CONGRESS WRESTLES WITH GAS PRICE ISSUES

High gasoline and diesel prices have been the main topic of discussion for Congress this week. Presidential candidates have also been partaking in the debate with Senators John McCain (R-AZ) and Hillary Clinton (D-NY) advocating a tax holiday over the summer months. The Congressional Research Service (CRS) also issued an assessment on gas prices which outlines previous attempts by Congress to address the issues. PMAA is reviewing the CRS report in detail.

On the issue of futures market reform, numerous Members of Congress and separately Senate Republicans have discussed the issue this week and some may introduce new legislation. Senate Democrats are working on gas price legislation and Senator Dorgan (D-ND) has been advocating an increase in margin requirements for speculators. Sen. Dorgan is also working to include an amendment to the Federal Aviation Administration Reauthorization bill (H.R. 2881) that would halt all oil deliveries to the Strategic Petroleum Reserve (SPR) until the price of oil falls below $75 a barrel. Senator John Barrasso (R-WY) has also introduced his own bill, S.2927, to halt oil deliveries to the SPR. While Senator Dorgan’s (D-ND) proposal incorporates a price trigger on halting deliveries to the SPR, Republicans are proposing a six month freeze on deliveries to the SPR without a price trigger. It is not yet known if the Democrats will support the Republican proposal.

Senator James Inhofe (R-OK), ranking minority member of the Senate Environment and Public Works Committee, is voicing his concern that the Renewable Fuel Standard (RFS) has driven food prices to unprecedented levels. He has proposed that the Environmental Protection Agency (EPA) should use its authority to waive all or portions of the RFS mandates as part of its rulemaking process. Senator Kay Bailey Hutchison (R-TX) who chairs the Republican Policy Committee, announced plans to introduce legislation to stop national biofuel production at current levels for 2008.

Meanwhile, it looks like the Farm Bill will get another two week extension. Lawmakers are close to an agreement, but need time to make some adjustments to farm subsidy caps. House Agriculture Chairman Collin Peterson (D-MN) said that the House and Senate intend to make substantial cuts to farm subsidy caps and will have the votes necessary to override a veto. House Majority Leader Steny Hoyer (D-MD) said that he expects the House to take up the final version of the bill next week.

CONFEREES TO FINALIZE FARM BILL

 

Speaker Pelosi (D-CA) announced House conferees for the Farm Bill (H.R. 2419) yesterday (Senate conferees were named in December) and all indications are that the bill is finally moving!  Conferees began the first formal meeting Thursday and the Chairs of the conference, Senator Harkin (D-IA) and Rep. Peterson (D-MN), have a blueprint for the bill almost completed and hope to finalize negotiations on the bill within two weeks.  

 

The most recent 30-day extension is set to expire on April 18 and Congressional Leadership is willing to do a short term extension if it means completing the bill.  The President has also indicated his support for this approach. 

HOUSE SUMMONS OIL EXECUTIVES TO TESTIFY BEFORE CONGRESS

 Last week the House Select Energy Independence and Global Warming Committee held a hearing to address oil companies’ profits, current gasoline prices and alternative energy. Testifying before the committee were: Mr. J. Stephen Simon, Senior Vice President of Exxon Mobil Corp; Mr. John Hofmeister, President of Shell Oil Company; Mr. Robert A. Malone, Chairman and President of BP America, Inc.; Mr. Peter Robertson, Vice Chairman of Chevron and Mr. John Lowe, Executive Vice President of ConocoPhillips. As in the past, the hearing served as political theatre to criticize major oil companies. Members asked oil companies to invest ten percent of their profits in renewable energy and biofuels. Currently, House leaders are trying to repeal $18.1 billion in oil production tax incentives to create tax breaks for alternative energy companies.

Mr. Simon, Senior Vice-President, Exxon Mobil Corporation explained that there are three factors affecting high energy prices: U.S. monetary policy, geopolitical events, and speculation which may add as much as much as 30 to 40 percent to the cost of crude oil.

HOUSE ENERGY COMMITTEE APPROVES FDA REGULATION OF TOBACCO

Earlier today the House Energy Committee adopted a revised version of HR 1108, legislation permitting the FDA to regulate the sale of tobacco.  The revisions were part of Subcommittee Chairman Frank Pallone’s (D-NJ) Manager’s Amendment to address the concerns of petroleum retailers.

