February 4, 2002

WINTER-TO-SUMMER RFG TRANSITION RULES STILL PENDING

SIGMA and other industry groups had urged EPA to finalize any changes to the 2002 winter-to-summer RFG transition rules no later than February 1, in order to give refiners and the markets ample time to comply. That target date was not met by EPA. We understand the “final rule” has been held up in processing, and won’t be announced until sometime this week.

While we are disappointed that the Feb. 1 date wasn’t met, slippage of a few days probably won’t make a lot of difference. This will be particularly true if EPA ends up making only relatively minor changes to the rules. While it is more important that EPA “get it right” than meet an artificial deadline, we hope EPA understands that industry needs planning time to comply with even “favorable” rules.

BOUTIQUE FUELS

Last Thursday, SIGMA submitted our formal comments on EPA’s “White Paper” on boutique fuels. EPA’s document, released last fall, outlined a number of possible options for reducing the number of unique fuel formulations required in specific geographic areas. SIGMA did not offer an opinion as to which of the various options was preferable; instead, we emphasized our desire for greater fungibility of fuel while not decreasing supply. We did, however, take issue with three “assumptions” EPA made in its White Paper:

EPA claims that, except in extraordinary circumstances such as a pipeline closure, the current system of boutique fuels works well. SIGMA said that, in reality, there are almost always some “extraordinary circumstances” going on; that problems are the norm rather than the exception.

EPA assumes that there will be some form of a renewable fuels mandate in developing its options. SIGMA pointed out that there is no environmental need for such a mandate, and took EPA to task for including a political assumption in what was supposed to be an analytic document about fuel options for clean air purposes.

After outlining the options, EPA then said that, in essence, “no matter what we do, states will be free to come up with their own fuel formulations.” SIGMA told EPA that, without preemption of state fuel mandates, the whole exercise by EPA was pointless. If EPA thinks it would require action by Congress to give them the power to override the states, we urged them to do so.

It is unclear what the next step by EPA will be in the area of boutique fuels. But we are hopeful that EPA will continue to pursue the issue over the coming months. The proliferation of area-specific gasolines contributes to supply shortages.

DIESEL ADVISORY PANEL

EPA will be naming an advisory panel on ultra-low-sulfur diesel in late winter or early spring. Known as a “FACA” (after the Federal Advisory Committee Act), the panel is supposed to include representatives from private industries affected by the rules in question.

EPA has indicated that it will reserve one seat on this panel for a marketer representative. SIGMA has joined with PMAA, NATSO, and NACS in nominating Alan Wright of Pilot Oil Corp. for that slot. Pilot is a member of all four organizations and is the largest retailer of diesel fuel in the nation. Alan is very knowledgeable about the issues of supply and distribution that are marketers’ concerns with the rule.

The FACA will focus in two primary areas. First, it will look at feasibility issues – what progress has been made by refiners and engine manufacturers in developing the systems that were envisioned when the rule was promulgated? Secondly, it will look at the implementation issues which EPA still has to address in future rulemaking – issues such as nozzle sizes for different distillates, misfueling liability, contamination, testing, etc. It is expected to begin meeting sometime this spring.

IMPORTANT SIGMA MAILINGS

Within the past ten days, you should have received two important mailings from SIGMA: an early promotion of our Spring Convention (mailed in a Strasburger Enterprises envelope) and our annual Directory Update mailing (to the “key contact” in your company only). In the next few days, Regular Member “key contacts” will also receive our annual Statistical Survey mailing.

ACTION IN CONGRESS

The Senate is currently debating an economic stimulus package. While it contains a number of issues pertinent to business in general, the one most specific to SIGMA members is SOT repeal (see story below). Once action on economic stimulus is done, the Senate will take up the farm bill, and then energy legislation.

It looks increasingly likely that energy won’t come up until after the Presidents Day recess. At this point, SIGMA lobbyists are working through specific members to target key Senators on issues of concern to us. We and our allies are working to remove the ethanol mandate (called a “renewable fuels” mandate) from the bill. We are also working to be sure the Senate includes a small refiner tax credit for environmental upgrades similar to what the House adopted. (It is rumored that the Senate Finance Committee will be working on a tax title for the energy bill this week, but that is now considered likely to slip back a week or more.)

SOT TAX REPEAL

Sen. Enzi (R-WY) is introducing an amendment to include repeal of the Special Occupational Tax (SOT) in the economic stimulus package now before the Senate. That tax, which was originally established to generate revenue for the Civil War, requires businesses to pay $250 per year for every location that sells beer, wine or spirits.

NACS, which is leading the charge on this issue, has asked its members to write to Senators urging support for this repeal. If you could join in that effort, it would be most helpful. For an appropriate sample letter, click here, enter your zip code, press “go”, and then select “Senate: SOT Repeal”. Be sure to personalize the letter with data pertinent to your operations, and add your own points as appropriate. Thanks!

HAZMAT DRIVERS

Under the USA Patriot Act passed by Congress last fall, an FBI background check and DOT security risk assessment are required before state issuance of a commercial drivers license with HAZMAT endorsement. However, the law specifies that the rules implementing this requirement are to be adopted by DOT, and while DOT is moving forward with the rules, they aren’t in place yet. Until the rule is finalized (expected by April 30), this leaves matters in the hands of the states, which are reacting in different ways. There is also legislation pending in Congress to clarify the requirement. Stay tuned...

MISCELLANEOUS TIDBITS

The U.S. Geological Survey has issued a report that says MTBE is likely to be found in urban drinking water sources, but at levels below EPA’s recommended maximum level of 20 parts per billion. It was found 4 times more frequently in reformulated gasoline (RFG) areas than elsewhere in the country . . . For helpful information on compliance with OSHA’s new recordkeeping rule, a new publication is available from the osha website. Click here, then click on “News Room”, then select “News Releases and Statements”. Select “January 2002", then find the January 17 “Trade News Release” entitled “OSHA Offers Five New Publications.” The first one listed in that news release is the one you want . . . Trucking companies are facing huge increases in insurance premiums, particularly for umbrella coverage. Pre-9/11, hazmat haulers were facing 90% increases, while post-9/11 they averaged 159% increases. Primary insurance rates for the year were up 36% in 2001, with 47% increases after 9/11 and 31% increases prior to that date.