Issues

Fuels Issues

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 EPA assessing the state of the fuel market, evaluating external policy developments, and using this data to determine whether to exercise its statutory waiver authority to ensure that renewable fuel mandates do not exceed the volume of renewable fuel the market can reasonably absorb. SIGMA believes this is necessary in order to ensure the RFS can achieve its objectives.

Provided the program is administered in a rational manner, SIGMA supports the RFS.

 

         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.

 

         Future of the RFS 

The RFS program mandates the production and blending of increasing levels of renewable fuels, with final congressionally-mandated levels set through 2022. After that point, the statute requires EPA to determine renewable volume obligation (RVO) amounts on its own, based on an analysis of the functionality of the program between 2005 and 2022, along with other relevant factors. There is much controversy surrounding turning the program over to EPA and no stakeholders—from the oil, renewable fuels, or other related industries—want EPA to have sole discretion over the program. However, there are certain issues with the RFS program that must be addressed, including the fact that fuel demand has not increased as predicted and advanced biofuels have not entered the market as rapidly as originally assumed.
 
SIGMA continues to work with Congress, EPA, and other stakeholders to chart a path forward post-2022.

 

Electric Vehicle Charging Infrastructure

As electric vehicles 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. Utility companies, however, are seeking approval from state governments to enter the vehicle recharging business for electric vehicles (EVs) and treat their capital investments in the alternative refueling business as part of the utility rate base, effectively creating a monopoly of EV charging stations paid for by all electric power consumers. If a state provides special incentives to a public utility to allow it to build an electric charging infrastructure at a cost with which the private market cannot compete, SIGMA members will be placed at a disadvantage when investing in the alternative fuel marketplace. 

SIGMA opposes granting a de facto monopoly on the provision of refueling services, which will undercut the competitive nature of the refueling marketplace, ultimately harming consumers. 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. 

Biodiesel Blenders’ Credit 

On February 9, 2018, as part of a bipartisan agreement to fund the federal government, the biodiesel blenders’ credit of $1.00/gallon was retroactively extended for 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. 

In line with SIGMA’s advocacy on the issue, Congress extended the biodiesel blenders’ tax credit and rejected efforts to make the credit a producers’ credit. As the credit was only extended for 2017, SIGMA supports legislation to further extend the blenders’ credit and incorporate a 5-year phase out.
 

Private Mobile Fueling

Private mobile refueling aims to have trucks travel to homes and offices to refill vehicles where they are parked, as opposed to at a retail motor fuel outlet, raising several safety, regulatory and legal concerns. 

SIGMA opposes mobile refueling in its current form as it could cause harm to individuals, vehicles, businesses, and the environment; such potential harms are mitigated at retail outlets, which are required to comply with many safety regulations.

 

CAFE Standards Midterm Review

The 2012 Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) joint final rule setting greenhouse gas (GHG) emissions standards for model year 2017-2025 light-duty vehicles contained a provision requiring EPA to conduct a mid-term review of the 2017-2025 light-duty vehicle emissions standards to determine if they are still appropriate. The Obama Administration issued a final determination concluding the 2022-2025 standards are still appropriate; the Trump Administration is reconsidering the 2017-2025 light-duty vehicle emissions standards to determine if they are still appropriate. Regulatory incentives and requirements built into current GHG emissions standards disproportionately favor EV technology. By offering parity in incentives for natural gas vehicles (NGVs) and EVs, EPA and NHTSA could encourage automakers to transition light-duty vehicle segments to natural gas. In addition, including NGVs in the formulation of GHG emissions targets for 2022-2025 model year light-duty vehicles could increase EPA’s estimates of achievable emissions and fuel economy improvements, which would weigh in favor of maintaining existing emissions reduction targets.

SIGMA supports modifying current regulatory incentives and dual-fuel vehicle design requirements to create a level playing field for light-duty natural gas vehicles and electric vehicles.

 

Biodiesel Trade Cases 

On March 23, 2017, a coalition of domestic biodiesel producers filed antidumping and countervailing duty petitions with the U.S. Department of Commerce (DOC) and the International Trade Commission (ITC) on biodiesel imported from Argentina and Indonesia. The petitions alleged that Argentine and Indonesian companies were dumping biodiesel by selling it in the U.S. at prices below production costs, as well as receiving unfair subsidies from their respective governments. The coalition contended that these practices injured the domestic biodiesel industry by reducing prices and denying market share to U.S. producers. 

