NY Governor Signs Bill Prohibiting Exclusivity Contracts; Designed to Encourage Renewable Fuels Sales

1 August 2006

New York Governor George Pataki signed legislation that will prohibit the use of exclusivity contracts between fuel distributors and gas stations that have limited the availability of renewable fuels for consumer use in their vehicles.

The new law will exempt renewable fuels from the provisions of any future motor fuel franchise agreements between fuel providers and retail service stations. Under these 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 service stations are contractually prohibited from offering renewable fuels to their customers. With the Governor’s signing of this bill into law, future contracts cannot prohibit or discourage a service station from selling alternative fuels.

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.

—Governor Pataki

The new law applies to E85 (85% ethanol, 15% gasoline), biodiesel fuel, hydrogen, and compressed natural gas (CNG). Distributors who violate the law by entering into exclusivity contracts will be subject to a penalty of $1,000. If the distributor does offer renewable fuels, they are allowed, under franchise agreements, to require the stations to use their brands. The law takes effect immediately and applies to all subsequent franchise agreements.

There are an estimated 200,000 flex fuel vehicles registered in New York State, and automakers have announced their intentions to dramatically increase their production of these vehicles, which can run on E85 or gasoline. However, at the present time there are only a few services stations in the State where drivers can purchase renewable fuels.

A groundbreaking ceremony for the first E85 pump on the New York Thruway was held on 13 July at the New Baltimore Plaza south of Albany. The pump is expected to be operational this fall.