and diesel blendstock available to wholesalers. In addition, the unblended blendstock must be suitable for blending with biofuels. The act also prevents contracts between a wholesaler and a refiner, supplier or permissive supplier from restricting the wholesaler's ability to blend petroleum products with ethanol or biodiesel.

In its lawsuit filing, the API claims that the state law conflicts with the federal renewable fuel standard (RFS) by interfering with the objectives and methods chosen by Congress to achieve the RFS's objectives. More specifically, the lawsuit claims the Tennessee Renewable Fuels Blending Act eliminates the ability of refiners to choose which combination of blended or unblended products to sell and creates a situation in which refiners may be prevented from either blending sufficient biofuels with their gasoline or purchasing enough renewable identification number (RIN) credits to meet their respective RFS obligations.

In addition, the lawsuit claims that the act violates the federal law that grants trademark holders the right to exclude others from using their trademark by allowing wholesalers to create fuel blends that are sold under the refiners trademarks. In the lawsuit filing, the API also claims that the Tennessee law is preempted by the Petroleum Marketing Practices Act, which includes a provision that invalidates state laws that impact the grounds for termination or non-renewal of a petroleum marketing franchise agreement. Finally, the API argues that the Tennessee Renewable Fuels Blending Act violates the Commerce Clause of the U.S. Constitution by discriminating against and burdening interstate commerce by favoring local distributors and retailers at the expense of out-of-state refiners.