NEON: NEFI Energy Online News

NEFI CONTACT: Jim Collura, VP for Public Policy (jimcollura@nefi.com)

Vote Fails In House On Anti-Excessive Speculation Bill; Bush Promises Veto
Hopes for passage before the August recess (scheduled to begin this Saturday) of the newest and strongest anti-excessive speculation legislation to-date were all but dashed this week. The House of Representatives voted for its anti-excessive speculation bill (the "Commodity Markets Transparency and Accountability Act," H.R.6604) on Wednesday. House Democrats brought the bill up under suspension of the rules to avoid consideration of controversial amendments, so a 2/3 vote (290 of 435) was needed for passage. Despite broad bipartisan support, the vote failed, 276-151 (see how your member voted). The industry has had a large role to play in bringing this issue to the forefront. During the House debate, Rep. John Larson (D-CT) thanked Gene Guilford, Jr., of the Independent Connecticut Petroleum Association (ICPA), for bringing this issue to his attention.

Democratic and Republican Senate leaders are working towards a deal to allow final consideration of their bill (the "Stop Excessive Speculation Act of 2008," S. 3268)with amendments later this week. Meanwhile, the President issued a statement promising to veto anti-excessive speculation legislation. Both the Senate and House bills would go a long way to close existing loopholes in federal law and give the CFTC the staff, funding and powers needed to insure orderly, functional, transparent and accountable commodities markets. They are vital to reducing energy prices and ensuring stable futures markets. These bills were heavily advocated for by NEFI, PMAA, industry state groups and Energy Market Oversight Coalition members. We also appreciate all NEFI members and supporters that have been calling Congress! Stay tuned to NEON and NEFI alerts for updates on this important issue.

In a related story, federal regulators this week announced a suit against a foreign commodity trading fund for manipulating energy futures for crude oil, heating oil and gasoline on the NYMEX (read the Reuters story here). This action taken of course against activity on a regulated, transparent market--until comprehensive legislation is passed regulators don't know what kind of abusive activity might be occurring in opaque trading environments.

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Industry Supported LIHEAP Legislation Fails Senate Vote
The NEFI-backed "Warm in Winter and Cold in Summer Act" (S.3186) failed a procedural vote in the Senate over the weekend, despite major bipartisan support. The legislation would have added $2.53 billion in funding for the Low Income Home Energy Assistance Program (LIHEAP), essentially doubling the current funding level. It failed to meet the 60-votes needed to invoke cloture in a special Senate session on Saturday, July 26th. Republicans (even some of those that supported this bill) rallied together in protest over their inability to introduce energy-related amendments. If Senate leadership can overcome a stalemate on the anti-excessive speculation bill (see previous article), this LIHEAP bill may be introduced as an amendment. In the U.S. House, the bill has been introduced by Reps. Welch of Vt. and Markey of Mass. as H.R.6427. It has not yet been considered and is in urgent need of co-sponsors.

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NH Senators Introduce Measure To Help With Home Heating Costs
U.S. Senators Judd Gregg (R-NH) and John Sununu (R-NH) have introduced the "Weatherization, Assistance, and Relief for Middle-Income Households (or "WARM") Act (S.3323), which would--like the aforementioned LIHEAP bill above, provide an additional $2.5 billion in current year funding for LIHEAP. Unlike the Democratic measure, it would also triple weatherization funding to $750 million and provide up to a $1,000 tax credit for individuals and $2,000 for married couples for home heating purchases this winter. Also unlike the Democratic measure, it would not classify spending as "emergency funding" (thereby adding to the national debt). Rather, it would offset this expense by repealing an obscure "manufacturing" tax deduction for major integrated oil companies and make clarifications regarding the determination of foreign oil and gas extraction income (FOGEI). This bill was just introduced this week and currently enjoys no bipartisan support, so its chances are slim. NEFI is reviewing the measure and monitoring developments closely.

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Package of Energy Tax Breaks Stalls In Senate
A bill that would extend and expand certain energy-related tax breaks is stalled in the Senate. The Renewable Energy and Job Creation Act of 2008 (H.R. 6049) failed a cloture vote on July 29 by 53-43 (60 votes needed). The bill is important to NEFI members because it would expand the Biodiesel tax credit to $1.00 per gallon through December 31, 2009. It would also shut down the abusive "splash and dash" loophole, whereby foreign-produced fuel can enter the US and claim the tax credit, only to be shipped off-shore for consumption overseas. The bill was approved by the House in May.

