April 1, 2002

ENERGY BILL GENERATES CONTROVERSY; CALL SENATORS!

Congress was in recess last week and remains in recess this week. When they return the week of April 8, the Senate will again take up the pending energy bill, with a goal of completing Senate action either that week or the following week at the latest. That means that this week, while most Senators are in their home state offices, is your last best chance to have an impact on the legislation.

SIGMA continues to oppose the proposed 5-billion-gallon ethanol mandate in the Senate version of the bill, and that is what we are asking you to contact your Senators about. Ask them to oppose the “Renewable Fuels Standard”, and support any amendments to remove it from the bill or to reduce the amount of interference with free market forces. Phone, fax, or e-mail your comments; due to the anthrax scare, regular mail isn’t getting to Congress on a timely basis.

Sen. Feinstein (D-CA) has indicated she will introduce amendments to modify the ethanol mandate in the bill. Her proposal will reportedly delay the mandate by one year, and reduce the amount of renewable fuel required in the early years. SIGMA will not oppose this amendment, but we think it doesn’t go nearly far enough and are working with other Senators to put together some stronger amendments.

At its meeting last week, the National Petrochemical and Refiners Assn. (NPRA) reportedly to a strong stand against the ethanol mandate. We will be looking to work with them in our opposition.

Meanwhile, a number of environmental groups are now making noises that they may organize to try to kill the overall energy bill. Their concerns are quite different from those of SIGMA and NPRA, but the end result of killing the legislation is something that might be the best outcome, unless the problem with the ethanol mandate can be overcome.

OZONE/PM RULE UPHELD

Based on a court decision last week, many more areas will be classified as non-attainment areas for ozone and for PM2.5 (small particulate matter). Back in 1997, EPA had proposed changing the way ozone pollution is measured. At the same time, it proposed to regulate PM2.5 (previously it had regulated PM10). But those new standards were challenged in court and have been blocked until now. Last year, the Supreme Court upheld Congress’s authority to delegate to EPA the issue of setting new standards, but left it to a lower court to determine if EPA had overstepped its authority. A 3-judge panel of the DC Circuit Court of Appeals has now ruled EPA did not overreach.

There are still a number of issues to be settled before the new standard will be implemented, with a few of those issues still before the courts. For the most part, though, it looks like the new ozone and PM standards will go forward – the only question now is how they will be implemented, not whether. Over the coming years, expect to see more areas required to implement Stage II Vapor Recovery, RFG, or other programs to reduce summertime smog.

TANK LEAK EXPENSES DENIED

A federal appeals court has ruled, in a case from North Carolina, that providing bottled water to third parties whose wells have been contaminated by a petroleum leak from an underground tank does NOT qualify as a “cleanup cost”. Instead, it is “compensation to a third party”. The issue was important because, under North Carolina’s tank trust fund, the deductible for compensation to third parties is $100,000, whereas the deductible for cleanup costs is only $20,000.

The court relied in part on specific language in the North Carolina statue. However, they also pointed out that, absent that language, they would still hold that bottled water is not a cleanup cost, but rather is compensation to a third party.

CONVENTION REGISTRATION

Registration for the SIGMA Spring Convention in San Antonio later this month now stands at 440, with the final number expected to exceed 500. Are YOU registered yet? Have your hotel room? Don’t delay – act today!

CALIFORNIA MTBE BAN

The head of California’s EPA has said that the state may have to delay even further the effective date of the ban on MTBE in gasoline. The ban was supposed to take effect the end of this year, but Gov. Davis (D) has now delayed that date by one full year. A consultant had recommended a delay until Nov. 2005 (almost three years delay), but that was rejected by Davis.

The reason for possible further delays? Concerns about the ability of the ethanol industry to supply the necessary levels of product to meet RFG requirements without soaring gasoline prices.

COST/BENEFIT OF RULES

The Office of Management and Budget (OMB) released a report on March 19 on the costs and benefits of all federal governmental rules. This report is required annually, and focuses on the impact of rules on the economy. There are lots of numbers in the report, but here are some that might be of interest to marketers:

New rules adopted from 4/1/99 through 9/30/01 (2.5 years):

* EPA regulations – Costs of $10.74 billion to $12.30 billion
Benefits of $33.14 billion to $54.35 billion

* All government regs – Costs of $16.10 to $19.26 billion
Benefits of $33.14 billion to $54.35 billion

* 70% of the costs and 80% of the benefits were from EPA

New rules adopted from 4/1/95 through 9/30/01 (6.5 years):

* EPA regulations – Costs of $41.52 billion to $42.33 billion
Benefits of $29.14 billion to $66.09 billion

* All government regs – Costs of $51.23 to $54.43 billion
Benefits of $48.65 billion to $67.60 billion

All rules in effect 9/30/01, regardless of when adopted:

* All government regs – Costs of $520 billion to $620 billion
Benefits of ½ to 3 times the costs

* All environmental regs – Costs of $120 billion to $203 billion
Benefits of $120 billion to $1.78 trillion

* All transportation regs – Costs of $17 billion to $22 billion
Benefits of about $95 billion

* All labor regs – Costs between $20 billion and $22 billion Benefits of about $32 billion to $34 billion

Note that all of the above numbers are annualized costs and benefits. Because costs and benefits are measured differently for rules adopted before 1995 versus those adopted later, the “all rules” category results in less precise numbers.

BELOW COST SELLING

SIGMA’s Legislative Committee will be discussing and debating various approaches to below-cost-selling laws and other legislation designed to deal with unfair competitive practices in motor fuel marketing. In preparation for that debate (open to all SIGMA members), we have distributed a large packet of material comparing various actual and proposes laws. We urge you to take the time to read through it, so you can understand the issues involved when the meeting begins. (The packet was mailed to all meeting pre-registrants, plus the “key contact” at all member companies. If you did not get a packet and would like one, call the SIGMA office at 703-709-7000, or e-mail to sigma@sigma.org.

SIGMA NOMINATING COMMITTEE

SIGMA is a member-run organization, governed by an elected Board of Directors. The nominating committee for 2002, which is charged with developing a slate of candidates for the election at our Annual Meeting this November, has now been named:

* Tom Robinson, Chairman; Robinson Oil Corporation, San Jose, CA, 408-869-2969
* Jon Day, Member; Hometown Inc., Milwaukee, WI, 414-276-9311
* Chris Kemph, Member; Site Oil Company, Saint Louis, MO, 314-725-4321
* Gregg Strasburger, Member; Fuel Distributors, Temple, TX, 254-778-3547

While the committee works to find the best qualified nominees, and looks to maintain balance on the Board in terms of geography and type of operations, the first prerequisite – and sometimes the most difficult hurdle – is finding candidates willing and able to serve. So don’t be bashful. If you know of someone who would make a good board member (including yourself), please let one of the members of the nominating committee know.

FAREWELL TO LEITER

Long-time SIGMA attorney and tank expert Jeff Leiter has resigned as a partner at Collier Shannon Scott and will be setting up his own practice. He’ll still be reachable at his old number for a couple of weeks. Best wishes in your new venture, Jeff – you’ll be missed at SIGMA!