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76–613 PDF 2012

S. HRG. 112–596 

GASOLINE PRICES IN THE STATE OF VERMONT 

HEARING 

BEFORE THE

COMMITTEE ON 

ENERGY AND NATURAL RESOURCES 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

TO

EXAMINE GASOLINE PRICES AND MARGIN DYNAMICS WITHIN THE 

STATE OF VERMONT 

Burlington, VT, August 6, 2012 

( 

Printed for the use of the 

Committee on Energy and Natural Resources 
(II) 

COMMITTEE ON ENERGY AND NATURAL RESOURCES 

JEFF BINGAMAN, New Mexico, Chairman 

RON WYDEN, Oregon 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

MARIA CANTWELL, Washington 

BERNARD SANDERS, Vermont 

DEBBIE STABENOW, Michigan 

MARK UDALL, Colorado 

JEANNE SHAHEEN, New Hampshire 

AL FRANKEN, Minnesota 

JOE MANCHIN, III, West Virginia 

CHRISTOPHER A. COONS, Delaware 

LISA MURKOWSKI, Alaska 

JOHN BARRASSO, Wyoming 

JAMES E. RISCH, Idaho 

MIKE LEE, Utah 

RAND PAUL, Kentucky 

DANIEL COATS, Indiana 

ROB PORTMAN, Ohio 

JOHN HOEVEN, North Dakota 

DEAN HELLER, Nevada 

BOB CORKER, Tennessee 

ROBERT M. SIMON, Staff Director 

SAM E. FOWLER, Chief Counsel 

MCKIE CAMPBELL, Republican Staff Director 

KAREN K. BILLUPS, Republican Chief Counsel 
(III) 

C O N T E N T S 

STATEMENTS 

Page 

Brockwell, Ben, Director of Data, Pricing & Information Service, Oil price 

Information Service .............................................................................................. 5 

Choquette, Joesph, III, External Affairs Manager, Vermont Petroleum Association, Downs Rachlin Martin PLLC, Montpelier, VT ..................................... 10 

Coutts, James, Director, Franklin County Senior Center, Saint Albans, VT ..... 19 

Horne, Gail, Owner, Keelers Bay Variety Store, South Hero, VT ....................... 16 

Leuck, Rob, Vice President and Regional Manager, Costco Wholesale, Sterling, VA ................................................................................................................. 14 

Sanders, Hon. Bernard, U.S. Senator From Vermont .......................................... 1 

(1) 

GASOLINE PRICES IN THE STATE OF 

VERMONT 

MONDAY, AUGUST 6, 2012 

U.S. SENATE, COMMITTEE ON ENERGY AND NATURAL RESOURCES, Burlington, VT. 

The committee met, pursuant to notice, at 2 p.m., at Contois Auditorium, City Hall, 149 Church Street, Burlington, Vermont, Hon. 

Bernie Sanders presiding. 

OPENING STATEMENT OF HON. BERNARD SANDERS, U.S. 

SENATOR FROM VERMONT 

Senator SANDERS. This is a formal hearing of the U.S. 

Senate Committee on Energy and Natural Resources. I want to 

thank Senator Jeff Bingaman of New Mexico, who is the chair of 

the committee, for allowing us to hold this hearing in Burlington. 

I want to thank his staff member for being with us today. What 

is being discussed here will become a part of the official record of 

the committee. I want to thank the city of Burlington for allowing 

to use this facility, which I have some familiarity with. 

I also want to mention that we have representatives from Senator Leahy’s office, Ted Brady, is here. Ted, thanks for being here. 

From Congressman Welch’s office, John Copans. I think we have 

the Attorney General of the State of Vermont, Billy Sorrell here, 

I believe. Thanks for being here as well. 

I also want to thank our panelists for taking the time to be with 

us to share their views on this extremely important issue. 

The issue that we are going to explore today is one that concerns 

many Vermonters, and that is how gas prices at the local level are 

determined, and why it is that, with few exceptions, gas prices at 

the pump in northwest Vermont—Chittenden, Franklin, and Grand 

Isle Counties, have been significantly higher over the last several 

years than gas prices in other parts of Vermont, in New England, 

and throughout the country. That is the primary issue that we are 

going to be looking at today. 

I think we all understand that in a rural State like Vermont, 

high gasoline prices have a very serious impact on many people 

and families in our State. It is certainly not uncommon in Vermont 

for workers to travel 20, 30, 50 miles a day to work, and then travel back. When gas prices go up, that is money coming right out of 

their pockets, and that it is especially taking place at a time when 

many workers are seeing stagnant or, in fact, declining paychecks. 

So high gas prices are a serious problem. These prices not only 

impact workers, but they impact small business owners, family 
2 

farmers, truckers, and volunteers, as we will hear later this afternoon, who deliver meals to senior citizens and perform other functions in our community. In other words, when gasoline prices become unusually high, extremely high, they impact the entire local 

economy. 

Now let me very clear at the onset. The issue that we are exploring today is a complicated one, and it is extremely opaque. It is an 

issue which has not, in my view, gotten the public attention or the 

transparency that it deserves. Today what we are going to try to 

do is to some degree lift the veil of secrecy, to the best that we can, 

on this complicated issue. 

Let me also be very clear in stating my understanding, and I 

think all of us understand, that there are many factors that go into 

setting gasoline prices in Vermont and across the country. Gasoline 

prices to a significant degree are determined by the price of crude 

oil. When crude oil prices go up, gas prices go up. When crude oil 

prices go down, gas prices at the pump go down. 

Excluding for the moment the enormous power of OPEC, the Oil 

Producing Exploring Countries—Exporting Countries—we have in 

this Nation 5 giant oil companies—ExxonMobil, BP, Shell, Chevron, and ConocoPhillips—that have made more than $1 trillion in 

profits over the last decade. I think it is fair to say that most people in Vermont and throughout this country have the belief that 

year after year as these companies make enormous profits, they do 

not stay up nights worrying about the needs of working families or 

consumers. 

I just want to point out just in passing that in 2005, Lee Ray- mond, the former chairman of ExxonMobil, was given nearly $400 

million in a retirement package by that company. I should also 

mention that many of these same giant oil companies receive huge 

subsidies and tax breaks from the Federal Government, something 

which on another day we can talk about at length. 

Further, when we talk about high oil prices, it is important to 

understand that high oil prices have a lot to do with Wall Street 

speculators who are buying and selling huge amounts of oil on the 

energy futures markets. The last information that I have received 

on that issue suggests that Wall Street speculators control over 80 

percent of the oil futures market. Needless to say, unlike fuel dealers, or airline companies, or trucking companies, these Wall Street 

speculators do not use one gallon, one barrel of oil. Their only function in life is to make as much money as they can by speculating 

in oil. 

To the point, Goldman Sachs, perhaps the largest speculator on 

Wall Street, came out with a report earlier this year indicating 

that excessive oil speculation is costing Americans about 56 cents 

a gallon at the oil pump. Others have estimated that number to be 

even higher. 

While these two factors and others can explain why gas prices 

have been extremely high on the national level, they cannot what 

we are exploring today, and that is the significant differences in 

gasoline prices that have existed in northwest Vermont compared 

to other regions in our State and other parts of the country. 

Over the past several months, many Vermonters have asked me 

why consumers have been forced to pay considerably more for a 
3 

gallon of gasoline in northwest Vermonter than in other regions of 

our State or throughout New England. Clearly in Vermont, State 

taxes are the same from one end of the State to the other, and we 

have learned that transportation costs amount to at most a few 

cents per gallon. 

So here are some of the questions that are on my mind and I 

hope that we can discuss this afternoon. As an example, on July 

6, 2012, a month ago, with the same gas station company owned 

by Maplefields, charged $3.35 a gallon in Middlebury, while charging $3.59 a gallon just 35 miles away in Burlington. Why on July 

1st were people in St. Albans paying on average—on average for 

the whole town—$3.60 per gallon of gas, while people in Springfield, Vermont on average were paying less than $3.40 a gallon? 

Why on June 24th were people in Waterbury paying more than 

$3.65 a gallon for gas on average, while people in Rutland were 

paying an average of $3.49 a gallon? These are just a few of the 

questions that the citizens of Vermont have been asking me. 

Now as many of you know, on July 2nd, I asked the Federal 

Trade Commission, the FTC, and the Oil and Gas Price Fraud 

Working Group to investigate why prices could be so much higher 

throughout northwest Vermont than in other areas of our State 

and the country. In the days that followed, we learned some interesting information. Let me just tick off a little bit about what we 

learned. 

First, the FTC provided information showing gasoline prices in 

Greater Burlington in late June—late June—were 10 to 43 cents 

a gallon greater than their computer model projected they should 

be based on historical wholesale prices. 

Second, according to OPIS—and we will hear testimony from Ben 

Brockwell from OPIS on this issue, and OPIS is the Oil Price Information Service—we learned that earlier this summer, the Burlington area was the most profitable gasoline market in the northeast, more profitable than Washington, DC, or New York or, in 

fact, any other region east of the Rocky Mountains. That the Burlington area was the most profitable gasoline market in the northeast. 

Further, according to additional information we received from 

OPIS, gasoline profit margins in Burlington more than tripled from 

January 1st of this year through June 30th of this year. During the 

first half of this year, Burlington was one of the most lucrative 

markets in the entire eastern half of the United States of America. 

As Ben Brockwell, the director of data at the Oil Price Information 

Service, OPIS, who is here with us today, told the Burlington Free 

Press on July 13th, and I quote, ‘‘Burlington is always the top market in the northeast in terms of profits.’’ 

Let us be clear. What we have seen in the first half of this year 

is not an aberration. Over the last 3 years, gasoline prices and 

profit margins have almost always been higher in the Burlington 

area than the national average. In fact, over the past 3 years, Burlington area gas prices have exceeded the U.S. average 86 percent 

of the time, sometimes by as much as 29 cents per gallon. Burlington gasoline prices over the past 3 years have exceeded the 

statewide average 72 percent of the time. 
4 

Prices in St. Albans exceeded both the U.S. average and the 

Vermont average 90 percent of the time. Prices in Waterbury exceeded the U.S. average 97 percent of the time and the Vermont 

average 100 percent of the time. 