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Contact: Mark Morgan, NEFI Regulatory Counsel (mark@nefi.com)

U.S. EPA Delays Decision On Ethanol Mandate Waiver Request
EPA Administrator Stephen Johnson announced a delay in a decision on Texas Governor Rick Perry's (R) request for a one-year 50% ethanol waiver. A decision on the waiver was expected on July 25th but is being delayed to give the EPA more time to read the more than 15,000 public comments submitted on the controversial issue. PMAA had submitted comments supporting the temporary waiver provided it was limited to Texas and the EPA adopted a sensible, well thought out procedure to address future limited waiver requests that would not limit gasoline supply in any region or market nationwide. Last year, Congress mandated that 9 billion gallons of ethanol be blended into gasoline in 2008. The mandate will rise to 36 billion gallons per year by 2022. Perry asked the EPA in April to reduce the requirement to 4.5 billion gallons, arguing that the demand for fuel ethanol was raising corn prices for livestock producers. Supporters of the waiver argue that food prices have also risen sharply due to the demand for corn ethanol as a fuel feedstock. Several dozen lawmakers, including Republican presidential candidate John McCain, the state of Connecticut as well as some of the country's largest grocery manufacturers have joined corn, livestock and poultry producers in supporting the waiver request. The EPA said that it expects to make a decision on the ethanol waiver by the end of August.

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New SBA Policy May End Small Business Loans for Gas Station Purchases
New SBA 7(a) and 504 lending guidelines that private lenders must follow to obtain federal loan guarantees for small business financing may no longer be available for the purchase of gasoline station/c-store operations. Under the newly revised SBA Standard Operating Procedure 50 10(E) that goes into effect 08/01/08 purchasers will no longer qualify for federal SBA loan guarantees without an environmental indemnification letter from the seller. Typically SBA 7(a) loans are used when a borrower does not have sufficient collateral for the loan, which is generally needed to purchase inventory. SBA 504 loans are used when purchasers do not have a 20% down payment for the purchase of a commercial building. The indemnification agreement replaces numerous documents and other guarantees from major oil companies, station owners and third party lessors previously accepted by the SBA to address responsibility for past, on-going and future contamination issues. The policy changes were part of a comprehensive SBA revision of SOP 50 10(E) that was designed to reduce the paperwork burden on small businesses seeking federally guaranteed loans from private lenders. The SBA worked closely with private lenders when drafting the policy changes but did not provide notice to nor seek input from the petroleum marketing and convenience store industry. In addition to the seller indemnity provision, the new SBA policy would require increasingly stringent environmental due diligence such as Phase I and Phase II Environmental Assessments depending on the age of the property, as a condition for loan qualification, even if the loan is for business purchase only. Regulatory Council Mark Morgan is studying the new policy, how it came about, its full affect on gasoline/c-store purchases and all potential avenues to reverse and/or appeal the onerous changes.

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Conference of State Legislators Call for Gas Tax Increase
The National Conference of State Legislatures (www.ncsl.org) approved a policy resolution at their annual meeting last week urging Washington to increase the federal gas tax to fund national surface transportation needs. The Conference says the motor fuel tax increase is necessary to prevent insolvency of the Federal Highway Trust Fund. According to the Conference, if not immediately resolved, the estimated $14 billion shortfall expected by 2009 in the Highway Fund would hinder state budgeting, threaten critical infrastructure projects, jeopardize 485,000 jobs, risk American competitiveness, and result in long term, steep declines in federal transportation funding for states, according to the Conference resolution.

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Photo courtesy Dennis K. Burke, Inc.

Massachusetts Biofuel Mandate for Heating Oil & Diesel Signed Into Law
After months of intensive legislative work by the Massachusetts Oilheat Council (MOC), and with the complete backing of MOC's Board of Directors, Massachusetts now has a biofuel mandate, making it the first major Oilheat state in the country to embrace biofuels for both home heating and transportation. Under the law, An Act Relative to Clean Energy Biofuels, signed by Governor Deval Patrick at an invitation-only ceremony on July 28, 2008, all home heating oil and diesel fuel must have a minimum of 2% biofuel by 2010, with a ramp up to 5% by 2013.

At the signing, the governor was accompanied by Energy and Environmental Affairs Secretary Ian Bowles, U.S. Congressman William Delahunt and several key legislative leaders. MOC's Michael Ferrante and Alisha Frazee attended the bill signing, along with MOC members Paul Nazzaro from Advanced Fuel Solutions, and Ed and Ted Burke from Dennis K. Burke. "The world is waiting for the next generation of clean, renewable alternatives to petroleum fuels, and Massachusetts is poised to deliver," said Governor Patrick. (Read Gov. Patrick's press release.)

