Members Discussions

WOMA Votes to ask for a Congressional Fix on RFS Standard

October 14th, 2013

October 14, 2013

The Environmental Protection Agency (EPA) is considering reducing its 2014 ethanol volume targets amid complaints from refiners that the volume requirements exceed their ability to blend it into fuels without resorting to higher blends such as E15 that would put engines at risk, Bloomberg has reported.

Within hours of the article being published, however, EPA Administrator Gina McCarthy issued a statement saying that the EPA and the Obama Administration have not made a final decision on 2014 volumes and obligations.  Many in our own industry, including WPMA states, feels McCarthy’s has no intention of making any real or significant changes to the RFS that will have lasting benefits to the marketers – at least not under the Obama Administration.

The EPA draft proposal reportedly would cut the mandate to 15.21 billion gallons for renewable fuels in 2014 instead of the 18.15 billion gallons established by a 2007 law, according to an internal proposal provided to Bloomberg. EPA would call for the use of 13 billion gallons of conventional corn-based ethanol down from 13.8 billion gallons.  The agency also proposes requiring just 23 million gallons of cellulosic biofuel for next year, or 0.017 percent, which is well below the statutory mandate of 1.75 billion originally envisioned in the law, but still a little less than double the 2013 target, OPIS has reported. EPA reportedly plans to keep biodiesel targets the same for 2014 and 2015 at 1.28 billion gallons.

The volumes of cellulosic biofuel continue to be challenged by refiners. The American Petroleum Institute (API) filed a lawsuit with the D.C. Circuit Court challenging the volume requirements for 2013, arguing that EPA has mandated significantly more cellulosic ethanol than is available in the marketplace.

In our Fall Board Meeting in early October, the WPMA States agreed to a resolution to ask for a Congressional fix the RSF mandate by capping the corn-based Ethanol gallons to the consumption of gasoline by American consumers and not to exceed E10.  This resolution was intended to signal a message to other PMAA states that at least seven states in the West are ready to flex their voice and make matters heard louder in DC.  Just last week, in a PMAA Board Meeting, Western Region PMAA Rep, Greg Benson, made the motion to the full board that PMAA take the position that seeks a Congressional Fix based on WPMA’s resolution.  That motion passed, along with another motion that authorizes PMAA to make the RFS Standard a “high priority”.

What makes our position differ from the movement by EPA is simple.  It’s based on gallons consumed of gasoline, not gallons blended of alternative fuels.  It is a more realistic measurement of what the America can offer, without incurring fines to refineries or pushing the RFS to blend to E15, which has serious equipment and infrastructure consequences to the entire distribution chain of the petroleum industry.

McCarthy said the Obama Administration remains “firmly committed to furthering the development of all biofuels, including corn-based ethanol, cellulosic and advanced biofuel.” She added that EPA is only developing a draft proposal and has not made a final decision on the proposed renewable fuel standards for 2014.

All stakeholders will be given the opportunity to comment on the proposal, she said.

Oil refiner Valero Energy Corp. is one refiner that had asked the Obama Administration to waive U.S. ethanol mandates, citing the rapidly rising cost of RINs and the high cost of achieving volume targets. Valero is pushing for lawmakers to repeal the RFS and develop new legislation to meet the changing needs of the oil market.

In issuing its 2013 targets, EPA had said in early August that it planned to reduce both the advanced biofuel and total renewable volumes in its 2014 RFS volume requirement.  EPA in September sent its 2014 biofuels proposal to the White House Office of Management and Budget for review. Next year’s targets were due to be finalized by year’s end, but could be delayed due to the government shutdown.

Pressure is mounting for lawmakers to either repeal or reform the RFS, amid concerns about the looming blend wall, the point at which adding the EPA-mandated volume of ethanol to gasoline supplies would result in ethanol blends that exceed 10 percent, and the rising price of renewable identification numbers (RINs).

Source:  NATSO, NACS and EPA

WOMA PAC Fundraiser – Walla Walla, WA

August 7th, 2013

WOMA invites all its members and supporters to join us as we organize an event benefitting our State PAC Fund.  Begin your Monday morning with a lovely wine tour of four fantastic wineries in a limo coach visiting Basel, Russell Creek, Cougar Crest and Waterbrook wineries!  A lunch will be served at one of our stops, and plenty of opportunities to taste, tour and have a lovely afternoon with industry friends.

