October 28, 2002

SIGMA JOINS CALL TO EPA: ALLOW CO-MINGLING OF OXYGENATES

Last week, SIGMA joined in a letter sent to EPA regarding flexibility in co-mingling of ethanol-based RFG with MTBE-based RFG. Others joining in the letter were PMAA, NACS, and the California Independent Oil Marketers Assn. (CIOMA). The request was specifically related to the situation in California, where MTBE is being phased out over the next 14 months but different refiners are following different schedules in introducing ethanol-based fuels.

Under EPA’s RFG rules, it is illegal to co-mingle RFG containing ethanol with RFG containing any other oxygenate from Jan. 1 to Sept. 15 of each year. This prohibition applies all the way down to retail, but obviously does NOT apply to the gasoline in the fuel tanks of consumers’ vehicles. While there is arguably some limited environmental benefit to this prohibition, the penalties for its violation are massive and the potential disruption of the fuel markets as California transitions from MTBE to ethanol are frightening.

The associations’ letter, to Asst. Administrator for Air and Radiation Jeff Holmstead and to Margo Oge of EPA’s Office of Transportation and Air Quality, asks EPA to work with state agencies in California to, in essence, grant waivers to the co-mingling ban when the state deems it necessary to avoid fuel shortages or outages. Whether EPA will grant our request is unknown at this time.

SIGMA does not usually get involved in state issues. We did in this instance because the issue has potential national impact. Other states are also facing MTBE bans soon, and could similarly face gasoline shortages while trying to deal with two non-fungible grades of RFG at the same time. 

SENATOR WELLSTONE DIES

Sen. Paul Wellstone (D-MN) died in a plane crash last Friday, along with family members and staff. We extend our deepest sympathy to his family, friends, and constituents. Although on the other side of many issues from SIGMA, he was widely respected in Washington.

Wellstone’s death near the climax of a close re-election campaign adds yet another twist to a volatile situation in the U.S. Senate, which had been divided 50 to 49 (plus an Independent voting with the Democrats). Because the Senate plans a lame-duck session, it’s now possible that Senate control could change multiple times in a few weeks.

• Minnesota Gov. Ventura (Ind.) may appoint a new Senator, but that person would only serve until the election results are known. It appears that former Vice President Mondale will step in as the Democratic candidate, and may have a good chance of retaining the seat for the Democrats. However, if Norm Coleman wins the election, that could tip Senate control to the Republicans during the lame duck session.

• Likewise in Missouri, Sen. Carnahan (D) is in a close “special election” to fill the remaining 4 years of the term her deceased husband won 2 years ago. Should she lose, her Republican replacement would be seated in the Senate immediately as well. That too could tip control to the Republicans during the lame-duck session, even if Democrats were to maintain control for the next Congress.

• Sen. Murkowski (R) is running for Governor of Alaska. If he wins, he must resign his Senate seat in early December. He will then be allowed to appoint his own successor, but must wait 5 days to do so. Thus, control of the Senate could change back and forth between Democrats and Republicans twice during the lame duck session as a result of this fluke.

• Louisiana has an unusual electoral system, with no primary. Instead, all candidates from all parties run in the November election and, if none receives a majority (over 50%), a run-off election is held in December. Should Sen. Landrieu (D) fail to win a majority on Nov. 5, control of the 2003 Senate might not be known until December.

• Beyond that, many Senate races are still billed by the pundits as “too close to call” – and there are always a few surprises as races that were “called” one way by the pundits go the other way when the votes are actually counted. It is now thought that either party could gain three or four seats, or the Senate could remain almost evenly divided.

• And then there’s the wild card: one Democrat and two Republican sitting Senators are prospects for changing parties or going “independent” under certain circumstances. So we won’t know until the day after the election – and might not know then – “who’s in charge” of the Senate! 

ENERGY BILL

As noted, Congress is effectively out of session, and won’t return until a week after the election. We expect a brief lame-duck session then, and probably another one in early December. The main focus of both of those sessions will be the budget and appropriations bills to fund the government through the current fiscal year. However, other issues will also be taken up if it looks like something can get done.

People are “strangely optimistic” that an energy bill will be enacted during one of those sessions. The optimism seems to be based not on any set of facts, but it’s there. Lots of people are starting to make noises on the energy bill – including lots of pushing by lobbyists on both sides of the Renewable Fuels Standard (ethanol mandate), but we’re unsure if anyone is listening.

SIGMA is working to see that tank legislation we support is included in any energy bill that does move forward. 

MISCELLANEOUS

• World talks on global climate change are reportedly changing their focus, away from merely trying to reduce greenhouse gas emissions and toward finding ways to “live with” climate change. Since the USA withdrew from the Kyoto treaty on global warming, there had been questions as to what might be done. The petroleum industry is affected by these talks, as the internal combustion engine is a contributor to greenhouse gases, as are refineries.

• According to PMAA, talks with DOT regarding a settlement to the lawsuit to reduce Hazmat transporter fees may result in significant savings for marketers. Those currently paying $2,000 per year may see savings of as much as $1,700 per year, and even small marketers paying the $300 annual fee (including processing charge) might see a reduction. The proposed rule to reduce the fee is supposed to be published prior to Feb. 1 of next year.

DIESEL DEVELOPMENTS

Marketers of diesel should be aware of three items:

• A federal appeals court has upheld a ban on diesel vehicles in public fleets which was imposed by the South Coast Air Quality Management District. This rejects a suit brought by the Engine Manufacturers Assn. and the Western States Petroleum Assn. Government agencies in Southern California will have to move forward with rules to buy alternative-fuel vehicles.

• Separately, the Chairman of California’s Air Resources Board (CARB) was reported in the Wall Street Journal as having had a “change of heart” and now sees cleaner-burning diesel as a viable option for the future in that state – and preferable to gasoline engines! This may help pave the way to significantly more diesel-powered vehicles – particularly SUVs and other “light-duty trucks” – which is something the automakers have under consideration.

• The Industry/EPA Clean Highway Diesel Implementation Workshop, scheduled for Nov. 20-21 in Houston, TX, continues to move forward. PMAA was added as a co-sponsor, and the program is shaping up. On the second day, a substantial part of the session will address marketer issues in three sections of the program. First will be an introduction to the issues, possibly by SIGMA attorney Greg Scott (who also serves as NACS counsel) – product transfer documents, mis-fueling, liability, downgrading of contaminated fuel, etc. Next will be a panel on transport, with three marketers who are all SIGMA members as well as being members of some of the other co-sponsoring organizations – Pat Barnecut of Southern Counties Oil, Steve Levy of Sprague Energy, and Alan Wright of Pilot. The third panel will include two EPA representatives, from the Office of Enforcement and Compliance Assistance and the Office of Transportation and Air Quality, plus Ron Marr of the Iowa Petroleum Marketers Assn. That session may be moderated by Greg Scott as well.

We are in the process of finalizing the question we will submit to EPA about the low-sulfur diesel program. If you have any questions you would like to have answered, please contact Greg Scott at Gscott@colliershannon.com or call him at 202-342-8646. Questions submitted in advance are far more likely to get definitive answers during the workshop.

And if you aren’t yet registered for the conference, do so right away! Go to www.npradc.org for full registration information and for a link to the hotel, the Westin Galleria in Houston.