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February 1999 Issue Highlights

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Cardlock Fuels, Arco Sign Alliance
EPA Backs Away from December 1998 UST Upgrade Deadline
Conoco To Cut Staff, Spending
Washington Voters Defeat Fuel Tax


ORANGE, CA. — Cardlock Fuels System has entered into an alliance with Arco Products Company to construct, develop, and operate commercial fueling sites at Arco stations.

There are three key components to the alliance, according to Bill Floyd, president of Cardlock Fuels. The first component is the building and operation of new, unattended Cardlock Fuels sites. These stations will be built on land that is currently held by Arco and will be developed and operated by Cardlock Fuels under the Cardlock Fuels brand and image.

"Cardlock Fuels is the operator of the stations, so we’ll market and sell fuel from these locations," explained Floyd. "Arco owns thousands of properties, so our first priority is to examine all their properties and see which ones could support stand-alone cardlock sites."

Under the terms of the deal, these new stations will be built in California and will be owned 50-50 by Arco and Cardlock Fuels.

The companies already have two sites under construction under their new alliance. The first station is in Los Angeles, on Rosecrans Blvd. The second site is in Santa Fe Springs at the location of a former Thrifty Oil gasoline station, located directly across the street from an Arco am/pm station. The new station will not compete with the existing Arco station because it will be operating under the Cardlock Fuels brand.

The second phase of the partnership is to evaluate all of Arco’s existing branded retail properties — including Arco’s company-operated Prestige Stations, lessee dealers, and contract dealers — and determine which sites would benefit from the addition of a diesel fuel side island. Arco will add the diesel islands to its branded stations across California and operate them for joint venture use.

The third phase of the partnership is the acceptance of the Cardlock Fuels network card at Arco’s 1,700 retail sites across the West. Floyd said the Cardlock Fuels card will be accepted at all Arco stations with a PIC unit, Arco’s reader that accepts both cash and ATM cards at the island, by the end of April.

According to Floyd, Arco and Cardlock Fuels have an initial objective to open 30 new stand-alone sites and add 80-100 side islands to existing stations within the next three to five years.

"We plan to develop sites as fast as we can," added Floyd. "We’re going to be aggressive."

Cardlock Fuels is a division of Southern Counties Oil Company.


WASHINGTON, DC. — In a move that has been called political expediency, the Environmental Protection Agency (EPA) announced that it was backing away from its strict enforcement of the December 22 Underground Storage Tank (UST) deadline.

"It now appears that EPA lied through its teeth," said Robert Phillips Jr., Fuel Managers, Tulsa, OK., and president of the Society of Independent Gasoline Marketers of America. "EPA double-crossed every gas station operator who relied on those promises in making business decisions. In a supplemental revision to its enforcement strategy, EPA changed the rules and virtually invited some categories of tank owners to ignore the deadline for six months."

For 10 years, the EPA had said that December 22, 1998 was the final date that a UST could be in compliance with its regulations. Statements made by Carol Browner, head of the U.S. EPA, throughout the year stressed that there would be no extensions of the deadline and no overlooking of non-compliant tanks. The EPA said there would be no exceptions made — not for rural areas where upgrades would be a financial hardship, not for small "mom and pop" operations, not for government agencies who’d failed to plan to make their upgrades. Everyone had to be in compliance by December 22.

Then, in a policy memo released just a few days before the UST deadline was to take effect, the EPA said that it would allow "flexibility in its enforcement of the 1998 UST regulations."

According to the EPA’s supplemental enforcement strategy, the government agency will allow tank owners who turn themselves in and agree to minimal fines and a formal compliance schedule to keep their tanks in operation.

In a letter from the EPA sent at the end of January, they noted that "the time for prompt self-disclosures is rapidly running out. To be given an opportunity to upgrade or replace tanks pursuant to a compliance schedule and pay a minimal penalty, a small tank facility, local government or State government must disclose before February 12, 1999. While they will remain low federal enforcement priorities until June 22,1999, facilities that fail to self-disclose by February 12, 1999 will not be given an extended compliance schedule."

The EPA also asked that the states — who will, for the most part, be enforcing the EPA’s regulations — only enforce the regulations for large marketers, multi-site operators, and major oil companies for the first six months. Facilities that are "endangering sensitive ecosystems or sources of drinking water" will also be targeted for enforcement.

The EPA asked that state and local governments and small, single-site operators (with four or fewer tanks) not be inspected for at least six months after the deadline.

This strategy will be official policy in two western states — Idaho and Hawaii — where the EPA is the only enforcement agency for UST regulations in the state. The EPA also has jurisdiction over USTs in operation in Indian Country.

"As it stands, the guy who ignored the rules, didn’t do anything to upgrade his tanks, and now ’self-reports’ his violation will have little or no penalty," said SIGMA’s Phillips. "But his competitor, who spent upwards of $175,000 per station to meet the new environmental rules, can be assessed heavy penalties if EPA auditors come in and find the tank contractors made some minor mistake during the installation process. Because the tank owner doesn’t know about the violation in advance, he can’t ’self-report’ this mistake and be eligible for lenience."

The EPA said they decided to change their stance and not enforce their own regulations across the board because "it has become clear that a significant number of USTs will not be in compliance by December 22," they noted in their letter to EPA Regional Administrators. "For some, it is a matter of poor planning and the unavailability of equipment and contractor assistance. For others, it may be a lack of financial resources."