Spend one or two nights at the historic and amazing Marcus Whitman Hotel, with all accomodations in tower king suites.  A hot breakfast and olf will be on the agenda for Tuesday morning at the links style golf course, Wine Valley Golf.  Tee times begins at 8a on Tuesday morning.

Package includes overnight accommodations for one night, golf, wine tour, lunch, a stellar steak dinner on Monday night, and breakfast on Tuesday morning.  All this for $650.  Reserve a second night at the hotel through Lea for an additional $99.  First night is included in your package.

For those of you choosing not to play golf, relax at the local spa.  A $75 voucher will be offered at the local Misbehaven Spa and Salon, within walking distance of the hotel.

Must register to attend by September 7th.  Register online by clicking here.

B&O Tax Pyramiding on Petroleum Products

January 7th, 2013
In 2008, The Washington Oil Marketers Association (WOMA) commissioned a study to be done on the affects B&O tax pyramiding has on the price of fuel.  The results were interesting, and much like we expected.  We would like to share that report with you in hopes it provides a better understanding on the forbidding factors B&O tax plays on fuel distribution in the state of Washington.  WOMA is working with the State Legislature to reform the model used to tax petroleum products in an effort to break down competitive barriers and stabilize market prices in a time of volatility.
The following report was published by the Washington Research Council in 2008.
This report examines the Business and Occupation (B&O) taxes charged during the petroleum distribution process and presents a modified B&O tax structure that is revenue neutral.

In 2008, over 3.4 billion gallons of motor fuel were distributed and sold in Washington state. There are several methods of distributing fuel, as outlined in this report, but the current tax system is structured in a way that favors a vertically-integrated distribution system over one that has multiple tiers. The B&O tax is collected at every level of the distribution process, unless a single entity maintains control of the product. In comparing different tax scenarios, vertically-integrated companies were found to have significant competitive advantages over a distribution process that used several independent businesses. A scenario following
the distribution of one million gallons of fuel found that the tax required of a vertically-integrated business was approximately $14,000 while a multi-business scenario had a tax obligation of nearly $56,000. The reasons include: multiple levels of taxation, tax inequity among competitors, unnecessary layers of regulatory compliance and tax collections, and the creation of a barrier for entry of new fuel storage capacity.

A modified B&O tax on petroleum is outlined in the report in which the tax would only be charged once at the beginning of the distribution process. To maintain a revenue neutral modification, the rate would be set at 1.54 percent and charged at the “terminal rack”—the same location the gas tax is currently collected. It would be paid by the party that sells the refined product over the “terminal rack” and the costs of the tax would trickle down through the distribution system in an equitable manner. The benefits of a B&O tax being collected just once at a single point in the process are: tax efficiency, preservation of state revenue, the creation a level playing field and the potential for minimized gas price spikes in the future.

This report examines the Business and Occupation (B&O) taxes charged during the petroleum distribution process and presents a modified B&O tax structure that is revenue neutral.In 2008, over 3.4 billion gallons of motor fuel were distributed and sold in Washington state. There are several methods of distributing fuel, as outlined in this report, but the current tax system is structured in a way that favors a vertically-integrated distribution system over one that has multiple tiers. The B&O tax is collected at every level of the distribution process, unless a single entity maintains control of the product. In comparing different tax scenarios, vertically-integrated companies were found to have significant competitive advantages over a distribution process that used several independent businesses. A scenario following the distribution of one million gallons of fuel found that the tax required of a vertically-integrated business was approximately $14,000 while a multi-business scenario had a tax obligation of nearly $56,000. The reasons include: multiple levels of taxation, tax inequity among competitors, unnecessary layers of regulatory compliance and tax collections, and the creation of a barrier for entry of new fuel storage capacity.A modified B&O tax on petroleum is outlined in the report in which the tax would only be charged once at the beginning of the distribution process. To maintain a revenue neutral modification, the rate would be set at 1.54 percent and charged at the “terminal rack”—the same location the gas tax is currently collected. It would be paid by the party that sells the refined product over the “terminal rack” and the costs of the tax would trickle down through the distribution system in an equitable manner. The benefits of a B&O tax being collected just once at a single point in the process are: tax efficiency, preservation of state revenue, the creation a level playing field and the potential for minimized gas price spikes in the future.

Click here to read the entire study.