New registration requirements mandated by congress
September 17, 2007 REG 07-20
JOBBERS FACE NEW REGISTRATION REQUIREMENTS MANDATED BY CONGRESS
Petroleum jobbers across the country are receiving letters from state transportation agencies requiring registration with the new Uniform Carrier Registration (UCR) program. The UCR program was mandated by Congress as part of highway funding legislation passed in 2005. The UCR replaces and expands the Single State Registration System (SSRS) that previously applied only to for-hire motor carriers. As concern grew about the cost of the SSRS, for-hire motor carriers asked Congress to drop the requirement, which was a relic from the long defunct Interstate Commerce Commission. States opposed elimination of SSRS because it is an important source of revenue for highway related safety programs. Congress brokered a compromise between the two sides that lowers compliance costs paid by for-hire motor carriers and enhances state revenue streams by expanding the pool of transporters required to register and pay the annual fee.
Under the expanded UCR system, for-hire motor carriers, private motor carriers, brokers, freight forwarders, and leasing companies, operating in interstate commerce (including interstate petroleum transporters) must register and pay a fee. According to the Federal Motor Carrier Safety Administration Office of Enforcement and Compliance, interstate transporters with U.S. DOT numbers must comply with UCR. Intrastate transporters may be required to register if individual states expand registration to transporters who remain wholly within state boundaries. Registration fees are based on the number of interstate trucks in a transporter’s fleet; $39 for 0-2 trucks; $116 for 3-5 trucks; $231 for 6-20 trucks and $806 for 21-100 trucks. States have until August 8, 2008 to opt into UCR. So far, the states participating in the UCR include: AL, AR, CO, CT, GA, IA, ID, IL, IN, KS, KY, LA, MA, ME, MS, MT, ND, NE, NH, NM, NY, OH, OK, OR, RI, SC, SD, TN, TX, UT, VA, WA, WI and WV. Interstate carriers located in states not listed as UCR participants will be contacted by a neighboring state with instructions on how to register. Registration deadlines will vary from state to state. Jobbers should follow instructions on UCR registration letters received from state agencies. For more information on UCR please visit: http://www.naruc.org/displaycommon.cfm?an=1&subarticlenbr=499.
HOS REQUIREMENTS REMAIN IN EFFECT UNTIL FEDERAL COURT RULES ON STAY
The Federal Motor Carrier Safety Administration (FMCSA) announced this week that it would not revert back to old driver hours of service regulations in order to satisfy a federal court order vacating major portions of existing hours of service regulations. Instead, the FMCSA said that the current 11-hour daily driving limit and 34-hour workweek re-start requirements will remain in effect until the U.S. Court of Appeals rules on a lawsuit filed by the trucking industry seeking an eight month stay of the order to vacate.
Under the original court order handed down in July, FMCSA was required to vacate the current maximum 11-hour daily driving limit and the 34-hour workweek restart provisions by September 14, 2007. As a result, the old driver HOS requirements for daily drive time and workweek restart provisions would replace the vacated provisions, causing severe compliance burdens for petroleum transporters. The FMCSA said reversion to the old HOS regulations, promulgated in 1936 and revised in 2005, would create serious disruptions in the nation’s trucking operations. The lawsuit, filed by the American Trucking Associations, is seeking the stay in order to give the FMCSA time to correct deficiencies the court found in the agency’s 2005 rulemaking revising the HOS regulations, which were the basis for the order to vacate.
The court should rule on the ATA request within the next two weeks.
EPA ISSUES NEW INTERPRETATION ON RINs FREE PURCHASE BY BLENDERS
Last week the EPA offered an important new interpretation of the RFS regulations involving splash blending of bio-fuels. The new interpretation allows blending of RINs-free bio-fuels into clear fuel below the terminal rack. This is an important development for petroleum jobbers because it provides a way to avoid compliance (registration and reporting) with the RFS regulations altogether.