The EPA estimated that of the 892,000 USTs currently in operation in the United States, only 500,000 were in compliance with the law in December.

The EPA did note, however, that while their policy would be to look the other way to protect small businesses and local governments, they were "strongly urged to move quickly to come into compliance as they could be subject to state enforcement actions or citizen suits."

Most small tank owners were aware of the regulations and were not planning on keeping their stations open past the deadline to avoid fines and liability from not being in compliance with the law. "They are putting the small guy out of business with all these regulations that only the large oil companies can afford to pay," said Caesar Silva, owner of Nanakuli Shell on Oahu, HI. Silva’s story is one of many small operators in the West: he was forced to close his tanks and put his business up for sale because he could not afford to bring his USTs into compliance or risk the fines.

According to the Petroleum Marketers Association of America, "the industry remains outraged. The [EPA’s new policy] is unfair to those who have complied, has created confusing liability questions for marketers and has potentially disrupted vigorous state enforcement activities."

Industry associations — as well as many tank owners — have stepped forward to protest the EPA’s decision. This is because tank owners who invested the money in their systems to come into compliance with the law — or tank owners who legally closed their tanks by the deadline — are now being penalized for following the EPA’s regulations. Their competitors, tank owners who did not spend the thousands of dollars to upgrade their systems, have been given an "unfair advantage."

The EPA’s action has also created new concerns about the operation of tanks that are not in compliance. As the American Petroleum Institute explained, "responsible suppliers may be at risk because they will be asked to deliver fuels to storage tanks that have not been upgraded. In some states, such actions would be in violation of state law."

"We have suspected that EPA would not hold to strict enforcement of the deadline," said PMAA Executive Vice President Dan Gilligan. "While the federal government has backed down from its responsibility, and has set a dangerous precedent, PMAA is confident that the state agencies will stay the course."

Many states have stepped forward and stated that while the federal EPA may be backing away from enforcement of its own regulations, they plan on making sure every tank is in compliance within their state — whether it belongs to a government agency, a small station, or a major oil.

California officials noted that state law prohibits delivery of product into non-upgraded tanks after December 31, 1998 and that law would be enforced across California, no matter who owned the tanks.

Failure to comply with the law — despite the EPA’s new position — may still result in major financial penalties, loss of insurance, or prosecution by state governments. Tank owners should still be working to come into compliance if they have not already met the Dec. 22 requirements.

"In sum, EPA has decided that there will not be strong enforcement of the deadline," SIGMA informed its members, "and what enforcement there is will not be fair. It will go after nickel-and-dime paperwork violations while ignoring the scofflaws. SIGMA finds this totally unacceptable. We will do whatever it takes to get this inequitable policy reversed. We’re reviewing each weapon at our disposal."

Tank owners in the West who still need to disclose the fact that they are not in compliance should contact their local EPA offices. Tank owners in EPA Region 6 (New Mexico) should contact Willie Kelley at (214) 665-7229. Tank owners in EPA Region 8 (Colorado, Montana, Utah, and Wyoming) should contact Michael Risner at (303) 312-6890. Tank owners in EPA Region 9 (Arizona, California, Hawaii, and Nevada) should contact Joanne Marchetta at (415) 744-1315. Tank owners in EPA Region 10 (Alaska, Idaho, Oregon, and Washington) should contact Jackson Fox at (206) 553-1073.


HOUSTON, TX. — Conoco has announced that it will cut its staff by approximately 975 positions "to improve operational efficiencies."

The majority of the positions eliminated will be from the company’s upstream operations. Following the cutbacks, Conoco will have approximately 15,000 employees worldwide.

As part of its cutbacks, Conoco also said it would reduce its 1999 capital budget by about $500 million or 21 percent from 1998 levels, to $1.8 billion. The reduced budget comes from Conoco’s completion of "several major projects" during 1998 as well as taking into account the low crude prices that are forecast for 1999.

Downstream expenditures have been budgeted at approximately $500 million; similar to the company’s 1998 spending.

Conoco President Archie W. Dunham said that "Conoco will further reduce costs by combining some functions in the United States and by more broadly sharing services and more effectively deploying our employees. Regrettably, these actions will result in fewer jobs."


EVERETT, WA. — Voters defeated a proposal to raise gasoline taxes in Snohomish County, WA., by a substantial margin — 76 percent cast a "no" ballot for increasing the tax.

Paul Dennis, Dennis Petroleum, Everett, WA., was the chairman for "No on Proposition 2," the measure to raise the fuel tax. Dennis spearheaded a grassroots campaign against the tax hike, getting service station dealers and major oil companies to place flyers against the tax at virtually every station in the county.

Many service stations pasted "vote no" bumper stickers onto their dispensers where consumers could see them as they filled up their tanks, bringing home the message that the tax would cost them more every time they filled up. The group also funded mailings to the voters to campaign against the tax.

According to the Everett Herald, the local paper, the "service station owner had a great pulpit from which to preach their opposition" to the Proposition.

Following the overwhelming defeat of the measure, Dennis told reporters that "I think it shows that the voters really are not as dumb as some county bureaucrats think they are."

Originally published in the February 1999 issue of O&A Marketing News.
Copyright 1999 by KAL Publications Inc.

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