June 3, 2002

SENATE ENERGY CHAIRMAN WANTS TO LIMIT BOUTIQUE FUELS

It is widely reported that Sen. Bingaman (D-NM) wants to push a proposal to limit to three the number of different gasoline formulations that could be mandated nationwide. As chairman of the Senate Energy and Natural Resources Committee, that makes him the most influential legislator to date to take up the issue of proliferating boutique fuels – an issue that SIGMA started raising nearly two years ago and which others now see as a problem.

As we understand his concept, each of the three formulations would have standards that fall short of the current Clean Air Act definition of “clean fuel”. However, supporters of this proposal believe that pending regulations to reduce gasoline sulfur in conventional gasoline, plus other pending regulations, will more than offset any losses to air quality.

It appears that Sen. Bingaman may push his proposal as part of the negotiations in conference committee over the Energy Bill. Technically, his committee doesn’t have jurisdiction over the Clean Air Act – the Environment and Public Works Committee headed by Sen. Jeffords (I-VT) does. But in conference committees, anything goes.

SIGMA is certainly supportive of efforts to reduce the number of different fuel formulations that are required in patchwork fashion around the nation. However, we are also concerned that the cure not be worse than the malady – that changes in the rules not lead to reduced supply and fewer suppliers. We have been in touch with, and will continue working with, Sen. Bingaman and other key legislators as this proposal takes form.

NON-ATTAINMENT AREA SUIT

A collection of environmental groups has given 60-day notice of its intent to sue EPA over EPA’s failure to designate new ozone non-attainment areas under the new ozone standard adopted in 1998. The new standards was appealed through the courts, and only recently was essentially upheld. The enviro groups say EPA was required to designate non-attainment areas within 2 years of adopting the standard; EPA has a number of reasons for not having done so, including the court case as well as legislative action by Congress delaying any required action a year at a time, through the appropriations process.

The new standard limits ground-level ozone to .08 parts per million (ppm) averaged over an 8-hour period, compared to the previous standard of .12 ppm averaged over a 1-hour period. The longer averaging time means there will be fewer violations because of very short-term “spikes” in ozone. However, the lower overall standard will mean many additional areas will be in “non-attainment” and be required to implement ozone control measures such as Stage II programs, RFG or other fuel mandates, etc. EPA has thus far withheld all data showing which areas are not in compliance with the new standard. We are worried that the number of areas could be massive. Even “background” ozone, with no human activity involved, can range as high as .05 ppm.

TERRORISM & TRUCKS

The Dept. of Transportation has issued a security advisory regarding the possible targeting of trucks and “petroleum transfer facilities” by terrorists. SIGMA members are urged to take this advisory seriously and review appropriate procedures in your transport arrangements as well as at your terminal facilities, pipeline breakout stations, bulk plants, etc. For more details, go to www.truckline.com. You may have to register to use the site, or try to access the story directly by www.ttnews.com/members/topNews/0008894.html#story6.

Separately, we remind you that RSPA (a division of the Dept. of Transportation) has proposed rules pending for new security requirements for transport. Among the proposed rules is one requiring a written manifest onboard each truck showing the precise destination of the shipment – a provision we are told could be problematic for tanker trucks making multiple drops, for marketers who routinely change truck destinations while they are enroute, and for mobile refuelers. The deadline for comments has been extended to July 3. We ask that you review our memo by clicking here. If any changes are needed to the proposed rules to reflect the way you do business, please contact SIGMA attorney Greg Scott as soon as possible at gscott@colliershannon.com.

ETHANOL BRIEFING

New York legislators who are opposed to the “renewable fuels” mandate in the Senate version of the pending Energy Bill have scheduled a briefing for key staffers on Capitol Hill to educate them on the problems with this ethanol mandate. SIGMA’s lobbyists will participate in the briefing, scheduled for Tuesday, June 4. Legislators from New York and California are uniting to fight the ethanol mandate, hoping to get it dropped when the conference committee acts to reconcile differences between the House and Senate versions of the energy bill. The House has never voted to support such a mandate, and nothing of that kind is in their version of the bill. It is an uphill battle, but SIGMA continues to be hopeful we can remove or at least improve the provision.

CONGRESS ENDS RECESS

Congress has been in recess this past week, but returns to work this week. We expect House conferees on the Energy Bill to be named very soon. Other action is also likely to pick up during June.

NEW STAFF MEMBER

We ask you to join us in welcoming SIGMA’s newest staff member, Sequonta Lovitt, who is our new accountant.

FINCEN PILOT PROGRAM

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) started a pilot program on May 28 to update its system for gathering financial information. The new electronic system, the Patriot Act Communications System (PACS) will initially be available to about 30 banks for a pilot period of two months. PACS will replace the current, antiquated method of suspicious activity reporting (SAR) and currency transaction reporting (CTR) under FinCEN anti-money laundering regulations.

Currently, SAR and CTR information is communicated and stored entirely by paper and magnetic tape data entry. Financial institutions, including money services businesses that sell money orders, are required to file SARs if they have reasons to believe a transaction of $2,000 or more is being used for money laundering or to fund criminal or terrorist activities. All financial institutions are also required to file CTRs when a customer makes a cash transaction of more than $10,000.

Once the test is completed, FinCEN may adjust the system to address the results of the pilot program. When PACS is fully operational, FinCEN plans to make it available to all interested financial institutions – including sellers of money orders. FinCEN believes PACS will speed its processing of SARs and CTRs and allow it to relay the information on an expedited basis to law enforcement. FinCEN hopes that most institutions will switch to PACS. Institutions that want to continue to use the existing system, however, will be allowed to do so.