According to the EPA, when a jobber splash blends E-100, B-100 or B-99 at a producer’s rack, the bio-fuel used in the blend may be transferred without RINs, even when blended into clear fuel. Under the EPA interpretation, this kind of transaction is possible because a producer is allowed to transfer biofuels with anywhere from 0 to 2.5 assigned RINs per gallon to another party. The producer does this by simply removing RINs from one portion of inventory and transferring them to the remaining gallons. The RIN free gallons may then be transferred for blending into any product, clear or dyed. The catch is that the EPA does not require the producer to transfer RINs free product, but gives them the discretion to do so. Jobbers will have to negotiate directly with their producers to obtain RINs free biofuels for splash blending.
As a result of this new interpretation, there are now at least four ways that jobbers can obtain RINs free biofuels: by purchasing pre-blended renewable fuels at the rack; by purchasing E-100, B-100 or B-99 for blending into dyed fuel; by purchasing E-100, B-100 and B-99 from a bio-fuel marketer; and by splash blending E-100, B-100 or B-99 at the producer’s rack. All of these options, except for purchasing biofuels for blending with dyed diesel fuel require negotiation with the biofuels marketer or producer. For more information, go to the EPA RFS Q & A at: http://www.epa.gov/otaq/renewablefuels/420f07041a.pdf
FALSE POSITIVE TEST FOR RED DYE IN CLEAR DIESEL FUEL RAISES CONCERNS
The IRS is investigating recent incidents of false positive tests for evidence of red dye in clear diesel fuel. The false positive results have occurred at the refinery level when severely hydrotreated diesel fuel is tested using both ASTM red dye test standards D-6258 and D-6756. Diesel fuel refined with this process can have a naturally orange-yellowish color. Analysis of severely hydrotreated diesel has revealed trace amounts of four-ring aromatics and higher than expected levels of carbozoles that have similar spectrum wavelengths to the red dye required by the IRS for marking off-road fuel.
IRS enforcement authorities routinely collect samples of diesel fuel from highway vehicles to check for visible evidence of dye. Samples are drawn by inspectors and observed in a clear class bottle. If visible evidence of dye is detected the sample is sent for laboratory analysis using the ASTM red dye test methods. The IRS imposes a fine of ten dollars per gallon for dispensing red dye into the fuel tank of an on-road vehicle. IRS liability can also reach to petroleum retailers and wholesalers who handled the fuel. At a minimum, violations of this kind could have a negative impact on the business relationship between marketers and their customers. Some refiners are raising the possibility that ASTM red dye test standards D-6258 and D-6756 need to be rewritten to minimize the impact of these naturally occurring color bodies on red dye test results. Such a change could allow distribution of “clear” diesel fuel that to the naked eye looks to contain visible evidence of dye.
IRS CHANGES RED DYE SAMPLE COLLECTION PROCEDURES
The IRS issued a memorandum this week that reissues and updates field concentration sample procedures for testing evidence of red dye in on-road diesel fuel. The memorandum was sent to all IRS Fuel Compliance Officers (FCOs). The memorandum instructs FCOs to use glass bottles in place of the plastic containers currently used to collect samples. Clear glass bottles make initial observations for evidence of red dye more accurate. FCOs collect samples of dyed product at wholesale and retailer locations. These samples are tested for dye concentration to ensure that dyed product in the distribution stream below-the-terminal-rack remains dyed to the concentration required in Treasury Regulations section 48.4082-1(b). These samples are called "field concentration" samples. A wholesaler or retailer who is found with dyed fuel dyed at a concentration below that required in IRS regulations 48.4082-1(b) may be in violation of Internal Revenue Code section 6715(a)(3) or (a)(4).
