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HOT FUELS: BIG OIL’S DOUBLE STANDARD FOR

MEASURING GASOLINE

HEARING

BEFORE THE

SUBCOMMITTEE ON DOMESTIC POLICY

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JUNE 8, 2007

Serial No. 110–195

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.oversight.house.gov

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

HENRY A. WAXMAN, California, Chairman

TOM LANTOS, California

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

BRIAN HIGGINS, New York

JOHN A. YARMUTH, Kentucky

BRUCE L. BRALEY, Iowa

ELEANOR HOLMES NORTON, District of

Columbia

BETTY MCCOLLUM, Minnesota

JIM COOPER, Tennessee

CHRIS VAN HOLLEN, Maryland

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

JOHN P. SARBANES, Maryland

PETER WELCH, Vermont

TOM DAVIS, Virginia

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

VIRGINIA FOXX, North Carolina

BRIAN P. BILBRAY, California

BILL SALI, Idaho

JIM JORDAN, Ohio

PHIL SCHILIRO, Chief of Staff

PHIL BARNETT, Staff Director

EARLEY GREEN, Chief Clerk

DAVID MARIN, Minority Staff Director

SUBCOMMITTEE ON DOMESTIC POLICY

DENNIS J. KUCINICH, Ohio, Chairman

TOM LANTOS, California

ELIJAH E. CUMMINGS, Maryland

DIANE E. WATSON, California

CHRISTOPHER S. MURPHY, Connecticut

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

BRIAN HIGGINS, New York

BRUCE L. BRALEY, Iowa

DARRELL E. ISSA, California

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

CHRIS CANNON, Utah

BRIAN P. BILBRAY, California

JARON R. BOURKE, Staff Director

(III)

C O N T E N T S

Page

Hearing held on June 8, 2007 ................................................................................. 1

Statement of:

Columbus, R. Timothy, general counsel, National Association of Convenience Stores, and general counsel, Independent Gasoline Marketers

of America ...................................................................................................... 102

Suiter, Richard, Weights and Measures Coordinator, National Institute

of Technology and Standards; Michael Cleary, chairman, National Conference on Weights and Measures; Martin Gafinowitz, CEO, Gilbarco

Veeder-Root; and John Seibert, owner-operator Independent Truck

Drivers Association ....................................................................................... 22

Cleary, Michael .......................................................................................... 28

Gafinowitz, Martin .................................................................................... 42

Seibert, John .............................................................................................. 45

Suiter, Richard .......................................................................................... 22

Letters, statements, etc., submitted for the record by:

Cleary, Michael, chairman, National Conference on Weights and Measures, prepared statement of ......................................................................... 31

Columbus, R. Timothy, general counsel, National Association of Convenience Stores, and general counsel, Independent Gasoline Marketers

of America, prepared statement of .............................................................. 106

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 13

Davis, Hon. Danny K., a Representative in Congress from the State

of Illinois, prepared statement of ................................................................ 9

Gafinowitz, Martin, CEO, Gilbarco Veeder-Root:

Information concerning average temperature ......................................... 96

Prepared statement of ............................................................................... 43

Kucinich, Hon. Dennis J., a Representative in Congress from the State

of Ohio:

Letter dated May 30, 2007 ....................................................................... 2

Prepared statement of ...................................................................................... 6

Seibert, John, owner-operator Independent Truck Drivers Association,

prepared statement of ................................................................................... 47

Suiter, Richard, Weights and Measures Coordinator, National Institute

of Technology and Standards:

Information concerning temperature compensation ............................... 68

Prepared statement of ............................................................................... 24

Watson, Hon. Diane E., a Representative in Congress from the State

of California ................................................................................................... 17

(1)

HOT FUELS: BIG OIL’S DOUBLE STANDARD

FOR MEASURING GASOLINE

FRIDAY, JUNE 8, 2007

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON DOMESTIC POLICY,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 9 a.m., in room

2154, Rayburn House Office Building, Hon. Dennis J. Kucinich

(chairman of the subcommittee) presiding.

Present: Representatives Kucinich, Cummings, Watson, and

Davis of Illinois.

Staff present: Jaron R. Bourke, staff director; Jean Gosa, clerk;

Auke Mahar-Piersma, legislative director; and Natalie Laber, press

secretary, Office of Congressman Kucinich.

Mr. KUCINICH. The committee will come to order. This is a meeting of the Domestic Policy Subcommittee of the Oversight and Government Reform Committee. Good morning. I am Congressman

Dennis Kucinich, chairman of the committee. We are joined this

morning by Danny Davis, a Congressman from Illinois, and by

Congressman Cummings of Maryland.

The title of today’s hearing is, ‘‘Hot Fuels: Big Oil’s Double

Standard For Measuring Gasoline.’’ This morning we are going to

hear from two panels of witnesses. I’ll be introducing them shortly.