For MOC, the event was a proud moment. "MOC has worked diligently for months on this legislation following a Board vote in support of the mandate. It is fair to say that MOC has had significant impact on the final language in this bill, and we are one of the main reasons the bill passed both the House and Senate. We are now poised to help reshape the Oilheat industry, not only in Massachusetts, but the country," said MOC President Michael Ferrante.

"This legislation has made Massachusetts a model for everyone else to look at and say 'now that's how it should be done,'" said Congressman Delahunt, who is viewed as a state and national leader on advancing the development of biofuels. He praised the governor for creating his "legacy" with swift passage this year of several important energy bills including House Speaker Sal DiMasi's Green Communities Act.

Now that the legal framework is in place for a biofuels mandate, MOC will be heavily involved in the drafting of the important regulations that will provide the ultimate guidance for full implementation. The state's Division of Energy Resources (DOER), and the Department of Environmental Protection (DEP), both of which reside in Executive Office of Energy and Environmental Affairs (EOEEA), are charged with writing the rules. "MOC has strong relationships within these agencies and we are confident that we can create rules that meet the best interests of the Oilheat industry and the manufacturers of the biofuels that are compatible with Oilheating systems," said MOC's Michael Ferrante.

MOC wishes to thank the many individuals and organizations that contributed to this legislative effort and worked closely with MOC including Senator Michael Morrissey and his staff, Rep. Brian Dempsey and his staff, Rep. Tim Golden and his staff, Ian Bowles and David Cash of the EOEEA, Paul Nazzaro and Bill Riordan of Advanced Fuel Solutions, Shelby Neal of National Biodiesel Board, Steve Falck of REG, Brooke Coleman and Andrew Schuyler of NFA, John Quinn and Steve Dodge of the Massachusetts Petroleum Council, and Ed and Ted Burke of Dennis K. Burke, Inc of Chelsea, MA.

May Sees Sharpest Drop In Miles Driven In Decades
May 2008 saw the biggest drop in miles driven by motorists in decades, a month that usually spikes in miles driven due to the Memorial Day holiday. A new federal report saw a drop of nearly 10 billion in vehicle-miles driven (VMT) from one year ago. The past year and a half has seen that number level off (even with an increase of 1 million drivers since 2005). The last time growth was this low was back in 1981. Gas prices then were at a record high of $3.223 a gallon (inflation adjusted). Experts are attributing the decline to increased fuel costs. Read the press release and the report.

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• NEFI Member Survey Shows Oilheat Dealer Credit Concerns
NEFI has been conducting an on-going survey of oil heat dealers to better understand their credit situation. 195 surveys have been completed since early July. Eighty-two percent of those polled feel that they will have problems securing adequate funds and/or lines of credit for the upcoming heating season. Thirty-two percent have met with their wholesaler and foresee difficulties with obtaining adequate lines of credit (on the other hand, 56% have not yet met with their wholesaler). In addition to meeting with wholesalers, 36% have met with their lending institutions and will be unable to secure long enough lines of credit for the upcoming season. In terms of the shortfall that fuel marketers are anticipating, 24% anticipate that it will be greater than $300,000. NEFI has been in regular communication with other industry groups, banks, suppliers and the Small Business Administration to address this issue. Members should contact their state association (click here for yours) to find out what kinds of resources are available in their state. CURRENT INDUSTRY CHALLENGES HIGHLIGHT THE IMPORTANCE OF ATTENDING THIS YEAR'S VISIONS CONFERENCE (see lead story article). NEFI is also preparing an array of member services and communications on this issue. Stay tuned.

• OILHEAT INSTITUTE OF RHODE ISLAND CLAM BAKE - AUGUST 7th
The Oil Heat Institute of Rhode Island's 46th Annual Clambake will be held on Thursday, August 7th at Kempenaar's Clambake Club in Middletown, RI. Chowder and clam cakes will be served from 12 Noon until 2pm. Chicken is available for those not shell-fish inclined. The clambake bell will ring at 4pm. Anyone who wishes to attend can access the forms at www.oilheatinri.com or by calling Julie Gill at (401) 464-8000 or emailing Julie@ohi.necoxmail.com. The bake will include a mini-trade show and new trucks. NEFI staff will be attending this event and we hope to see you there!