The bill now goes to the House Floor for consideration where it will likely pass. However, it is expected President Bush would veto any legislation that reaches his desk.

HOUSE ENERGY TO MARKUP TOBACCCO REGULATION BILL

Before Congress adjourned for its Easter recess, the House Energy & Commerce Subcommittee on Health approved H.R. 1108, legislation granting the Food and Drug Administration (FDA) regulatory authority over tobacco manufacturing and retailing. The full House Energy & Commerce Committee is expected to mark up the bill Wednesday, April 2.

It is expected that Chairman John Dingell (D-MI) will offer a manager’s amendment at the hearing to address some of the concerns expressed by petroleum retailers.

This bill is harmful to every petroleum retailer that sells any tobacco product. The FDA can barely regulate food and now the government thinks it can regulate the sale of tobacco at over 300,000 retail stations. States are doing a fine job preventing cigarettes and the like from kids under 18. 

 

HOUSE SUBCOMMITTEE APPROVES FDA TOBACCO BILL

Last week the House Energy and Commerce Subcommittee on Health approved legislation, H.R. 1108, that would require the FDA to regulate the manufacture and sales of tobacco.

Though Republicans offered several amendments to stall the legislation’s passage through the subcommittee, both sides ultimately agreed to move the legislation for a full committee markup. H.R. 1108 would establish a schedule of fines for retailer violations that takes into account whether a retailer has training programs for employees. It would also specify that a retailer cannot be held liable for a violation if a minor presents a fake government-issued ID.

Two Republican amendments were adopted. First, to allay some concerns that the bill might allow for an expedited regulatory process, Ranking Member Nathan Deal (R-GA) offered an amendment that would require all regulations to go through the standard rule-making process. The second amendment that was accepted was offered by Rep. Michael Burgess (R-TX) which would require the FDA tobacco program to be funded entirely by user fees and would also bar any Treasury money to be shifted from other areas if the user fees are inadequate. The user fees would be paid by tobacco manufacturers and importers to offset the expected loss in revenues from decreased smoking. Other Republican members offered amendments to delay implementation of the bill ranging from two to ten years, but the delay of implementation proposals were rejected by voice vote.

Full Committee mark-up of H.R. 1108 is expected in the next few weeks. While PMAA grassroots opposition to the retailer provisions continues, we urge increased focus on the need for equity in all forms of sale (online sales and sales on Native American reservations). If you have not already contacted your Representative in Congress, please contact them now and tell them to oppose FDA regulation of retail sales of tobacco products and close the Native American and online sales loopholes. You can reach your Representative by calling the switchboard at 202-225-3121.

The Senate Health, Education, Labor and Pensions (HELP) Committee marked up the companion bill, S. 625, last August but no further action has been taken on the Senate bill. President Bush has voiced concerns about the legislation in the past. However, last August the White House Cancer Panel recommended that the federal government raise taxes on tobacco products and begin regulating tobacco as a drug. PMAA continues to voice opposition to the tax increase and the FDA regulation of tobacco retailers.

RETAILERS READY TO BATTLE CREDIT CARD FEES ON THE HILL

This week Representatives John Conyers (D-MI) and Chris Cannon (R-UT) introduced legislation to address unfair and burdensome credit card interchange fees.  In response to the proposed legislation, the Merchants Payment Coalition (MPC), of which PMAA is a member, issued this statement: “We applaud the legislative efforts by House Judiciary Committee Chairman John Conyers (D-MI) and Rep. Chris Cannon (R-UT) and the Senate Judiciary Committee to fix the broken interchange fee market. With about 80 percent market share, Visa and MasterCard operate like price fixing cartels, each monopolist sets ‘take it or leave it’ oppressive credit card interchange fees and rules, and they do so in secret. Their illegal price fixing alone costs our customers more the $350 per household every year, and it is rising. This legislation under consideration would end the practice of anti-competitive rate setting by the credit card industry and give retailers an opportunity to negotiate terms and conditions just as we do with every other business. The only viable alternative to fix this problem is government regulation, which we oppose. 

Retail is all about negotiating to bring value to our customers. Unfortunately, there is no negotiating with the credit card industry.  The proposed legislation would finally bring some competition to this broken market.”

