Rent Seeking Begets More Rent Seeking

The EPA recently approved a 50% increase in ethanol blends for cars manufactured after 2006, moving from E10 to E15. This means that gas stations are now free to offer E15 as well as E10 as options at the pump. It isn’t likely that many gas stations will be taking advantage of these new rules for a number of reasons.

One important issue is that the EPA has not made it clear who will be liable for consumers who damage their automobiles by using higher blends of ethanol that aren’t appropriate for their vehicle. Automobile manufacturers are worried that they will be held liable through warranties and required to repair engines, retailers share the same concern.

The EPA has not provided sufficient details on these liability issues, despite the E15 approval:

“The EPA said in its proposed E15 label rule that it would not typically hold a fuel retailer liable for customer misfueling into any vehicle, engine or piece of equipment, provided that the station’s pumps were properly labeled. That does little to comfort retail fuel groups such as NACS, which claim that the Clean Air Act includes a provision that allows for citizens to sue retailers for misfuelings. NACS said it is concerned that misfuelings could be both accidental and intentional, and labels may not provide them with enough litigation protection. “

It is funny to see the ethanol industry so frustrated by these burdensome government-imposed regulations, while they ignore the reality that government support of their industry is the basis for much of their revenue in the first place.

In response to problems stemming from confusion at the pump, the National Association of Convenience Stores offered up a brilliant solution: “The easiest way to remedy the situation is to mandate that everything’s full-serve, that you do not allow the customer to have the opportunity to misfuel, either deliberately or unintentionally,” said NACS spokesman Jeff Lenard.

I’m surprised he didn’t mention that it would create millions of green low paying jobs. Mandating full service pumps would benefit large incumbent gasoline franchises at the expense of smaller stations. This was certainly the case in New Jersey (where full-service stations are required), whose gasoline stations were closely involved in overturning propositions to strike down these laws.