NACS

In July 29, the Obama ad­ministration announced an aggressive policy to reduce the nation€™s reliance on crude oil: Increase the fuel economy standard to 54.5 miles per gallon by 2025. This significant development would require passenger vehicles to at­tain a fuel economy average greater than 60 miles per gallon, while light trucks would average slightly more than 40 miles per gallon. For perspec­tive, in 2010, the average fuel economy of the American fleet was only 22.5 miles per gallon.

The administration projects that the new standard, scheduled to phase in between 2011 and 2025, will reduce the use of petroleum for transportation purposes by 44 percent by 2025. Once the entire fleet turns over and complies with the new average, the administra­tion projects an 80 percent reduction in the use of petroleum-based fuels.

If indeed the administration€™s pro­jections are accurate and fuel demand declines by 44 percent in the next 14 years, what does that mean for your business?

NACS estimates that convenience stores serve an average of 400 fuel cus­tomers each day. If those customers needed 44 percent fewer gallons of fuel, you can expect a loss of up to 176 customers each day. Over the course of a year, a retailer could anticipate a drop in total fuel customer visits from 146,000 to 81,760 €" a loss of more than 64,000 customer visits.

How the automotive industry plans to comply with the new standards re­mains to be seen. Electric drive or elec­tric-assist hybrid vehicles could play a much greater role in the years ahead, but the demand for traditional liquid fuels is going to decline. Even without the new CAFE standards, the Energy Information Administration projects a 1 to 2 percent decline in fuel demand each year going forward. The pressure is on for this critical category.

But there remains another challenge that further complicates our future: the Renewable Fuels Standard (RFS). The RFS mandates the use of qualified re­newable fuels, annually increasing the required volumes until reaching 36 bil­lion gallons in 2022. When the current program was enacted in 2007, the 36 billion gallon mandate was expected to represent approximately 20 percent of the transportation fuel sold in the Unit­ed States. With the new CAFE standards, however, and the projected decline in fuel demand, the RFS is set to represent nearly 50 percent fewer of the liquid fuels market in 2025.

In simpler terms: Given the trajectory of current federal programs, in 2025 retailers will be selling 44 percent fewer gallons and, of those gallons, ap­proximately 50 percent must be re­newables. So what do we do?

Long-term analysis and evaluation of the auto industry€™s production plans is underway to provide clearer insights into the options out there. In addition, alternative fuels that include liquid and non-liquid are being evaluated for their potential marketability and adaptabili­ty for the convenience channel. In the meantime, convenience retailers must be empowered to bring new liquid fu­els to their customers in a market-friendly and low-cost way.

To accomplish this, NACS is pushing legislation in Congress that will reduce the cost of entry for retailers to sell new fuels as well as remove some of the un­reasonable liabilities that may prevent retailers from taking a chance on a new fuel. If a new fuel can be offered to con­sumers without a significant investment for the retailer, it will be easier to deter­mine consumer interest and develop fu­els that will provide value to the market.

The legislation will do three primary things:

1. Enable retailers to have existing equipment recertified as compatible with a new fuel. Currently, equipment must be listed as compatible with a fuel. If not, it must be replaced with something that is. The legislation will eliminate unnecessary replacement costs.
2. Protect retailers from unreasonable liability associated with the actions of the self-service consumer. If a fuel is not approved for all engines, the government should develop a label to inform the consumer. Unless the retailer neglects to comply with the labeling provisions, he should not be held responsible if the consumer misfuels.
3. Protect all parties from retroactive liability if an approved fuel is later declared a defective product. If a person complies with the law today, he should not be held liable if the law changes in the future.

This flexibility will provide retailers with legal options as they enter into evolving new liquid fuel markets and preserve the retailers€™ ability to capitalize on new market opportunities. NACS is also developing a strategy to help retailers enter new non-liquid markets and compensate for the poten­tial declining consumer demand for transportation energy.

Swipe Fee Battle Continues to Rage
By John Eichberger

Since finalization of the Federal Reserve€™s rules implementing the Durbin Amendment, the banking industry has tried to blame all of its economic woes on these reforms. From a Wall Street Journal ar­ticle linking Bank of America€™s deci­sion to lay off 30,000 workers with swipe fee reforms and its $5 monthly fee on customers who use debit cards, the rhetoric continues to escalate €" so much so that members of Congress are calling for an official investigation.

In October, Representatives Peter Welch (D-VT), John Conyers (D-MI), Raul Grijalva (D-AZ), Keith Ellison (D­MN) and Michael Honda (D-CA), sent a letter to U.S. Attorney General Eric Holder urging him to investigate wheth­er big banks are coordinating their fee strategies and violating antitrust laws: "It appears that banks are seeking to justify fee increases after Congress and the Federal Reserve Board recently lim­ited banks€™ ability to collude with net­works to set debit interchange fees€¦ Statements made by individual banks and their trade associations raise ques­tions about whether some price increas­es that have occurred this year have ac­tually been coordinated."

