August 5, 2002

SENATE RECESSES; CONGRESS OUT UNTIL AFTER LABOR DAY

Last Thursday, the Senate recessed until after Labor Day. The House had already gone home a week earlier. Congress is traditionally out of town for the month of August, but this year there will be lots going on during the month in spite of the recess. However, much of the action will be behind the scenes and not reportable until September.

Work on the massive Energy Bill will continue, mostly at the staff level. Conferees last met the week of July 22, and reported at that time they had made significant headway. However, there were still some 90 issues of significant disagreement between the two houses.

“Familiarization” sessions are being held on some of the most contentious issues, with such sessions last week focusing on energy research and development, ethanol, ANWR, and climate change. Ethanol was discussed as recently as July 30, and Rep. Tauzin (R-LA) indicated publicly that House conferees have not yet reached a conclusion on how that issue should be resolved. Some of his comments, though – about perhaps asking for changes in the amount of ethanol that would be mandated – may indicate the House conferees are ready to cave in on the principle of an ethanol mandate.

Meanwhile, the House Transportation and Infrastructure Committee is urging conferees to find ways to offset any lost tax revenue for the Highway Trust Fund if an ethanol mandate is enacted. A letter dated July 26 by the leadership of the committee – Young (R-AK), Oberstar (D-MN), Petri (R-WI), and Borski (D-PA) – was co-signed by 57 other committee members. The 14 committee members who did not sign represent corn-growing states.

MTBE interests are floating a new proposal that would perhaps weaken the MTBE ban in the pending bill. It would reportedly add three additional issues a state would have to address before banning MTBE: the impact of a ban on overall supply, the impact of a ban on prices, and assurance the state had taken appropriate efforts to prevent leaks from underground storage tanks. While all three issues seem to track concerns SIGMA has raised in one context or another, there is great potential for “mischief” in the details of such a proposal. Thus, until we have seen and analyzed it, we are not in a position to take a position.

ACCOUNTING RULES

Last Tuesday, President Bush signed into law the Public Company Accounting Reform and Investor Protection Act which had been passed by Congress the prior week. The act will have a significant impact on how accounting and auditing firms operate. It will also have a direct effect on the officers and directors of publicly-held corporations.

Since most SIGMA members are not publicly-traded, maybe you think you can ignore this? Wrong! It is very likely that the standards set for public corporations will effectively become standards for privately-held firms as well – for tax purposes and borrowing purposes, if nothing else.

SIGMA’s attorneys have prepared a quick analysis of the key provisions of the act, which is available by clicking here. Please be sure the appropriate people at your company review it!

AUTOMAKERS: BAN MMT

The Alliance of Automobile Manufacturers has issued a call for a ban on the use of MMT (methylcyclopentadienyl manganese tricarbonyl) in gasoline. They report that 6 years of study shows MMT use contributes to smog formation, lowers the fuel economy of vehicles, increases greenhouse gases, and causes low-emission vehicles to fail the standards for hydrocarbon emissions. The battle between AAM and the maker of MMT is not totally new. In the 1990's, automakers complained that MMT fouled spark plugs and messed up onboard diagnostic systems in new cars.

MMT, an octane-enhancing additive, is widely used in Canada, where about 80% of fuel contains some level of the additive Its use in the United States is reportedly increasing, despite the fact that it is banned throughout California and in mandatory RFG areas of the country.

PROPOSED TRUCKING RULES

Two agencies of the Dept. of Transportation announced proposals related to hazmat trucking, published on July 16.

The Research and Special Projects Administration (RSPA) issued an “Advance Notice of Proposed Rulemaking” seeking comments on potential security enhancements that might be required for hazmat carriers, including such ideas as:

Escorts

Vehicle Tracking & Monitoring Systems

Emergency Monitoring Systems

Remote Shutoff

Direct Short-Range Communications

Notification to State and Local Officials

This is not yet a specific proposal, but only a notice that RSPA is considering these ideas.

Meanwhile, the Federal Motor Carrier Safety Administration has issued a Notice of Proposed Rulemaking (an actual proposal) to delete an old and outdated requirement, the elimination of which might improve hazmat security.

The old rule: that vehicles with dual tires are required to stop once every 2 hours or 100 miles to inspect tires. If the proposed new rule is adopted, drivers would still be required to check such tires at the beginning of each trip, and at each stop. (We suspect many companies and drivers were totally unaware of the old rule.) You can review the proposal by clicking here.

MTBE DEVELOPMENTS

California – which had scheduled a ban on the use of MTBE after Dec. 31 of this year – has given refiners and marketers an extra year before they must comply with the ban (i.e., the deadline was extended to 12/31/03).

Separately, a federal court in New York ruled on July 16 against well owners seeking class action status in lawsuits over MTBE caused by nearby gasoline operations. The court held that the plaintiffs failed to show a homogeneity of their claims and interests. However, the lawsuits may continue to move forward individually.

COMMERCIAL DRIVER LICENSES

On Wednesday, the Federal Motor Carrier Safety Admin. published its Final Rule designed to enhance the safety of commercial motor vehicle operations, focusing on drivers with commercial licenses. The rule will be effective 9/30/02. We’ll have a detailed legal memo next week; for the actual rule click here.

DIESEL FACA MEETS

The Federal Advisory Committee (FACA) advising EPA on low-sulfur diesel met last week to begin drafting its report. It’s clear that environmentalists and state representatives are completely unwilling to have any mention in the report of the implementation issues raised by marketers. They want a report that says everything is “hunky dory.” Because of this, there is discussion among some panel members about filing a minority report, or simply refusing to sign the majority report when it comes out. Marketers and refiners have identified many issues which must be resolved for the rule to work, but EPA and its allies seem to want a whitewash report. The final report – including any minority report – is due to be finalized at the next meeting of the FACA, Sept. 24-25. Alan Wright of Pilot Oil continues to represent SIGMA and other marketer groups on the FACA.

ALLIES ON ENERGY BILL?

An op-ed piece appeared in The Washington Post last week edited by a couple of political “strange bedfellows.” Carl Pope, executive director of the liberal environmental group Sierra Club, and Ed Crane, president of the conservative Cato Institute, wrote that the current proposals posing as energy legislation are really “Fueled by Pork.” At the top of their list was “a poorly conceived, environmentally damaging and expensive ethanol mandate,” but it goes on to condemn the bill for containing benefits “for virtually every energy technology represented by a lobbyist.” Their conclusion: “If it is too late for something better, then let’s just kill these bills and call it a day.” While SIGMA isn’t yet ready to reach the same conclusion, many of the points they make are points we have been making for months. Strange allies . . .

MISCELLANEOUS TIDBITS

President Bush is pushing “Clear Skies” legislation, which would reduce power plant emissions by 70%. If enacted, it could reduce the number of ozone non-attainment areas, thereby saving marketers from Stage II and RFG requirements . . . The IRS has issued a revision to its earlier 1998 Coordinated Issue Paper for the petroleum industry. The changes deal with the IRS position on costs related to removal and replacement of USTs. In general, costs to clean up and dispose of old tanks are deductible; soil cleanup costs are deductible only to the party that contaminated the property; and other removal costs are only deductible if the tanks are not replaced AND the costs are by the party that contaminated the property. All other removal, replacement, and cleanup costs must be capitalized. For more information, contact SIGMA attorney Allan Weiner at aweiner@colliershannon.com.