WASHINGTON, DC -- On March 28, NACS and the Society of Independent Gasoline Marketers of America (SIGMA) sent a joint letter to key House and Senate leaders expressing strong opposition to recent legislative proposals that would require gasoline retailers to install dispenser systems to handle the sale of E-85.

"NACS and SIGMA are not opponents of E-85. In fact, an increasing number of NACS and SIGMA members have chosen to market E-85, and we expect this number to increase in the future. However, a mandate to market E-85--particularly when that mandate does not take into account market forces, consumer demand for E-85, the varying economics of E-85 and the impact that the costs of this mandate could have on small business marketers--necessitates our opposition to these proposals," stressed the letter.

NACS and SIGMA said that a mandate for E-85 at retail is misguided for a number of reasons:

• Cost to the retailer -- The most practical option for a retailer to meet the E-85 mandate would be to install a new underground storage tank (UST) system at significant cost. The installation of a new dispenser and underground storage tank system alone to market E-85 will require an investment of between $50,000 and $200,000 per retail outlet (depending on the market), assuming the retail location has the physical space on its site and can obtain the necessary permits to construct such an additional UST system.
  
• Consumer demand for E85 -- Less than five percent of the current motor vehicle fleet is comprised of flexible fuel vehicles that can operate on both E-85 and gasoline, and the number of motorists who actually use the flexible fuel option to use E-85 is substantially lower. While these percentages may rise in the future based on the long-term plans of motor vehicle manufacturers and motorists' behavior, there is no guarantee that consumer demand for these vehicles will remain constant or increase in the future.
  
• Varying economics of, and consumer demand for, E-85 – E-85 offers motorists lower fuel economy and fewer "miles per dollar" (as opposed to the more typical measure of "miles per gallon"). According to anecdotal evidence provided by existing marketers of E-85, if the retail price of E-85 rises above regular unleaded, their E-85 sales drop by between 70 to 80 percent. The best available evidence indicates that most motorists will buy E-85 only when its price is significantly lower than regular unleaded; given that recent ethanol prices have ranged between $2.50 to $3.00 per gallon (between 50 to 90 cents per gallon over the pre-tax wholesale price of gasoline), it has not been practical for E-85 retailers in most markets to price their E-85 below regular unleaded without losing substantial money on every gallon sold.
  
• Impact on small business marketers -- A mandate to install E-85 UST systems would fall disproportionately on small businesses, not major integrated oil companies. Over 70 percent of the convenience stores that sell gasoline are owned and operated by companies that operate fewer than 10 stores.  Thus, an E-85 retail mandate to spend more than $50,000 for a new UST system to market E-85 would fall disproportionately on these small business marketers.
  
• Impact on the federal budget -- The Energy Policy Act of 2005 authorized a tax credit for each retail facility that installs an E-85 tank and dispenser system up to a maximum of $30,000. If an E-85 retail mandate is adopted, even if only half of the nation's 167,000 gasoline retail facilities are covered by the mandate, the costs to industry would exceed $8 billion and the tax credit would cost the federal government over $2.5 billion.

Read the entire letter sent to Sen. Pete Domenici (R-NM), chairman of the Senate Energy and Natural Resources Committee; Sen. Jeff Bingaman (D-NM), ranking minority member on the Senate Energy and Natural Resources Committee; Sen. James Inhofe (R-OK), chairman of the Senate Environment and Public Works Committee; James Jeffords (I-VT), ranking minority member of the Senate Environment and Public Works Committee; Rep. Joe Barton (R-TX), chairman of the House Energy and Commerce Committee; and Rep. John Dingell (D-MI), ranking minority member of the House Energy and Commerce Committee.