August 6, 2001

TRIBAL TAX EVASION BILL INTRODUCED IN CONGRESS

Late last Thursday, just before the House of Representatives recessed for the month of August, Rep. Don Young (R-AK) introduced a bill to deal with the problem of tribal evasion of sales and excise taxes on tobacco and motor fuel sales. The bill, H.R. 2726, is "The Tribal-State Tax Fairness Act of 2001".

The Coalition Against Sales and Excise Tax Evasion (CASETE), of which SIGMA is a founding member, expressed its delight at the development. Rep. Young's bill contains many of the provisions in draft legislation CASETE has been circulating on Capitol Hill. It would provide a mechanism for federal involvement in collection of the appropriate state and local taxes when Indian tribes and triballyowned or controlled businesses make taxable sales to consumers who are not members of the tribe.

Other founding members of CASETE are NACS, NATSO,and PMAA. Numerous state petroleum marketing and ostore associations have joined CASETE, as have national groups representing grocers and other retailers. For a copy of the bill, go to http://thomas.loc.gov and type in "H.R.2726" in the bill number space. The bill was not yet posted as of our press deadline, but should be available in the early part of this week.

Action on this bill will not begin until after the August recess (and probably not immediately then). So now would be an excellent time to meet with your Congressmen and urge them to support the bill. As Dawn Carlson, vice president of Petroleum Marketers & Convenience Stores of Iowa put it in a CASETE news release, Retailers cannot compete against tribal businesses that are aggressively marketing tax-free fuel. The entire convenience store and petroleum marketing industry must rally behind this legislation."

FTC CONFERENCE ON MOTOR FUEL PRICES; SIGMA TESTIFIES

Last Thursday, the Federal Trade Commission (FTC) held a conference on "Factors that Affect Prices of Refined Petroleum Products" in Washington. SIGMA attorney Tim Columbus testified on behalf of SIGMA at the session. In his prepared comments, he said what SIGMA has been saying for some time: that the recent volatility is due to a combination of factors including high demand, increased concentration in the refining industry, high refiner investment costs for complying with environmental regulations (leading to fewer refineries than otherwise), isolation of the U.S. market from foreign supply, and the loss of fungibilitv of fuels due to balkanization and the creation of boutique fuel areas.

As for specific recommendations to the FTC, SIGMA made two. The first was to urge continuing efforts to better understand the motor fuel marketplace, and thus to better understand the reasons for motor fuel price volatility. Beyond that, SIGMA urged that the FTC re-examine its traditional methods of analyzing proposed refining industry mergers and the remedies the FTC historically sought. We urged that the FTC examine the impact of any proposed merger on unbranded motor fuel supply in a market, and to look for innovative remedies to lessen any negative impact on unbranded supply.

The basis for that last point was made by Tim Columbus in his prepared statement, pointing to the fact that private brand marketers have historically been the low cost and low price marketers. His point was substantiated by another speaker at the conference, economist Justine Hastings, an assistant professor at Dartmouth. She presented a paper outlining a study of the California market, which showed a clear and favorable relationship between the presence of private brand marketers and low overall gasoline prices in an area.

During questioning, Columbus made another suggestion to the FTC that would help independent marketers: give us some help in dealing with MasterCard and Visa. Given the cost structure of the industry, he noted, there is no logical explanation of why fees paid by marketers are so high, other than raw market power by MasterCard and Visa.

HOUSE PASSES ENERGY BILL; SENATE BEGINS ACTION

Last Wednesday night (actually, early Thursday morning) the House of Representatives approved H.R. 4, the "Secure America's Future Energy Act of 2001". This was the "omnibill" we have previously reported, rolling together legislation that had been reported out by 4 different committees. The vote was 240 to 189, with most Republicans and a few Democrats in favor.

During debate, several amendments were offered. An attempt was made by Reps. Markey (D-MA) and Johnson (RCT) to delete a provision allowing for oil exploration in the Arctic National Wildlife Refuge (ANWR), which was defeated 206 to 223. An amendment to limit ANWR exploration to 2,000 surface acres, by Reps. Sununu (RNH) and Wilson (R-NM) was approved 228 to 201. An effort to force an increase in fuel efficiency of light trucks and SUVs from the current 23.5 mpg CAFE standard to 27.5 mop, by Reps. Markey (D-MA) and Boehlert (R-NY) was soundly defeated 160 to 269.

An amendment supported by SIGMA, to grant the California waiver from oxygenates in RFG, was also soundly defeated. Offered by Reps. Waxman (D-CA) and Cox (RCA), it lost 125 to 300. Although we supported it, we knew from the outset it was a "lost cause". An effort to grant such a waiver to all states would have picked up more support (i.e., from northeastern Congressmen), but was not offered.

In a surprise move, a "managers amendment" was introduced by Rep. Tauzin (R-LA) at the beginning of the debate, which was adopted. It requires the Dept. of Energy and EPA to study the idea of modifications to the motor fuel excise tax rates as a way of promoting cleaner-burning fuels in regard to boutique fuels. SIGMA does not vet have a position on this proposal. While our members generally support incentives rather than mandates, there is also a longstanding concern about actions which might open the door to tax cheating.

The bill also has added a new provision to allow up to $200 million to be spent from the LUST Trust Fund for "inspection of UST systems" and groundwater monitoring relative to MTBE, over and above the normal annual appropriation from the LUST fund. While SIGMA didn't oppose the provision, we are concerned at its imprecise language, and have suggested that the bill passed twice by the House in previous years, which has the support of all marketing groups, would be a better approach.

SIGMA is, of course, supportive of the overall bill passed by the House. It contains nothing we opposed (with the possible exception noted above), and two provisions we pushed for strongly: a study of boutique fuels, and $153 million in tax breaks for small refiners to upgrade for making ultralow-sulfur diesel (including our expanded definition of "small refiner".)

The Senate Energy and Natural Resources Committee began markup of energy legislation on Aug. 1 and 2. However, the only issues covered were conservation and some research/development items. Nothing controversial was taken up, and won't be until after the August recess.

MORE EPA NEWS

California's environmental protection agency is considering a variety of options to deal with EPA's denial of its waiver from the RFG oxygenate mandate, including possibly a judicial challenge.

The Senate Environment and Public Works Committee has voted to approve 5 nominees for senior positions at EPA The positions are assistant administrators for the offices of Water, Air and Radiation, and International Activities, as well as head of the enforcement office and general counsel. Only Donald Schregardus of Ohio, the enforcement nominee, drew any negative votes.

Last Monday, the House approved the EPA spending bill for next fiscal year, and on Thursday the Senate passed its counterpart bill. The House version included an amendment by Rep Capps (D-CA) to increase regular funding from the LUST Trust Fund by $7.2 million, to $79.2 million. The Senate version is still at $72 million, so the difference will have to be worked out in a conference committee.

Finally from EPA, in testimony on Aug. 1 before the Sen. Environment and Public Works Committee, Acting Asst. Administrator for Air And Radiation Rob Brenner made clear that EPA will NOT use an advisory committee to review the benefits of its diesel sulfur rule, but it WILL convene such a panel to monitor progress by refiners in moving toward the goal and to assess the availability of the necessary equipment. SIGMA is working with EPA, other stakeholders, and Congressional contacts to ensure marketers will be represented on that advisory committee.

RSPA HAZMAT ISSUES

The Dept. of Transportation's RSPA agency has extended until the end of Nov. the comment period for its proposed rule defining "transportation in commerce" for purposes of hazardous materials transport rules. Separately, the Senate has approved a budget for RSPA that is $15 million more than the House approved. Two-thirds of the increase is for pipeline safety.