I would like to say that first of all, without objection, the chairman and the ranking minority member will have time to make

opening statements, followed by opening statements of other Members not to exceed 3 minutes. Without objection, Members and witnesses may have 5 legislative days to submit written statements or

extraneous materials for the record.

Now, in connection with that, I have a statement from the Partnership for Uniform Marketing Practices [PUMP] Coalition and

without objection this statement will be entered into the record.

I also have a letter from Bart Gordon who is the chairman of the

Committee on Science and Technology of the U.S. House. It is a

copy of a letter that he sent to the National Academy of Sciences.

Without objection, that correspondence will also be put in the

record.

[The information referred to follows:]

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Mr. KUCINICH. I want to welcome the witnesses and the committee very much appreciates your presence here. I want to begin by

saying that everyone knows that gasoline prices rise during the

summer. Everyone also knows that his or her gas mileage suffers

during the summer. But it is a little-known industry secret that

the amount of gasoline, when you put it in your tank, when you

fill up in the summer, is less than the amount in the winter in

terms of weight and energy content. Scientists call this the thermal

expansion of gasoline.

And the oil industry has known for 100 years that gasoline expands with temperature. As it warms, gasoline expands by volume

but not by weight or energy content. Therefore, a gallon of gasoline

at 90 degrees weighs less and has less energy content than a gallon

at 60 degrees. That is part of the reason why gas mileage suffers

in the summer.

Now, since the 1920’s, the oil industry has taken temperature

into account for wholesale transaction. And they use a 60-degree

Fahrenheit standard when measuring gasoline at wholesale. In

other words, when the sale of gasoline is between two members of

the oil industry, they adjust for temperature, no matter what the

actual temperature of the gasoline. Therefore, they make sure that

the same amount of gasoline by weight and energy content is

transacted. They standardize wholesale transactions. They remove

the variable of temperature from their sales to each other.

But the oil industry does not adjust for temperature in retail

sales to consumers. When the temperatures of gasoline fall below

the industry standard, as they do in many States in the winter,

gasoline contracts and the weight of a gallon rises. But when temperatures rise above the industry standard, as they do in all States

during the summer and in many States during most of the year,

consumers pay what we call a Hot Fuel Premium when gasoline

prices exceed or are sold at above 60 degrees.

Existing technology can correct for temperature at the retail

level. That technology is known as automatic temperature compensation [ATC]. One of our witnesses today is the largest manufacturer of automatic temperature compensation devices in the

world. The oil industry is not known for lacking business sense. In

Canada the oil industry moved quickly to adopt automated temperature compensation at the retail pump. We will be hearing testimony today that Canadian gasoline stations are almost universally

equipped with temperature compensating technology.

But in the United States, where, of course, temperatures are

often considerably warmer than they are in Canada and they are

warmer than the industry standard of 60 degrees, the oil industry

has resisted equipping their gas stations with temperature compensating technology. Even after the State of California approved

that automatic temperature compensation for use and sale in the

State, no oil company purchased it. In fact, they resist even talking

about the subject.

We invited ExxonMobil and Shell to testify today because they

have large commercial presences in both Canada and the United

States. And we hoped they could explain why they decided to do

one thing in Canada and another thing in the United States. Unfortunately, they refused to appear.

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I just want to go over this again. These companies do business

in both countries. They have one standard in Canada, where they

want to make sure they are not going to lose money if the temperature drops below 60 degrees. So they have automatic temperature

control compensation so they can sell gasoline at a constant volume

without losing money. And in the United States, a whole different

standard. Temperatures are higher, they rise, people end up in this

country paying a lot of money for gas they are not getting.

So in a way it is understandable that ExxonMobil and Shell

wouldn’t show up in front of a committee of the U.S. Congress to

explain. The majority staff of the subcommittee conducted a study

of the hot fuel premium American consumers were likely to pay

during the coming summer season. Using actual gasoline temperatures by month and by State and forecast prices for the summer,

the staff calculated that gasoline retailers will sell over 500 million

gallons of gasoline that are in effect created for free by thermal expansion. And consumers will pay over $1.5 billion for those heatexpanded gallons, and they will be getting less energy for it. People

are paying for gasoline they are not getting.

Now, this is Big Oil’s double standard. When they sell gasoline

to each other it is temperature-adjusted so they are not cheating

each other. But at retail, the oil companies oppose temperature

compensation in this country. And although they oppose temperature compensation for retail sales in the United States, they universally use temperature compensation at retail in Canada.

This summer this double standard will be worth $1.5 billion to

the oil industry. Every American consumer is paying for this gasoline they are not getting. And it could be costing people, depending

on how much they are filling up their tank, it could be costing each

American motorist between 2 cents and eight cents per gallon.

Now, think of how American consumers are going to respond to

this when they realize they are already paying incredible prices for

gasoline. And on top of that, they are paying for gas they are not

getting. Understandably, then, there is much riding on the National Conference on Weights and Measures which will, this July,

decide whether or not to encourage the use of the temperature compensation devices at the retail level.

