EPAct 2005: What's in it for Marketers

Longtime SIGMA counsel Tim Columbus has a simple first test for any tax proposal that is floated by legislators in the House and the Senate: “How does it impact me?” After considering that first test and reaching a conclusion, Tim then moves on to consider how his clients will be impacted by the tax proposal.

A similar set of tests should be applied by independent marketers to the “Energy Policy Act of 2005” (EPAct 2005), the massive national energy policy legislation passed by Congress in late July and signed into law by President Bush in August. By asking first “How does it impact me and my company?” and then asking “How does it impact the industry as a whole?,” marketers can assess whether EPAct 2005 ultimately will have a positive or negative impact on independent motor fuel marketers.

SIGMA’s Priorities
SIGMA’s Legislative Committee and Board of Directors in 2001 established a set of legislative goals for the energy legislation that Congress was just then beginning to consider. Those goals were as follows: (1) to increase overall gasoline and diesel fuel supplies; (2) to reduce the number of boutique fuels mandated across the nation; (3) to repeal the federal reformulated gasoline (RFG) oxygenate mandate and to oppose new mandates; (4) to provide for the orderly phase-out of MTBE as a motor fuel additive; and, (5) to provide for significant reform of the federal Leaking Underground Storage Tank (LUST) Trust Fund and to increase annual appropriations from the Fund. In 2003, SIGMA’s Board added a sixth goal to this list — (6) to secure an MTBE “safe harbor” from defective product lawsuits.

This article’s quick review of relevant provisions of EPAct 2005 reveals that SIGMA’s government relations efforts — which starts with the active involvement of member company executives, continues with SIGMA’s Summer Legislative Conference each year, is augmented by the Association’s “Grasstops” program and SIGMAPAC, and is guided by the Legislative Committee and executed by SIGMA counsel — secured some, but not all, of these priorities in the new energy bill.

Increase Supply
This priority is broad and vague, but it is a key to SIGMA’s approach to every legislative issue on Capitol Hill — how will a proposal impact overall supplies to motor fuels? With respect to this priority, EPAct 2005 contains (or doesn’t contain) the following provisions that should lead to increased supply and will increase marketer flexibility to respond to supply disruptions or shortages:

Tax breaks for domestic refineries to expand capacity;

No restraints on imports of finished products, despite the tendency of some on Capitol Hill to see “reduction in dependence on foreign oil” and protection of domestic companies as a primary goal of an energy bill;

Repeal of RFG program’s oxygenate mandate (see more discussion below); and,

Limited authority for retailers to blend compliant RFGs during the summer months in the case of temporary supply disruptions. EPAct 2005 also contains provisions that will likely harm overall supplies of motor fuels:

The seasonal use mandate of the Renewable Fuels Standard (RFS), which may reduce supply by requiring the use of ethanol and biodiesel during the summer months;