April 29, 2002

SENATE PASSES ENERGY BILL 88-11; DEFEATS KEY AMENDMENTS

Last Tuesday, the Senate voted 86 to 13 to invoke cloture to force action on the Energy Bill. On Thursday, that action was taken – the bill passed the Senate by a vote of 88-11. In between, the Senate voted on two amendments of concern to SIGMA which would have made the bill more palatable. Both of those amendments went down to defeat.

The bill passed by the Senate is very different from the one passed earlier by the House. It will now go to a Conference Committee with the House, to work out those differences. We don’t expect a bill to emerge from the Conference Committee until August or September. While it is likely (better than 50/ 50) that the differences will be worked out and a bill will be passed and signed by the President, it will not be an easy process. SIGMA will be working with the conferees, once they are named, to nudge the final bill in directions that will make it better for marketers.

The Senate bill contains, but the House bill does not, the following provisions: the ethanol mandate (renewable fuel standard), phase-out of MTBE, elimination of the oxygenate mandate for RFG, and MTBE/ethanol liability provisions. The House bill contains, but the Senate bill does not, a provision allowing for oil drilling in the Alaska National Wildlife Refuge (ANWR). In addition, there are myriad differences in other energy areas outside of petroleum and ethanol to be worked out (nuclear, electricity, etc.)

Earlier in the week, Sen. Feinstein (D-CA) offered a SIGMA-supported amendment to delete the 2004 portion of the ethanol mandate. That was defeated by 60 to 39. Sen. Schumer (D-NY) proposed an amendment to delete the ethanol mandate entirely, also supported by SIGMA; it was defeated 69 to 30.

On final passage, the 11 Senators voting “no” were: Boxer (D-CA), Clinton (D-NY), Feingold (D-WI), Feinstein (D-CA), Graham (D-FL), Gramm (R-TX), Kennedy (D-MA), Kyl (R-AZ), McCain (R-AZ), Reed (D-RI), and Schumer (D-NY). Sen. Helms (R-NC) did not vote on this or any of the amendments or cloture; he is hospitalized with heart problems.

SIGMA ADDRESSES MARKET ISSUES

On Friday, SIGMA took another significant step in our ongoing efforts to address market issues, when the Legislative Committee took up the subject during the Spring Convention in San Antonio. More than 180 were in the meeting, with broad participation from members and non-members of the committee. Discussion was vigorous, but not contentious. This was a long-planned step in SIGMA’s deliberative process of seeking member input before adopting a position on specific below-cost selling legislation.

In preparation for the meeting, all attendees were mailed a packet of material including below-cost or minimum markup laws from several states plus two federal proposals that have been suggested in recent years. The discussion included a review of the perceived problem or problems that are causing some in the industry to suffer low or negative margins; a discussion of what are the desired solutions to the problems; and then a discussion of political possibilities.

Through various speakers, three perceived problems were identified: large retailers (including many in the audience) pricing at or below cost subsidized by profits from other profit centers or other geographic areas; refiner-marketers selling at retail below their wholesale prices; and the use of special allowances, rebates and subsidies through dealer networks leading to similar price inversions.

As for desired solutions, there was general agreement that any federal legislation should address all three problems. Two speakers suggested a broader approach, looking to change overall Federal antitrust laws (broader than just petroleum).

Ultimately, however, not one member in the room felt there was any possibility of passing federal legislation (only PMAA executive Dan Gilligan felt it is “not impossible”). Some felt it would be counter-productive. Instead, the committee voted (with one dissent) to recommend that our attorneys begin drafting model state legislation which members could use, if they so chose. SIGMA would not be involved in any state efforts on these issues. The committee will look at this further at its July meeting.

TRIBAL TAX ISSUES

SIGMA and our allies have been busy working on lining up co-sponsors for H.R. 2726, legislation introduced by Rep. Don Young (R-AK) which would address the problem of state tax evasion by some tribal interests on sales of motor fuel, tobacco, and alcohol. Both PMAA and NATSO made it one of the issues their members raised on Capitol Hill during their recent legislative conferences, and SIGMA and NACS counsel and staff have been working the issue with Congressional visits as well. We are hopeful of building enough support to move the legislation later this year.

FTC STUDY OF GASOLINE

SIGMA will be submitting written answers to questions the FTC has asked about the downstream petroleum industry, but we will not be making an oral statement at the FTC public workshop coming up in a couple of weeks. We have already testified at an FTC hearing on the same topic, and through meetings over the past 5 years we have made our views well known to the Commission. We have decided to respect the FTC’s time, and let them instead use this opportunity to hear from other groups whose views have not been so well presented up to now.

PHILLIPS/CONOCO MERGER

The FTC is taking a hard look at the proposed merger between Phillips and Conoco. Marketers who have concerns about the competitive impact of the merger, either overall or in specific markets, have an opportunity right now to make their views known – a window of opportunity that will soon close. If you wish to have any input on this merger, contact SIGMA attorney Tim Columbus at 202-342-8555, or e-mail him at Tcolumbus@colliershannon.com.

MINIMUM WAGE CALL TO ACTION

We have heard a rumor that Senate Democrats will stage a vote of the full Senate on a minimum wage increase sometime this week. SIGMA members are urged to contact their Senators as soon as possible and ask them to oppose any increase in the minimum wage. As is the case since 9/11, we urge you to make your contacts by phone, fax, or e-mail, and not by regular mail, because regular mail is being delayed due to anthrax.

RFG SUMMER TRANSITION

The winter-to-summer transition of RFG is now well underway. SIGMA asks members to give us a “heads up” on any outages or serious inversion problems you see that may be related to this process. We are in constant contact with the appropriate regulators, and can be of assistance in resolving such problems. If anything comes up, please contact Greg Scott at gscott@colliershannon.com, or 202-342-8646.

PETROLEUM IMPORT FEES

SIGMA’s Legislative Committee reviewed the recent call by at least one refiner for import fees for petroleum products similar what was done for steel. The committee saw no reason to change SIGMA’s historic position in opposition to import fees, because we favor policies that will maximize supply rather than restrict supply.

ABANDONED MONEY ORDERS

Charging service fees for abandoned money orders can produce a lucrative income stream for the issuer. On average, .75 percent of money orders and up to 21 percent of gift certificates are abandoned each year.

Eventually, abandoned items become state property, but if you manage your own money order system, you can charge a monthly service fee against the face value of these items for a specific period of time, often months or years. Service fees range up to $2 per month. However, if you outsource the money order operation, your third-party provider keeps these fees.

3T’s Total Solution is the leading in-house money order system, and as a SIGMA member, you’re entitled to an important discount. Call toll-free: (877) 343-9900. Or email: sales@3tsolutions.com.

CONVENTION UNDERWAY

As we go to press, the SIGMA Spring Convention in San Antonio was still underway. Registration passed the 500 mark on-site. Some staff will not be back in the office until mid-week, but the office will be open all week.