Fuels Issues

Renewable Fuels Standard: Renewable Volume Obligations and Point of Obligation– Priority 1

Renewable Fuel Standard (RFS) Program 
The RFS was enacted in 2005 to displace traditional fuel from unstable sources with renewable substitutes, promote environmental benefits, and diversify supply. To implement the program, EPA must set annual blending requirements for how much biofuel gets blended into the nation’s fuel supply, which can be adjusted using the agency’s statutory waiver authorities. SIGMA supports the rational administration of the RFS program. Specifically, SIGMA supports EPA assessing the state of the fuel market, evaluating external policy developments, and using this data to set appropriate blending levels. It is important for EPA to ensure that renewable fuel mandates do not exceed the volume of renewable fuel that the market could reasonably absorb.

RFS Definition of Obligated Party
The RFS requires “obligated parties” to generate and retire a sufficient number of Renewable Identification Numbers (RINs) to show they are in compliance with the program.  When EPA implemented the expanded RFS program pursuant to legislation enacted in 2007, EPA set the point of obligation on those refining or importing motor fuels. This decision was made after a full notice and comment period during which EPA rejected making blenders and downstream entities obligated parties. Moving the point of obligation downstream would not only increase compliance and enforcement issues, as EPA would be required to monitor a substantial number of newly obligated parties, but it would lead to increases in the retail price of fuels for consumers.  EPA noted as much when it rejected petitions to change the point of obligation in November of 2017. SIGMA supported EPA’s denial of the petitions and opposes any future efforts to change the definition of obligated party from refiners, manufacturers, and importers to position holders. 

RIN Transparency – Priority 1
EPA has proposed a rule to provide a Reid Vapor Pressure (RVP) waiver for E15 that would allow for the year-round sale of E15 in non-reformulated gasoline markets, as well as make certain reforms to the Renewable Fuel Standard (RFS) Program’s Renewable Identification Number (RIN) market. Despite noting that there is no “data-based evidence” of manipulation in the RIN market, EPA is proposing four reforms:

1. Requiring public disclosure when holdings of separated D6 (conventional ethanol) RINs held by an individual actor exceed specified limits; 
2. Prohibiting entities other than obligated parties from purchasing separated RINs (this would not apply to blenders who deliver RINs to an obligated party as part of a contract); 
3. Requiring the retirement of 80 percent of the RINs needed for compliance by obligated parties be made quarterly, instead of annually; and
4. Limiting the length of time a non-obligated party can hold separated D6 RINs (a non-obligated party would be required to sell or retire as many RINs as it obtained in a quarter).

SIGMA is concerned that the proposed “reforms” could create dysfunction in the RIN market, which is working in a transparent and efficient manner (other than EPA’s interference in it by granting small refinery waivers in a non-transparent manner). 

Octane Proposals – Priority 1
The statutorily-mandated blending targets under the RFS program are scheduled to sunset in 2022. At that point, EPA will have almost unlimited discretion—subject to certain statutory requirements—to determine annual RVOs, which will lead to uncertainty in the program. In light of that impending deadline, certain lawmakers in the Senate and House, led by Senator John Cornyn (R-TX) and Representative John Shimkus (R-IL), have initiated RFS reform efforts. A number of provisions are under consideration as a part of those efforts, including an “octane solution,” which is being workshopped among various industry stakeholders, including retailers and oil industry members.

The octane proposal would require all automobiles after a certain model year (to be determined) to use a minimum octane of 95 Research Octane Number (RON) for fuel — comparable to about 91-92 octane under the current (RON+Motor Octane Number)/2 rating. According to the automakers, at this octane rating, improvements in mileage, emissions characteristics, etc. would make a significant contribution towards helping ensure that the automakers could achieve their required Corporate Average Fuel Economy (CAFE) requirements. In its current iteration, while 95 RON would be the floor, there would be no ceiling on octane levels, which would ensure a place in the market for higher octane premium fuels. Further, the octane standard would be a performance specification – not a formulaic specification – therefore retailers would be able to choose from a variety of components to meet the octane requirements (not just ethanol). SIGMA does not have a position on the “octane solution,” but looks forward to working with Congress and stakeholders on RFS reform.

Electric Vehicles – Priority 1
As electric vehicles (EVs) enter the market, an electric charging infrastructure must be created to provide alternative fuel options to motorists. Given that SIGMA members are located in the highest traffic areas that allow motorists the most convenient locations to fuel their vehicles, the fuel marketing industry is the most efficient way to create an alternative fuel marketplace if consumer demand warrants it. 

