Tuesday, August 08, 2006

Minimum Markup Mischief

This afternoon, Governor Doyle announced that he would be directing the state not to enforce the minimum markup law on gasoline "blended" with ethanol. As you know, the minimum markup law mandates that "motor vehicle fuel" be sold at the pump at a certain price above what it cost the retailer, which automatically makes it more expensive for the consumer.

The idea behind the law is that it protects small gas stations from competition from large retailers, who can afford to sell gas cheaper. Instead, all the law guarantees is that you will be paying about 30 cents per gallon more than you would otherwise. A bill eliminating the law was unfortunately defeated this session in the State Legislature. Ethanol producers believe that the law shouldn't apply to ethanol, despite state law requiring a 9.18% markup on "motor vehicle fuel," which pretty clearly applies to ethanol.

I actually support Doyle if he's serious about getting rid of minimum markup. This is a good move for him, as it will likely win support from a lot of people who were harshly critical of the bill mandating 10% ethanol in gas sold statewide that was defeated this session. However, despite my own personal support for Doyle's suspension of the law today, his actions raise some significant questions.

If Doyle asserts, as he did today, that the Governor has the ability to capriciously and unilaterally "refuse to enforce" the minimum markup law, why did he wait until now to do it? If he could have done this all along, why have we been paying 30 cents per gallon extra for the last couple of years while he did nothing? If he could really do this, what took so long?

This is made all the more appalling by Doyle's anti-oil company rhetoric this year. During the same time that he has been setting up phony petition websites and calling for limits on oil company profits, he "allowed" a law that mandated these profits to continue to stand. If Doyle truly has the ability to suspend enforcement of the law on August 8th, why didn't he have the ability to suspend it on January 1? If he could have ordered the suspension then, isn't it reasonable to ask him why he decided to let gas cost so much this summer? How much extra did you pay because Doyle was slow to act?

And assuming, again, that Doyle can just "suspend" statutes, why did he only choose to refuse enforcement of this statute when the ethanol industry came calling? Why wasn't it worth suspending when you were paying a lot for gas, but it was worth ignoring when the ethanol boys complained?

The other explanation, of course, is that Doyle actually doesn't have the authority to suspend enforcement of the statute. This would be entirely consistent with some of Doyle's previous actions to ignore the Legislature and the laws it passes. Apparently, Doyle doesn't agree that the Legislaure should have any say in whether he wants to turn Wisconsin in "Vegas East" when he negotiates casino compacts with the Indian tribes. He doesn't think there are any limits on the use of his expansive veto authority, which he used to transfer $400 million in the budget to a purpose for which the Legislature never intended. And he even tried to unilaterally raise the state's minimum wage by directing the Department of Workforce Development to do so. The first two examples, incidentally, are positions Doyle changed once he took office.

Once Doyle asserts that he can just suspend laws that are passed by the Legislature, what's next? Can he suspend enforcement of school district property tax caps when the teachers' union needs a favor? When Mark Green is elected governor, can I call him up and ask him to suspend laws that would inhibit my burgeoning pimpin' business? (Public stock available soon.)

What the effect of this law "suspension" will be isn't exactly clear. Presumably, Doyle rushed his press release out in response to this article to cash in on good press. The release first says that minimum markup will be lifted for "ethanol based fuel," which one could presume is E-85 (85%) ethanol fuel. But in the same sentence, he mentions there won't be any enforcement on "ethanol blended fuel," which would indicate E-10, or 10% ethanol, fuel.

If E-10 is indeed included in the exemption, this constitutes a massive policy change. Gas stations all over the state would be crazy not to carry E-10, as they now would get the benefit of not having to comply with the minimum markup law on their gas. So while the Legislature killed a bill mandating all the state's gas be E-10, this change may have the effect of doing just that. All the gas in Southeast Wisconsin is already 10% ethanol due to the non-attainment status imposed by the EPA. So if Doyle wants to exempt ethanol "blended" fuel, the entire Milwaukee area is immediately exempt.

I suspect Doyle waited until now to "suspend" this statute because nobody actually believes he has the authority to do so. It's just too bad he decided to make this bold move to mollify a group of ethanol producers and not Wisconsin's citizens, who have been paying artificially high prices for years.

UPDATE: I realize my argument hinges on the fact that ethanol is covered by the minimum markup law. So, for clarification:

"Motor vehicle fuel" is defined in statute as "gasoline or diesel fuel."

"Gasoline" is defined as (my emphasis):

"gasoline, casing head or natural gasoline, benzol, benzine, naphtha, and any blend stock or additive that is sold for blending with gasoline other than products typically sold in containers of less than 5 gallons. "Gasoline " includes a liquid prepared, advertised, offered for sale, sold for use as, or used in the generation of power for the propulsion of a motor vehicle, including a product obtained by blending together any one or more products of petroleum, with or without another product, and regardless of the original character of the petroleum products blended, if the product obtained by the blending is capable of use in the generation of power for the propulsion of a motor vehicle. "Gasoline " also includes transmix. " Gasoline " does not include diesel fuel, commercial or industrial naphthas or solvents manufactured, imported, received, stored, distributed or sold for exclusive use other than as a fuel for a motor vehicle.

So it seems perfectly reasonable that the Department of Agriculture, Trade, and Consumer Protection would think minimum markup applies to ethanol. That is, until Doyle needed a press release saying otherwise.