Shell Dealer Cited for Flying American Flags
Giant to Acquire Interest In Western Refining
Conoco to Supply Internet-Based American Petroleum Exchange
Unocal Reformulated Gasoline Case May Head to Supreme Court

SHELL DEALER CITED FOR FLYING AMERICAN FLAGS

GLENDALE, CA. — A Shell station located here, just north of Los Angeles, has been cited for flying too many American flags and has been ordered to take them down by the City of Glendale.

According to Shell dealer Kelly Khoury, an official from the City showed up at his station claiming that the City had received four complaints about his station flying too many American flags. At that time, Khoury was displaying 20 American flags at his station.

"I fly the flags at my station from the Fourth of July until Labor Day," said Khoury. "It’s something I’m proud of, to show my freedom and my patriotism toward the country.

"I’ve been doing this for 18 years," Khoury continued. "Three years ago, they printed my picture on the front page of the paper with all the flags." The headline with Khouri’s photo read "Pumped Up on America."

Khoury was cited under the city of Glendale regulation 15-08-0800 which "prohibits banners, flags and pennants without Planning Board approval" and was given a three-day ultimatum to remove the flags from his property.

Khouri believes that his annual patriotic flag-flying was not an offense and did not take the flags down. "I’ve been doing this all these years," he explained. "I’m not about to take those flags down."

Instead, he and his staff began talking to his customers about the situation. Khoury found a groundswell of support from his neighbors and customers who appreciated the American flags flying at the station.

"We’ve been getting support from our neighbors, calls of support — more than you can imagine," Khoury reported. "I’ve had people living all over Los Angeles County, from Irvine and Temecula (in Orange and San Diego Counties) stopping by to show their support.

"One customer called the Glendale paper," he continued, "and told them that the man they featured for flying the flags had been cited for it. They came out and did a story.

"Since then, I’ve been live on the TV news for ABC, CBS, NBC, FOX, [and local stations] KTLA and KCAL. I’ve been on a radio talk show in San Francisco, on the local radio stations KABC and KROQ, on programs in Birmingham, Alabama and in Dallas, Texas. And it’s been on the AP wire. And now it’s on the Internet. The support I’m getting makes me feel good."

He continued, "Now I’ve gotten calls from all over the country, e-mails and letters to the City and the Mayor in support of the flags."

Khoury’s office is filled with letters of support. He has a large stack of credit card forms that have been signed with messages of support from his customers on the top of his desk and a large bag of letters and messages of support alongside him. Khoury shows a particular favorite, a poem brought to him by a local lady entitled, "Where Are Those Flags?"

"It stinks," said a customer at the Shell station who came in to talk to the dealer after his fill-up. "I’m amazed that the city workers have nothing better to do with their time." He added to Khoury, "We really support you and what you do."

"It’s been amazing," said Khoury. "One out of 10 customers come to me and say something about it — in support.

"We have one unique customer out there," he continued. "He brought his own flag and said he wanted to place it at my station — and ask the city to send him the citation. He posted it and says he’s waiting to hear from the city." The customer’s flag can be found alongside of Khoury’s flags on display.

Khoury says that Shell has also been supportive of his action. "We’ve a nice looking station," he explained. "We’re neat. In fact, six years ago we won the city’s Beautification Award. Shell is behind me on this."

Khoury added that Glendale City Councilman Gus Gomes has also supported the dealer against the citation. "He stood up behind us and said we should be able to fly as many flags as we want."

What is next for the dealer? Traditionally, Khoury would take down his flags and store them until the next Fourth of July but this year he will not take them down until he sees what action the City of Glendale is planning to take.

The fine for flying the flags under the citation could be as high as $500 per day or up to six months in jail. However, city officials have not contacted Khoury since the groundswell of support began for his flags.

Khoury also noted that the American Civil Liberties Union has become involved in the case, offering free legal advice to the small businessman. "The ACLU called the D.A. and talked to him about the issue," explained Khoury. "They said they were still undecided about what they were going to do."

He concluded, "I immigrated to the United States 25 years ago. It is my home. What’s wrong with advertising America?"

GIANT TO ACQUIRE INTEREST IN WESTERN REFINING

SCOTTSDALE, AZ. — Giant Industries, Inc. has signed a letter of intent to acquire at least an interest in Western Refining Co. of Dallas, TX. Western Refining operates refineries in Texas and is currently negotiating with Chevron to purchase even more capacity in the state.

The deal would undoubtedly help Giant Industries maintain supply for its service stations in New Mexico as well as nearby states which could pull from the Texas refineries.

In addition to its Arizona refinery, Giant Industries retails fuel in Arizona, Colorado, New Mexico, and Utah.

CONOCO TO SUPPLY INTERNET-BASED AMERICAN PETROLEUM EXCHANGE

ROCKVILLE, MD. — Conoco Inc. has reportedly agreed to be a supplier for American Petroleum Exchange, the first Internet-based trading exchange for wholesale diesel and gasoline.

The American Petroleum Exchange will function as a reverse auction, with buyers posting their fuel needs and potential sellers bidding for the business.