We will hear today from their chairman about their process,

pressures and prospects. The bottom line we hope to answer today

is not so much whether consumers may be overpaying for gasoline—we think there are some broadly accepted opinions on that—

but the more basic question of what is the fair method of selling

gasoline.

There is a saying in America, ‘‘What’s fair is fair.’’ Well, is it fair

that the oil industry compensates for temperature at wholesale

transactions, or is it fair when the industry sells uncompensated

gallons at retail? And what is the fairness in the oil industry treating itself one way and consumers the other; having one standard

in Canada and another in the United States, causing American motorists to have to pay a premium for hot fuel?

These are the questions we are probing today.

[The prepared statement of Hon. Dennis J. Kucinich follows:]

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Mr. KUCINICH. And at this point, I want to recognize the gentleman from Illinois, Mr. Davis.

Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Chairman.

And let me thank you for holding today’s hearing aimed to better

understand how the petroleum industry in the United States addresses hot fuels. Today we find gas prices closing in on $4 per gallon. People all over the country are struggling to cope with increasing transportation costs and many are running out of options.

While it is important that we as an American community seek

new and creative ways to fuel our country, we must still attempt

to solve the problem of exorbitant gas and oil prices. In the first

3 months of the year, gasoline imports to the United States fell 12

percent compared to the same period last year. Energy information

agency data from May shows that gasoline demand from late April

and early May rose 2.3 percent from the same period last year. And

regular gasoline nationally averaged $2.97 a gallon, about $0.09

lower than the highest price ever.

Higher demand, lower input, and higher prices all lead to the

very scary realization that oil prices will continue to rise. In my

own district my constituents are dealing with the possibility of increased fare hikes for public transportation partly because of higher fuel costs. Each and every one of us is dealing with higher fuel

costs and it is imperative that we strive to find a solution that

works.

I am reminded of an incident that happened with my father and

I. My father died not too long ago. He was 92-years old. And he

grew up in an era when people were very proud. I mean they were

as proud as they could possibly be. And he traveled around with

me a great deal on the weekends when I was home. I stopped to

get some gasoline 1 day and he jumps out of the car. And I said,

well, what are you doing? He said, here, let me pay for it. I said

‘‘No that is all right. I am a Member of Congress, I can certainly

pay for gasoline.’’ And the pump started going $10, $20, $30, $40.

It gets up to about $50 and he said, ‘‘Yeah, I guess you better go

ahead and pay for it.’’

So I want to thank all of the speakers for coming today to help

further inform us of the impact that consumers face regarding the

effect that thermal expansion of gasoline has on the affected price

of gasoline at the retail pump. I thank all of you gentlemen for

coming to share with us this morning.

Again, Mr. Chairman, I thank you for holding this hearing and

yield back the balance of my time.

Mr. KUCINICH. I thank the gentleman.

[The prepared statement of Hon. Danny K. Davis follows:]

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Mr. KUCINICH. The Chair recognizes Mr. Cummings from Maryland.

Mr. CUMMINGS. Mr. Chairman, I thank you very much for holding this hearing. It is vitally important. Most Americans these days

are concerned with the extremely high price of gas. The average

national price at the pump is currently $3.13 per gallon, and that

may have changed within the hour, I don’t know. The average price

in Baltimore City, which I represent, is $3.04. We are a blue collar

town, and our people have great difficulty. Many of them are

locked into their income and to have to pay the kind of money that

they are paying; it literally affects almost every single thing they

do.

There is indication that the costs will go up over the summer as

demand rises and supplies go down. Just this Wednesday the government announced that refinery utilization fell 1.5 percent to 89.6

percent of capacity.

Mr. Chairman, the American people rely on gas to fuel their cars

so that they can get to work and get their children to school and

visit loved ones. They simply can’t afford the rising costs of filling

up their tank. This is why this hearing is so very very important.

This little-known practice by the petroleum industry has been robbing American consumers for decades.

Mr. Chairman, I just read the letter from the Partnership of Uniform Marketing Practices [PUMP] Coalition, and as I read this letter I got angrier and angrier because basically what they say is,

slow the process down, suspend everything, we have to study this

and we are going to study this some more, The National Academy

of Sciences is studying it, just hold up.

I have often said that true leadership has to have a sense of urgency, because people are affected every single day by these gas

prices. If this practice is in any way causing people to pay more at

the pump, if it is causing them to pay a dime, let’s say a penny

more at the pump than they should be, we need to look at it and

we need to address it in an urgent fashion.

Finally, let me say this, Mr. Chairman. Sometimes as I have

watched, and having been here for the 11 years I have been here

in Congress, one of the things that I have noticed—and I have said

this to you before—is that a lot of times industries rely on us to

hold a hearing every 2 or 3 years. So therefore it becomes a big

issue. It is reported in the press, and so they say wait, wait, wait,

and we do wait. By that time there are a new set of players, there’s

a new chairman, and the issue sort of just drifts away. But in the

meantime, families have suffered, people have been literally—

money has been literally taken out of their pocketbooks.

