WASHINGTON – On Friday, Sens. John Thune (R-SD), Ken Salazar (D-CO) and Chuck Hagel (R-NE) re-introduced legislation authorizing the use of Corporate Average Fuel Economy (CAFE) penalties to provide grants to eligible entities who install alternative fuel pumps for fuel types such as E-85 ethanol and natural gas.

U.S. automobile manufacturers are producing an increasing number of vehicles that run on alternative fuels, such as E-85, but only 1 percent of U.S. gas stations have E-85 fuel pumps available to motorists. Retailers have cited limited consumer demand, limited availability of supply and significant infrastructure costs as reasons for not offering E-85. This bill will give grant money for the construction or expansion of the infrastructure necessary to offer alternative fuels to consumers, thereby helping ease the financial burden retailers might incur when choosing to sell certain alternative fuels.

CAFE standards are the weighted average fuel economy for a manufacturer’s fleet of automobiles. Penalties paid by manufactures when they fail to meet the CAFE standards are deposited directly into the general treasury.

The legislation is the same bill supported by NACS during the 109th Congress. In August 2006, NACS sent a letter in support of the language and commending its sponsors for their efforts to address one of the primary challenges facing retailers wishing to sell alternative fuels. But the association also cautioned the senators.

“It is important to note, however, that while these infrastructure grant programs will help offset the cost of converting a retail facility to accommodate an alternative fuel, there are other factors a retailer must consider before making such an investment,” NACS wrote, adding:

These include whether there is the physical capacity to store and dispense an additional fuel product without compromising the availability of traditional fuels, whether the level of consumer demand for the alternative fuel justifies the investment, and whether the alternative fuel can be offered for sale at a price that is competitive with traditional fuels on a miles per dollar basis. These considerations will be determined by individual retailers based upon conditions within their own markets.