SENATE COMMITTEE HOLDS HEARING ON THE EFFECTS OF RENEWABLE FUEL STANDARD

As you may know, President Bush has pushed for increased production and distribution of ethanol in gasoline. The Senate recently held hearings to discuss the Renewable Fuel Standard included in the 2007 Energy Bill.

Senator Bingaman (D-NM), Chairman of the Senate Energy and Natural Resources Committee, raised concerns over the recently passed energy bill, H.R. 6, which drastically increases the Renewable Fuel Standard (RFS) to 36 billion gallons by 2022. The chairman stated that the mandates might be too aggressive and questioned the availability of biofuels to meet the new mandates since cellulosic ethanol plants are just getting started and are not commercially ready for use.

Senator Bingaman was concerned that the EPA would have difficulties implementing rules to achieve the aggressive mandates and stated that technical corrections to the RFS expansion will likely be needed. New regulations have to be in place within one year of the energy bill’s passage, which is going to be extremely hard to accomplish given the circumstances. Charles Drevna, President of the National Petrochemical and Refiners Association, highlighted to the Committee that all the talk about how ethanol will solve our nation’s dependency on foreign oil is not the final answer. He cited that it costs 13 to 18 cents a gallon to transport ethanol compared to conventional gasoline, which only costs three to five cents.

Automatic Temperature Compensation

ATA letter to NCWM

The American Trucking Association (ATA) has told the National Conference on Weights and Measures (NCWM) that they are opposed to a national Automatic Temperature Compensation (ATC) retail mandate. ATA believes that due to the competitive nature of the retail motor fuel industry, inventory shrinkage or expansion is accounted for in the retail pricing of diesel, and “any impact of temperature variances is eliminated through competitive pricing.” ATA also voiced concern that the cost of the installation of temperature compensation devices would increase the retailer’s cost of goods and ultimately be passed on to the consumer. “For this reason, ATA is concerned that the installation of ATC devices is a solution that may be more expensive than the problem it is trying to address”.

As some may know, the energy content of gasoline fluctuates with the temperature. One gallon of gasoline is measured as 235 cubic inches at 60 degrees (238 cubic inches in Hawaii).  As the temperature rises and falls above or below 60 degrees, your vehicle gains or loses miles per gallon.  On average the amount of energy lost in winter is equivalent to a teaspoon.

ATC has caught the attention of the NCWM after several congressional hearings. Rep. Dennis Kucinich (D-OH) called several hearings and tried to drag the leaders of Exxon and Shell to testify on the matter.  Congress was alerted to the issue by several articles in the Kansas City Star after truck drivers noticed they got fewer miles per gallon after filling up at a particular truckstop out west.

If the NCWM approves mandated or permissive ATC, we will also see the cost of gasoline rise.

Initial Agreement Reached on National Economic Stimulus Package

With the Nation teetering on the verge of a recession, Congress and the President believe they must pass an economic stimulus package. Last night a tentative agreement was reached on a $145 billion economic stimulus package that would quickly send payments to the poor and middle class while offering businesses faster tax write-offs for corporate investment and immediate tax deductions for small-business investments in plants and equipment. Businesses also would be able to take tax deductions this year on operating losses from as long as five years ago.Every Member of Congress via the urging of interest groups will be lining up to add riders to the package. Of note for marketers, it is possible that an extension of the renewable energy tax credits will be in the package.* That would mean an extension of the biodiesel and ethanol tax credits, which are set to expire at the end of this year. The Senate Finance Committee still plans to put together provisions to be attached to the final bill.

Also, Senator Snowe (R-Maine) is fighting for full funding of the Low Income Home Energy Assistance Program (LIHEAP) at $5.1 billion and House Speaker Pelosi (D-Calif.) has set aside proposed funding increases for low-income heating assistance. PMAA has strongly urged Congress to fully fund the critical LIHEAP program.The process for passage of the package is for the House to take up the measure first, and for both chambers to pass the bill before President’s Day (February 18). It is likely that the regular committee process will be bypassed in order to move the package quickly.  *Senate Finance Chairman Max Baucus has signaled he does not support renewing the tax credits.

*Senate Finance Chairman Max Baucus has signaled he does not support renewing the tax credits.