In December, the ITC found that the U.S biodiesel industry was materially injured by subsidized biodiesel imports, leading DOC to enact countervailing duty orders. On February 21, 2018, Commerce found that Argentina and Indonesia dumped biodiesel at a rate of 60.44 to 86.41 percent and 92.52 to 276.65 percent less than fair value, respectively. 

SIGMA supports open markets and access to supply and remains concerned that the imposition of countervailing and antidumping duties will negatively impact the RFS program and the fuels market more generally.

General Business Matters

Data Security 

Retailers – including SIGMA members – spend over $6.5 billion each year trying to protect against card fraud. Fraud rates, however, continue to rise in the United States because of outdated payment card technology, including the use of chip-without-PIN. Because of this, and despite retailers’ significant security investments, merchants bear the brunt of fraud costs. Even more, it is the retailer’s brand that can suffer irreparable harm in the event of a data breach, and the retailer’s customers who stand to lose. 

Data security is extremely important to the fuel retailing industry and its technology providers – SIGMA supports consistent data breach notification standards across all industries. Data security requirements, however, should be reasonable in light of the type of business handling the data and the sensitivity of the data itself. Policymakers should ensure that data breach notification legislation is not riddled with loopholes that allow selected industries (i.e., the financial services and telecommunications industries) off the hook. A breached entity should not be able to push the legal obligation to notify affected consumers onto another business in the data chain – notification obligations should fall upon the entity that suffers a breach.

 

Infrastructure 

In February, the Trump Administration released its Legislative Outline for Rebuilding Infrastructure in America, around which it is urging Congress to craft legislation that would generate a $1.5 trillion investment in infrastructure. President Trump’s plan, however, only includes $200 billion in direct federal spending — and Congress cannot agree on how to pay for it. Regulatory permit reform, public-private partnerships, state and local government contributions and other incentives will be used to leverage infrastructure investment. SIGMA supports legislation to address the nation’s crumbling infrastructure, even if it requires raising the federal motor fuel excise tax, provided the revenue generated is directed to fund highway infrastructure projects.

 

Commercialization of Rest Areas 

President Trump’s infrastructure proposal suggests overturning the 60-year ban on commercialized rest areas, allowing state governments to sell food, fuel, and other commercial services at rest areas directly on the Interstate right-of-way. Overturning the ban would result in commercial activity being diverted from off-highway communities to on-Interstate locations, killing off-highway business like those owned and operated by many SIGMA members and taking needed tax revenue from localities. 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 

President Trump’s infrastructure proposal would also allow tolling on existing Interstates – another inefficient way to collect revenue for highway programs. Approximately 30 percent of revenue raised via tolling is spent on administrative costs while more than 99 percent of revenue raised from federal motor fuel excise taxes is invested in surface transportation projects.  Furthermore, taxpayers should not be charged again for roads they have already paid for and had built with their tax dollars. Tolling also impacts communities and businesses that rely on the unrestricted flow of people, such as fuel marketers. By undercutting existing businesses, tolling Interstates would erode the tax base in local communities throughout the nation. SIGMA strongly opposes 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.

 

Tax Reform 

In the last months of 2017, Congress passed tax reform legislation entitled the Tax Cuts and Jobs Act (H.R.1). Tax reform is important to gasoline marketers, most of whom make business decisions based on the structure of the tax code and are impacted by both general business provisions, as well as those specific to the fuel and convenience retail community.  H.R.1 contained several provisions affecting SIGMA members, including lowering the corporate and individual tax rates, lowering tax rates for pass-through businesses, repealing the corporate Alternative Minimum Tax, increasing individual AMT exemptions, and maintaining current estate tax rates, among others. 

SIGMA supports tax proposals that would positively impact members’ business activities and actively engages on tax matters specific to the fuel industry.

 

Joint Employer Standard 

In 2015, the National Labor Relations Board (NLRB) announced a new standard for determining joint employer status under the National Labor Relations Act (NLRA). Under the 2015 joint employer standard, the NLRB could find that two or more entities are joint employers of a single work force if they had indirect or potential control over an employee. This was broader than the previous standard, which required employers to have actual or direct control over employees to be considered a joint employer.  The NLRB overturned its 2015 expanded standard on December 14, 2017, returning to the pre-2015 standard. 

The franchisee-franchisor and analogous business models are common in the fuel marketing business and the retail space in general.  Many SIGMA members utilize this business model, and SIGMA closely monitors all government efforts that may impact the relationship between franchisors and franchisees. 

SIGMA supports legislation to codify the NLRB’s reversal of its 2015 ruling on joint employer, including H.R. 3441, the Save Local Business Act, which passed the House on November 7, 2017, and is awaiting consideration in the Senate. It remains to be seen whether the Senate will act on the bill.