And I am just begging you, Mr. Chairman, to stay on top of this

issue. I know you will, and maybe we do need to—maybe some of

these studies are—we need to look at them? But we need to have

some date certain when these studies are complete so that we can

bring folks back and say, OK, you asked us to wait for a study; we

got a study. And it will be interesting to read what these studies

say.

Finally, I guess some of the most compelling—and I hope our

witnesses will testify to this—some of the most compelling information came, Mr. Chairman, in your statement when you talked

12

about how the system is being used in Canada but not used here

in the United States. Help me with that. I don’t understand how

we can go across the border and they can use a system; and you

travel a mile and go across the border, and then it is a whole other

situation. Something’s wrong with this picture and it’s up to us to

try to, first of all, ferret out what is wrong and then try to address

it as best we can.

Thank you Mr. Chairman.

Mr. KUCINICH. I want to thank the gentleman from Maryland.

[The prepared statement of Hon. Elijah E. Cummings follows:]

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Mr. KUCINICH. I want the gentleman to know and also to our distinguished colleague who has just joined us, Diane Watson from

California, to know that we did invite the oil companies to be here

today and that they did not accept our invitation. But we will invite them again. And I would like to recognize the distinguished

Congresswoman from California, Diane Watson.

Ms. WATSON. Thank you so much, Mr. Chairman. You are always

right on target. In recent years Americans have had to continuously adjust to the steady rise in our Nation’s gas prices. With

prices reaching $4 a gallon in many areas of the country, our constituents are facing enormous prices at the pump while Big Oil

reaps considerable profits. Every day our constituents have had to

make a choice between either putting gas in their cars, food on

their table for their families, or buying expensive prescription

drugs.

Since 2006, gas prices in my home State of California alone have

increased almost 10 percent. The average price of gasoline in the

United States escalated to $3.18 per gallon in May 2007, even

when adjusted for inflation. These were some of the highest prices

that were ever recorded. As these prices are steadily rising, the organization of the petroleum exporting countries and others continue to sit back and maintain an idle hand.

This committee must take action on this issue, and I appreciate

so much the Chairperson calling us together. Hurricane Katrina

was the Nation’s largest natural disaster ever recorded. Not only

did this disaster displace thousands of American citizens, it also

left our wetlands destroyed and interfered with the production of

our Nation’s oil refineries.

Gas prices during this time were topping off at nearly $2.80 per

gallon on the average. And yet, even during a natural disaster, gas

prices then were better than they are in today’s economic climate.

So, Mr. Chairman, again I want to commend you on this timely

hearing that affects every American consumer. It is crucial that we

adhere to national interest and not to the Big Oil companies. And

I am fully aware that in order to improve the economic dilemma

that we are facing, we must first revisit our energy policies and

make sure they are adhering to our Nation’s needs.

Congress must focus on giving our constituents reliable service at

fair market prices. And I look forward to the testimony from our

witnesses today and hope that we can work together to find solutions that will lessen our energy dependence and reduce the economic pressures that lay upon so many Americans each day.

And I want to say we are giving subsidies to the oil companies

when they are making huge profits. And particularly, I think, it

was scandalous that during Katrina they made between $300 million and $400 million. They don’t need our subsidies. People need

relief.

So, thank you. I yield back.

Mr. KUCINICH. I thank the gentlelady.

[The prepared statement of Hon. Diane E. Watson follows:]

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Mr. KUCINICH. I want to thank all Members of Congress who

have given opening statements. And I welcome your participation

in the questioning of witnesses.

The subcommittee will now receive testimony from the witnesses

before us today. I want to start by welcoming our first panel and

to tell members of the committee and the public a little bit about

them.

Mr. Richard Suiter. Mr. Suiter is the Weights and Measures Coordinator at the National Institute of Standards and Technology.

His responsibilities include training of the national-type evaluation

program laboratories in the area of liquid measuring devices, training State and local weights and measures officials, and serving as

technical adviser to the National Conference on Weights and Measures Specifications and Tolerances Committee where he conducts

research, analysis of technical issues and provides guidance to committee members.

Next, Mr. Michael Cleary. Mr. Cleary is chairman of the National Conference on Weights and Measures, which will be considering a proposal to encourage temperature compensation for retail

gasoline sales at its July meeting. He is formerly the director of the

California Division of weights and Measures, and is currently special assistant to the chief legal counsel at the California Department of Agriculture.

Mr. Martin Gafinowitz was appointed president of both Gilbarco

and the Veeder-Root Co. in 2006, having previously served as the

top executive in Gilbarco since 2003 and, before that, a senior executive in the Veeder-Root Co. Mr. Gafinowitz has been an executive

with the Danaher Corp., which is the parent company of Gilbarco

Veeder-Root since 1991.

