PMAA Priorities Report
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Top Issues
1. RFS 9.7 Fix
2. Obamacare Repeal (employer
mandate)/Replacement
3. Tax Reform: LIFO, Estate Tax, Step Up
Basis, Border Adjustment, Bonus
Depreciation
4. Speed Limiter/Sleep Apnea
5. Menu Labeling Fix
6. SNAP - Reform New Retailer Regulation
7. NORA Reauthorization/Benefits of Oilheat
8. ULSD Corrosion
9. Swipe Fees/Security Issues
10. Placarding
Secondary Issues/Backburner
*
RP 1200 (Reducing UST Compliance
Costs)
ONGOING
*
E-Vapor Regulation and Predicate
Date Repeal
*
Biodiesel Tax Credit/Producers Credit
*
85 Octane
*
Fuel Neutral Policies
*
Disaster Planning/Establish Emergency Response
Program
*
On-Demand Fueling
*
Jones Act
*
LUST Fund
* Keystone XL
*
DOL Overtime Repeal
Motor Fuels Committee
* RFS Reform
On November 23, 2016, EPA released the final 2017 RFS volumes which raised the total amount of biofuels required for blending into gasoline and diesel from 18.1 billion gallons in 2016 to 19.28 billion gallons (15 billion gallons of corn ethanol). The 2018 biodiesel mandate was left unchanged from the proposal at 2.1 billion gallons earlier this year. Although today's increase represents a 10.7 percent ethanol blend, PMAA believes that refiners will continue to use RIN credits to maintain E10 blended gasoline for the foreseeable future.
PMAA is disappointed but not surprised that the outgoing Obama Administration decided to raise the ethanol mandate. PMAA will now work with the incoming Trump Administration to cap the ethanol mandate at 9.7 percent of gasoline supply going forward. Capping the ethanol mandate at 9.7 percent will resolve UST compatibility concerns with E10 plus blends, reduce RIN prices which will result in lower RFS compliance costs for refiners and preserve the ability for position holders at the rack to blend.
* Sleep Apnea
The DOT's Federal Motor Carrier Safety Administration (FMCSA) issued an advanced notice of proposed rulemaking seeking public input on the impact of future screening, evaluation and treatment of CDL drivers for obstructive sleep apnea (OSA). The proposed rule is important to petroleum marketers because if promulgated, it could disqualify CDL even moderately overweight drivers with a body mass index greater than 33 bmi and a neck circumference over 17 inches.
The controversial proposal has been floating around the FMCSA for the past 15 years but was recently given a boost by a study by the National Transportation Safety Bureau (NTSB) pointing to a recent series of truck and train accidents that are linked to OSA, a respiratory disorder characterized by a reduction or cessation of breathing during sleep. The FMCSA said undiagnosed or inadequately treated moderate to severe OSA can cause unintended sleep episodes and deficits in attention, concentration, situational awareness, memory, and the capacity to safely respond to hazards when driving commercial motor vehicle.
There are currently no OSA screening or treatment requirements in DOT regulations. However, a series of voluntary guidance for medical professionals issued by the DOT recommends using a 33 bmi and 17 inch neck circumference as thresholds for treating CDL drivers with OSA. Drivers who surpass the threshold would be required to undergo invasive and expensive OSA treatment, obtain annual medical exemptions from FMCSA and in more severe cases, be disqualified from driving a commercial motor vehicle. PMAA opposes OSA screening and treatment for short haul drivers and will attend public hearings, meet with FMCSA officials, work with Congress and submit written comments as the rulemaking process continues.
* Speed Limiters
During PMAA's Fall Conference, both the PMAA Motor Fuels Committee and the PMAA Heating Fuels Committee confirmed ongoing disapproval of the proposed speed limiters rule.
PMAA recently submitted written comments to the Federal Motor Carrier Safety Administration (FMCSA) and the National Highway Traffic Safety Administration (NHTSA) calling on the agencies to withdraw the controversial proposed rule to mandate speed limiters in heavy duty trucks weighing over 26,000 pounds. The proposed rule would require all newly manufactured heavy duty trucks to be equipped with speed limiters set to a maximum speed that will be included in the final rule. NHTSA is proposing to set the maximum speed at either, 60 mph, 65 mph or 68 mph based on written comments received from interested parties.