As my office has looked into this issue, we have tried to understand why prices in northwest Vermont were so much higher than 

the rest of the Nation, the rest of New England, and, in fact, the 

rest of our country. One conclusion that we have reached is that 

it appears that there is just not a whole lot of competition when 

it comes to gas prices in this region, certainly as compared to other 

parts of the State and other parts of the country. 

Now one of the reasons for that may well be a reality that many 

Vermonters are not aware of, and that is that the largest—the 3 

largest gasoline distributors in northwest Vermont—S B Collins, 

Champlain Oil, and R.L. Vallee—own more than half of the filling 

stations in this region—that is out of 185—and just 4 companies, 

adding Wesco to that mix—own nearly two-thirds of the filling stations in northwest Vermont, or 64 percent of the total. 

Now I suspect that this concentration of ownership and lack of 

price competition may be a significant reason why gasoline stations 

in northwest Vermont have been able to charge substantially higher prices than other regions of our State and country. 

No one is disputing that gasoline distributors—gas stations— 

have a right to make a profit. That is not in dispute. In my view, 

however, especially in these difficult economic times when workers 

and families are struggling to keep their heads above water, they 

should not be ripping off people. 

Now let me mention something that I have found to be very interesting, speaking only for myself. That is since I have called for 

this investigation into unusually high gasoline prices in northwest 

Vermont, I am happy to say that I and others have suddenly detected a more competitive spirit among gasoline station distributors 

in Chittenden County. I say this fully understanding that national 

wholesale gas prices have soared in recent weeks, and have in the 

last couple of days been reflected locally. We all know that to be 

the case. 

On Friday, August 3rd—now this is interesting to me—gas prices 

in Burlington were for the first time in several months below the 

national average. Today as best as we understanding, with gas 

prices in Vermont and nationally increasing substantially—in 

Vermont, nationally, and in Burlington—gas prices in the Burlington area remain at about the national average. 

In the month of July, average gas prices in the Burlington area 

went down—went down—by about 9 cents a gallon, even though 

wholesale gasoline prices in our region have gone up by more than 

18 cents a gallon during this same time period. 

Now why is that? We can all guess why, but I happen to think 

it has something to do with the fact that maybe a spotlight has 

been shined on this situation, and that local distributors and gas 

stations have responded accordingly. I am glad that they did, and 

I hope very much that they will continue to do that. 

Now on another issue. As many of you know, and we will hear 

some discussion about this later on this afternoon, Costco has been 

trying to build a gasoline station at its Colchester location since 
5 

2007. Costco recently informed my office—and I will enter that letter as part of the record—that it could have sold gasoline for 19 

cents a gallon less than the average price charged by gas stations 

in Colchester during the past 2 years. I want to thank a representative from Costco for being with us today. 

Now I raise this issue—and I want to be very clear about this— 

not to be pro-Costco, not to be anti-Costco, but to emphasize that 

when low cost competitors enter a market, what national statistics 

show is that market forces have a tendency to bring prices down. 

Let me also be clear, Costco, as we all know, is attempting to receive a permit to build gas stations on their premises through a regional environmental board. This hearing today—so we are absolutely clear on it—has nothing to do with that process. It would be 

totally improper if I or anyone else tried to intervene. We have an 

environmental board that is independent that is dealing with that 

issue, and that is the way it should be. 

But I think that most people—and I myself do find it interesting—that the major opponents of Costco getting that permit are 

local gasoline dealers. In a letter to me Costco wrote, and I quote— 

and I do not quote, but that Costco wrote to me that they have obtained several approvals for our proposed gas station in Colchester, 

but each approval has been appealed by, among others, gas station 

owners in northern Vermont. We can—this is Costco speaking— 

‘‘We can discern no legitimate reason for these appeals and believe 

that they are really an attempt to use the land use process to stifle 

competition for gas sales. We intend to vigorously pursue our rights 

in court, and we are confident that we eventually will prevail,’’ end 

of quote. So let it stand at that. We will hear from Costco in a moment. 

Let me again thank our panelists for being with us today. My 

suggestion is if you can make your testimony in 5 minutes, great. 

If you need more time, that is OK, too. 

Let us begin with Ben Brockwell. Ben is the director of data pricing and information services for the Oil Price Information Service. 

Ben, we very much appreciate your being here. The microphone is 

yours. 

OPENING STATEMENT OF BEN BROCKWELL, DIRECTOR OF 

DATA, PRICING & INFORMATION SERVICE, OIL PRICE INFORMATION SERVICE 

Mr. BROCKWELL. Thank you, Senator, for inviting me, and it is 

nice to be in Burlington, a beautiful town. As I was told by the 

Senator, it happens to have a college. I called it a beautiful college 

town. He says, you are wrong, Ben, it is a beautiful town that happens to have a college. It is nice to be in Burlington. 

My name again is Ben Brockwell. I am director of data pricing 

information services for OPIS, Oil Price Information Service. OPIS 

is an independent company that has been in business for over 30 

years. We independently value the price of petroleum, gasoline, jet 

fuel, diesel fuel, and other finished products as they make their 

way through the downstream petroleum supply chain from the refinery, to the wholesale terminal, to the retail station. 

Our prices are critical benchmarks for people who buy bulk petroleum. The Federal Government through the DESC, the Defense 
6 

Energy Support Center, relies on our numbers for benchmarking 

purposes, for prices to escalate and deescalate. 

I myself have been covering oil markets since the 1970s. It is 

really all I have ever done. I have had a chance to view the oil market over a long arc of time, from the oil embargo in 1973, to what 

that did to prices, to the price collapse in 1986 where prices went 

to under $10 a barrel, again in 1999, and obviously through 2008 

when prices went to an all-time record. 

Much has changed in the business in terms of what determines 

prices. I am not going to give you a summit on how it has changed, 

but at one time the major oil companies—Exxon, Chevron, et 

cetera—had a big voice in determining prices. That was kind of 

taken away from them in the 1960 when OPEC was formed. As the 

Senator said, the Organization of Petroleum Exporting Countries 

are a high volume. They produce 1 out of every 8 gallons or barrels 

of oil that are consumed in the world are produced by OPEC. Saudi 

Arabia is the biggest OPEC producer. They produce 10 million barrels a day, so they are the prime producer. 

OPEC had pricing power for many years, but probably about 10 

years ago, and we, OPIS, really documented a lot of this over time. 

Wall Street and big money started to identify crude oil—heating 

oil, gasoline futures—contracts as a commodity that they can invest 

in and make money. So over the past 10 years, in my opinion, and 

I think it is an issue that people have talked about, but people 

have not really examined close enough. The Wall Street refinance 

as we call it, the Wall Street speculators are the primary force that 

determines the price of gasoline that you pay at the pump. Anybody who tells you differently, they are simply wrong. 

Again, I am not going to give you a summit on how that has happened, but one of the important things that has happened was 

some of the deregulation that occurred in 2001, cheap money, low 

interest rates has also been another factor. It is very cheap the 

poker game. So I can get in for a cheap price. 

Basically what happens is oil is traded on a daily basis on the 

futures market. That benchmark, that transparent number is the 

starting point for what a refiner in Exxon or a Chevron or a Shell 

will sell their incremental gallons for into the marketplace. That 

becomes the factor of what your wholesale prices are set at. That 

ultimately affects the price of retail. So, again retail prices are directly linked to the futures market, and all of us are victims of 

that. 

It was brought to my attention by Senator Sanders’ office that 

Burlington prices for a long period in his estimation were higher 

than the industry average. OPIS, among other things, surveys 

probably 150,000 retail gasoline stations on a daily basis. So we 

have a solid data base of what stations charge by location, by 

brand, by grade of fuel. I was not personally aware that Burlington 

was a market that stood out, so I was asked by the Senator’s office 

to do some data crunching. 

I think I took some of that data back to 2009, looking at wholesale rack prices in Burlington versus retail pump prices over a 

statewide configuration, some of it by location. I then compared 

that other—Burlington to other cities in Vermont, and compared 
7 

Vermont to the northeast or New England northeast region, and 

then compared that to the U.S. average. 

It was apparent to me, as the Senator elegantly pointed out in 

his statement, that your market for a long time has been a great 

market for a gasoline retailer to sell gasoline in terms of margin 

above his costs. I was asked if I could reasonably explain that. 

Since I do not have really have a stake one way or another, I am 

not a defender or oil companies. I do not condemn them. I am just 

a data collector, and I try to make sense of the data. 

Since the Senator asked me if there was a reasonable explanation that Burlington prices should be so much higher than neighboring areas, and I have a set of criteria I go through, and I will 

close my testimony just taking you through that for the next couple 

of minutes. 

I thought since Burlington prices were 25 or 30 cents higher than 

neighboring areas, that they may use a special fuel. In the summertime, there are a number of metropolitan areas that are required to use a reformulated fuel, which is a more sophisticated 

harder fuel to burn. It is required in metropolitan areas because of 

pollution and clean air. Reformulated fuel in the bulk supplied 

markets is running all summer about 25 cents. So my immediate 

thought, it is reformulated fuel in Burlington. It is conventional 

fuel in the other cities. 

As it turns out, Burlington uses the same kind of fuel everybody 

else uses. It is a conventional fuel, and it is priced essentially the 

same throughout the State. So I eliminated fuel type as a possible 

explanation. 

The next thing I look at because I always—I am a New Jersey 

resident, and New Jersey has cheap State taxes, so our prices tend 

to be lower than Pennsylvania and New York, for example. So I am 

always asked how come you guys are so cheap? Taxes is the second 

thing I looked at. Normally it is a State tax issue versus another 

State. 

There are a number of locations nationwide—Chicago is probably 

the most blatant or most conspicuous—where there are also county 

and city taxes that add to the additional State taxes. So I thought 

maybe Burlington had a special tax in place that would elevate its 

price. I eliminated that. 