Finally, in the first panel, Mr. John Siebert is a project manager,

researcher, and communications training specialist who works with

the Owner-Operator Independent Drivers Association Foundation

producing education safety materials for independent truckers. He

also performs survey research concerning driver behavior and attitudes. It is not much of a stretch to say that Mr. Siebert is the discoverer of the issue that brings us here today. While hot fuels were

well known to the petroleum industry and weights and measures

professionals, Mr. Siebert was one of the first civilians to figure it

out.

I want to thank all of the witnesses for appearing. It is the policy

of the Committee on Oversight and Government Reform to swear

in all witnesses before they testify. I would ask the witnesses to

stand and raise your right hands.

[Witnesses sworn.]

Mr. KUCINICH. Let the record reflect that the witnesses, each of

them answered in the affirmative. I ask that each of the witnesses

now give a brief summary of their testimony and to keep in mind

that it would be good to keep this summary under 5 minutes in duration. Your complete written statement will be included in the

record.

Mr. Suiter, you will be our first witness, and please proceed.

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STATEMENTS OF RICHARD SUITER, WEIGHTS AND MEASURES

COORDINATOR, NATIONAL INSTITUTE OF TECHNOLOGY

AND STANDARDS; MICHAEL CLEARY, CHAIRMAN, NATIONAL

CONFERENCE ON WEIGHTS AND MEASURES; MARTIN

GAFINOWITZ, CEO, GILBARCO VEEDER-ROOT; AND JOHN

SEIBERT, OWNER-OPERATOR INDEPENDENT TRUCK DRIVERS ASSOCIATION

STATEMENT OF RICHARD SUITER

Mr. SUITER. Chairman Kucinich and members of the subcommittee, thank you for the opportunity to testify. I look forward to discussing what the National Institute of Standards and Technology

[NIST], part of the Department of Commerce does to establish uniformity in weights and measures requirements and practices for

the U.S. economy and how thermal expansion of gasoline relates to

compensation issues in the marketplace.

NIST has no weights and measures regulatory authority. Instead, NIST fosters efficient and equitable transactions in the domestic and global marketplace through sound science to enable

sound policies. In this case NIST provides technical guidance to the

National Conference of Weights and Measures [NCWM]. The

NCWM, which consists of weights and measures officials, device

manufacturers, users and consumers, serves as a forum for the development of weights and measures requirements and practices in

the United States.

Through its association with the NCWM, NIST provides three

types of technical weights and measures information to the States,

including requirements for equipment in NIST handbook 44, model

regulations in NIST handbook 130, and test procedures in NIST

handbook 133. NIST handbooks 44 and 130 take on the effect of

law when adopted in State law, rule, or regulation.

NIST provides technical guidance on the requirements in handbook 44 and 130. Each State has the final decision on how the requirements are implemented and enforced. For over 30 years, temperature compensation has been discussed. NIST has been in the

middle of the discussion, providing technical advice and information.

Temperature compensation, as it relates to the sale of petroleum,

is an adjustment made to assure that each gallon of fuel sold contains the same energy content. To put it simply, energy per unit

of fuel is measured at 60 degrees Fahrenheit. When the external

temperature is warmer, it causes the fuel to expand. With automatic temperature compensation, the measuring device on an application adjusts the volume indicated for any delivery to a referenced temperature. For petroleum products, the referenced temperature is 60 degrees Fahrenheit, which was established in the

1920’s by the then-National Bureau of Standards and the American

Petroleum Institute.

Some States specify that a gallon of gasoline is defined as 231

cubic inches at 60 degrees Fahrenheit. The State of Hawaii, which

has a tropical climate, has adopted an alternative referenced temperature of 80 degrees Fahrenheit for petroleum. In some States,

compensating for temperature of refined petroleum products takes

place at the wholesale level but not at the retail gasoline or diesel

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pump or for delivery of home heating fuel. Some States prohibit

temperature compensation at retail, some States prohibit temperature compensation anywhere in the petroleum distribution chain.

Most States require temperature compensation for certain products such as liquefied petroleum gas sales or propane for home

heating. The NCWM and its standards committees have paid particular attention to temperature compensation issues for the past

7 years.

In 2004, NIST, as technical adviser to the NCWM, developed a

presentation on the technical aspects of temperature compensation

and its impact on the measurement and testing of petroleum products. The presentation included an explanation of temperature

compensation and a history of temperature compensation issues:

examples of automatic temperature compensation equipment; effects of temperature compensation on product and test equipment;

current and proposed requirements for temperature compensation;

test procedures and equipment for testing devices with automatic

temperature compensation; changes in the handling and storage of

refined petroleum products in the marketplace, such as single- versus double walled storage tanks and electronic versus mechanical

meters; a review of the application of temperature compensation to

petroleum volume data, showing average fuel storage tank temperatures in the United States and the possible effect on petroleum

measurement.

