August 2, 2006

New York prohibits exclusivity contracts to encourage renewable fuels

Albany, New York – New York governor George Pataki has signed legislation that will prohibit the use of “exclusivity” contracts between fuel distributors and gas stations that have limited the state’s availability of renewable fuels for consumer use.

The new law will exempt renewable fuels, such as E85 (85 per cent ethanol/15 per cent gasoline) from the provisions of any future agreements between fuel providers and retail service stations. Under exclusive agreements, service stations are not allowed to purchase or sell fuels from a source other than the main distributor. Since most major petroleum fuel distributors do not offer E85 or other renewable fuels in New York State, many stations are contractually prohibited from offering renewable fuels to customers. The new law means that future contracts cannot prohibit or discourage a service station from selling alternative fuels.

“Renewable fuels provide an opportunity for us to significantly reduce our dependence on imported petroleum, and this new law will help to increase the use of renewables by allowing service stations to sell these clean, homegrown fuels,” Pataki says. “The exclusivity agreements serve no purpose other than protecting the interests of fuel providers at the expense of motorists who want to use E85, biodiesel or other renewable fuels. This year, we have taken significant steps to increase the production and use of alternative fuels, and I am pleased to sign this bill to provide a viable alternative to high-priced gasoline.”

The new law applies to E85, biodiesel, hydrogen, and compressed natural gas (CNG). Distributors who violate the law by entering into exclusivity contracts will be subject to a penalty of US$1,000. If the distributor does offer renewable fuels, it is allowed under franchise agreements to require the stations to use its brands. There are an estimated 200,000 flexible fuel vehicles registered in New York State, but there are only a few service stations where drivers can purchase renewable fuels. The New York State Thruway Authority earlier announced plans, first proposed by Pataki, to install renewable fuel pumps at all 27 Thruway travel plazas. Groundbreaking for the first pump was held on July 13, 2006 near Albany, and is expected to be operational this fall.

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