SIGMA is actively working with stakeholders to find ways to deploy an electric charging infrastructure via the existing privately developed motor fuels infrastructure to ensure that the investments local businesses have made in their properties are not diminished by state plans to subsidize alternative fueling locations. In general, SIGMA supports the notion that the government should not pick technology winners and losers through tax incentives for electric vehicles, granting utilities a monopoly deploying charging infrastructure and ensuring all vehicles that use the roads contribute to the maintenance and building of those roads.

CAFE and GHG Standards – Priority 2
In 2018, the Trump-era Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) proposed the Safer Affordable Fuel Efficient (SAFE) Vehicles rule, which proposed to freeze fuel economy standards at the model year 2020 level proposed by the Obama Administration, as opposed to incorporating continued increases. SIGMA believes EPA should create a level playing field for all relevant fuels and technologies, including gasoline-powered vehicles, flex-fuel vehicles, NGVs, and EVs.  That level playing field should be based on the relative environmental profiles of EVs and internal combustion engine vehicles.

Climate Change – Priority 2
Some legislators and environmental advocacy groups are supporting a climate change agenda that would aim to, among other things, decarbonize the economy. While specific, detailed proposals have not been released, concepts that could be part of any climate change legislation include: cap and trade, a carbon tax, subsidies for green technologies and other regulations and mandates. 

As the climate change debate evolves, SIGMA believes the government should not promote solutions that pick winners and losers in the technology space. Instead, government should set a level playing field on which all technologies can compete to meet transparent goals. In determining the requirements for technologies, definitions of terms such as “clean” or “zero emission” must be clear, specific, and based on the best available science. 

RFS Small Refinery Waivers – Priority 2
The RFS program allows small refineries to receive waivers from RFS blending requirements if those requirements would cause severe economic harm to the refinery. However, EPA’s process for granting these waivers has lacked transparency and undermined the RIN market. While EPA has worked to improve the system, including publishing a public dashboard to notify when waivers have been granted, much work still needs to be done. In particular, SIGMA believes EPA must articulate the standards it uses to determine severe economic hardship and other factors that lead to the granting of a waiver. Without proper knowledge of how the waivers are being granted and to whom they are given, the market cannot function appropriately. 

Biodiesel Blenders’ Tax Credit – Priority 2 
The biodiesel blenders’ tax credit of $1.00/gallon expired on December 31, 2017. The biodiesel blenders’ tax credit makes it more attractive for retailers to blend and sell biodiesel, and these savings are passed along to consumers. SIGMA supports legislation to extend the blenders’ credit in the near term and eventually incorporate a responsible phase down of the credit. SIGMA believes that a phase down shows fiscal responsibility while also allowing businesses to plan with a multi-year extension of the credit.

E15/Misfueling – Priority 3
Currently, only E10 can be sold year-round as it has been granted a “1 lb. waiver,” allowing it to exceed Reid Vapor Pressure (RVP) restrictions around the country. E15 has not been granted such a waiver and so cannot be sold legally in many parts of the country during the summer months (June 1-September 15). On March 13, 2019, EPA proposed a rule to grant the waiver for E15 and allow the year-round sale of E15 across the country. The legality of such a move remains in question; many believe the Clean Air Act (CAA) only permits a waiver for E10 and that legislative action would be needed to grant a waiver for E15. 

Allowing E15 to be sold year-round across the country could provide an opportunity for more ethanol to enter the marketplace. Retailers, however, face infrastructure limitations regarding the ability to store and dispense higher level ethanol blends. Given these limitations, it is unclear how much more ethanol could penetrate the market. Additionally, SIGMA has concerns about misfueling liability issues stemming from the increased use of E15, as higher blends of ethanol such as E15 cannot be used in all cars on the road, and existing misfueling liability protections do not go far enough to protect retailers. 

As new fuels enter the market, retailers want to be able to compete to sell these fuels without incurring liability when consumers use the wrong fuel as long as retailers comply with signage requirements. If consumers misfuel even in the face of clear signage, then retailers should not be legally responsible. 

Automatic Temperature Compensation – Priority 3
Certain states have been considering requiring Automatic Temperature Compensation (ATC) for motor fuel dispensers. The goal of ATC is to adjust for fuel volumes because those volumes change at different temperatures. For retailers and consumers, a gallon of fuel equates to a volumetric measurement: 231 cubic inches of liquid, not the number of British Thermal Units (BTUs). SIGMA opposes ATC as there is no need for it in the marketplace and it would only cause consumer and retailer confusion. 

