Inside Washington
By John Eichberger

Retailers Should Not Be Punished
Should retailers be liable for selling fuel that’s not compati­ble with their equipment if the government and their suppli­ers make them sell it? Or should the government help retailers comply with the federal law? NACS thinks the gov­ernment should help out and we are pushing to make that happen.

The federal renewable fuels standard (RFS) requires the industry to blend 36 billion gallons of renewable fuels by 2022. What’s not understood is that the market will maximize its use of the cur­rent mix of renewable fuels (predomi­nantly E10 and E85) within the next two years. This poses a huge problem.

Currently, Underwriters Laborato­ries (UL) certifies retail refueling equipment to sell fuel with a maximum ethanol content of 10 percent. Anything beyond that exposes the retailer to gross negligence liability and results in violations of OSHA requirements, tank insurance policies and state tank fund programs. Despite an announcement earlier this year by UL that most dis­pensers in the market are suitable for up to 15 percent ethanol, the company will not retroactively recertify any equipment already in use, which leaves the retailer vulnerable to these liability standards.

If that weren’t enough, more than 95 percent of vehicles on the road are not equipped to operate on more than E10 (warranties would be voided and emissions control technologies could fail). Retailers considering sell­ing fuels above E10 risk li­ability associated with misfueling.

In spite of this, the Environmental Protection Agency is considering pe­titions to allow the use of fuels with greater than 10 percent ethanol to reach compliance with the fed­eral mandate. The agency is currently reviewing the science of vehicle perfor­mance and emissions to determine if this is even possible. NACS believes at some point, however, EPA will approve the use of these fuels, but perhaps only for vehicles manufac­tured after a certain year. Yet, during all of this dis­cussion, there is little at­tention paid to the liability issues facing retailers.

To put this in layman’s terms, all it would take is one bored trial law­yer and one leak of an ethanol-blended fuel from non-certified equipment to trigger a lawsuit that could subse­quently put a retailer out of business. NACS argues that if a retailer has reason to believe his equipment is compatible (i.e., reference to the re­cent statement by UL or a manufac­turer’s statement of compatibility), that retailer should not be punished for complying with a federal man­date.

To help retailers, NACS is asking Congress to enact legislation that will:

• State that any EPA-approved renewable fuel that complies with the RFS requirements cannot be declared a defective product.
• Provide retailers with an opportunity to use existing equipment to sell approved renewable fuels without the risk of liability, regulatory enforcement or insurance policy violation.
• Ensure vehicle warranties are not void for using fuels with greater than 10 percent ethanol.
• Direct EPA to establish requirements (including labeling standards) to prevent misfueling of vehicles and protect retailers from liability if they comply with those requirements.

It is important to note that what NACS is advocating in no way removes the retailer’s responsibility to comply with applicable underground storage tank regulations and clean up any re­leases. The proposal simply protects the retailer from excessive liability as­sociated with selling a fuel blend ap­proved by the EPA.

We have had very positive meetings with dozens of lawmakers and we hope the issue will be addressed this Con­gress before it is too late. 

The End of Tobacco Tax Evasion?
The flood of consumers to the Internet to save money by buying “tax-free” ciga­rettes” is likely to increase dramatically this year with the April 1 increase in the federal excise tax. While consumers cannot escape paying federal excise taxes, many of them are able to illegally skirt state taxes by buying on the Internet — a big incentive for them to shun convenience stores. A bill introduced on March 23 by Repre­sentative Anthony Weiner (D-NY) seeks to close this loophole.

For years, NACS has led the charge against online tobacco merchants who fail to collect state excise taxes as required by federal law. Many of these ven­dors blatantly advertise on their Web sites the availability of “tax-free cigarettes.” In fact, a simple Google search for the phrase will yield hundreds of sites that illegally evade collection of state tobacco excise taxes. Further, these sites are notorious for not verifying the age of their consumers and have not been held accountable for their negligence.