I then looked at transportation because it does distributors to 

transport fuel from point A to point B. But at the end of the day, 

and I looked at a bunch of rates from independent haulers around 

the country, it costs about 3 and a half cents to haul fuel—3.4 cents 

a gallon to haul fuel 50 miles. This includes loading and unloading 

the product. It costs 75 cents to go—excuse me, 4.6 cents to go to 

75 miles, 6 cents to go 100 miles, and 13 cents to go 200 miles. As 

the Senator had pointed out, fuel price discrepancies within 35 

miles, and it was not in any way that transportation was going to 

explain that 35 cent difference. 

The Senator pointed out in his—in these statistics that he put 

in his letter to the FTC, that I became aware of it when I saw the 

letter, that he was concerned about competition. I looked at the 

stations in Burlington that OPIS surveys in its assessment of 

prices. I did not look at who owns which station. I did not get into 

that deep analysis. There is no reason for me to doubt the Sen-
8 

ator’s analysis. He got it from sources that I would go to if I were 

doing the same thing. 

But more than, I think, 60 percent of the stations in Burlington 

are branded as opposed to unbranded. Branded stations tend to 

value their product more than unbranded. But again, the market 

kind of differential for that is, you know, typically 6, 7, or 8 cents 

a gallon, not 35 cents a gallon. 

You know, real estate values come into play, how much it costs 

a company to get into the market. But again, some of the data that 

I examined showed margins in Burlington more expensive than 

places like DC and places New York City. I do not know property 

values in Burlington, but I certainly know New York City is probably more expensive. So I did not think that was an issue. 

At the end of the day—and the quote that this Senator quoted 

me, is an accurate quote—my conclusion was I did not have a reasonable explanation as an expert in the field as to why prices 

should be that different. That is essentially what I told some of the 

press people who contacted me to talk to me about it. So that was 

my conclusion. 

I would be glad to answer any questions that the Senator or any 

other person may have on this issue. It is a complicated issue. 

There is a lot that goes into it. But the data that I provided is consistent data we use to compare different markets. It did show Burlington to be a profitable market over a long arc of time. 

[The prepared statement of Mr. Brockwell follows:] 

PREPARED STATEMENT OF BEN BROCKWELL, DIRECTOR OF DATA, PRICING & 

INFORMATION SERVICE, OIL PRICE INFORMATION SERVICE

My name is Ben Brockwell and I am Director of Data, Pricing & Information 

Service with OPIS (Oil Price Information Service). 

OPIS is a privately-held, independent business information company, a division 

of Gaithersburg, Maryland-based UCG. The parent company provides business information services across a wide array of businesses including oil and energy, the 

specialty of OPIS. Other UCG business units deal in health, banking, and technology fields. 

UCG celebrates 35 years in business in 2012. 

OPIS celebrates its 32 year as part of UCG in 2012. 

OPIS essential business function is to independently value the price of refined oil 

products (gasoline, diesel, jet fuel, propane, etc.) as they move along the supply 

chain from the refiner producer to the end-user consumer. 

OPIS prices provide independent benchmarks for bulk buyers and sellers of petroleum needing an independent source to value their daily buy/sell transactions for 

specific products. 

OPIS tracks wholesale rack or terminal prices at close to 400 city locations 

through all fifty U.S. states and in Canada. 

OPIS wholesale prices are highly referenced benchmarks used by petroleum 

wholesalers to sell product to end-users. Our prices are typically used as reference 

points around which contract prices between a supplier and a consumer rise or fall, 

escalate or de-escalate. 

The U.S. government through its Defense Energy Support Center (DESC) relies 

on OPIS data to buy its bulk fuel needs for the military. 

OPIS, through its retail gasoline/diesel group, also tracks retail gasoline prices at 

some 175,000 gasoline stations through all fifty states, including Vermont. 

OPIS retail prices are site specific, brand specific, and product specific, and updated daily via credit card transaction reads mainly through Portland, Maine-based 

Wright Express, a credit card services company serving small, medium, and large 

sized fuel fleets. 

OPIS also collects prices directly from some of the large chain retailers who have 

a vested interest in our data being correct because OPIS retail gasoline prices are 
9 

being used by automobile companies as part of the dashboard software used to find 

gasoline stations and other consumer services—GPS based technology. 

Retail gasoline and diesel prices are aggregated in a retail fuel data base and 

sorted in a variety of formats so the information can be sold on a fee-subscription 

basis. 

A sampling of OPIS retail fuel products include: Retail Fuel Watch (RFW), a 

weekly publication that tracks rack-to-retail gasoline and diesel prices profit margins by geographical region (Northeast, for example); by state (Vermont); and by 

metropolitan location (Burlington). Among other things, RFW ranks by region the 

most profitable and least profitable cities to market gasoline. It also rates the top 

earning brands by region. 

OPIS stores lots of retail pricing data in its Retail Data House, which can be used 

to generate comparative price studies over time by region, by brand, by state, etc. 

OPIS also publishes a Retail Radius Report which essentially provides competitive 

station pricing data by specific geographical region within a specified radius of any 

selected station location. 

OPIS also published from time to time special retail reports, including an Annual 

Retail Market in Review that summarizes and compares various data components, 

including gallons sold, annual margins, market share by brand, branded supplier 

price comparison, unbranded supplier price comparisons, branded versus unbranded 

price comparisons, etc. 

Because of OPIS recognized expertise in wholesale and retail gasoline prices, I 

was contacted by the office of Senator Bernie Sanders regarding possible pump pricing discrepancies in Vermont, specifically the variation between prices in Burlington, Vermont and other areas of the state. 

I was made aware of a July 2012 letter that the Senator had sent to the U.S. 

Attorney General and the Federal Trade Commission asking for an investigation to 

explain why Burlington, Vermont prices were some 35cts/gal higher than places like 

Middlebury, less than 30 miles from Burlington. 

Senator Sander’s office asked OPIS to provide some historical information on 

rack-to-retail gasoline margins in Vermont over time to determine how Burlington 

profit margins compare to other Vermont cities, the U.S. average, plus the northeastern regional average. 

OPIS provided several data series to aid the Senator with his inquiry. 

I was asked by the Senator’s office if there was a reasonable explanation why 

Burlington prices were so much higher than neighboring areas. 

My immediate response was to take the Senator’s office through a number of variables that I would examine to help explain any significant price differences. 

One of the first avenues of inquiry was took verify the type of gasoline that Burlington may use versus other areas of Vermont, the possibility that Burlington required what is known as reformulated gasoline, gasoline that is required in certain 

metropolitan areas to comply with ozone and clean air requirements. 

RFG gasoline tends to be much more expensive than conventional gasoline because the fuel is tougher for refiners to make and requires the use of more expensive blend stocks. 

Burlington, Vermont is not one of the metropolitan locations required to burn reformulated gasoline or low Reid Vapor Gasoline to meet clean air standards. 

Burlington uses conventional gasoline at its stations, the same gasoline used 

through the entire state. 

So my initial conclusion was that fuel specification differences did not explain the 

price discrepancies the Senator outlined in his letter to the attorney general. 

I then looked at state, county, and local gasoline tax possibilities as a reason one 

areas price could be so much higher than another—perhaps some Burlington city 

tax existed or some additional county tax on gasoline existed beyond the normal 

Vermont state gasoline tax that would create a price difference related to gasoline 

taxes. 

I believe the Vermont gasoline tax structure is pretty uniform and to my knowledge no additional or special gasoline taxes or fees are in place in Burlington or in 

the neighboring counties that would explain the price differences mentioned by Senator Sanders’ office. 

So gasoline taxes didn’t seem to me to offer a reasonable explanation of the retail 

gasoline price differences outlined by Senator Sanders. 

I also took a look at transportation—the possibility that it cost more to deliver 

gasoline to Burlington than to other markets but the major oil terminals are located 

closer to Burlington than to other markets so I eliminated this as a cause for the 

price differences described by the Senator in his letter to the attorney general and 

chairman of the Federal Trade Commission. 
10 

Companies that deliver gasoline for a living tell me it costs about 2.4cpg to deliver 

gasoline from zero to 25 miles; 3.4cpg from 26 to 50 miles; 4.6cpg from 51 to 75 

miles; 6 cpg from 76 to 100 miles; and approximately 13 cpg to deliver fuel 200 

miles. Time and distance are the controlling variables that determine transportation 

rates, along with loading and unloading product, which is built into the rates. 

Real estate values in Burlington may offer one explanation but it is a variable 

I am not in a position to evaluate: the point being that the cost of building a running a station in Burlington may be higher than in other Vermont locations so retailers strive to earn bigger profits to offset higher expenses. 

Senator Sanders mentioned in his letter to the attorney general that the Burlington retail gasoline market was mostly controlled by four companies, suggesting 

a possible lack of local competition. That is an avenue of inquiry that might deserve 

closer inspection. 

The impact of having a low-cost gasoline provider in a market can be significant. 

In New Jersey, for example, areas that have Wawa gasoline outlets tend to be 15 

to 24cpg lower-priced than areas that don’t. 

Based upon my inquiry into this matter I have been unable to find a reasonable 

explanation to justify or explain why Burlington, Vermont retail gasoline prices are 

higher than neighboring areas. 

Senator SANDERS. Ben, thank you very much. Our next panelist 

is Joe Choquette, who is the external affairs manager at the 

Vermont Petroleum Association. Joe, thanks for being with us. 

OPENING STATEMENT OF JOSEPH L. CHOQUETTE, III, EXTERNAL AFFAIRS MANAGER, VERMONT PETROLEUM ASSOCIATION, DOWNS RACHLIN MARTIN PLLC, MONTPELIER, VT 

Mr. CHOQUETTE. Thank you, Senator Sanders, and members of 

the committee. Thank you for the opportunity to provide some perspective regarding gasoline prices in the Burlington area. 

As the Senator mentioned, my name is Joe Choquette. I have 

worked with most of the companies that are spotlighted here for 

more than 25 years, first as executive director of the Vermont Petroleum Association, and more recently as it government and public 

affairs advisor. 