A major concern for petroleum marketers is the possibility that the speed limiter mandate would be made retroactive to trucks manufactured after 1990. PMAA opposed any retrofit requirement in its written comments. PMAA told the agencies that there is insufficient data to move forward with the rule. PMAA pointed out that the proposed rule does not adequately weigh the cost on how the rule would impact small business motor carriers. In addition, the proposed rule failed to demonstrate through comprehensive data and conclusive studies that the speed differential between cars and trucks created by a speed limiter mandate would not adversely affect highway safety. Finally, PMAA told the agencies that the one size-fits-all regulatory framework that would be imposed across the industry was too broad because short-haul, private carriers who operate locally spend far less time operating at speeds that limiters would address than long-haul for hire motor carriers operating on interstate highways. PMAA intends to work with the Small Business Administration's Office of Advocacy to force the FMCSA and NHTSA to undertake a thorough small business cost benefit analysis as required by law. In early December, PMAA and other groups were successful in preventing the inclusion of an amendment in the final Continuing Resolution which would have compelled a speed limiter mandate. Going forward is the possibility of these proposals being dropped by the incoming Trump Administration. In fact, the House
Freedom Caucus's list of 232 regulations for the Trump Administration to repeal upon taking office includes the speed limiters proposed regulation.
* ULSD Corrosion
On July 20, 2016, the EPA released its study on accelerated corrosion of UST system components storing and dispensing ultra-low sulfur diesel fuel (ULSD). The EPA found that 83 percent of the 42 UST systems studied had moderate to severe corrosion on metal components including; submersible turbine pump shafts, automatic tank gauge probe shafts, flapper valves, ball valves, inner walls of tanks and fuel suction tubes. While the EPA said accelerated corrosion "could be a very common occurrence" in UST systems storing diesel fuel, it acknowledged the sampling was small and cannot be used to predict whether the incidence of moderate to severe corrosion on metal components is higher or lower in retail UST systems nationwide. The EPA is recommending that owners check their diesel fuel UST systems for similar corrosion.
The EPA study did not conduct any research into possible causes for accelerated corrosion in diesel fuel UST systems. There is currently no definitive research that has identified what causes accelerated corrosion although microbial growth is a leading factor. The Coordinating Research Council (CRC) is planning a study to research the cause of accelerated corrosion later this year. PMAA requested the CRC study to research possible causes that may occur above the terminal rack.
The PMAA ULSD Corrosion Task Force is working closely with the EPA and other industry groups to address the issue of accelerated corrosion through further study, including research into potential fuel quality issues above the terminal rack that may lead to accelerated corrosion downstream.
* Placarding
In 2000, the Pipeline and Hazardous Material Safety Administration (PHMSA) issued a letter (Reference No. 00-0208) interpreting section 49 CFR 172.336 to allow cargo tank shipments entirely of diesel fuel or heating oil to be placarded with the 1203 placard for gasoline, even though no gasoline was contained in any compartment of the cargo tank. This allowed petroleum marketers who shipped diesel fuel, heating oil and gasoline in separate loads to affix permanent 1203 placards to their cargo tank vehicles rather than changing the placard with each subsequent load of a different product. Although a January 28, 2008 Rule changed this, enforcement authorities in the states did not interpret the 2008 Rule as prohibiting placarding to the lowest flashpoint on subsequent straight loads, so it was business as usual and the 2000 interpretation stood for 15 years until PHMSA issued interpretative letter # 14-0178 on June 26, 2015. PHMSA's new interpretation of 49 CFR 172.336 limits placarding to the lowest flash point to shipments where at least one cargo tank compartment contains gasoline.
The PHMSA created separate placarding for E10+ blends in the 2008 rulemaking (73 Federal Register, 18, 4699 (January 28, 2008)) to enhance the effectiveness of hazard communication and response by aligning hazardous material classification more concisely with emergency response protocols. PMAA is working for a return to PHMSA's pre June 2015 Interpretative Guidance that allowed subsequent straight loads of gasoline (E10 maximum) and diesel fuel to be transported under the UN1203 placard for gasoline which requires the same emergency response measures.
PMAA has been working with Congress and PHMSA to make this change. We should know by this Spring a change will be made.
Convenience Store Committee
A top priority for President-Elect Trump and for the 2017 Republican-controlled Senate and House is to repeal Obamacare. Congress may use the budget reconciliation process (which avoids a filibuster by requiring only a simple majority to pass) to overturn some of Obama's policies including the Affordable Care Act.