General Business Matters

Credit and Debit Swipe Fees – Priority 1
Banks and credit card companies collect fees from retailers on all payment card transactions. The Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act required the Federal Reserve to limit price-fixing of debit swipe fees by Visa and MasterCard and protect competition in routing debit transactions over different card networks. In most instances, banks are making far more money than retailers on the sale of each gallon of gasoline paid for with a payment card.  Swipe fees remain one of the highest operating expenses for retailers, second only to labor costs. Visa and MasterCard fix fees and rules on behalf of the banks to create an anti-competitive situation that is not market-based. 

SIGMA opposes any efforts to repeal or weaken debit fee reform and supports further reforms to ensure that retailers pay competitive fees for credit transactions. SIGMA continues to educate Congress about debit swipe fee reform and its implementation, discourage any action by Congress that would undo the important progress made by swipe fee reform, and make lawmakers aware of significant problems that still exist with credit card swipe fees and the card companies’ anticompetitive rules. Additionally, retailers are working with relevant federal agencies to ensure that there is scrutiny of the card companies and banks under the antitrust laws.      
  
Payments Security and Standards – Priority 2
Payments security is a serious concern for retailers who spend over $6.5 billion each year trying to protect against card fraud.  However, fraud rates continue to rise in the United States because of outdated payment card technology.  Despite retailers’ significant security investments, increasing fraud rates lead to significantly higher fraud costs for merchants.  

Visa and MasterCard use their control of standard-setting bodies like EMVCo and PCI to entrench their dominance of the payment system and market – not to protect against fraud. For example, Visa and MasterCard established rules to shift liability for fraudulent transactions between merchants and banks based upon which of them has upgraded for EMV.  Since the October 2015 EMV liability shift, there has been a significant increase in the number of fraud chargebacks that merchants are required to pay — in part because EMV has not included a shift to PIN use.

SIGMA urges Congress to modernize the current payment card security standards process so that all industries affected by payments as well as consumers have a voice in how the system operates.  SIGMA is working with a new coalition of retailers and debit networks, the Secure Payments Partnership (SPP), that was formed to improve security across the U.S. electronic payments system.

Data Security and Privacy – Priority 2
Over the past several years, many businesses and government agencies have suffered security breaches that have resulted in the theft of personal information from millions of customers.  In addition, concerns have also been mounting about the voluntary sharing and selling of consumer information by businesses. These privacy concerns have led to state legislation including, significantly, the California Consumer Privacy Act (CCPA).  Congress, in turn, is examining privacy issues along with data breach and data security issues.

Banks, the government, technology companies, and credit reporting agencies in addition to retailers have all suffered security breaches affecting millions of people. Over-zealous privacy laws such as in California threaten how business is done – including, for example, making loyalty programs difficult or impossible to maintain. Additionally, because retailers are among the businesses that deal directly with consumers, other industries such as financial services, telecommunications and technology companies want to push legal responsibility off of themselves and onto the retail industry. 

Privacy and data security laws should cover every business sector based upon the sensitivity of the data handled without loopholes. These laws should also be workable and not overburden business or prevent consumers from getting the benefits and services they want.

Rest Area Commercialization– Priority 3
When Congress created the Interstate Highway System in the 1950s, policymakers feared that undercutting off-highway businesses and redirecting consumer transactions onto the Interstate right-of-way would do irreparable harm to local governments and communities that depend on off-highway businesses as an integral part of their tax base.
For 60 years there has been a ban on commercializing rest areas. That ban has formed the foundation for Interstate travel in the United States. State-owned commercial rest areas would establish virtual monopolies on the sale of services to highway travelers due to their location. Off-highway communities – which rely on the motoring public for survival – derive much of their commercial activity and tax revenue from healthy off-highway businesses. Thousands of off-highway businesses would effectively vanish if Congress were to commercialize rest areas. Moreover, tens of thousands of jobs would be lost and communities would be devastated. 

Rest area commercialization is an ineffective, inefficient way to raise money for the highway program – SIGMA opposes rest area commercialization as the ban on such activities has been critical to the livelihood of businesses that are located near the highway and the communities that depend on their tax dollars.

Interstate Tolling – Priority 3
As motor vehicles become more fuel efficient, it is increasingly difficult to fund highway programs solely through a motor fuels excise tax. Tolls on existing interstates, however, are an inefficient and counterproductive way to collect revenue. Tolling negatively impacts communities and businesses, such as fuel marketers, that rely on the unrestricted flow of people.  By undercutting existing businesses, tolling Interstates would erode the tax base in local communities throughout the nation. 