ENERGY INFORMATION ADMINISTRATION
US Average Retail Gasoline Prices - The US average retail price for regular gasoline increased 2.2 cents last week to rise to 281.8 cents per gallon as of September 10, 2007, 20.0 cents higher than last year. Retail regular gasoline prices were up throughout all of the major regions last week with the Midwest moving up by 0.6 cent to reach 297.9 cents per gallon, the highest in the country and 53.1 cents per gallon over last year. East Coast prices grew by 2.1 cents to 273.0 cents per gallon. Prices for the Gulf Coast gained 3.6 cents settling at 269.3 cents per gallon, the lowest regional price. The Rocky Mountain region price rose to 283.6 cents per gallon, up 1.5 cents this week but 4.8 cents per gallon lower than last year. West Coast prices strengthened 4.4 cents to 281.6 cents per gallon. The average price for regular grade in California was up 4.8 cents to 283.9 cents per gallon, 11.0 cents per gallon lower than the previous year.
US Average Retail Diesel Fuel Prices - Retail diesel prices climbed to 292.4 cents per gallon, 3.1 cents more than last week, and 6.7 cents per gallon higher than this time last year. Prices rose in all regions of the country. The largest increase, 4.5 cents, occurred on the East Coast where prices settled at 291.2 cents per gallon. In the Midwest, prices rose 3.2 cents to 294.2 cents per gallon while the Gulf Coast increased 2.9 cents to 286.5 cents per gallon. The Rocky Mountain region price increased 1.6 cents to 295.5 cents per gallon. The West Coast price grew by a penny to 298.2 cents per gallon. California prices went up a cent to 299.5 cents per gallon, 13.0 cents per gallon lower than a year ago.
Propane Inventories Rebound - The sluggish build in propane inventories recently was ended this week with inventories rebounding higher by 2.2 million barrels, an increase that put the nation's primary supply of propane at an estimated 57.4 million barrels as of September 7, 2007. Higher production and imports accounted for the weekly stockbuild. Strong imports into the Gulf Coast raised the regions inventories by 1.4 million barrels last week while the Midwest reported inventories up by 1.0 million barrels during this same period. East Coast inventories moved down by 0.2 million barrels, while the combined Rocky Mountain/West Coast region remained relatively unchanged. Propylene non-fuel use inventories also remained relatively unchanged last week although its share to total propane/propylene fell slightly to 4.7 percent from the prior week's 4.9 percent share.
JOBBERS FACE NEW REGISTRATION REQUIREMENTS MANDATED BY CONGRESS
Petroleum jobbers across the country are receiving letters from state transportation agencies requiring registration with the new Uniform Carrier Registration (UCR) program. The UCR program was mandated by Congress as part of highway funding legislation passed in 2005. The UCR replaces and expands the Single State Registration System (SSRS) that previously applied only to for-hire motor carriers. As concern grew about the cost of the SSRS, for-hire motor carriers asked Congress to drop the requirement, which was a relic from the long defunct Interstate Commerce Commission. States opposed elimination of SSRS because it is an important source of revenue for highway related safety programs. Congress brokered a compromise between the two sides that lowers compliance costs paid by for-hire motor carriers and enhances state revenue streams by expanding the pool of transporters required to register and pay the annual fee.
Under the expanded UCR system, for-hire motor carriers, private motor carriers, brokers, freight forwarders, and leasing companies, operating in interstate commerce (including interstate petroleum transporters) must register and pay a fee. According to the Federal Motor Carrier Safety Administration Office of Enforcement and Compliance, interstate transporters with U.S. DOT numbers must comply with UCR. Intrastate transporters may be required to register if individual states expand registration to transporters who remain wholly within state boundaries. Registration fees are based on the number of interstate trucks in a transporter’s fleet; $39 for 0-2 trucks; $116 for 3-5 trucks; $231 for 6-20 trucks and $806 for 21-100 trucks. States have until August 8, 2008 to opt into UCR. So far, the states participating in the UCR include: AL, AR, CO, CT, GA, IA, ID, IL, IN, KS, KY, LA, MA, ME, MS, MT, ND, NE, NH, NM, NY, OH, OK, OR, RI, SC, SD, TN, TX, UT, VA, WA, WI and WV. Interstate carriers located in states not listed as UCR participants will be contacted by a neighboring state with instructions on how to register. Registration deadlines will vary from state to state. Jobbers should follow instructions on UCR registration letters received from state agencies. For more information on UCR please visit: http://www.naruc.org/displaycommon.cfm?an=1&subarticlenbr=499.