The data on storage tank temperatures, collected by a manufacturer of tank monitoring equipment over a 2-year period, indicated

that the average temperature of product in below-ground storage

tanks across the United States was 64.7 degrees.

In conclusion, NIST serves only as a technical adviser and has

no voting role in the process of the NCWM, the organization that

provides a framework to individual jurisdictions. NIST analysis,

however, shows that temperature compensation can be used to ensure accurate measurement of energy content in fuels being sold.

We will continue to work with State and local officials, industry,

and the public to ensure informed decisionmaking and to enhance

the reliability of measurements in the marketplace.

Thank you for the opportunity to testify and I would be happy

to answer any questions that the committee may have.

Mr. KUCINICH. I thank the gentleman.

[The prepared statement of Mr. Suiter follows:]

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Mr. KUCINICH. Mr. Cleary.

STATEMENT OF MICHAEL CLEARY

Mr. CLEARY. Thank you very much, Chairman Kucinich and

members of the subcommittee. Thank you for the opportunity to

testify today on hot fuels and the impact on the transactions of

thermal expansion of gasoline. I look forward to discussing the role

the National Conference on Weights and Measures place to establish uniformity in weights and measure requirements and what we

are currently debating in our consensus organization.

Some background on the National Conference on Weights and

Measures. On January 16, 1905, the National Bureau of Standards,

today known as the National Institute of Standards and Technology, invited the States to participate in the development of uniform weights and measures for the United States. The relationship

grew into what was known as the National Conference on Weights

and Measures.

The United States is one of the only countries in the world without a Federal weights and measures regulatory agency. In the

United States each jurisdiction funds its own weights and measures program based on budgetary priorities in that particular

State. The Conference is fully funded by the membership. NIST

today provides the Conference with technical advisers to assist in

the development of standards.

As a standards development body committed to the consensusbuilding process, the Conference has created a model process that

generates high praise from both regulators and business representatives alike. The National Conference serves as a forum for the development of weights and measures requirements and practices in

the United States.

Membership in the National Conference is open to all interested

parties, including weights and measures regulatory officials, device

manufacturers, users and consumers. An environment of inclusion

gives voices to all in every step of the way. In this way, the National Conference has addressed some of the most important economic issues of our time.

The end result, ongoing contributions from industry experts, assist in producing final standards that reflect the latest technical innovations. It is the National Conference members who provide the

input for the four national conference committees. And these committees provide for the standards development for each of the specific areas. They also provide counsel on weights and measures

issues as they emerge in the marketplace by drawing on the expertise of our diverse membership of public and private sector members. Most issues come to the National Conference committees

through one of the regional weights and measures associations: the

central, the northeastern, the southern and the western weights

and measures association. But the Conference committee can accept important issues from any source.

At the National Conference annual meeting, standing committees

review all comments received since the intermeeting. They hold

open hearings to discuss further, make revisions to the recommendations as needed, and produce the final report. Final reVerDate 11-MAY-2000 10:37 Oct 19, 2009 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 U:\DOCS\51987.TXT KATIE PsN: KATIE
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ports are then presented in open forum to the representatives and

delegates for a vote.

As a standards development body committed to consensus-building, the National Conference has created a model process that has

generated high praise from both regulators and business representatives alike. Our board of directors oversees the activities of the

four standing committees and the standing committees of the board

of directors; specifications and tolerance committee; laws and regulation committee; and the professional development committee.

I would like to talk about temperature compensation at this time.

For many years the issue of temperature compensation as it relates

to petroleum products has been discussed and debated in the

weights and measures community and at the National Conference.

The issue of how to standardize the sale goes back in history to the

early 1900’s when Standard Oil Trust funded the American Petroleum Institute, working with then the National Bureau of Standards, to set the size standard gallon of petroleum product. This

study was conducted at the time for the purpose of inventory control for the petroleum industry. The study was conducted between

1912 and 1917. And in conjunction with an agreement with Great

Britain, the standard was set at 231 cubic inches at an ambient

temperature of 60 degrees.

From that time on, temperature compensation has been used by

the petroleum industry to adjust the delivery of petroleum products

at the wholesale level. The question of whether this adjustment

should or could be made at the retail level has been debated at the

National Conference on Weights and Measures for years. In 1974,

the 59th Conference had a detailed proposal to allow permissive

temperature compensation at the retail level proposed by the State

of Hawaii. A very heated discussion took place, remarkably similar

to the debate currently facing the Conference. The primary difference in the arguments pro and con today is the availability of

equipment that would make it possible. The equipment exists today

but would add costs to the petroleum industry.

In 1974 the motion was defeated, but the issue continues to be

discussed, and over the last 7 years it evolved into what the Conference is debating today. What the Conference is debating today

is a proposal that would be a model law for the States to consider

adopting that would allow permissive temperature compensation at

the retail level. The proposal would detail if temperature compensation is used, how it would be used in order to prevent the facilitation of fraud. This proposal is currently a voting item scheduled to be further debated and could be voted in July of this year

at our annual meeting in Utah.