Senate Majority Leader Mitch McConnell (R-KY) has stated that an "Obamacare replacement resolution," will be the chamber's first order of business in 2017. The Senate will begin work on a budget resolution, which will include reconciliation instructions to repeal the Affordable Care Act, when the next Congress begins on January 3, 2017.
House Speaker Paul Ryan and House Budget Committee Chairman Rep. Tom Price (R-Ga.) are considering how long a transition period will last after Congress repeals Obamacare. In both bodies the proposed time frame for transition runs between one and three years.
PMAA strongly supports the effort to repeal and replace Obamacare.
* Tax Reform: Estate Tax/ Last-In, First-Out (LIFO)
A top priority for President-Elect Trump and for the 2017 Republican-controlled Senate and House is comprehensive tax reform. In June, House Republicans issued a 35 page Tax Reform Blueprint outlining a plan for tax reform and Donald Trump issued a similar proposal which he includes among his 100-day action plan.
Under the House proposal federal estate and gift taxes would be repealed, although Trump's plan would impose capital gains taxes on assets held at death and valued at over $10 million. A recently proposed regulation issued under Internal Revenue Code Section 2704 would minimize the number of estates that will be eligible for valuation discounts and avoidance of double taxation via the estate, gift or transfer taxes. PMAA has been working with coalitions to fight this valuation discount regulation. Fortunately, experts think that the 2704 proposed regulations will be withdrawn.
The tax rate for all businesses would drop from 35 percent to 15 percent, and the corporate alternative minimum tax (AMT) would be eliminated. The Tax Blueprint diverges from the Trump plan with respect to active business income from sole proprietorships and pass-through entities, capping it at 25 percent (although compensatory income would be taxed at up to the 33 percent rate). S corporations would be taxed at a flat 20 percent rate.
The blueprint also indicates it preserves the last-in-first-out (LIFO) method of accounting while Trump has been silent on LIFO. LIFO is an inventory accounting method used by many PMAA member companies to determine tax liability. Primarily, LIFO is used to manage the costs of inflation. If inventory costs are rising, LIFO is a more accurate way of measuring financial performance and calculating tax. LIFO takes into account greater costs of replacing inventory, thereby, giving a more conservative measure of the financial condition of the business and the economic income to which tax should apply. Repealing LIFO would force PMAA member companies currently using this method to report their LIFO reserves as income, resulting in a massive tax increase for small business petroleum marketers across the country. Additionally, repealing LIFO would mean potentially higher future tax bills and would make it harder for PMAA member companies to manage inflation.
Given the strong support for tax reform among congressional Republicans, we expect 2017 to bring significant changes to the tax code and PMAA will continue to weigh in on provisions that are particularly important to petroleum marketers such as the estate tax and LIFO.
* Menu Labeling
Menu labeling requirements are now delayed until May 5, 2017; one year after FDA finalized its guidance document.
PMAA pushed for the "Common Sense Nutrition Disclosure Act" to be included in the continuing resolution but it was unfortunately not included. The legislation would modify the menu-labeling language in Obamacare to permit retailers to identify a single primary menu while not having to include nutrition labeling in other areas of the store. Furthermore, the bill clarifies that advertisements and posters do not need to be labeled and provides flexibility in disclosing the caloric content for variable menu items that come in different flavors or varieties, and for combination meals. Lastly, the bill ensures that retailers acting in good faith are not penalized for inadvertent errors in complying with the rule and stipulates that individual store locations are not required to have an employee "certify" that the establishment has taken reasonable steps to comply with the requirements.
PMAA will urge the new Congress to pass the "Common Sense Nutrition Disclosure Act" in 2017.
In March, 2016, the USDA released a proposed Supplemental Nutrition Assistance Program (SNAP) rule that went further than the requirements of the 2014 Farm Bill. Following final input from the PMAA Convenience Store Committee, PMAA submitted comments on "Enhancing Retailer Standards in the SNAP."
On December 8, USDA released the final SNAP rule. While there are improvements from what was originally proposed, the final rule still presents challenges and additional costs for retailers to participate in the program, especially for small business convenience store owners. Click
here for more details.
Regarding the SNAP program, House Agriculture Committee Chairman Mike Conaway (R-TX) recently released a committee report based on 16 hearings he's called to review the performance of the SNAP. Based on report findings, clear program goals and more flexibility for states is needed, however, the program does not need to be completely gutted. Still, House Republicans are laying the groundwork for a fresh effort to overhaul the program which could occur in the next farm bill which is due in 2018.