Wal-Mart Stores Inc., United Parcel Service Inc. and about 20 other major petroleum buyers have signed up to use the new exchange, which is not currently operational but is planned to launch before the end of September.

The buyers who have already announced they will participate represent about 15 billion gallons, or about 6.4% of the total U.S. fuel consumed annually. UPS alone has reportedly agreed to buy approximately 90 million gallons from APE of their 300 million gallons purchased annually.

"This is the next logical step," said UPS’ Energy Procurement Manager Jeff Ridings. It’s been quite an evolution for the UPS bidding process. What started with half-inch piles of paper specs subsequently moved to floppy disks, and more recently to e-mail with Excel attachments. Now UPS is ready for the next step.

"This system will condense the entire process and provide instantaneous feedback to and from suppliers. It takes what would ordinarily be accomplished in three weeks down to a week or less," Ridings noted.

"This will bring it all online and reduce the need for calling around," said Steven Gloyd, the exchange’s senior vice president of sales.

Conoco is the first of "a handful" of oil companies expected to announce involvement in the exchange.

American Petroleum Exchange, headquartered in Maryland, is majority-owned by United Communication Group.

UNOCAL REFORMULATED GASOLINE PATENT CASE MAY HEAD TO SUPREME COURT

WASHINGTON, D.C. — They"re trying to take it all the way to the Supreme Court.

Five major oil companies have asked the Supreme Court to review a Federal Circuit Court ruling that will force them to pay royalties to Unocal for producing reformulated gasoline.

The Federal Court upheld the validity of Unocal"s RFG patent and confirmed the earlier jury award of 5-3/4-cents per gallon in damages for infringing motor gasoline production by the six major oil refiners.

’We believe that the Supreme Court should hear our case, as it has important consequences for consumers as well as for the integrity of the regulatory process,’ said Gene Renna, senior vice president of Exxon Mobil Corporation. ’We continue to believe that the Unocal patent is invalid, that Unocal improperly exploited the patent and regulatory processes in obtaining the patent, and that Unocal should not be awarded any royalties. We contend that the trial and appellate courts committed errors in their judgments in this case, and that those errors have serious implications, not just for gasoline refiners and consumers but for how we make environmental rules in the U.S.’

Unocal has responded to the Supreme Court petition by offering the four plaintiffs ’limited amnesty from punitive damages’ if they drop the lawsuit and being ’serious licensing discussions’ for patent rights.

In a press statement, Exxon Mobil responded to Unocal"s offer by claiming they believed Unocal was not entitled to any royalties and, therefore, negotiating with them would not be right.

The situation began in the early 1990"s after the California Air Resources Board announced stringent new requirements for California Reformulated Gasoline, which was to be introduced in 1996. All of the major oil companies immediately began working on ways to meet CARB"s requirements.

Some scientists for the major oil companies claim that the research into finding a solution to CARB"s requirements was a joint effort, with information exchanged freely among all parties.

Unknown to the other oil companies, however, Unocal applied for a patent for their solution to the RFG problem. This patent was granted by the U.S. Patent and Trademark Office on Feb. 22, 1994.

As the patent covered virtually all possible formulations for California RFG, Unocal then demanded royalties from all companies manufacturing motor fuel in the state.

The other major oil companies claimed this action was unfair and unjust and countersued Unocal, saying Unocal patented information that was being freely exchanged by many companies.

In 1997, a jury in the Federal District Court in Los Angeles found the Unocal patent was valid and that the six defendant companies — all refiners manufacturing California RFG — had infringed on the patent. They ordered that Unocal be paid 5 3/4 cents royalty for every gallon of RFG sold in the state of California.

The other major oil companies appealed this decision — which has now been upheld. It may leave the oil companies liable for 5 3/4 cents per gallon for all the gallons of RFG sold in California since 1996 — and for every gallon of this formulation sold in the future.

It is estimated that for the period of the original trial — March 1 to July 31, 1996, the jury award would total $95 million to Unocal, including interest and attorney"s fees. If the royalties were applied to all the RFG sold in the state between March 1, 1996 and the present, the royalties paid to Unocal would be closing on $1 billion.

If the formulation for California RFG becomes mandated in other states — as is being considered — all gasoline marketed in these states also would be subject to paying Unocal royalties.

’The Unocal patent is clearly a misuse of the patent system,’ Renna added. ’Unocal participated in regulatory proceedings while secretly filing and then amending patent claims to closely resemble the regulatory outcome. The five companies participating in the petition have been forced to pay Unocal over $90 million in patent royalties, equivalent to 5.75 cents per gallon, for just five months of RFG production in California alone. Our brief points out the inequity of effectively levying a fine against producers who are required by law to make this clean burning gasoline.’

The State of California has supported plaintiffs" position in a brief filed with the U.S. Court of Appeals for the Federal Circuit. The brief stated that ’a patent gained — or gaining value — by virtue of such conduct should be invalidated as manifestly contrary to the public good.’

The Supreme Court is expected to decide whether to grant the petition in the fall during the term that begins in October.

Originally published in the September 2000 issue of O&A Marketing News.
Copyright 2000 by KAL Publications Inc.