To further strengthen our voice, NACS is supporting the enactment of the Prevent All Cigarette Trafficking Act (PACT Act, H.R. 1676), to ensure the collec­tion of applicable excise taxes for all sales of product, including those via Internet and mail order. It does so by:

• Making it a felony to sell tobacco via telephone, the mail or the Internet and not complying with all state excise tax laws.
• Empowering each state to enforce the federal law against out-of-state sellers that deliver into its state by giving state attorneys general the authority to seek injunctive relief and civil penalties against violators.
• Empowering the attorneys general to compile a list of delivery sellers who fail to comply with this act or state tax laws.
• Requiring Internet and other remote sellers to verify the purchaser’s age and identity through easily accessible databases. It also requires the person accepting delivery to verify their age.
• Making cigarettes and smokeless tobacco products non-mailable through USPS. While FedEx, UPS and DHL have agreed not to ship cigarettes and other tobacco products, USPS has continued to deliver tobacco products bought over the Internet.
• Granting the Bureau of Alcohol, Tobacco, Firearms and Explosives inspection authority for distributors of cigarettes and imposing a penalty for those who refuse inspection.

It was unclear at press time what the schedule might be for Congress to con­sider the PACT Act. NACS will be working to generate broad support for the legis­lation and hopes to secure enactment this Congress.

Futures Markets Transparency
To help avoid a repeat of 2008’s painful rise to $140 per barrel oil, NACS wants Congress to enhance transparency in the commodities futures markets to prevent any manipulation of oil prices. And, to make it official, at its early April meeting, the NACS Board of Directors decided to support the Derivatives Markets Transparency and Account­ability Act of 2009 (H.R. 977).

The 2008 run-up in oil prices was driven in large part by the investment in futures contracts by noncommercial traders seeking a more stable market. These non-commercial traders could amass positions of sufficient size to exert undue influence on the value of the futures market — to the detriment of retailer interests. H.R. 977 will in­crease transparency in the futures markets and protect market participants from potential manipulation by non-commercial traders.

The legislation, which was passed by the House Agriculture Committee on Feb­ruary 12 and is now pending in the House Financial Services Committee, would:

• Limit direct access to a foreign board of trade’s electronic trading facility unless the board meets certain transparency and regulatory standards.
• Direct the Commodity Futures Trading Commission (CFTC) to define and classify index traders and swap dealers and establish reporting requirements for positions in contracts trading on designated markets.
• Apply CFTC reporting requirements to all over-the-counter transactions for all commodities and give the organization special call authority to obtain OTC market positions held by any person.
• Direct CFTC to establish limits on positions — other than bona fide hedge positions — that may be held by any per­son with respect to futures contracts.
• Require the CFTC to appoint at least 200 new full-time employees.
• Require several reviews and studies into market transparency and the effects of position limits in the OTC market as well as the possibilities for regulation in international markets.
• Require all prospective OTC transactions be settled and cleared through a CFTC-regulated designated clearing organization.

NACS will be working with the Com­modities Markets Oversight Coalition and a broad range of interested parties to ensure that legislation provides pro­tections from manipulation without negatively affecting the ability of petro­leum marketers to participate in the market. 

The Rest Stop Threat Re-emerges
For more than 50 years, convenience and petroleum retailers have invested in business locations located near exits along the nation’s Interstate highway system. These investments have been protected by a federal law that prohibits Interstate rest areas built after January 1, 1960, from selling food and motor fuels. Congress enacted this prohibition because community leaders feared that local businesses, jobs and tax bases would shrink as truckers and other mo­torists bypassed their cities and towns. This protection is now under attack.

NACS and other associations repre­senting these local businesses, including NATSO, believe proposals to allow the commercialization of rest areas will come up sometime this summer during the reauthorization of our nation’s sur­face transportation programs.

The existing ban on the commer­cialization of rest areas has resulted in a robust competitive economic envi­ronment, with businesses developing along interstate highways. The cur­rent prohibition has been a success, resulting in numerous travel plazas, truck stops, restaurants, hotels and gas stations.

The Bush administration’s highway reauthorization proposal included the establishment of a pilot program with up to 10 states eligible to offer commer­cial services at rest areas. Additionally, California, Oregon and Washington, under the guise of an experimental pro­gram, have applied to the Department of Transportation to commercialize the state’s rest areas as a means to increase revenues for their cash-strapped states.

We are working with NATSO and other organizations to help reserve this competitive market, which has proven mutually beneficial for consumers and businesses. Rest area commercializa­tion results in an unfair competitive environment for privately operated in­terchange businesses, and could ulti­mately destroy a successful economic business model nearby.