February 25, 2002

ETHANOL & MTBE KEY ISSUES IN CALIFORNIA & IN ENERGY BILL

There were developments last week on three fronts in the ongoing saga of what to do about MTBE and ethanol – at the SIGMA Board of Directors meeting, in California, and in negotiations over an energy bill in the Senate.

In California, a study by Stillwater Associates released at a California Energy Commission (CEC) workshop, says that the petroleum infrastructure in that state is not prepared for a switchover to ethanol, and recommends a 3-year delay in the planned ban on MTBE as of the end of this year Gov. Davis has not yet announced whether he will delay the ban, which he ordered in 1999. The report indicates that independents will be hurt more than anyone else if the ban goes forward while the oxygenate mandate is in place – which backs up SIGMA’s position.

Ethanol interests immediately challenged the report, suggesting that there was little likelihood the state would be ready for the transition in 3 years if they haven’t made preparations in the past 3 years since the ban was announced. Of course, this ignores that point that the intent of the ban was never to require ethanol; the state had expected to receive a waiver from the oxygenate mandate in federal RFG rules.

Meanwhile, in Washington, Senators who are key to the fuels debate in the energy bill have had their staffs hard at work in negotiations over those provisions. Sens. Daschle (D-SD), Bingaman (D-NM), Smith (R-NH), and Inhofe (R-OK) have formed subgroups of staff to meet separately with “stakeholders” to deal with different aspects of proposed legislation. Some major oil companies are among those who have been invited to participate in the discussions, but SIGMA has not been. The reason? Sen. Daschle insists there must be an ethanol mandate as part of the bill, and those invited to participate in the discussions are limited to those who either do support – or under the right circumstances could support – an ethanol mandate. It appears, therefore, that some oil companies are saying that under the right circumstances they will support an ethanol mandate – the “right circumstances” apparently being if their “price” is met in other parts of the bill.

SIGMA’s Board of Directors, meanwhile, reiterated our position that we are opposed to an ethanol (or “renewable fuel”) mandate in any form. The Board also voted to approve a recommendation from the Legislative Committee that SIGMA should seek en equalization of treatment between foreign and domestically-produced fuel ethanol.” Currently there are significant tariffs and other governmentally-imposed costs which make the import of foreign ethanol impractical. Our position is that, if ethanol is really good for the environment, we shouldn’t have punitive import duties on foreign ethanol in relation to domestic ethanol or in relation to foreign or domestic oil!

UST DEVELOPMENTS

SIGMA First Vice President Art DeBlois testifies today on behalf of SIGMA and NACS at a hearing on underground tank leaks. He will support effective enforcement of the rules, expanded uses of the federal LUST Trust Fund monies, and allowing federal funds to reimburse any tank owner subject to a state’s trust fund, regardless of financial condition . . . The head of EPA’s OUST, Cliff Rothenstein, says “over 100,000 tanks are still out of compliance, 150,000 need to be cleaned up, and another 200,000 are located on brownfield sites” waiting to be redeveloped . . . Since its inception in 1987, the Federal Lust Trust Fund has been allowed to spend only about 1/3 of its total income in taxes and interest in pursuit of the purposes those taxes were imposed.

BELOW-COST SELLING

SIGMA’s Board approved the following position at its meeting last week: “SIGMA’s traditional position has been that below cost legislation is a state issue. We have honored PMAA’s request not to take a new position on this issue until they gave us their bill, which we have now received. PMAA’s bill addresses one aspect of the marketing problems our members are facing. We are aggressively looking for our members’ opinion and input on this issue.” SIGMA continues to solicit your input – click here. In another development, Virginia’s proposed below-cost sales bill was defeated in committee last week. The Federal Trade Commission staff had sent a letter in opposition.

HAZMAT TRANSPORT

The DOT’s Federal Motor Carrier Safety Administration has visited 36,000 of about 39,000 hazardous materials carriers and driving schools since Sept. 11, working to heighten awareness of suspicious activity which should be reported to authorities. A report to Congress is expected in March, outlining a program to improve safety of trucks carrying hazmat .

SIGMA MAILINGS

You’ll be receiving in the mail this week the main promotional mailing for the Spring Convention in San Antonio, April 25-28. Be sure to read it right away – if you’re already registered, this is your first chance to sign up for the special events, and if you’re not registered you only have a short time to do so before the “late rates” will kick in!

We also remind you of recent mailings you need to act on:

SIGMA Statistical Survey (received by your company’s “key contact”) – due no later than March 15!

SIGMA Membership Directory Update (also received by your company’s “key contact”) – due now, but deadline extended until March 1.

“SIGMA Masters” Program in Baltimore, June 5-7, “Positioning Your Business for Growth & Succession: Getting Smart Enough, Early Enough.” The cutoff for Early Bird registration, with SUBSTANTIAL savings, is next Monday, March 4!

DRIVERS LICENSES

SIGMA’s Board of Directors endorsed a recommendation from the Legislative Committee, with a slight alteration, that “SIGMA supports legislation to require national standards for I.D. cards – usually drivers licenses – which would be machine readable by equipment at marketers’ retail outlets. There is currently a governmental task force working on such an effort, and NACS is representing retailers’ interests. SIGMA believes this could assist members in enforcing age-restricted product sales.

MISCELLANEOUS

Congress has been in recess this past week, but comes back today for a full month of work before the next recess. We expect energy legislation to be acted on in the Senate during this month . . . SIGMA’s Board of Directors voted to decline to participate in the funding of an effort to create a sub-class in retailer litigation against VISA/MasterCard . . . The U.S. Patent Office has re-evaluated Unocal’s so-called ‘393 patent for RFG (one of two such patents, the other being ‘126), and concluded that any refiner having ordinary skill in the art at the time of the “invention” would have been able to produce similar RFG. This was a preliminary proceeding which NPRA hailed as a “positive development,” but Unocal says they are confident their patents will be upheld.