As chairman of the Conference, I am not here today to take a position one way or another on the issue as the Conference has not

as yet voted on the current proposal before the membership. I have,

however, called for establishing a steering committee working within the Conference to continue the technical issues surrounding this

issue, as I believe work will be needed to be done regardless of how

the vote goes in July.

For your information, I have attached a copy of the temperature

compensation proposal before the Conference, including the comments that have been made relevant to it, for your review.

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I thank you for the opportunity to testify before you today. I

would be happy to answer any questions the subcommittee might

have about our Conference or the general debate on this particular

issue. Thank you, sir.

Mr. KUCINICH. I thank the gentleman.

[The prepared statement of Mr. Clearly follows:]

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Mr. KUCINICH. Mr. Gafinowitz has submitted a statement for the

record. And do I understand that is your statement and you will

be available for questions. Did you want to make any comments?

STATEMENT OF MARTIN GAFINOWITZ

Mr. GAFINOWITZ. Thank you very much, Mr. Chairman, for the

opportunity to testify and I will be happy to answer any questions.

Mr. KUCINICH. When we get to the question part make sure the

mic is closer. Thank you.

[The prepared statement of Mr. Garfinowitz follows:]

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Mr. KUCINICH. Mr. Siebert, would you proceed?

STATEMENT OF JOHN SEIBERT

Mr. SIEBERT. I am John Siebert, project leader for the Owner-Operator Independent Drivers Association Foundation. Thank you,

Mr. Chairman, and distinguished members of the subcommittee,

for inviting me to talk about the retail sale of hot fuel.

The Owner-Operator Independent Drivers Association is the Nation’s largest trade association representing small fleets and truck

drivers. Many of our members were reporting a wide range of fuel

mileage from one fill-up to the next. And that prompted the foundation to perform a nationwide survey of diesel fuel quality. The

only significant variable we could find was temperature of the fuel.

We had temperatures reported as high as 114 degrees.

Here are the reasons why dispensing hot fuel creates problems.

The petroleum industry uses a reference temperature of 60 degrees

Fahrenheit to determine volume of a gallon of fuel. As with many

materials, when heated fuel expands, increasing its volume, retail

pumps do not compensate for this expansion. Subsequently, each

gallon that is measured by volume has less energy inside it.

Internal combustion engines run on energy, not volume. Through

every step of the petroleum production distribution, up to and including the refinery rack, volume is computed using temperature

compensation. However temperature compensation is not used

after the tank truck fills up at the refinery rack, because the U.S.

retail fuel pumps do not use temperature compensation. If fuel is

hot, the 8,000 U.S. petroleum gallons at the rack may turn out to

be 8,240 U.S. standard gallons which the retailer sells, but each

gallon has a reduced amount of energy.

Simply put, American consumers are not getting what they pay

for. Consumers are paying for energy they do not receive. This can

equal $27 to $45 per car per year. Consumers are also paying a

Federal gasoline tax of around $140 million on these expanded gallons’ taxes which are never remitted to the government.

How does it affect OOIDA members? Well, our members consumed 4.1 billion gallons of diesel fuel in 2006. At $2.65 per gallon,

that equals $11 billion of purchases. And for truckers, hot fuel can

equal losses of $450 to $630 per truck annually.

What can be done? Well, the new automatic temperature compensated pumps, or ATC retrofitted pumps, dispense an amount of

fuel that is equal to a gallon at 60 degrees, regardless of the temperature the fuel actually is. There are already precedents for this.

In 1975, Hawaii adopted a gallon of gasoline that was sized as if

it were 80 degrees. Since 1995, Puerto Rico has had legislation

mandating temperature compensation at retail pumps; however, it

has never been implemented. And in Canada, where the fuel is

cooler, retailers were very supportive of a voluntary converting over

to automatic temperature compensation pumps.

Why hasn’t it been addressed before? Well, last year it is estimated that retailers made an additional $2.3 billion off of hot fuel

sales. Petroleum producers and retailers seem to be universally opposed to adopting ATC at the retail level. This reminds us old-timers of making sure that the meat cutter kept his thumb off the

scales when selling us a pound of hamburger. Fuel retailers are

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meat cutters. Their thumbs are on the scale. They are ripping off

American consumers some $2.3 billion each year.

The Petroleum Marketers Association of America has stated that

mandating temperature compensated or retrofitted pumps for fuel

stations would increase the price consumers must pay for fuel.

Well, retailers are facing a one-time charge that is nearly equal to

the annual losses by consumers due to hot fuel.