It is worth noting that Vermont’s annual gasoline sales have 

about 329 million gallons, is the lowest in the lower 48 United 

States, and second only to Alaska among all the States. In New 

England, even tiny Rhode Island beats us selling 395 million gallons of gasoline in 2010. 

This is a small market served by as many as 6 terminals located 

in 4 States and 2 countries. It is a complex market with many challenges—the distance to refineries, high real estate costs, strict environmental regulations, and high taxes. 

The Vermont Petroleum Association, a division of Vermont Grocers Association, is a trade group that serves the needs of 

Vermont’s motor fuel distributors. In Vermont, there are approximately 75 licensed wholesale distributors. These companies provide 

gasoline and diesel fuel under many different contractual arrangements to branded and unbranded gasoline stations. None of these 

are major oil companies. 

We have identified at least 10 licensed distributors who actively 

serve the Chittenden County market. The relationship of these distributors to the stores they serve varies greatly. They might own 

the store and operate it with their own employees. They might own 

the property and equipment and lease the business to an independent dealer. Or they might sell directly to an independent dealer who owns all of his own assets. Some dealers even buy their 
11 

product directly from the terminal and arrange delivery through a 

common carrier, which brings me to the purpose of the hearing. 

First, we recognize that the difference between the wholesale 

rack price for gasoline at the Burlington terminal and the average 

retail price in the Burlington area during the period that you selected was above the national and regional average. However, the 

petroleum industry is a volatile industry, and such periods are routinely offset by times when the difference between rack price and 

retail price is narrow and often negative. This was true during 

some periods of October through March, and it also true today. 

Second, margins are not profits. From the gross difference between wholesale and retail, distributors and dealers have to meet 

the cost of running their businesses. It costs at least a million and 

a half dollars to build a convenience store from scratch in this location, and an estimated $250,000 to replace 3 underground petroleum storage tanks and two multiple product dispensers. Credit 

card fees alone cost about 10 cents per gallon. 

Third, sales volume varies considerably and low volumes mean 

slow turnover. The original cost of the product stored underground 

is almost always different from the current price at the terminal. 

In many locations, inventory lasts for at least 10 days. Considering 

all of this, these companies have to earn a living when the market 

allows them to do so. 

An analysis by the National Association of Convenience Stores 

prepared for this hearing illustrates this point. NACS estimates 

that the average cost of running a convenience store nationwide is 

about 17 cents per gallon. The OPIS data for the months of January through March shows extremely narrow and sometimes negative net margins. That is also true today. 

Further, these margins only measure the difference between rack 

and retail, and the cost calculated by NACS apply only to the store 

or station. They fail to consider the cost of running a distribution 

business, and, thus, the two businesses are considered as one. 

You have questioned whether the Burlington market is competitive, citing a 20 cent per gallon difference between Burlington and 

Middlebury. A search for prices on the publicly available 

gasbuddy.com consistently shows at least a 17 cent percent gallon 

difference between the low price in the Burlington area and the 

high price in the Burlington area. Last week as well as today, the 

difference is 24 cents. Consumers have many choices in this area. 

If they always bought at the lowest price, all of the prices would 

quickly come down. 

The analysis performed by NACS also reveals a population to 

store density and a density of store ownership that is more competitive than the national average and not less competitive. Of 105 

stores in Chittenden County, 61 appear to be operated by independent dealers, and only 44 are operated by 7 distributors operating 4 or more stores each. 

Chittenden County has 1,492 people per retail outlet. Across the 

northeast, there are 2,877 persons per store, and nationally 2,576. 

Thus, there are more independent stations competing for your business here than elsewhere. 

The companies and businesses we represent in general are longtime legacy businesses that are now in the second and third gen-
12 

eration of family ownership. They have come to supply this area 

after major oil companies have sold their assets and stopped doing 

business here because of low volumes and shrinking profits. Unlike 

some other businesses, our distributors and dealers give back to 

their communities every single day. 

Among the actual causes supported by these local family businesses are the C. Douglas Cairns hockey arena in South Burlington, the Muscular Dystrophy Association, the Children’s Hospital, the Make a Wish Foundation, the Vermont National Guard 

Scholarship Fund and Christmas Fund, the Vermont Food Bank, 

and the Ronald McDonald House. 

In the past few weeks, the wholesale price of gasoline has increased more than 20 cents per gallon, yet retail prices have moved 

very little in the Burlington area. Last week and today, the average price in Chittenden County was below both the State and national average, despite paying a 5 to 6 cent per gallon premium for 

gasoline delivered to the Burlington terminal by rail. 

Now as then, there is at least a 17 cent per gallon different between the high price in Burlington and the low price in Burlington. 

Consumers have many choices here. 

Thank you for listening, Senator Sanders and members of the 

committee. I will be happy to answer your questions at the end. 

[The prepared statement of Mr. Choquette follows:] 

PREPARED STATEMENT OF JOSEPH L. CHOQUETTE, III, EXTERNAL AFFAIRS MANAGER, VERMONT PETROLEUM ASSOCIATION, DOWNS RACHLIN MARTIN PLLC, MONTPELIER, VT 

Senator Sanders and members of the committee: 

Thank you for the opportunity to provide some perspective on the issues you have 

raised regarding gasoline prices in the greater Burlington area. My name is Joe 

Choquette. I have worked with many of the companies that are spotlighted here for 

more than 25 years, first as the executive director of the Vermont Petroleum Association and more recently as the VPA’s government and public affairs advisor. 

The Vermont Petroleum Association, a division of the Vermont Grocer’s Association, is a trade group that serves the needs of Vermont’s motor fuel distributors. 

In general, these are second and third generation family-owned businesses that 

have operated here for many years. 

It is worth noting that Vermont’s annual gasoline sales of 329 million gallons is 

the lowest in the lower 48 United States and second only to Alaska among all of 

the states. In New England, even tiny Rhode Island beats us, selling 395 million 

gallons of gasoline in 2010. This is a small market served by as many as five terminals located in four states and two countries. It is a complex market with many 

challenges—the distance to refineries, high real estate costs, strict environmental 

regulations and high taxes. 

In Vermont, there are approximately 75 licensed wholesale distributors. These 

companies provide gasoline and diesel fuel under many different contractual arrangements to branded and unbranded gasoline stations. None of these are major 

oil companies. The major oil companies abandoned this market long ago because of 

low volumes and narrow margins. 

We have identified at least ten licensed distributors who actively serve the 

Chittenden County market. The relationship of these distributors to the stores they 

serve varies greatly. They might own the store and operate it with their own employees. They might own the property and equipment and lease the business to an 

independent dealer, or they might sell directly to an independent dealer who owns 

all of his own property and equipment. Some dealers even buy their product directly 

from the terminal and arrange delivery through a common carrier. 

Along with variations in ownership come variations in capital costs. From buying 

land to equipping stations, capital costs can total millions of dollars per location. 

Some dealers make a major investment in real estate and equipment. Some have 

nothing invested. 

Which brings me to the purpose of the hearing. 
13 

First, we recognize that the difference between the wholesale rack price for gasoline at the Burlington terminal and the average retail price in the Burlington area 

during the period you selected was above average both across the country and in 

this area in general. However, the petroleum industry is a volatile industry, and 

such periods are routinely offset by periods when the difference between wholesale 

costs and retail prices is narrow and often negative. This was true during some periods of October through March. 

Second, margins are not profits. From the gross difference between wholesale and 

retail, distributors and dealers have to meet the cost of running their businesses. 

It costs at least $1.5 million to build a convenience store from scratch and an estimated $250,000 to replace three underground petroleum storage tanks and two multiple product dispensers. Credit card fees alone cost about ten cents per gallon. In 

the end, our companies gamble that the highs and the lows will average out and 

that they are able to maintain their equipment, pay their employees a fair wage, 

keep the business running, and make a fair and reasonable profit. 

Third, sales volume varies considerably and low volumes mean slow turnover. The 

original cost of the product stored underground is almost always different from the 

current price at the terminal. This phenomenon adds even more to the complex economics of running a gasoline station. Simply put, these companies have to earn a 

living when the market allows them to do so. 

An analysis by the National Association of Convenience Stores prepared for this 

hearing illustrates this point. NACS estimates that the average cost of running a 

convenience store nationwide is about 17 cents per gallon. The data that you have 

selected for the months of January through March shows extremely narrow, and 

sometimes negative, net margins during the first three months of the year when the 

average cost is applied. Companies need to recover those costs somewhere or close 

their business. 

Further, the margins cited in your report only measure the difference between 

rack and retail, and the costs calculated by NACS apply only to the store or station. 

It fails to consider the cost of running a distribution business. Thus, it makes no 

distinction between two different businesses and the two businesses are being included as one. 

You have questioned whether the Burlington market is competitive, citing a 20 

cent per gallon difference between Burlington and Middlebury at one point. A 

search for prices on the publicly-available www.gasbuddy.com consistently shows at 

least a 17 cent per gallon difference between the low price in the Burlington area 

and the high price in the Burlington area. Last week the difference was 24 cents. 

Smart consumers shop for lower prices and they have many choices in the Burlington area If consumers always bought at the lowest price, all of the prices would 

quickly come down; but consumers also shop for convenience, by brand, or to earn 

brand-related discounts. 

An analysis of the ownership and density of stores in the Chittenden Country 

area performed by NACS reveals a population-to-store density and a diversity of 

store ownership that is more competitive than the national and regional average, 

and not less competitive. Of 105 stores in Chittenden County, 61 appear to be operated by independent dealers and 44 are operated by eight distributors operating 4 

or more stores. Chittenden County has 1,492 people per retail outlet. Across the 

northeast there are 2,877 persons per store and nationally, 2,576. Thus, there are 

more independent stations competing for your business here than elsewhere. 

The companies and businesses I represent, in general, are long-time legacy businesses that are now in the second and third generation of family ownership. They 

have come to supply this area after major oil companies have sold their assets and 

stopped doing business here because of low volumes and shrinking profits. In short, 

we are at the end of the pipeline in the motor fuel industry. These companies are 

the survivors. 

