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South Carolina Not So Business Friendly

June 23, 2008

By Jeffrey Sewell

Let us count the ways…

Last week we revealed the last minute cloak-and-dagger shenanigans the legislature engaged in to save oil marketers from their own business decisions by requiring oil companies to continue selling them ethanol-free gasoline.

The companies recently exercised their contractual rights to start providing the marketers with gasoline already mixed with ethanol because of a new federal law requiring oil companies to increase production of ethanol-mixed gasoline.  Companies previously sold marketers unblended gasoline and allowed them to add ethanol.

When we first broke this story, we opposed this amendment because it was added to a bill, S 1143, which deals with sales tax exemptions and therefore is unrelated to the subject of the bill.  That’s called bobtailing, and the courts have ruled that bobtailing is unconstitutional.

It turns out that this amendment is so ill-conceived that it violates the constitution in more than one way.  Let us count the ways.

Two of the state’s top business groups, the S. C. Manufacturers Alliance and the S. C. Business and Political Action Committee, are outraged over what the legislature did for a reason having nothing to do with bobtailing.

The business groups are concerned that the amendment essentially voids private contracts between oil companies and marketers. 

They say that would be a terrible precedent.  If this misdeed is allowed to stand, then any special interest with money and clout could slither out of contracts simply by asking the legislature to intervene.

Here’s how Tom Deloach, CEO and president of South Carolina BIPEC sees it: “BIPEC PAC’s analysis for more than 2 decades has been consistently that government’s interference in contractual relations of private parties is at best unwarranted and at worse unconstitutional.”

He’s right.  The marketers voluntarily signed contracts giving oil companies the option of selling them ethanol-mixed gasoline.  The companies chose to exercise that option because Congress has burdened them with the requirement of increasing the production of the product.  The marketers, pitching a hissy fit, dragged their legislative friends into smoke-filled rooms and demanded a fix.  THE FIX was in.

To his credit, Governor Sanford vetoed the bill.  The legislature will return to Columbia Wednesday to vote on an override.  If the legislature refuses to uphold the veto, lawsuits will fly.

  • A citizens’ lawsuit will challenge the unconstitutional bobtailing.
  • The oil companies will challenge the contractual interference.
  • Millions of taxpayers’ dollars will be spent defending the lawsuits.
  • The courts will declare the bill unconstitutional.

And South Carolina again will be embarrassed.  No one will be able to claim with a straight face that our state is “business-friendly” when the legislature has so brazenly tried to screw the business community.


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