January 21, 2002

SIGMA’S LEGISLATIVE COMMITTEE RECOMMENDS 3 POSITIONS

Meeting in Denver last Friday, SIGMA’s Legislative Committee approved three recommended positions for consideration by the Board of Directors. The Board will be meeting in February.

ETHANOL

The energy bill to be taken up by the Senate in the first couple of weeks of February contains a renewable fuels mandate – effectively an ethanol mandate. The committee suggested that, if there is to be an ethanol mandate, SIGMA should take the position that there should be equal treatment between domestically-produced ethanol and imported ethanol. At present, there are quotas and tariffs on imported ethanol, and there is a question of whether imported ethanol qualifies for the same tax credits as domestic ethanol.

Separately, in response to a member’s inquiry, it was felt that SIGMA would support repeal of any ethanol labeling laws. This would be consistent with our overall position that labeling requirements should be limited to those factors which have a bearing on mechanical requirements of engines, such as octane.

BELOW-COST SELLING LAWS

The Legislative Committee recommends a four-part position on below-cost selling laws. SIGMA should take no position at this time on the subject of Federal legislation dealing with below-cost selling. SIGMA should reaffirm that below-cost-selling laws are primarily a state issue. SIGMA should concentrate its efforts currently on price inversion legislation similar to H.R. 2966, the bill aimed at such practices which was brought before Congress in the early 1990's. Finally, that SIGMA should remain open to the possibility of taking a position on Federal below-cost selling legislation if and when a specific bill is proposed.

NATIONAL I.D. CARDS

Congress is considering legislation to require national I.D. cards, as a means of preventing driver’s license fraud, which in turn is part of the battle against terrorism. The Legislative Committee recommends that SIGMA support such legislation, in the belief that it will assist marketers in enforcing and complying with laws governing age-restricted sales.

RFG TRANSITION ISSUES

EPA continues to grapple with proposed changes to the winter-to-summer transition rules for RFG. One item still under consideration is to eliminate the May 1 terminal compliance deadline – something SIGMA has expressed grave concerns about. Last week, in response to an EPA request, we were able to demonstrate the problem. Using data from our annual Statistical Report, we were able to show that, while unleaded regular grade poses relatively few transition problems under that scenario, volumes of midgrade and premium are such that a substantial number of stations – perhaps half or more – would have difficulty turning their tanks to come fully into compliance by June 1 if they were still receiving product which did not meet summertime specs after May 1. Incidentally, you will be receiving your Statistical Survey form in a couple of weeks. When it arrives, please complete it promptly. The information is extremely helpful as we try to represent your interests in Washington.

CONGRESS TO RECONVENE

Congress, which has been in recess since just before Christmas, is scheduled to reconvene this Wednesday. The Senate will take up the farm bill first, and then energy legislation the first or second week of February. Key issues for SIGMA in the energy bill are MTBE phase-out, plus the appearance of growing support for some kind of an ethanol (renewable fuel) mandate. Daschle has promised action on the energy bill before the next Congressional recess, which begins Feb. 18. It is still questionable whether that can be accomplished, as many forces are now aligned that would prefer to see no action rather than action which they oppose. If the Senate does pass a bill, it will be very different from the House-passed legislation, which would require massive compromises to iron out the differences. Senate Democrats may be content to pass a bill which cannot be reconciled with the House – providing them political cover but solving nothing.

FINCEN "SUSPICIOUS ACTIVITY"

As you know, as of December 31, 2001, certain "Money Services Businesses" ("MSBs") are required to register with the Department of the Treasury’s Financial Crimes Enforcement Network ("FinCEN"). Most convenience stores are considered MSBs because of the check-cashing or money order services they provide; however, the vast majority of SIGMA members are not required to register with FinCEN, either because they serve only as agents of other MSBs (such as American Express and Western Union), or because they do not meet the daily monetary threshold (i.e., providing money services of at least $1,000 per person per day).

At the same time, FinCEN has announced that, as of January 1, 2002, all MSBs, whether or not they are required to register, must file Suspicious Activity Reports ("SARs") with FinCEN if employees notice suspicious behavior that could indicate money laundering or other potentially illegal activity. SAR forms must be filed within 30 days of the suspicious activity. (SIGMA has published a compliance manual that provides guidance on the registration and reporting requirements).

FinCEN recently published a new, interim SAR report form (No. TD F 90-22.47), which has been tailored to meet the needs of MSBs. (The previous SAR report was created for other types of financial institutions, such as banks.) Both the interim report form and preparation instructions are available in the "What’s New" section of FinCEN’s MSB web site at www.msb.gov.

FinCEN notes that it is undertaking a comprehensive outreach program aimed at helping MSBs comply with the new registration and reporting requirements. The Agency has announced that it also plans to provide MSBs with the opportunity to order or download free educational materials, including an information packet, a poster, and a training brochure in the near future. Plans are underway to continue education and outreach efforts over the course of the next year.

If you have any questions about the MSB registration or SAR reporting requirements, please contact Tim Columbus at (202) 342-8555.

TANK LEGISLATION

SIGMA will be joining with other marketing groups in a meeting with EPA this Friday to discuss the Chafee bill on underground storage tanks. Among other provisions, the bill would mandate minimum standards for state enforcement of tank rules, would push for more effective enforcement of tank rules against government-owned tanks, and would allow funds from the Federal LUST Trust Fund to be used by the states for enforcement purposes.

TERRORISM INSURANCE

As insurance policies for businesses renew, reports suggest that rates are increasing anywhere from 10 to 100 percent, with the highest increases being for larger accounts, for commercial property and umbrella insurance, and for high-profile properties in high density locations, particularly New York and Washington. On January 8, the Bush Administration contacted insurance industry leaders and urged them to offer Congress hard evidence of the need to pass a federal backstop for terrorism coverage. Everyone wants to be sure the problems and the solution are real, and not just a ruse that will help the insurance industry make a lot of money.

PHILLIPS-CONOCO MERGER

Last week, Phillips Petroleum Co. said it had received a request from the FTC for additional information and documentation related to its proposed merger with Conoco. The merger is expected to be finalized in the second half of 2002, pending regulatory and shareholder approvals.

SIGMA ANNUAL MEETING

Mark your calendar for the SIGMA Annual Meeting, Nov. 7-9 in Chicago, IL. If you have an OPIS calendar, please mark that as a correction.