Our distributors and retailers give back to their communities every single day, 

and they demonstrated their social responsibility long before the term became popular. Among the actual causes supported by these local family businesses: 

• C. Douglas Cairns Hockey Arena in South Burlington 

• The Muscular Dystrophy Association 

• The Children’s Hospital 

• The Make a Wish Foundation 

• Vermont National Guard Scholarship Fund and Christmas Fund 

• Vermont Food Bank 

• Ronald MacDonald House 

In the past few weeks the wholesale price of gasoline has increased more than 

20 cents per gallon, yet retail prices have moved very little, especially in the Bur-
14 

lington area. Last week the average price in Chittenden County was below both the 

state and national average, despite paying a 5-6 cent per gallon premium for gasoline delivered by rail to the Burlington terminal. 

Now, as then, there is at least a 17 cent per gallon difference between the high 

price in Burlington and the low price. There is virtually no other product that puts 

its price on three foot signs that are visible on the street, so customers can make 

informed decisions on where to buy their gasoline. 

Thank you for listening, and I will be happy to answer your questions. 

Senator SANDERS. Joe, thank you very much for your testimony. 

Our next panelist is Rob Leuck, who is the vice president and regional manager for Costco Wholesale from Sterling, Virginia. Rob, 

thanks for being with us. 

OPENING STATEMENT OF ROB LEUCK, VICE PRESIDENT AND 

REGIONAL MANAGER, COSTCO WHOLESALE, STERLING, VA 

Mr. LEUCK. Thank you. Good afternoon, Senator Sanders and 

committee members. My name is Rob Leuck, and I am the vice 

president of operations for Costco in the northeastern division, the 

second largest retailer in the United States in terms of sales volume. The written testimony I provided you has more background 

on our company. 

I personally currently oversee 20 locations in the northeast, including the one here in Colchester, Vermont. The Colchester, 

Vermont location has been open since 1993, August 1993. 

Senator SANDERS. If you could speak a little bit closer to the mic. 

Bring that a little bit closer. There you go. 

Mr. LEUCK. The location here in Colchester, Vermont has been 

open since August 25th of 1993. We currently have 130,000 card 

holders, which accounts for 20 percent of the residents of the State 

of Vermont. 

Costco has a very simple business model. The primary goal of our 

operations is to bring goods and services to the market at the lowest possible price. We do this through high volume, no frills. We 

offer value on everything we sell, and we only carry the highest 

quality, which is expected by our members who pay to shop with 

us. 

We offer a suite of products and services, all of which operate 

under the same philosophy, including, but not limited to, photo, optical, and pharmaceutical departments, hearing aids, and a food 

court, and, of course, gasoline, all of which we consider to be part 

of our core services, which brings us to the heart of why we are 

here today, our gasoline operations. 

As previously stated, we consider this one of our core businesses, 

and wherever practical we operate stations at our warehouses. As 

with any product we sell, we sell the highest quality at the lowest 

possible price. An example of what we do is we have put 5 times 

the required additive by the EPA of detergent into our gasoline to 

make sure our members’ engines are running clean at all times. 

The pricing philosophy on gasoline is simple as well. We will not 

be undersold. We will always try to be the lowest price in the market, and I have provided data in my written testimony for the locations which I oversee. 

We understand that some competitors may feel that we use as 

a loss leader, and it is simply not the case. We will not sell below 

cost unless we are lawfully allowed to do, only to meet the competi-
15 

tion, and usually only on a temporary basis. We operate all our stations in a responsible manner. We meet or exceed lawful requirements for environmental concerns and safety concerns. Unlike most 

of the self-service gas stations, we have an attendant available at 

the pumps during all hours of operation. We do this because, as 

previously stated, it is what we do with all our businesses, and our 

members expect it. 

We have been trying for more than 4 years to obtain approval 

for a station in Colchester and have faced opposition from what we 

understand to be parties with competitive interests. We will not be 

deterred, and we will continue to vigorously pursue those approvals. 

In every major market, we face vigorous competitors, both large 

and small. Competition serves the entire community because without competition, markets will charge what the market will bear. 

Based on our experience, we believe that a station in Colchester 

would serve the entire community by lowering the opening price 

point and reducing prices paid for at the gas—at the nearby gas 

stations. In our written testimony, we have provided an example 

of our station affected the market in Maui, Hawaii. 

I would like to conclude by saying that our analysis of pricing in 

the Colchester market, based on data we were able to obtain, 

showed that we would have been an average of 19 cents lower per 

gallon of regular gasoline and 25 cents lower per gallon of premium 

than the market averaged. That is not to mean that if we were 

open tomorrow that we would be that much below the competition. 

As has been our experience, the average market price would lower, 

which is exactly what competition will do in a market. This would 

be to the benefit of all consumers, members and non-members 

alike. 

Thank you. 

[The prepared statement of Mr. Leuck follows:] 

PREPARED STATEMENT OF ROB LEUCK, VICE PRESIDENT AND REGIONAL MANAGER, 

COSTCO WHOLESALE, STERLING, VA 

Good morning, Mr. Chairman and Committee Members. 

My name is Rob Leuck. I am a vice president for Costco Wholesale Corporation, 

the second largest retailer by sales in the United States. I have responsibility for 

20 locations in the northeast United States, including the Costco in Colchester, 

Vermont. I am including with my written testimony some background information 

about Costco wholesale. Our Colchester warehouse currently provides 279 good paying jobs with generous health and other benefits. Over 130,000 Vermont residents 

have a Costco card which accounts for approximately 20% of all Vermont residents. 

Our business model is centered on high volume, no-frills facilities operating with 

low overhead so that we are able to provide tremendous value for our members. 

Wherever it is practical, Costco operates gasoline stations at our Costco warehouses. 

We consider gasoline to be one of our core services. Our philosophy is simple: Our 

members pay to shop with us, and we strive to provide a suite of products that provide great value for that membership fee. Gasoline is one such product. 

While we, of course, will always strive to provide the best possible price, we are 

also committed to providing the highest possible quality on gas. As an example, we 

now offer gasoline with 5 -times the EPA required detergent dose. This assures our 

members that their engines will receive enough detergent to remove deposits from 

intake valves and injectors, so that they can run at peak efficiency. We call that 

‘‘doing the right thing.’’ This detergent program is currently available at over 200 

US Costco sites and will be available at all Costco locations by September of 2013. 

Costco’s policy concerning gasoline pricing is simple: we will not be undersold by 

competitors in our market areas. Because our members pay to shop at Costco, it is 
16 

critical that we show them consistently good value. The chart attached to this document is a snapshot of the value being offered at sites that I manage for Costco. 

We have read that some of our competitors believe we sell gasoline as a ‘‘loss leader.’’ That is simply not the case. Sometimes meeting the competition means that— 

where it is lawful to do so—we sell below our cost, usually on a temporary basis. 

We will not, however, sell below cost unless meeting competition requires us to do 

so and it is legally permitted. In such circumstances, we would only lower prices 

to ‘‘meet’’ the competition and not ‘‘beat’’ it. 

Additionally, we operate all our gas stations in a responsible manner, and implement and maintain environmental and safety measures that meet, and often exceed 

industry and legal requirements. Every business a member encounters in a Costco, 

from optical, to pharmacy to gasoline, is there to provide a great value for our members: that includes great pricing, great quality and great service. 

We have been trying for more than 4 years to obtain approval for Costco gas station in Colchester but we have faced opposition from competitors. We will not be 

deterred, and will continue to try to obtain approval so we can provide this important core service to our Vermont members. 

We face vigorous competition from competitors large and small in nearly every 

Major market in the United States and Canada. Ultimately, competition serves the 

needs of the community—Costco members and nonmembers alike. In the absence 

of our type of competition, markets typically charge what the market will bear. Our 

model is different, in that, as we are able, we seek to maximize sales by providing 

the lowest possible prices on all of the items we sell. Based on our experience 

throughout the United States, we believe Costco gas station at the Colchester site 

would serve the entire community by lowering the opening price point and reducing 

the average price paid for gasoline at all nearby outlets. 

We have included some information about our recent gas station opening in Maui, 

Hawaii, which demonstrates how our entering a market positively influences the 

prices paid for gas in that community, not just at the Costco, but across the island. 

Thank you for your time. 

Senator SANDERS. Rob, thank you very much. 

Our next panelist is Mrs. Gail Horne, and Gail is the owner of 

the Keelers Bay Variety Store in South Hero. Gail, thanks very 

much for being with us. 

OPENING STATEMENT OF GAIL HORNE, OWNER, KEELERS BAY 

VARIETY STORE, SOUTH HERO, VT 

Mrs. HORNE. My husband, Mark, and I have owned and operated 

Keelers Bay Variety in South hero since 1974. We are a family 

owned business with our daughter, Wendy, now taking an active 

role in the management of our business. We have always sold gasoline along with a variety of food and beverages in our store. 

Our customers have supported us since we began nearly—excuse 

me—38 years ago, and we do everything we can to support them 

with fair prices, community donations, good employment opportunities, and a welcome place to see friends and neighbors. We work 

hard to be part of our community and donate back on a daily basis 

as much as we can. 

We support a wide variety of charities from the United Way in 

Grand Isle Food Shelf, to local sports such as the Little League. 

This Wednesday, we are donating 1 percent of our store’s sales 

to Champlain Islander’s Developing Essential Resources, 

C.I.D.E.R., which operates many of our senior programs, including 

Meals on Wheels, on the islands. We are excluding gasoline from 

that 1 percent. 

We are also active members of the Vermont Grocers Association. 

I have served on the board of directors and was chair of the association from 2005 to 2007. The VGA has 180 member stores in 

Chittenden, Franklin, and Grand Isle County. Over half of these 

stores sell gasoline. 
17 

In many respects, I think we are typical of many other independent store keepers. We do not charge our customers an annual 

membership, B, we accept MasterCard, Visa, American Express, 

and probably 10 other cards, which we alone can cost 8 to 10 cents 

per gallon. We also set our own retail price on gas. There are a variety of ways a store like ours can buy and sell gasoline. The option 

we chose may not be the same for the next person. 

