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 Issue Update

John Eichberger
Vice President
Government Relations
(703) 518-4247

Renewable Fuels Retailer Liability
Posted: March 25, 2011                          

Intro to the Issue
Retailers are being encouraged to sell gasoline containing higher levels of ethanol, but there are significant legal and technical hurdles that prevent retailers from doing so. NACS is pursuing legislative solutions to these hurdles.

On December 19, 2007, President Bush signed into law the Energy Independence and Security Act, H.R. 6, which dramatically increases the renewable fuels standard (RFS) to require the use of 36 billion gallons by 2022. If every gallon of gasoline were blended with 10 percent ethanol, the market would be able to accommodate only approximately 14 billion of the 36 billion gallon mandate. To address this issue, in 2010 EPA approved a waiver allowing the sale of gasoline containing up to 15% ethanol (E15), but only for vehicles manufactured in or after model year 2001. Motorcycles, boats and outdoor power equipment are not authorized to use E15.

Why You Should Care
Federal law and many state and local regulations require retailers to use equipment certified by a nationally recognized testing laboratory, such as Underwriters Laboratories (UL), as compatible with the fuel they are selling. Failure to use listed equipment exposes the retailer to claims of gross negligence liability, violation of local fire codes and OSHA regulations, violation of tank insurance and state tank fund policy requirements, and provisions contained in many business loan agreements.

Further, if the retailer allows the consumer to misfuel a non-approved engine with E15, that retailer could be held liable for violating the Clean Air Act (fines up to $37,500) and for any damage to the consumer’s engine. In addition, if the fuel were ever declared a defective product by a court, retailers could be held liable for selling the fuel.

What NACS Is Doing
Last Congress, NACS endorsed the Renewable Fuels Marketing Act, which would have provided an alternative mechanism for determining the compatibility of new and existing equipment with any new fuel that enters the market. The bill would also have protected retailers from Clean Air Act violations and certain liabilities associated with consumer misfueling provided the retailer complied with EPA labeling requirements.

NACS also believes that Congress should act to protect market participants from potential liability if fuels containing ethanol are declared a defective product. No retailer should be subject to litigation for a lawful action taken today if the law changes tomorrow.

Latest Developments
Legislation has not yet been introduced this Congress to address the issues of concern to retailers. NACS is working with a broad coalition of interested stakeholders to develop legislation that can be passed into law.