* Swipe Fees
The Durbin Amendment has been under attack via legislation that threatens to fully repeal it. House Financial Services Committee Chairman Hensarling's (R-TX) bill to provide an alternative to the 2010 Dodd-Frank Wall Street Reform Act, the "Financial CHOICE Act" would repeal the Durbin Amendment which would be extremely harmful for retailers. In September, the House Financial Services Committee approved the Financial Choice Act. The vote passed 30-26, with all Democrats and one Republican voting in the negative. The Financial Choice Act will likely be reintroduced next year.
In November, 2016 PMAA sent a letter to Visa calling on them to stop using EMV technology to direct debit card transactions to its own processing network, which the Federal Reserve says violates merchants' legal right to choose who will process transactions. When the industry began to implement the new EMV readers last year, they found that in many cases debit card users are steered to a screen asking them to choose between "Visa Debit" and "U.S. Debit." A customer that chooses Visa debit will be routed over Visa's more expensive, less secure signature network. If that customer instead chooses U.S. debit, the transaction is routed through the retailer's preferred choice among about a dozen competitive debit networks that are typically less expensive, but more secure because they allow the use of a Personal Identification Number, or PIN.
The Federal Reserve recently ruled that these screens are in violation of the debit reform law that states that retailers must be afforded the choice between at least two unaffiliated networks on debit transactions, not customers. Moreover, the prompt asking consumers to choose credit or debit on a debit transaction, was also found to be in violation of the law.
Heating Fuels Committee
* NORA Reauthorization/Benefits of Oilheat
PMAA played a critical role in reauthorizing the National Oilheat Research Alliance in 2014. NORA expires in February 2019, so it'll be important to move NORA reauthorization legislation forward within the next two years. PMAA will be on the lookout for possible legislative vehicles to attach NORA reauthorization language.
Meanwhile, NORA issued a landmark industry report on the utilization rate and analysis of the use of biofuels in heating oil equipment. The report, Developing a Renewable Biofuel Option for the Home Heating Sector, is important to heating oil dealers because it demonstrates the significant economic and environmental benefits of biofuels along with important information regarding its efficiency as a home heating fuel, compatibility with existing heating oil equipment and data on market penetration and acceptance.
Key findings of the report include: The transition to ultra-low sulfur heating oil (ULSHO) lowers maintenance, improves efficiency and reduces pollution from heating systems; B20 blends using ULSHO as a blend stock are lower in greenhouse gas emissions (GHG) than natural gas when measured over 100 years; Blends of two percent (B2) or more are lower in GHG than natural gas when evaluated over 20 years; and Performance studies of B20 blends on basic burner operation are equal to that of unblended heating oil. The report concluded that biodiesel fuel and the move to renewable fuels present new opportunities for the heating oil industry and consumers. The transition can be made with minimal costs by consumers and heating oil dealers, removing a significant barrier to the widespread introduction of use of renewable home heating fuel.
Meanwhile, EPA requires 2 billion gallons of biodiesel for 2017 and 2.1 billion for 2018 under the RFS final rule released on December 1, 2016. PMAA has no concerns over the biodiesel mandate because it supports BioHeat® which is cleaner than natural gas.
Other Priorities
* PEI RP 1200 (Reducing UST Compliance Costs)
The EPA final UST regulation does not set out a specific test procedure and instead defers to RP-1200 which requires liquid testing to the top of the sump above the penetration points where pipes enter the sump area. Filling the sumps to the top with liquid to test for tightness is problematic because it generates a tremendous amount of hazardous waste water that must be properly handled and disposed. This generates additional expense and waste water to the test process. In addition, preparing the penetration points in the sump area with fittings and grommets that are liquid tight is extremely expensive and could cost as much as $8,000 per site.
A better sump tightness test method that states should adopt is to allow liquid testing only to the level where the sensor alarm will sound and shut down the system turbine. The sensor alarm is below the penetration points in the sump where leaks are more likely to occur. This test method is more protective of the environment than the liquid test method in RP-1200, and far less burdensome on tank owners.
A PEI RP 1200 Committee meeting was held in December. PMAA urged PEI to incorporate an additional test method into new and existing industry standards for tank inspection and testing, but the proposal was rejected. PMAA is now considering other means for obtaining the optional test method. PMAA has also provided guidance to state association executives on methods for regulators to make implementation of the UST rule on the state level less burdensome.