Approximately 30% of revenue raised via tolling is spent on administrative costs while more than 99% of revenue raised from federal motor fuel excise taxes is invested in surface transportation projects.  Many of the country’s crumbling roads and bridges are in less populated areas that are not traveled frequently enough to generate sufficient toll revenue. Furthermore, taxpayers should not be charged again for roads they have already paid for with their tax dollars. 

SIGMA is strongly opposed to tolling on existing Interstates as a means of raising infrastructure revenue. The privatization of highways could dangerously alter the playing field for many business-owners along the nation’s highways and motorists should not have to pay for the same roads multiple times over through tolls.

Revisions to Rules Governing Overtime Pay – Priority 3
In March 2019, the Department of Labor (DOL) proposed a new Overtime Rule that would raise the minimum salary level below which an employee is entitled to overtime compensation to $679 per week ($35,308 per year). This would replace the Obama-era rule, which had attempted to raise the salary threshold dramatically (from $23,660 per year to $47,476 per year) and had been blocked by the courts. The new $35,308 per year threshold is more in line with actual industry salaries. In establishing this new salary threshold, DOL returned to using traditional methodology that looks at wages in the lowest wage geographic region in the country and the lowest wage industry (retail). The proposed rule would also allow nondiscretionary bonuses to count for up to 10 percent of an employee’s annual salary and proposes updates to the salary threshold every four years (subject to notice-and-comment rulemaking) to prevent the threshold from becoming outdated. 

The DOL’s new proposed salary threshold is based on long-standing precedent (the proposal uses the 2004 methodology to update the threshold) and the $35,308 number is much more in line with salaries that are actually seen at the managerial level in the fuel retail and wholesale  industry.  It follows SIGMA’s comments submitted during the rulemaking and SIGMA supports it.

Retail Issues

FDA Regulation of Tobacco – Priority 2
The average convenience store/motor fuel marketer derives a significant portion of its in-store sales from tobacco products. Retailers must comply with various regulations in order to sell such products and violations could subject retailers to significant fines and penalties. Today, the Food and Drug Administration (FDA) maintains the authority to regulate the manufacture and retail sale of all tobacco products, including cigarettes, smokeless tobacco, and e-cigarettes.

The average convenience store/motor fuel marketer derives nearly 34 percent of its in-store sales from tobacco products.  The implementation of legislation or regulations that affect retail tobacco sales will have an impact on many SIGMA members.           

SIGMA supports the ability of retailers to sell tobacco products responsibly on a level playing field. Regulations should not disadvantage SIGMA members in favor of other retail businesses (such as tobacco shops, online sellers, and Native American businesses).  Furthermore, SIGMA believes that certain regulatory actions, such as overly aggressive limits on nicotine and flavors, could increase the illicit trade of tobacco products.  FDA should enforce the current laws consistent with the authority it was given by Congress and with retailers’ rights to Due Process.

E-Cigarettes – Priority 2 
The Food and Drug Administration (FDA) issued draft guidance that would limit the sale of most flavored e-cigarettes to adult-only stores, stores with adult-only sections, or the Internet.  
The Family Smoking and Prevention Tobacco Control Act of 2009 grants FDA authority over significant aspects of tobacco manufacturing marketing and retail practices. However, it prohibited FDA from preventing the sale of a tobacco product in one type of retail channel. FDA’s guidance is an attempt to circumvent its legislatively granted authority. While FDA is ostensibly banning all sales of flavored e-cigarettes, the Agency intends to “prioritize enforcement” at businesses that are not adult-only, like convenience stores/fuel marketers. FDA’s guidance does not address the issue of underage use of e-cigarettes, but instead chooses regulatory winners and losers.

SIGMA opposes FDA’s guidance that would allow vape shops and Internet sellers to develop a monopoly on sales of most flavored e-cigarettes while banning convenience stores/fuel marketers from that market.  Vape shops and Internet sellers are a more frequent source of e-cigarette sales to minors than are convenience stores/fuel marketers, even though there are 15 times more convenience stores than vape shops and tobacco stores combined. 

Supplemental Nutrition Assistance Program – Priority 3
Convenience stores owned and operated by SIGMA members play an integral role in the Supplemental Nutrition Assistance Program (SNAP), particularly in rural and urban communities where economically challenged Americans have few places to shop for food and many stores may have limited hours of operation. In order to participate in SNAP, retailers must meet certain eligibility requirements, including specific requirements about what items and how many items a retailer must stock in order to participate in SNAP. 

SIGMA advocates for stores operated by fuel marketers to continue to participate in SNAP on a level playing field with other channels of commerce. SIGMA does not object to the goal of providing SNAP participants with access to a broader array of foods, but regulations should not be so onerous that they push small format retailers out of the Program and limit food access for SNAP beneficiaries.