When we replaced our undergrounds storage tanks 25 years ago, 

it cost us $35,000. More recently in 2006, we had our gasoline distributor replace the tanks and pumps. The cost 6 years ago had increased to $175,000. I shudder to think what it will be the next 

time. 

Today that cost is much higher, which is why we chose to turn 

over the ownerships of our tanks and pumps to our distributor. Additionally, our contract allows us to pay for the gasoline as it is 

sold and not when it is put into the ground. While it reduces our 

margin, it also reduces our cash needs and market risk at a whole 

market as they change daily. The 16,000 capacity of our tanks represents $56,000 inventory at $3.50 a gallon. 

As such, our margins may be significantly less in a station that 

owns its own equipment and is responsible for all the regulatory 

and capital costs associated with them. Nevertheless, we are an 

independent operator, and we do set our own prices—retail prices. 

A number of factors go into pricing of gasoline every day, including market conditions, expected wholesale—changes in wholesale 

prices, our cost of operations, and competition. Our small and 

somewhat seasonal community of South Hero has 3 gas stations 

within one mile. We keep a close eye on the price everyone charges 

to make sure that we are competitive. Because we are so close to 

Colchester and other areas in Chittenden County, so many options 

are also available to our customers. Most of Grand Isle County 

works in Chittenden County or further. 

Sometimes we make a few cents and sometimes we do not. Last 

week—on Tuesdays we have 5 cents off a gallon, and there was a 

price change that day, so we were actually selling below our wholesale costs for half of the day. Not a good business practice. 

When our supply contract is up for renewal in 2917, we will have 

several options. We can get out of the gasoline business, we could 

change distributors, we could buy direct from a terminal and hire 

a trucker to help us bring the product. That would involve paying 

excise taxes, and investing in our equipment upgrades, and assuming all the various regulatory compliance issues. 

With the contract with the distributor, we have several options. 

We can own the tanks and pumps and pay for gasoline as it is delivered, cover our own costs with credit cards for gasoline or have 

them embedded in our wholesale cost, have the distributor to take 

ownership of the tanks and pumps and assume all the costs and 

compliance with them, which we do now, and other variations. 

According to the survey of the National Association of Convenience Stores, 62 percent of consumers say that price is a primary 

determining for when they buy fuel. Location is primary for 20 percent. Sixty-six percent shop for price by driving around and looking 

at store signage. Forty percent of the customers say they will drive 
18 

5 minutes out of their way to save as much as 3 cents per gallon. 

Seventy-one percent will drive for 5 cents additional difference. 

There is virtually no product that puts its price on large –foot 

signs for all the customers to see and make informed decisions on 

where to buy their gas. As small business owners, we work real 

hard to bring value to our customers every day. 

I am not here to talk about hypothetical and what I would have 

done it the past. I think our customer support is somewhat evidenced in the recognition that we value their business and are 

neighbors in the community. We are fortunate to have had a distributor who has chosen to partner with us for many years, which 

has allowed us to stay in the gas business. 

Thank you. 

[The prepared statement of Mrs. Horne follows:] 

PREPARED STATEMENT OF GAIL HORNE, OWNER, KEELERS BAY VARIETY STORE, SOUTH HERO, VT 

My husband Mark and I have owned and operated the Keelers Bay Variety Store 

in South Hero, VT since 1974. We are a family owned business with our daughter 

Wendy, now taking an active role in the management of the business. We have always sold gasoline along with a wide variety of food and beverages in our store. 

Our customers have supported us since we began nearly 38 years ago and we do 

everything we can to support them with fair prices, community donations, good employment opportunities and a welcome place to see friends and neighbors. We work 

hard to be part of our community and donate back on a daily basis as much as we 

can. We support a wide variety of charities from the United Way and Grand Isle 

Food Shelf to local sports such as our Little League. On Wednesday we are donating 

1% of store sales to Champlain Islanders Developing Essential Resources, which operates many of the senior programs, including Meals on Wheels, on the islands. 

We are also active members of the Vermont Grocers’ Association. I have served 

on its board of directors and was chair of the organization from 2005 to 2007. VGA 

has 180 member stores in the Chittenden, Franklin and Grand Isle counties. Over 

half of these sell gasoline. 

In many respects I think we are typical of many other independent storekeepers. 

We don’t charge our customers an annual membership fee and we accept Visa and 

MasterCard for payment from our customers, which alone can cost 8-10 cents per 

gallon. We also set our own retail price on gasoline. 

There are a variety of ways a store like ours can buy and sell gasoline. The option 

we chose may not be the same for the next person. When we replaced our underground storage tanks 25 years ago it cost us $35,000. 

More recently (2006), we had our gasoline distributor replace the tanks and pumps. 

The cost 6 years ago had increased to an estimated $150,000 or more. I shudder 

to think what it will be the next time. 

Because that cost is much higher it is why we chose to turn over the ownership 

of the tanks and pumps to our distributor. Additionally our contract allows us to 

pay for the gasoline as it is sold not when it is put in the underground tanks. While 

that reduces our margin, it also reduces our cash needs and market risk as wholesale prices change daily. The 16,000 gallon capacity of our tanks represents $56,000 

of inventory at $3.50 per gallon. 

As such our margins may be significantly less that a station that owns its own 

equipment and is responsible for all the regulatory and capital costs associated with 

them. Nonetheless we are an independent operator and we set our own retail prices. 

A number of factors go into the pricing of gasoline every day including market 

conditions, expected changes in wholesale prices, our costs of operation, and competition. Our small and somewhat seasonal community of South Hero, has 3 gas stations. We keep a close eye on the price everyone charges to make sure we are competitive. And because we are close to Colchester and other areas of Chittenden 

County, so many other options are also available to our customers. 

Sometimes we make a few cents, sometimes we don’t. Last week at one point we 

were actually selling below our wholesale cost. Probably not a good business practice. 

When our supply contract is up for renewal in 2017 we have several options: 

• We can get out of the gasoline business 
19 

• We can change distributors • We can buy direct from the terminal and hire a trucker to bring us the product. 

This would involve paying the excise taxes, investing in the equipment upgrades and assume all the various regulatory compliance issues. 

And with the contract with a distributor we have several additional options: 

• Own the tanks and pumps and pay for the gasoline as it is delivered. • Cover our own costs with credit cards for gasoline or have them embedded in 

our wholesale cost • Have the distributor take ownership of the tanks and pumps and assume all 

the costs and compliance issues associated with them. • And more variations thereof 

According to a survey by the National Association of Convenience Stores 

• 63% of customers say that price is the primary determining factor for where 

they buy fuel; location is primary for 20% • 66% shop for price by driving around and looking at a stores’ signage • 40% of customers say they will drive 5 minutes out of their way to save as little 

as 3 cents per gallon; 71% for a 5 cent differential. 

There is virtually no other product that puts its price on large three foot signs 

for all to see so customers can make informed decisions on where to buy their gasoline. As small business owners we work real hard to bring value to our customers 

every day. I am not here today to talk about hypothetical’s and whatI would have 

or wouldn’t have charged in the past. I think our customers support is somewhat 

evidence of their recognition that we value their business and are their neighbors 

in the community. We are fortunate to have had a distributor that has chosen to 

partner with us for many years which has allowed us to stay in the gas business. 

Thank you. 

Senator SANDERS. Gail, thanks very much. 

The issue we are talking about impacts not only Chittenden 

County or Grand Isle County. It also impacts significantly Franklin 

County. Jim Coutts is the director of the Franklin County Senior 

Center in St. Albans. Jim, we very much appreciate your being 

here. 

OPENING STATEMENT OF JAMES COUTTS, DIRECTOR, 

FRANKLIN COUNTY SENIOR CENTER, SAINT ALBANS, VT 

Mr. COUTTS. Thank you, Chairman Sanders, and members of the 

committee, and staff members, and guests. As you said, my name 

is Jim Coutts. I am the executive director of the Franklin County 

Senior Center. We have 570 members. I am one of about 120 senior 

centers in the State of Vermont. 

Our primary purpose is nutrition. We serve meals at the center, 

but more importantly, we run a Meals on Wheels program that has 

continually run through Franklin County Center for 40 years. 

We rely heavily on volunteer drivers. We have no stipend to pay 

drivers to drive. When we see the price of gasoline escalate, as it 

has in the last 2 years, we get very, very concerned. When the 

price hit $4 a gallon a few years ago, we lost drivers. Four dollars 

a gallon seems to be a psychological point at which part-time drivers will not volunteer their time. 

If the volunteer driver leaves our area and still wants to volunteer, he will go to some place where he does not have to drive. We 

will not see that volunteer driver come back again because citizens 

of Vermont are very, very active in civics, and they can always find 

someplace to volunteer their time. 

Recently, we have seen gas prices that have been extremely high, 

and some of our members that work in Franklin County or have 

relatives that work in Franklin County tell stories about going 
20 

down to Burlington and buying their gas, especially the one nearest 

the Costco station. That seems to be that strip between Costco and 

Wisniewski, where prices are sometimes 15 or 18 cents a gallon or 

more difference. 

During the summer, we do not worry so much about the pricing 

because right now we are not—the drivers that we have, which are 

80-year-old or 70–year-old members, they do not have the high 

electric and gas prices for their furnaces and things like that. 

When that happens and we start seeing cold weather come around 

again, they are going to think twice about the price that they can 

afford to pay to deliver meals free. They are going to have higher 

prices for everything. If the price of gas goes up, it seems reasonable to think that the price of oil will follow, as it has in the past, 

and the LIHEAP program and the other programs that are in place 

to help people heat their houses are going to feel the pinch of that. 

There is not an awful lot that we can do about the gas prices individually. We have to have to gas. We have to deliver. If we were 

to, as a center, pay people to deliver the meals that we do, which 

is 17,000 meals a year, it would cost on a stipend of 50 cents a gallon approximately $9,000. That is just not a tenable thing for our 

center or any other centers. 

So what we can do? We can do a couple of things. Obviously, we 

could go to 3 days a week delivery and have cold meals on those 

other days, which sometimes have said that seems to be a good 

choice. Meals on Wheels is not a program that only delivers meals. 