* Biodiesel Tax Credit
The biodiesel blender's tax credit expires at 11:59pm on Dec. 31, 2016. The next opportunity for the biodiesel blenders' tax credit to be extended would be in the tax reform package that the 115th Congress is expected to take up after President-elect Donald Trump takes office. Although there is no guarantee that the biodiesel blenders' tax credit will be included in next year's tax reform package, PMAA will be meeting with Members of Congress to encourage support of an extension of the blenders' credit and oppose moving it to the production level.
PMAA opposes moving the blender's credit to the production level because it would effectively kill any below the rack biodiesel blending and subsequent savings to consumers. Leaving the biodiesel tax credit at the blender level will ensure that the fuel remains competitive in the marketplace. Petroleum marketers have legitimate concerns that much of the tax credit will be pocketed by producers and not passed on to marketers and consumers. In the current environment where biodiesel is not competitive with conventional diesel without the tax credit, it is essential that the credit be passed on to the consumer.
* Fuel Neutral Policies
Unfair policies that favor one fuel over another, "fuel switching," are threatening thousands of home heating oil businesses. Policy makers fail to acknowledge recent technological advances in heating oil efficiency. New high efficient oilheat equipment combined with the near elimination of sulfur content and BioHeat® makes heating oil cheaper, more efficient, safer and cleaner than natural gas. Unlike electric and natural gas utilities, oilheat infrastructure was developed without taxpayer or ratepayer money and none is needed to maintain it. Incentivizing oilheat customers to make costly conversions to natural gas and other fuels is not fair and is unlikely to result in lower heating costs or emissions. Additionally, Congress should be treating both oil and natural gas pipelines fairly but recent legislation favors natural gas over oil. Rather than deregulate the natural gas pipeline permitting process, Congress should require that regulators and gas companies increase system efficiency by requiring that the thousands of miles of existing natural gas pipelines that are aging or obsolete be repaired or replaced.
The House and Senate reached a compromise on an energy bill; however it was not included in the year-end spending bill. Although there were disagreements on many provisions, the Senate and House bills included language relating to liquefied natural gas (LNG) exports. One provision would have required the Department of Energy (DOE) to approve or deny the use and operation of a liquefied natural gas (LNG) exports facility no later than 45 days after an environmental review conducted by the Federal Energy Regulatory Commission (FERC). A second provision would have required the DOE to gather and distribute data on the destinations of LNG exports.
It is unclear how quickly the new Congress will act on energy legislation.
* On-Demand Fueling
According to the NFPA 30A Technical Committee, On-Demand Mobile Fueling is defined as the retail practice of fueling motor vehicles of the general public while the owner's vehicle is parked and might be unattended. This practice is already occurring in California and Texas, and state and local fire officials are looking for direction on how to regulate this practice.
The committee is proposing a new chapter be added to NFPA 30A on On-Demand Mobile Fueling. The proposed language is based on language developed by the California State Fire Marshall's Mobile Fueling Task Force which was submitted in a public comment to NFPA. Similar language has also been proposed to be added to the International Fire Code (IFC).
The proposed language is designed to regulate on-demand mobile fueling by providing specific requirements related to the operations, vehicles, and equipment and requiring approval by the authority having jurisdiction (AHJ) including the operations, location, safety and emergency response plan, and vehicle operator training. In addition, fueling must be from an approved vehicle or metal safety can and is prohibited on roads, public right-of-ways, in buildings, or covered parking areas and within 25 feet of buildings, property lines, or combustible storage.
In general, the draft language provides a good basis for regulating this activity. PMAA and other groups were able to incorporate appropriate requirements that require mobile fueling activities to comply with fire and safety procedures and equipment requirements similar to a retail fueling facility and that limit the locations where this type of refueling can occur. It is important to note that there are other issues not related to NFPA 30A that may need to be addressed including weights and measures and DOT requirements for transporting hazardous materials. These are outside the purview of NFPA so they are not addressed in the proposed language. The proposed language will be included in the second draft revision and subject to a formal ballot of the Technical Committee. The ballot requires a 2/3 majority to pass and be incorporated into the next version of NFPA 30A.
* Disaster Planning and Response
During an emergency, federal, state and local government entities generally want both priority for fuel as if by branded contract and lowest price as if by spot unbranded. If the government entity has the ability to receive fuel in bulk they will generally get to receive fuel first. The supply that may be available unbranded is going to be used by all that can access it, and marketers also prioritize government for first access to their unbranded supply. In some cases, marketers use their "branded contract" volume to supply some of the critical infrastructure customers. During an emergency there tends to be a "rolling" affect the regional market will experience, not just in the immediate impact zone but potentially hundreds of miles away.