Retail Issues

Swipe Fees 

Banks and credit card companies collect fees from retailers on payment card transactions involving virtually every consumer product, including gasoline. Despite the passage of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2012, which 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, swipe fees remain one of the highest expenses for retailers, second only to labor costs. In most instances, banks are still making far more money on the sale of each gallon of gasoline paid for with a payment card than retailers. Although House Financial Services Chairman Jeb Hensarling (R-TX) introduced a bill in 2017 that would repeal the Dodd-Frank Wall Street Reform Act, including debit swipe fee reform, the provision was not included in the legislation that passed the House. Exceptional grassroots opposition from SIGMA members ultimately pushed House Republicans to remove the debit swipe fee repeal provision from the bill prior to its consideration on the House floor. 

SIGMA opposes any efforts to repeal or weaken debit fee reform—and continues to educate congressional offices about debit swipe fee reform and its implementation, to discourage any action by Congress that would undo the important progress made by swipe fee reform, and to make lawmakers aware of significant problems that still exist with credit card swipe fees and the card companies’ anticompetitive rules.   

Menu Labeling Requirements

In November 2014, the Food and Drug Administration (FDA) finalized rules establishing menu labeling requirements for chain restaurants and “similar retail food establishments” with 20 or more locations. The final rule applies to more entities than was anticipated, including many convenience stores. Generally, establishments that are covered by the rule must post calories for standard menu items on menus or menu boards or, for self-service items and foods on display, on signs adjacent to the items. Covered establishments will also be required to provide additional written nutrition information to consumers upon request.  On February 6, 2018, the House passed the Common Sense Nutrition Disclosure Act (H.R. 772), introduced by Representative Cathy McMorris Rodgers (R-WA), which would make changes to the existing law to make it easier for convenience store retailers to comply with the menu labeling regulations.  SIGMA urges the Senate to pass the companion bill (S. 261) introduced by Senators Roy Blunt (R-MO) and Angus King (I-ME). The Common Sense Nutrition Disclosure Act will provide the much needed flexibility to fuel marketers nationwide – allowing them to provide nutritional information to their customers in a manner that is compatible with the fuel retailing business – and shield them from possible criminal penalties and class action lawsuits under the FDA’s final menu labeling rules

 

Supplemental Nutrition Assistance Program

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. SIGMA advocates for convenience stores operated by fuel marketers to continue to participate in SNAP on a level playing field with other channels of commerce. As Congress begins to draft the 2018 Farm Bill, SIGMA urges lawmakers to keep small format retailers in mind. Any provisions that result in the imposition of requirements that are too costly or burdensome for small format retailers may lead to those retailers leaving the program. 

In December 2016, the U.S. Department of Agriculture’s Food and Nutrition Service (FNS) issued a final rule to update retailer eligibility requirements, pursuant to changes contained in the 2014 Farm Bill. A provision in the FY 2017 omnibus appropriations bill, however, delayed implementation of certain parts of the rule until FNS rewrites the definition of “variety” to the “Depth of Stock” requirements. SIGMA supports revising the definition of “variety” in the SNAP retailer eligibility regulations to make it workable for small-format retailers. SIGMA does not object to the goal of providing SNAP participants with access to foods in a variety of categories, but regulations should balance the desire to increase food choices for SNAP beneficiaries with the goal of ensuring that SNAP beneficiaries have adequate food access. 

In addition, SIGMA opposes efforts to permit swipe fees on SNAP transactions as this would raise retailers’ cost of participation in the Program, which would lead to higher food costs for SNAP beneficiaries.

 

Tobacco Matters 

The average convenience store/motor fuel marketer derives a significant portion of its in-store sales from tobacco product sales. Retailers must comply with various sales and marketing restrictions in order to sell those 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 cigarettes and smokeless tobacco. FDA has been citing retailers for multiple violations of its regulations if retailers fail a single inspection. That practice contradicts the language of the 2009 law granting FDA the authority to regulate tobacco. Litigation challenging this practice is pending before the U.S. District Court for the District of Columbia. 

Furthermore, in May 2016, FDA finalized a rule that would extend its regulatory authority to cover e-cigarettes in addition to traditional cigarettes. On May 1, 2017, FDA announced it is delaying implementation of this deeming rule pending legal challenges from the vaping and tobacco industries. 

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. That requires FDA to enforce the law consistently with the authority it was given by Congress and with retailers’ rights to Due Process.