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The Honolulu Advertiser
Posted on: Monday, April 2, 2007

Fuel mandates create problems, not solutions

By Joe Sparano

Rep. Colleen Meyer's recent letter (March 11) on ethanol-blended gasoline highlights a clear example of the law of unintended consequences. This phenomenon reflects a particularly onerous problem when it involves critical transportation fuel supplies.

When Hawai'i's Legislature mandated that gasoline in the state be blended with ethanol, it set in motion a chain of events that is today affecting boat, small-aircraft and small-equipment owners. We now know that ethanol in gasoline can cause damage to the tanks and equipment of certain boats, experimental aircraft and small engines like those used in lawn mowers.

While it's possible that no one saw this problem coming when the law was adopted more than 10 years ago, it is now readily apparent that the often-repeated warning regarding tampering with complex markets and global supply chains is true. It almost always ends up causing unintended negative consequences for consumers.

Now, some legislators such as Rep. Meyer are proposing another mandate on fuel providers in a misguided attempt to fix the problem. In particular, House Bill 791 would prohibit ethanol from being added to premium gasoline in the state.

Adding an additional mandate onto fuel providers is the wrong way to fix a problem created by ill-advised mandates. Specifically, requiring fuel providers to produce and supply both ethanol-blended gasoline and nonethanol gas presents some potentially costly and very complex logistical problems for refiners, some distributors and retailers.

Refining crude oil into gasoline, diesel, jet fuel and other useful products is a very complex process. Producing a gasoline that cannot later be blended with ethanol could require significant changes to the refinery process.

In addition, trying to manufacture gasoline that will be blended with ethanol, along with gasoline that won't and distributing the two different products to the same set of retail outlets could present some extremely challenging problems for the state's petroleum industry.

Gasoline containing ethanol cannot be transported, stored or otherwise commingled with non-ethanol gas. That means the state's existing transportation fuel infrastructure pipelines, storage tanks, fuel terminals, trucks and service stations would have to constantly alternate between the two types of fuel.

Talk about the potential for unforeseen consequences.

According to news reports, the market already is moving, without another mandate, to help solve the problems created for boat, aircraft and small equipment owners. At least one fuel provider is beginning to make nonethanol blended fuel available on the islands of O'ahu and Hawai'i. Furthermore, non-ethanol fuel is also already available on Moloka'i and Lana'i. If there is a market for this product, other fuel providers may follow.

We sympathize with boat, aircraft and small engine users who have been inconvenienced by Hawai'i's mandate on ethanol-blended fuel. But it is important to note that federal law already prohibits the use of ethanol-blended fuel in small aircraft. To suggest the presence of ethanol in gasoline is a critical public safety issue is a mischaracterization of the situation.

Furthermore, aviation gasoline called Avgas 100 is currently available at airports throughout Hawai'i. This gasoline does not contain ethanol and is the standard fuel for aircraft powered by piston or rotary engines.

It seems unreasonable to impose another and potentially harmful mandate on all the consumers of Hawai'i to accommodate a small number of aircraft owners who appear to have viable alternatives at their disposal.

The U.S. Environmental Protection Agency has noted that local or regional specialty fuel requirements can create significant problems for the marketplace when supply issues emerge. And those problems, the EPA said, can translate to higher prices for consumers.

The Federal Trade Commission, Hawai'i's own experts, and numerous economists have commented on the heavy layer of regulations and mandates that affect Hawai'i's costs and hurt consumers. They have concluded the complex layers of state laws and regulations that distort the marketplace and discourage competition have been major contributors to the state's higher gasoline prices.

We all can and should learn from this unfortunate example of the law of unintended consequences. Imposing yet another mandate on this already-burdened market is surely not the answer. In fact, it would be more accurate to say mandates are the problem.

Joe Sparano is president of the Western States Petroleum Association, a nonprofit trade organization representing the petroleum industry in Hawai'i and five other states.