Meals on Wheels relies on a safety check for the people that are 

out there. In many, many instances, the people that are delivering 

Meals on Wheels are the only contact that seniors have either that 

day, that week, or sometimes even that month. That safety check 

is vital, and it is done by every Meals on Wheels program. If we 

went to 3 days a week delivery, it would suffer. Two weeks ago, gas prices in Swanton were $3.64. I go south, 

and gas prices were 22 cents different. I have lived in Swanton for 

35 years. It used to be that the pricing in Swanton and St. Albans 

gas was relatively close to the prices in the rest of the State. It is 

not that way any longer. When I travel to relatives in Berry, 

Vermont, I can pay as little as $2.40 a—excuse me, $3.40 a gallon 

for that same gas. 

Thank you for the opportunity to testify today on behalf of the 

seniors, and I hope that we have shed some light on what it means 

when prices go up, what happens to the senior citizens in this 

State. As I look out in the audience, there are many senior citizens 

here. I thank you. 

[The prepared statement of Mr. Coutts follows:] 

PREPARED STATEMENT OF JAMES COUTTS, DIRECTOR, FRANKLIN COUNTY SENIOR

CENTER, SAINT ALBANS, VT 

My name is Jim Coutts and I live in Swanton Vermont. I welcome the opportunity 

to testify to the impact that rising gas prices have on the seniors in Franklin County Vermont. I am the Executive Director of a 570 member Senior Center—Franklin 

County Senior Center, 75 Messenger Street, St Albans, Vermont 05488. 

The Center has operated a meal site at this location for 40 years and is one of 

the longest running programs in the State. We currently deliver 17,000 meals to 

home-bound seniors through nutrition programs funded by the Older American Act. 

We deliver meals five days a week to an average of 70 clients a day. To accomplish 

the delivery we rely heavily on our members, many have been delivering for years 
21 

and some are husband and wives each delivering a route on alternate days.. A typical route covers 25 miles from start to finish and many of our members drive cars 

averaging 12-15 miles to the gallon in city driving. This requires 2 gallons of gas 

per delivery or $7.00/day. Most of our drivers are on fixed income of less than 

$15,000/year as they are either a surviving spouse or a retired from a low-paying 

occupation. 

While recent gas prices have eased a little this summer they are still above the 

national average and 15-20 cents higher than some other area of the Vermont. 

When prices reached the $4.00 mark this spring several drivers told me that they 

could no longer afford the gas and we lost two drivers. $4.00 appears to be a psychological barrier that resonates with many drivers. We experienced the same situation 

a few years ago when gas reached the $4.00 mark. During the summer our drivers 

are not faced with high heating and electric bills, so they have a little extra money 

for gas and can afford to volunteer. I am concerned that if estimates of higher gas 

prices this fall and winter come true we will face a critical shortage of drivers. Past 

history with volunteer drivers is that if they don’t deliver meals they will find some 

other volunteer position and we will not get them to return. 

One contingency plan would be to cut deliveries to three days/week and add cold 

meals for the alternate days. While this seems plausible it eliminates one essential 

component of the Meals on Wheels program—The Safety Check. For many of our 

home-bound the only person they see daily is the meals on wheels driver. A bond 

delivers between the drivers and the clients and our drivers are trained to assess 

the status of the client and to report any abnormalities to the emergency contact 

or case worker. 

Our six routes a day average 150 miles a day or 39,000 miles a year. If we were paying a mileage stipend this would amount to $19,890/year. Mileage reimbursement is not a viable option for most programs and certainly not for Franklin County 

Senior Center. On behalf of Franklin County and the numerous other Meals on 

Wheels providers I urge you to complete a comprehensive study of the impact of 

high gas prices on the health and welfare of the senior citizens of Vermont. A week ago prices in Swanton VT were $3.64. I drove 28 miles south and gas prices were $2.42-22 cents difference. I hope this hearing sheds some light on the 

disparity in pricing. Thank you for this opportunity to comment on a matter of extreme importance in our efforts to serve the home-bound Vermonters meals . . . 

Senator SANDERS. Jim, thanks very much. 

What I want to do is just start it off with some questions. Joe, 

if it is OK with you, I will begin with you. 

Jim Coutts made the point about traveling around the State and 

seeing the differential in prices. Let me tell you just a personal experience. I was in a parade in Brandon on July 7th, so I traveled 

from Burlington down Route 7 to Brandon. 

As we went along the road, I was just taking a look at gas prices 

on Route 7. What I noticed was on that day in Middlebury, we had 

a gas station that was charging $3.35 a gallon, which was owned 

by Maplefields. Later on in the day after I came back, I went up 

to Burlington. It was in Burlington. That same Maplefields company was charging $3.59 a gallon. That was on July 7th. All right, 

that is a 24 cent differential in prices. 

Explain to us why one company owning two gas stations about 

35 miles apart, one in Burlington, one in Middlebury, would have 

a 24 cent differential in prices. Does this have something to do with 

the fact that in Middlebury, there is simply more price competition 

than there is in Burlington? 

Mr. CHOQUETTE. I want to go back and point out that I also 

pointed out the difference in the Burlington area was 17 cents a 

gallon, so there is variation even here in Burlington. 

Each of these markets behaves as an individual market. You are 

correct in saying that. The Burlington market is one, and the 

Middlebury market is one, and the Rutland market is one. For 

many years, it has been known certainly that Rutland, for whatever reason, all the players say it is a very competitive market. The 
22 

same is apparently also true in Middlebury. I does not have the 

reputation. 

But each of these markets is organic. It develops out of the individual activities of each of the players in the market. Apparently, 

you know, the players in this market have not been as aggressive 

as they have been in Burlington—I am sorry, Middlebury and Rutland. 

Senator SANDERS. Joe, listening to what you said—and I agree 

with the thrust of what you said. But when you say that for whatever reason prices, say, in Rutland have been lower, is the whatever reason not that we do not see a lot of competition? I think you 

are basically telling us that we have not seen the kind of aggressive competition here in the Burlington area that we have seen in 

Middlebury or in Rutland. 

Mr. CHOQUETTE. Senator, I am pointing out that today you can 

go to gasbudy.com, look up the prices in the Burlington area, and 

find a 24 cent difference between the high price and the low price. 

If everybody went to the low price, all the prices would come down 

almost immediately, but they do not. They shop for convenience. 

They go to Gail’s store because they know Gail, and they always 

shop there. They have a Mobil credit card. They participate in a 

program where they get a discount for shopping at a supermarket. 

So consumer behavior is a part of the market, and it is just as 

much of a factor as some of the others that are cited. 

Senator SANDERS. Joe, I mean, be that as it may, you did not answer my question. Let me just quote you, what you said to a weekly newspaper, Seven Days. This is what you said, ‘‘There does seem 

to be a phenomenon that the Burlington area does go down in 

prices more reluctantly than other parts of the State.’’ That is you, 

Joe. 

I do not know if we are beating around the bush or not. I think 

you basically said what I am saying, is that in other parts of the 

State you have more competition than you do in the Burlington 

area, which is why in—I understand. We all understand. Different 

prices in different stations in Middlebury, in Burlington, in every 

place in America. 

But on average is what I am talking about. On average, prices 

up here are much higher than they are elsewhere. Does this not 

have everything to do with the fact that there is not vigorous price 

competition here? 

Mr. CHOQUETTE. We think there is pretty vigorous price competition. I cited the NACS data that suggests 61 independent dealers 

here in the Burlington area. I am sorry that does not apply to the 

information that OPIS brought, but I did not have to go see whether we used reformulated gasoline or not either. 

I mean, the fact is that 61 dealers in this area set their own 

price at a minimum. 

Senator SANDERS. What should I conclude about your quote to 

Seven Days? Were you misquoted, or is that, in fact—— 

Mr. CHOQUETTE. I picked up on the information that you produced to say that that is what that suggests. But your information 

also suggests to me that at times during October through March, 

margins were extremely tight and possibly negative even in the 

Burlington area. 
23 

Senator SANDERS. We will deal with that issue later. We have 

some charts to deal with. Anybody else—we will open it up for 

questions or comments. Mr. Brockwell—— 

Mr. BROCKWELL. I would like to just comment on the exchange 

you just had. The gentleman from Costco indicated that his presence in the market—and I understand he did not say it would automatically bring competition down 19 cents, but over time it was 

probably a 19 cents advantage. 

In New Jersey, one of the things I asked our retail group to do, 

and I had a limited amount of time to do it. I am sure I could do 

it on a broader basis. But I asked our retail group to give me some 

independent data that would indicate to me what having a low cost 

competitor in a market—what kind of impact that had. I did not 

know, by the way, about the 19 cents Costco information. I think 

that was in a letter from Costco to the Senator I was not privy to. 

In New Jersey, we have a low cost provider called Wawa. I do 

not know if any of you have come through New Jersey and seen 

Wawa, but Wawa is a huge presence. Wawa, by the way, is the 

Lenape Indian word for Canadian goose. They are a low cost provider. 

I did an analysis or my retail group did an analysis between 

North Jersey prices that do not have low cost providers, like the 

Burlington Vermont market, and Southern New Jersey, Ocean 

County being where I live and where Wawa has now a 45 percent 

market share. It shows consistently a 16 cent a gallon to a 24 cent 

a gallon difference in price. In other words, the competitive lower 

price Wawa market—Wawa had that kind of impact. 

The interesting thing to me was the 24 cents occurred in downward markets. In markets where prices are dropping, Wawa seems 

also to be a price leader on the downsize so that the 24 cents 

showed up in declining markets, but on average it was at least 16 

cents. So a low cost provider—there is no—I mean, we can debate 

it all we want, but statistics show that having a low cost provider 

in the marketplace changes the competition and changes the pricing model. 

Senator SANDERS. All right. Let me just continue my discussion 

with Joe, and then I want to other people to jump in. 

Joe, this is a chart that is entitled ‘‘gross profit margins for retail 

unleaded gasoline’’ comparing northwest Vermont to the national 

average. It starts with January 2009 and goes to July 2012. 