Following the explosion on Colonial Pipeline's Line 1 in Shelby County, Alabama, PMAA worked with the federal government, PMAA State Association Executives, and industry representatives to ease the many barriers to continuing gasoline supply in the southeast region that is affected by the disruption.
PMAA represents marketers on the Oil and Gas (ONG) Sector Coordinating Committee (SCC) which recently met with federal members of the ONG Government Coordinating Committee to discuss ongoing security, disaster prevention and emergency response. During these meetings PMAA again brought up the problem of not having enough drivers who can pick up fuel at a port. PMAA argues that during an emergency the Transportation Workers Identification Card (TWIC) requirement should be waived to allow drivers with hazardous materials certification to pick up fuel for delivery to states that are experiencing supply disruptions. At a minimum, escorts should be available at the terminals 24/7 during an emergency in order to minimize delays in moving fuel where it is needed. We are also in discussions regarding problems drivers face at weigh stations and with state police while driving thru non state of emergency states in order to assist with fuel delivery in states where waivers are in place, and ways that region wide HOS and weight waivers can be issued when appropriate rather than waiting on the piece meal state waivers. These are but a few of the ways processes can be modified, and PMAA welcomes all member feedback on inefficiencies that should be addressed.
PMAA also served on the National Petroleum Councils' Emergency Preparedness Coordinating Subcommittee in order to ensure that petroleum marketers were fairly and broadly considered in formulating the "Enhancing Emergency Preparedness For Natural Disasters, Government and Oil & Natural Gas Industry Actions to Prepare, Respond and Recover" handbook. For a copy of the handbook contact PMAA at
703-351-8000.
President-elect Donald Trump has vowed to work with TransCanada on a reapplication for a border-crossing permit in order to revive the effort to build the Keystone XL pipeline that President Obama rejected in November 2015.
In its battle against the U.S. government, in July, TransCanada filed a request for arbitration under Chapter 11 of the North American Free Trade Agreement (NAFTA). TransCanada is seeking $15 billion in damages because the Keystone XL pipeline rejection was not based on merit but because "President Obama wanted to prove his administration's environmental credentials to a vocal activist constituency that asserted that the pipeline would lead to increased production and consumption of crude oil and, therefore, significantly increase greenhouse gas emissions." TransCanada asserts that President Obama's rejection of the pipeline exceeded his constitutional authority.
PMAA was disappointed with President Obama's decision to veto the Keystone XL pipeline and we strongly support efforts to build Keystone XL. The pipeline has wide ranging support and several environmental impact studies have shown that the pipeline would have no effect on climate change.
* Jones Act Reform
PMAA supports efforts to reform the Jones Act to alleviate the Gulf Coast supply glut which will bring cheaper motor fuels and heating oil prices to consumers. There has been some discussion in Congress to loosen the nearly 40-year-old restrictions on US crude exports in exchange for modifications to the Jones Act. Unfortunately, to date there hasn't been any momentum toward making changes to the Act but PMAA will continue to keep this on the congressional radar.
* 85 Octane
Several states allow the use of 85 octane and repealing it would ultimately harm petroleum marketers and consumers by restricting supply which would lead to higher prices at the pump. There has been limited evidence presented regarding harm to engines or complaints from consumers regarding engine damage - or any other problems - due to 85 octane gasoline. Furthermore, there is simply not enough information to determine whether the overall environmental impact of an 87 octane standard will be positive or negative. Early in 2016, an ASTM ballot initiative to repeal 85 octane was defeated. Several PMAA members voted to maintain 85 octane at retail, and ultimately, the auto manufacturers didn't have enough votes to repeal it.
* Leaking Underground Storage Tanks (LUST) Fund
In the 1980s, Congress and the EPA began to address the problem of underground storage tanks (UST) releases by creating the LUST Trust Fund financed by a federal one-tenth cents ($0.001) per gallon tax on motor fuels. States and EPA have made tremendous progress by cleaning 86 percent of the 528,000 releases. However, there is still a backlog of 72,000 waiting to be completed. Petroleum marketers have supported the LUST fund and have paid $3.8 billion in LUST taxes since its inception.
