May 27, 2002

TANK LEGISLATION GETS PUSH AT MTBE HEARING

At a hearing last Tuesday of a Subcommittee of the House Energy and Commerce Committee, several Congressmen endorsed the idea of allocating more of the funds currently resting in the LUST Trust Fund for cleanups and enforcement. Rep. Gillmor (R-OH), chairman of the Subcommittee on the Environment and Hazardous Materials, said he was considering such legislation. Among others, Rep. Lois Capps (D-CA) urged that tank legislation be moved forward, using some of the excess funds in the LUST Trust Fund to deal with the MTBE contamination problem in her state and elsewhere.

It appears that tank legislation of the type supported by SIGMA is relatively uncontroversial, at least among lawmakers. However, EPA is dragging its feet. EPA’s concern appears to be that, if more funding is approved from the LUST Trust Fund, other parts of the EPA budget will be reduced. Although that shouldn’t be the case, the way things work in Washington EPA’s concerns may be justified.

HAZMAT SECURITY PLANS

We remind you that the Dept. of Transportation has proposed some new security requirements for companies that transport hazardous materials, including gasoline and diesel. A memo outlining the proposal is available on our website. Click here.

SIGMA will not be opposing the regulations, but we do want to make sure they take into account the way you do business. We have heard from a few marketers, but not enough to be sure our requests for "fixes" in the required procedures would be representative. Comments are due June 3. Please review the memo quickly and call SIGMA attorney Greg Scott with any reactions – 202-342-8646, or gscott@colliershannon.com (We understand that an extension requested by PMAA was just granted, but urge you to not delay anyway.)

DIESEL TAX LIABILITY

The IRS is proposing a change of liability for the improper blending of untaxed liquids into taxed diesel fuel. Under current rules, if such blending is done into a retail tank, the retailer is liable. IRS is proposing to make the person who put the untaxed fuel into the tank (i.e., the wholesaler) jointly and severally liable as well. SIGMA supports the intent of the rule, but plans to comment about the unfairness of taxing a retailer who in good faith thought he was purchasing taxed fuel. Go to our website for more details on the proposal – click here.

CLEAN DIESEL REVIEW PANEL

The first meeting of the Clean Diesel Review Panel convened by EPA under the Federal Advisory Committee Act (FACA) was held last Tuesday. Alan Wright of Pilot Oil serves on that panel, representing SIGMA, PMAA, NATSO, and NACS as the only marketer representative. SIGMA attorneys were also present for the meeting, as were representatives of other marketer groups.

The outcome of the meeting was extremely disappointing. The panel decided it would limit itself to technology questions only (related to making the 15 ppm sulfur diesel, and the engines designed to run on it). This was in spite of earlier assurances by EPA that marketing issues would be addressed – specifically the phase-in period. In essence, we were told that retail issues are not going to be central to the group’s deliberations, because (according to the chairman) the phase-in period is not a problem at the retail level.

Three more meetings of the panel are scheduled over the summer months, with a final report due to EPA by Sept. 30. Alan Wright and the four groups he represents are considering whether it is worth his time and expense to continue participating in the Review Panel. Regardless of how that comes out, SIGMA will continue to push our concerns on the technical and retail issues related to the coming ultra-low sulfur diesel and the phase-in period. We just may have to find another vehicle for doing so.

ENERGY BILL

Congress left for the Memorial Day recess without the House having named its conferees for the Energy Bill. There are some behind-the-scenes negotiations going on, but we don’t expect movement on a final energy bill until August or September, or later.

SUMMER RFG TRANSITION

Last winter, SIGMA and other industry groups suggested that the transition from winter to summer fuel this year would not lead to massive supply problems, barring some unexpected disruption. The trend during April and May supported that conclusion.

API President Red Cavaney has written to all Members of Congress outlining the fact that gasoline inventories stand at 5% higher than a year ago. However, he cautions that "potential disruptions can still affect the reliability of gasoline supplies for consumers, as we have experienced in the past few years. The current patchwork of gasoline specifications across the country limit refiners’ flexibility to shift supplies to where they are most needed, and limited spare refining capacity reduces the ability for the market to respond quickly to unexpected outages or demand surges."

DIESEL LAWSUIT

SIGMA is in discussions with NPRA and API about the possibility of appealing the recent ruling upholding EPA’s ultra-low-sulfur diesel rule. That ruling, by a 3-judge panel, at first glance looked pretty air-tight. However, upon closer examination, some of the parties think there may be some "cracks" worth looking into. The plaintiffs have 45 days from the date of the original ruling, or until approximately June 17, to appeal for an "en banc" hearing by the entire court.

SUCCESSION PLANNING

We have a new feature on the SIGMA website – the first in a series of articles being developed exclusively for that purpose. The first such article, on succession planning, is available by clicking here .

ENVIRONMENTAL TIDBITS

A report from the National Research Council, reported in last week’s Washington Post, contained some interesting numbers related to petroleum contamination of the oceans. While some 34 million gallons of petroleum enter ocean waters from North America each year as a result of human activity, only 3% of that is from oil exploration and production, and 8% is from pipeline and tanker transport of crude oil. The bulk of the man-made petroleum pollution is from spills from cars and trucks, refinery run-off, fuel dumped by airline pilots, and fuel leaked into the waters by two-stroke engines found in older outboard motors and water skis.

Interestingly, while humans contribute 34 million gallons of petroleum pollution per year, natural seepage of crude oil from geologic formations below the sea floor exceeds 47 million gallons a year in North America and perhaps 180 million gallons a year worldwide.