As you have indicated, there have been times where right here 

in October 2011 and April 2012, where the gross profit margin here 

in the Burlington area was lower than the national average. But 

the overwhelming majority of times, the profit margin has been 

higher, and in June it was off the charts. Can you explain why that 

might be? 

Mr. CHOQUETTE. I am not familiar with the data, Senator, that 

you are presenting here. But I will say as I said in my testimony, 

this is a low volume market. To the extent that Wawa or anybody 

else who offers product in any market, you know, makes a profit— 

volumes in New Jersey are higher than they are in Vermont. If you 

are Gail at her variety store, you know, she is not going to sell a 

million gallons of gasoline a month like Wawa is in southern New 

Jersey. 
24 

Senator SANDERS. But I am not talking about—— 

Mr. CHOQUETTE. In order to pay her fixed costs, she is going to 

have to get a lower—a higher margin over time, and that is your 

answer. 

Senator SANDERS. But I am not talking about Wawa, and I am 

not even talking about Gail in South Hero. This is, as you know, 

the largest city in the State of Vermont. This is, a lot larger than 

Middlebury, a lot larger than Rutland. So I am still not clear from 

you why with all of these gas stations we do not have more competition driving prices down. 

What this indicates, you made the point that there have been 

times when the profit margins in the Burlington area were lower 

than the national average. That is here. We see them here and 

here. But you have not explained at least to me why we have seen 

an off the chart profit margin, which, in fact, was one of the highest in the entire United States of America. 

Now my second question is, you correctly made the point that 

very recently what we have seen—and this is what this this chart 

is about. What we have seen is that while prices nationally have 

gone up, actually prices in the Burlington area have gone down. 

Wholesale prices have gone up. Prices in the Burlington market 

have gone down. 

Do you think maybe this has something to do with the kind of 

public discussion that is taking place in the State of Vermont on 

this very issue in the last couple of weeks, or do you think it is just 

coincidental? 

Mr. CHOQUETTE. Senator, there are a lot of factors that go into— 

first of all, and I would reiterate, that margins are not profits. So 

it is inaccurate to call this a chart of profits. Having said that—— 

Unidentified Speaker: Can I just—— 

Senator SANDERS. No, let him finish. Joe? Hold it, Joe has the 

mic. My apologies. 

Mr. CHOQUETTE. Sorry. I lost my train of thought. What was the 

question again? 

Senator SANDERS. I am sorry. You know, I just hoped that you 

could give us a good—the answer was that recently, as you have 

indicated, prices in the Burlington area have been much more competitive with the rest of the country and in the State of Vermont. 

I think you made that point. 

I was asking you whether you think it is just kind of a coincidence that all of this occurred at a time when there has been a lot 

of public discussion when I asked for an FTC investigation. Is that 

a coincidence? 

Mr. CHOQUETTE. We can neither prove nor disprove that, but you 

have every right to make that assertion, Senator. 

Senator SANDERS. OK. Other discussion from anybody, feel free. 

Gail, anybody else to jump in. 

Mr. BROCKWELL. I would like to just defend the data. That is our 

data. I think it is a bit disingenuous to hide behind the debate by 

calling it not a profit margin. Whatever you want to call it, it is 

the difference between a wholesale price that a distributor pays for 

a product and retail price that he sells that product at, less transportation, less taxes, less some other costs. 
25 

So the data shows that retail operators in Greater Burlington 

have a wider margin to do whatever they want to do with, operate 

their business, if you do not want to call it a profit or whatever 

they do, whereas other areas have a smaller margin. I think the 

Senator is trying to ask someone, anybody, to justify that difference. So I guess how would you justify that difference, whether 

you call it a regular margin—— 

Senator SANDERS. Let me ask the questions. All right, I will 

ask—I mean, I think I did ask you—— 

Mr. BROCKWELL. Yes, you have. 

Senator SANDERS. So I will ask the questions of—any other—of 

course, Jim? 

Mr. COUTTS. I was interested in the fact that in the Burlington 

area, there is a 17 cent a gallon difference, or 19 cents, whatever 

it happens to be, between the highest and lowest. We have 17 stations in Franklin County, St. Albans, and the Swanton area. There 

was a one cent difference Friday in all of those stations. Some of 

them are owned by different people. Some of them are owned by 

distributors. 

It used to be years ago, and some of you St. Albans might remember a place that was called Lester’s. He was an independent, 

and when he sold gas, he sold it at about 3 to 5 cents below what 

the local stores did. Very quickly, all the other gas stations followed 

suit. 

There was another station, A. Brown, similar situation. A. Brown 

always sold the lowest—and I see some heads nodding, so they 

know what I am talking about. That station is no longer A. Brown. 

It belongs to one of the distributors. A. Brown’s price now is the 

lowest by one cent. 

Senator SANDERS. Joe, I am going to put you on the hot seat 

again. Nothing personal here, just the other guy to defend that. 

Mr. CHOQUETTE. All right. I mean, there has—— 

Senator SANDERS. Jim says, I mean, I am not aware of that, Jim. 

You have checked the gas stations. 

Mr. COUTTS. I have checked that, and there are people from St. 

Albans, I think, that could back that up. 

Senator SANDERS. All right. You tell me, I mean, just for the average person, how many do you think you have in competition, 17 

stations? 

Mr. CHOQUETTE. Seventeen stations in the St. Albans area. 

Senator SANDERS. One cent differential. Does that sound like a 

vigorous competitor situation? 

Mr. CHOQUETTE. I have not—you know, I do not have any information on the St. Albans market. I am sorry, I have not been up 

there. 

Senator SANDERS. OK. Let me go to Mr. Brockwell and ask him 

a question. According to your firm, the Burlington metro area, 

which includes Chittenden, Franklin, and Grand Isle Counties, was 

the most profitable market to sell gasoline in the northeast earlier 

this summer, and is consistently among the most profitable markets in the country to sell gasoline. Do you have an explanation as 

to why that might be the case? 

Mr. BROCKWELL. I think, Senator, I indicated in my initial statement that I went through what I would consider objective criteria 
26 

to try to offer a reasonable explanation. At the end of the day, ladies and gentlemen, these retail stations and these distributors are 

my customers, so I am not here to condemn them or make them 

look bad, believe me. I was asked to evaluate a market condition 

that was in the Senator’s eyes, it looked like a market distortion. 

I have no reasonable explanation. I do not know why Burlington 

stations are able to price. Maybe they have reached a pricing point 

that the consumer is comfortable with, and the consumer pays that 

price, and that is what they pay. I think I was quoted because I 

was taken to task by one of the distributors as saying, I guess they 

can charge whatever they want to charge in Burlington because 

that looks like what they are doing. I am open, Senator, to anybody 

offering me an explanation. 

Look, I have not been doing this for 35 years and not learned 

something. I cannot explain this. I cannot explain. You are the one 

that pointed it out, and I know there is a bit of a debate going on 

between you two about the competitive nature of the market. But 

I certainly think competition ought to be looked at, and competition 

seems to be a factor. Places that have low-cost providers are consistently cheaper than places that do not. I do not know that there 

is a Stuart’s, or Sheetz, or a Wawa, or a Giant, that is a low cost 

provider. 

But again, is that the answer? I do not know. But it is certainly 

a reasonable explanation in the absence of any other data that I 

can provide. 

Senator SANDERS. Let me go to Mr. Leuck and Costco and just 

ask you a question, if I might, sir. On July 16th, Costco sent me 

a letter, and this is what it said. ‘‘Since 2007, Costco has been seeking land use permits and approvals to build a gasoline filling station at our current store in Colchester, Vermont. We have obtained 

several approvals for our proposed gas station in Colchester, but 

each approval has been appealed by, among others, gas station 

owners in northern Vermont. We can discern no legitimate reason 

for these appeals and believe that they are really an attempt to use 

the land use process to stifle competition for gas sales. If we had 

been selling gas at our Colchester location, our prices on average 

would have been approximately 19 cents a gallon lower than the 

average price in the Colchester area for regular gas.’’ 

That was in the letter that Costco sent to me. Could you elaborate on that, please? 

Mr. LEUCK. That was determined by data supplied to us, I believe, by OPIS, and how we would evaluate our pricing if we were 

selling gasoline and obtaining gasoline from our wholesale sources. 

Senator SANDERS. Do you want to say anything about the nature 

of the opposition to your getting a permit? 

Mr. LEUCK. No. I think we are going to go through the appeal 

process and let the authorities make the proper decisions. We feel 

that we have the right to sell gasoline, and we will continue 

through that appeal process. 

Senator SANDERS. OK. Let me ask you Gail a question, if I 

might. I mean, Gail, the bottom line that I think you suggested to 

us is you do not make a heck of a lot of money selling gas. 

Mrs. HORNE. No. 
27 

Senator SANDERS. Let me ask you this. Could you tell us who 

your distributor is? 

Mrs. HORNE. Champlain Oil. 

Senator SANDERS. Champlain Oil. Are there any restrictions on 

the price that you can charge? 

Mrs. HORNE. No. 

Senator SANDERS. OK. So they sell to you, and you can charge 

whatever you want, high or low. OK. Essentially, you are looking 

at your competition, other people in South Hero, and that is how 

you determined. 

All right. Is there anything else you wanted to add to this discussion, Gail, that you have not said? 

Mrs. HORNE. No, I think I am good. 

Senator SANDERS. OK, good. OK. I do not have any other profound questions. Joe, is there anything else you wanted to add? I 

do not want to—— 

Mr. CHOQUETTE. No. 

Senator SANDERS. OK. Anything else anyone wanted to add? 

All right. I think this has been—I appreciate—Joe, and I did not 

mean to make your life miserable here, but you are the designated 

representative, right? 

Mr. CHOQUETTE. Designated hitter anyway. 

Senator SANDERS. That is what they pay you to do, right? OK. 

So I just want to thank the panelists for being here, and call this 

hearing to a close. Thank you. 

[Whereupon, at 3:15 p.m., the hearing was adjourned.] 

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