PMAA Prepares 'Hot Fuel' Talking Points

Valero, Wal-Mart, Sam's Club announce settlements

Published in CSP Daily News

By  Carole Donoghue, Petroleum Editor

OAK BROOK, Ill. -- With more companies settling out of the hot fuel litigation, media attention is again returning to the issue and at least one marketer group has prepared "talking points" that its members can use with reporters who call for a comment.

The advice is aimed at countering some of the claims made in the now five-year-old case winding its way through a federal court in Kansas City, Mo.

As previously reported in CSP Daily News, Shell, BP, ConocoPhillips and Casey's General Stores Inc. have reached settlement agreements on the matter. Now Valero Energy Corp., Wal-Mart Stores Inc. and Sam's Club have also settled, according to a Kansas City Star report. Costco Wholesale Corp. settled in 2009.

Valero spokesperson Bill Day confirmed that company is part of a settlement agreement, but declined to offer any details.

The class-action attorneys in the case have claimed that consumers can lose as much as $2 billion to $3 billion a year when they buy gasoline or diesel at a temperature of above 60 degrees Fahrenheit (click here for previous coverage of the "hot fuel" issue).

"This is an unsubstantiated 'back-of- the-napkin' estimate that completely ignores the reality of motor fuels retailing," according to the push-back paper prepared by the Petroleum Marketers Association of America and circulated to its state affiliates recently.

"Retailers strive to price their product in a manner to cover the wholesale cost of the fuel with a reasonable return on investment. It is ridiculous to suggest that increasing the size of the gallon based on temperature will not increase the price the consumer will pay," the document said.

State laws and standards mandate that terminals report sales in both gross and net gallons, notes the jobber group. There are about 1,200 terminals distributing millions of gallons a week in the United States.

"Requiring ATC at 1,200 terminals pales in comparison to requiring the retrofit of 800,000 dispensers. Requiring dispensers to be retrofitted at $3,000 per dispenser would cost retailers over $2 billion, not to mention the skyrocketing cost to state weights and measures agencies who must annually inspect 800.000 new ATC devices," it said.

"These added costs would be unproductive," PMAA maintained, and would eventually be borne by motorists. " It is naïve to suggest that increasing a retailers operating costs will lower prices for the retail customer." As for allowing retailers to voluntarily install ATC devices, it would rob consumers of the ability to "compare apples to apples." The consumer would never know which station had the best price.

The National Conference on Weights & Measures (NCWM) performed an exhaustive four-year review of all the issues surrounding retail ATC. "In the end there was very little support among W&M officials for mandatory or permissive ATC at retail," PMAA noted.

And as reported in a Morgan Keegan/CSP Daily News Flash yesterday, refiners and chain retailers signing out-of-court settlements with class-action attorneys in the hot fuels case due to go to trial next month will likely have to make financial contributions into a special fund that will be used to advance installation of temperature-compensation devices on U.S. fuel pumps.

Details of the settlements are still secret, but a knowledgeable source told CSP Daily News that the deals will involve the creation of a special ATC fund. "They will pay money into a fund to encourage the installation of automated temperature correction devices," said the source.

Settlement agreements must still be approved by the court but Judge Vratil indicated in one recent ruling that she could order the industry to take "all reasonable steps to seek regulatory approval of implementing ATC."

She specifically referred to a pending settlement with Costco that committed the chain to install ATC pumps at sites in 14 states over a five-year period.