HOS REQUIREMENTS REMAIN IN EFFECT UNTIL FEDERAL COURT RULES ON STAY
The Federal Motor Carrier Safety Administration (FMCSA) announced this week that it would not revert back to old driver hours of service regulations in order to satisfy a federal court order vacating major portions of existing hours of service regulations. Instead, the FMCSA said that the current 11-hour daily driving limit and 34-hour workweek re-start requirements will remain in effect until the U.S. Court of Appeals rules on a lawsuit filed by the trucking industry seeking an eight month stay of the order to vacate.
Under the original court order handed down in July, FMCSA was required to vacate the current maximum 11-hour daily driving limit and the 34-hour workweek restart provisions by September 14, 2007. As a result, the old driver HOS requirements for daily drive time and workweek restart provisions would replace the vacated provisions, causing severe compliance burdens for petroleum transporters. The FMCSA said reversion to the old HOS regulations, promulgated in 1936 and revised in 2005, would create serious disruptions in the nation’s trucking operations. The lawsuit, filed by the American Trucking Associations, is seeking the stay in order to give the FMCSA time to correct deficiencies the court found in the agency’s 2005 rulemaking revising the HOS regulations, which were the basis for the order to vacate.
The court should rule on the ATA request within the next two weeks.
EPA ISSUES NEW INTERPRETATION ON RINs FREE PURCHASE BY BLENDERS
Last week the EPA offered an important new interpretation of the RFS regulations involving splash blending of bio-fuels. The new interpretation allows blending of RINs-free bio-fuels into clear fuel below the terminal rack. This is an important development for petroleum jobbers because it provides a way to avoid compliance (registration and reporting) with the RFS regulations altogether.
According to the EPA, when a jobber splash blends E-100, B-100 or B-99 at a producer’s rack, the bio-fuel used in the blend may be transferred without RINs, even when blended into clear fuel. Under the EPA interpretation, this kind of transaction is possible because a producer is allowed to transfer biofuels with anywhere from 0 to 2.5 assigned RINs per gallon to another party. The producer does this by simply removing RINs from one portion of inventory and transferring them to the remaining gallons. The RIN free gallons may then be transferred for blending into any product, clear or dyed. The catch is that the EPA does not require the producer to transfer RINs free product, but gives them the discretion to do so. Jobbers will have to negotiate directly with their producers to obtain RINs free biofuels for splash blending.
As a result of this new interpretation, there are now at least four ways that jobbers can obtain RINs free biofuels: by purchasing pre-blended renewable fuels at the rack; by purchasing E-100, B-100 or B-99 for blending into dyed fuel; by purchasing E-100, B-100 and B-99 from a bio-fuel marketer; and by splash blending E-100, B-100 or B-99 at the producer’s rack. All of these options, except for purchasing biofuels for blending with dyed diesel fuel require negotiation with the biofuels marketer or producer. For more information, go to the EPA RFS Q & A at: http://www.epa.gov/otaq/renewablefuels/420f07041a.pdf
FALSE POSITIVE TEST FOR RED DYE IN CLEAR DIESEL FUEL RAISES CONCERNS
The IRS is investigating recent incidents of false positive tests for evidence of red dye in clear diesel fuel. The false positive results have occurred at the refinery level when severely hydrotreated diesel fuel is tested using both ASTM red dye test standards D-6258 and D-6756. Diesel fuel refined with this process can have a naturally orange-yellowish color. Analysis of severely hydrotreated diesel has revealed trace amounts of four-ring aromatics and higher than expected levels of carbozoles that have similar spectrum wavelengths to the red dye required by the IRS for marking off-road fuel.