They continued: "Actions taken by Bank of America (BOA) earlier this week highlight our concern and dem­onstrate that immediate scrutiny of additional anticompetitive pricing practices by banks is in order€¦we are concerned that BOA€™s announcement may be a reaction to, and participation in, price signaling or collusion that has occurred among and between banks and bank associations."

Meanwhile, Representatives Jason Chaffetz (R-UT) and Bill Owens (D-NY) introduced the Consumer Debit Card Protection Act (H.R. 3156) to repeal debit card fee reforms that took effect on October 1. NACS responded immediately by delivering a letter to members of the House of Representatives urging them to not cosponsor the bill.

In the letter, NACS Senior Vice President of Government Relations Lyle Beckwith told Congress that cur­rent debit card swipe fee reforms pro­vide retailers "some relief from devas­tating, and non-competitive swipe fees" and that such cost savings always "result in lower prices and better ser­vice for customers."

Further, he commented on those who may be concerned about the ef­fect of reforms on the community banks, credit unions and consumers: "Those concerns have been well ad­dressed by the market reactions. In­deed, debit card reforms have created a marketing opportunity for credit unions and community banks to offer consumers better deals than the large banks€¦Because of these reforms, fees that were once hidden are now trans­parent. This transparency is good for competition and should not be dis­couraged. Indeed, it should be ex­panded to credit cards as well."

Beckwith informed all representa­tives that those who cosponsor H.R. 3156 or vote for the bill will be held accountable by NACS in our voter score­cards and would be widely reported to our broad membership. As of press time, no other representatives have signaled their support for the bill.

FDA to Regulate E-Cigs
Electronic cigarettes (e-cigs) are growing in popularity. At the NACS Show expo this year, more than 25 vendors showcased their e-cig entries to the marketplace. But while demand may be growing, govern­ment regulations will continue to affect these products.

The Food and Drug Administration intends to treat e-cigs as "tobacco products," but no official announce­ment has been made. The Tobacco Control Act provides FDA with the authority to regulate tobacco products €" meaning any product "made or derived from tobacco" that is not a drug or device under the Food, Drug, and Cosmetic Act. Between 2008 and 2010, FDA determined that e-cigs were "drugs" or "devices" and subject to stricter regulations. However, after a challenge to that determination in court, the U.S. Court of Appeals for the D.C. Circuit held that e-cigs can be regulated as tobacco products but are not drugs/devices unless marketed for therapeutic purposes €" smoking cessation aids, for example. For now, e-cigs are regulated as tobacco products and are subject to a few controls:

• E-cigs cannot be marketed in combination with other goods, such as food or beverages.
• E-cigs are subject to registration requirements and misbranding restrictions.

FDA intends to extend its tobacco regulation authority to additional tobacco product categories such as registration, product listing, ingredient listing, good manufactur­ing practice requirements, user fees for certain products, adulteration and misbranding provisions, as well as the premarket review require­ments for new tobacco products and modified risk tobacco products.

Contact NACS Government Relations Director Corey Fitze at cfitze@nacsonline.com or (703) 518-4283 if you have questions regarding FDA€™s regulation of e-cigs or tobacco products.

NACS Opposes Attacks on C-Store Products
As we first told you last month, the government is blatantly using taxpayer dollars to fund campaigns against certain products sold inside convenience stores. The Centers for Disease Control and Prevention (CDC) has been awarding grants to states and localities with the express purpose of influencing state and local legislation to promote increased taxation and regulation of tobacco products and products determined to contribute to obesity.

In October, the Senate Committee on Health, Education, Labor and Pensions held a hearing on chronic disease prevention.

NACS sent a letter to committee members objecting to the manner in which the CDC is funding lifestyle-change programs: "The CDC distributed over $100 million in Community Transforma­tion Grants (CTG) to state and local organizations on September 27, 2011. These grants aim to steer consumers away from unhealthy lifestyles by using grant funds to push for changes to state and local laws €" namely excise tax increases, and sales and marketing restrictions on consumer food, beverage and tobacco products. In 2010, the CDC distributed more than $400 million in similar grants under an almost identical program €" the Communities Putting Prevention to Work Initiative funded by the 2009 Recovery Act."

NACS identified projects supported by CDC that directly harm convenience retailers, such as:

• Using zoning laws to restrict retail locations for convenience stores and reducing the number of convenience stores.
• Limiting access to certain food and beverages inside convenience stores.
• Placing moratoriums on quick-service restaurant construction.
• Requiring additional signage and menu labeling at retail.

NACS concluded: "In a time of econom­ic woes, the last thing convenience store owners, employees €" and all Americans need is wasteful, perhaps illegal, funding of programs to pass new taxes and regulations on small businesses." NACS urged the committee "to ensure that CTG activities that harm convenience store owners are not funded and that proper oversight into the grants already distributed is conducted."

The convenience industry appears to be caught in the crosshairs of this battle against obesity. We must fight for our reputation and defend our businesses against burdensome and unfair regula­tions. NACS is working diligently on these issues but we need your help. If you are aware of any campaigns in your market, please let us know by contacting NACS Government Relations Director Carin Nersesian at cnersesian@nacsonline.com or (703) 518-4210.