In July, for the first time in seven years, the House passed its' Interior-EPA spending bill. In the bill, the Leaking Underground Storage Tank (LUST) fund would receive $96 billion, a 2.7 percent increase over the 2016 budget, but well under the $150 million PMAA asked for. Congress did not include the language in the year end funding continuing resolution, so PMAA will work again with Congress in 2017 to increase the LUST funding level.
In recent years, Congress and the President have woefully underfunded the program, appropriating around $90 million each year. To make matters much worse, Congress has transferred $3.4 billion from the LUST Fund to help keep the Highway Trust Fund (HFT) solvent, leaving only $481 million in the coffers now. PMAA opposes all such LUST fund transfers, and has continued to urge Congress not to transfer the remaining $485 million in LUST funds to the HTF.
* E-Vapor Regulation and Predicate Date
In May, 2016, the FDA released its long awaited final rules for e-cigarettes, cigars, pipe tobacco and other tobacco products it had not previously regulated. Under the rules, the newly regulated tobacco products will be subject to the same general requirements to which cigarettes and smokeless tobacco are already subject, including those related to: adulterated and misbranded products; ingredients listing; health documents submission; reporting of harmful and potentially harmful constituents; and registration and product listing. The rules became effective on August 8, 2016.
As part of the final rules, the FDA maintained the February 15, 2007 predicate date. This date is important as it determines which pathways a product can take to stay in and/or enter the marketplace. Products that were not in the market on February 15, 2007, nor have a comparable product that was in the market on this date, must submit a Pre-Market Tobacco Application (PMTA). The PMTA requires a product to meet a regulatory hurdle that is very complex and costly. Some have estimated that a single PMTA could cost up to several million dollars. As such, the regulatory hurdle to enter the marketplace will be much higher for e-cigarettes than for traditional cigarettes. Because of the speed at which innovation has occurred with e-vapor products since 2007, essentially all products currently being sold to consumers fall into this regulatory trap.
As of August 8, 2016, retailers: Must not sell e-cigarettes, hookah or pipe tobacco, or cigars to people under 18 years of age; they must check photo ID of everyone under age 27 who is attempting to purchase such products; they must not sell tobacco products covered under the rule in a vending machine (except in a facility where people under age 18 are not allowed on the premises); and must not give away free samples of any newly regulated tobacco products (this provision also applies to manufacturers, importers, and distributors).
PMAA advocated against portions of this FDA rule and supports legislation to change the rule to be less burdensome for manufacturers, retailers and consumers.
* Manager Overtime
On May 17, 2016 the Department of Labor (DOL) announced a final rule that doubles the minimum salary threshold required to qualify for the Fair Labor Standards Act's ("FLSA") "white collar exemption" to $47,476 per year ($913 per week). The current annual requirement is $23,660 ($455 per week).
In mid-November, a Texas federal judge entered a nationwide preliminary injunction blocking the implementation of the Department of Labor's ("DOL") overtime rule that was set to go into effect on December 1. In a 20 page order, U.S. District Judge Amos Mazzant ruled that the DOL overstepped its authority by raising the salary threshold for receiving mandatory overtime from $23,660 to $47,476 a year, or from $455 to $913 a week. In substance, the court held that the Fair Labor Standards Act (FLSA) did not envision a salary test for determining whether a salaried employee performs sufficient managerial functions to warrant a "white collar" exemption from the overtime rule. The Court rejected the DOL's plea to hold off on an injunction, finding that the states and business groups that sued the DOL would suffer sufficient injury during the pendency of the case to warrant an order blocking the rule until the case is decided on the merits.
The nationwide temporary injunction means that DOL cannot enforce the new overtime rule until the case is decided on the merits or until the Fifth Circuit Court of Appeals, a relatively conservative court, overturns the injunction. On December 12, the Justice Department requested to stay further proceedings until the Fifth Circuit Court of Appeals decides whether to uphold the lower court's preliminary injunction against it. It is unlikely; however, that the Court of Appeals will set aside the injunction on a preliminary basis before the appeal is decided. Nor is it likely that the appeal will be decided by January 20, when the new Administration takes office.
The new Administration could withdraw the appeal when it takes over in January, allowing the injunction to remain in effect and providing the new Administration or the Republican Congress with time to rescind the rule on a permanent basis.
Bottom Line: While the DOL overtime rule is now on a temporary hold, many employers have already changed the way they pay their workers to meet the new requirements of the new rule. Unless or until the injunction is lifted, these employers can revert back to complying with the existing rule.