IRS enforcement authorities routinely collect samples of diesel fuel from highway vehicles to check for visible evidence of dye. Samples are drawn by inspectors and observed in a clear class bottle. If visible evidence of dye is detected the sample is sent for laboratory analysis using the ASTM red dye test methods. The IRS imposes a fine of ten dollars per gallon for dispensing red dye into the fuel tank of an on-road vehicle. IRS liability can also reach to petroleum retailers and wholesalers who handled the fuel. At a minimum, violations of this kind could have a negative impact on the business relationship between marketers and their customers. Some refiners are raising the possibility that ASTM red dye test standards D-6258 and D-6756 need to be rewritten to minimize the impact of these naturally occurring color bodies on red dye test results. Such a change could allow distribution of “clear” diesel fuel that to the naked eye looks to contain visible evidence of dye.
IRS CHANGES RED DYE SAMPLE COLLECTION PROCEDURES
The IRS issued a memorandum this week that reissues and updates field concentration sample procedures for testing evidence of red dye in on-road diesel fuel. The memorandum was sent to all IRS Fuel Compliance Officers (FCOs). The memorandum instructs FCOs to use glass bottles in place of the plastic containers currently used to collect samples. Clear glass bottles make initial observations for evidence of red dye more accurate. FCOs collect samples of dyed product at wholesale and retailer locations. These samples are tested for dye concentration to ensure that dyed product in the distribution stream below-the-terminal-rack remains dyed to the concentration required in Treasury Regulations section 48.4082-1(b). These samples are called "field concentration" samples. A wholesaler or retailer who is found with dyed fuel dyed at a concentration below that required in IRS regulations 48.4082-1(b) may be in violation of Internal Revenue Code section 6715(a)(3) or (a)(4).
ENERGY INFORMATION ADMINISTRATION
US Average Retail Gasoline Prices - The US average retail price for regular gasoline increased 2.2 cents last week to rise to 281.8 cents per gallon as of September 10, 2007, 20.0 cents higher than last year. Retail regular gasoline prices were up throughout all of the major regions last week with the Midwest moving up by 0.6 cent to reach 297.9 cents per gallon, the highest in the country and 53.1 cents per gallon over last year. East Coast prices grew by 2.1 cents to 273.0 cents per gallon. Prices for the Gulf Coast gained 3.6 cents settling at 269.3 cents per gallon, the lowest regional price. The Rocky Mountain region price rose to 283.6 cents per gallon, up 1.5 cents this week but 4.8 cents per gallon lower than last year. West Coast prices strengthened 4.4 cents to 281.6 cents per gallon. The average price for regular grade in California was up 4.8 cents to 283.9 cents per gallon, 11.0 cents per gallon lower than the previous year.
US Average Retail Diesel Fuel Prices - Retail diesel prices climbed to 292.4 cents per gallon, 3.1 cents more than last week, and 6.7 cents per gallon higher than this time last year. Prices rose in all regions of the country. The largest increase, 4.5 cents, occurred on the East Coast where prices settled at 291.2 cents per gallon. In the Midwest, prices rose 3.2 cents to 294.2 cents per gallon while the Gulf Coast increased 2.9 cents to 286.5 cents per gallon. The Rocky Mountain region price increased 1.6 cents to 295.5 cents per gallon. The West Coast price grew by a penny to 298.2 cents per gallon. California prices went up a cent to 299.5 cents per gallon, 13.0 cents per gallon lower than a year ago.
Propane Inventories Rebound - The sluggish build in propane inventories recently was ended this week with inventories rebounding higher by 2.2 million barrels, an increase that put the nation's primary supply of propane at an estimated 57.4 million barrels as of September 7, 2007. Higher production and imports accounted for the weekly stockbuild. Strong imports into the Gulf Coast raised the regions inventories by 1.4 million barrels last week while the Midwest reported inventories up by 1.0 million barrels during this same period. East Coast inventories moved down by 0.2 million barrels, while the combined Rocky Mountain/West Coast region remained relatively unchanged. Propylene non-fuel use inventories also remained relatively unchanged last week although its share to total propane/propylene fell slightly to 4.7 percent from the prior week's 4.9 percent share.
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