The PMAA admits that hot fuel provides less energy, but will tell

you it all balances out when you are buying cooler fuel in the winter. I direct you to the charts and graphs in my written statement

which show this just isn’t true. Since temperature affects the energy content of retail fuels, it is important that the buyer be just

as aware of it as is the seller. Temperature compensation retail

pumps make the entire transaction transparent and allows consumers to shop for their best fuel values, because every gallon of

similarly labeled products will contain this same energy content.

Mr. Chairman, distinguished members of the subcommittee,

again thank you for allowing me to talk about hot fuel, and I stand

ready to answer any questions you might have.

Mr. KUCINICH. Thank you very much Mr. Siebert.

[The prepared statement of Mr. Siebert follows:]

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Mr. KUCINICH. We are now ready to go to questions of the panel.

I would like to begin with some questions of Mr. Gafinowitz, whose

company, I understand, manufactures the automatic temperature

compensation devices. And because of your unique understanding

of this, the committee is very grateful for your presence here today

so that we in the States may be better able to understand how this

technology works.

And I would like to start by: Where do you sell your temperature

compensating devices Mr. Gafinowitz.

Mr. GAFINOWITZ. We primarily sell temperature compensated devices in Canada.

Mr. KUCINICH. Have you ever received complaints from your customers in Canada that your automatic temperature compensating

devices do not work accurately?

Mr. GAFINOWITZ. No, we have never received those complaints.

Mr. KUCINICH. I assume your Canadian customers would include

readily identifiable names here in the United States?

Mr. GAFINOWITZ. There are certainly readily identifiable names

among our Canadian customers.

Mr. KUCINICH. Would those names be ExxonMobil, Shell Husky,

companies like that.

Mr. GAFINOWITZ. I think all of those companies do market fuels

in Canada.

Mr. KUCINICH. Mr. Gafinowitz, you applied with the State of

California, if I am correct, to certify your automatic temperature

control devices for sale in California on or around December 2006.

Why?

Mr. GAFINOWITZ. Mr. Chairman, I think everybody is aware

there has been a tremendous amount of market interest and discussion on automatic temperature compensation. We put out equipment in front of the California regulatory body for certification to

see what would be required to bring this equipment to market in

the United States.

Mr. KUCINICH. And, of course, there was a cost associated with

the application. What was it.

Mr. GAFINOWITZ. The cost actually associated with the application is minimal. I am not sure of the exact figure, but it is a minimal cost.

Mr. KUCINICH. Something in the nature of $3,000?

Mr. GAFINOWITZ. It sounds like you are more familiar with the

exact number than I am, sir.

Mr. KUCINICH. Why was Gilbarco willing to spend any money to

obtain certification?

Mr. GAFINOWITZ. It seemed highly likely that at some point the

equipment would be available for sale in the United States.

Mr. KUCINICH. So you thought you could sell them.

Mr. GAFINOWITZ. Well, our company was looking to prepare ourselves for the point in time when there was market demand for

that equipment and wanted to understand what would be required

to bring that equipment to market in the United States.

Mr. KUCINICH. Why were you under the impression that you

would be able to sell the automatic temperature compensation device in California?

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Mr. GAFINOWITZ. There had been a tremendous amount of press

coverage on the need for automatic temperature compensated devices and some of the States had begun looking at legislation for

that equipment.

Mr. KUCINICH. Now, have you in fact sold any of your automatic

temperature compensation equipment in California?

Mr. GAFINOWITZ. We do not have the equipment on the market

in California or elsewhere in the United States.

Mr. KUCINICH. Why not?

Mr. GAFINOWITZ. The work we did with the California regulators

was in preparation for bringing that equipment to market. We

never actually attempted to bring the equipment to market. The

reason we didn’t do that is for us to sell any equipment, we need

demand from our customers. When there is demand from our customers, we will be ready to sell the equipment.

Mr. KUCINICH. You are saying there might be an interest but

there may not be a demand?

Mr. GAFINOWITZ. Sir, I burden of proof, sir.

Mr. KUCINICH. Mr. Gafinowitz, let me read from the minutes of

a meeting of the National Conference on Weights and Measures,

Laws and Regulations Committee, and this is a quote: A meter

manufacturer testified that a decision on this issue was needed, indicating that parameters must be defined and a decision to allow

or disallow temperature compensation in retail fuel transactions is

necessary for the industry to determine its direction on the matter.

The manufacturer stated that his company is receiving increased

calls from customers requesting the technology and mentioned two

major manufacturers who currently have developed ATC devices.

He recommend that the committee pursue permissive, not mandatory, language in developing the model regulation. The manufacturer noted that previous attempts to submit automatic temperature control devices for type approval has been rejected and therefore certificates of conformance cannot be obtained.

Did your company receive increased calls from customers requesting the technology?

Mr. GAFINOWITZ. We received calls from a small number of customers interested in that technology.

Mr. KUCINICH. And what happened to these potential customers.

Mr. GAFINOWITZ. We are not currently in a position to supply

that, because prior to our work in California, the equipment wasn’t

certified for sale in the United States.

Mr. KUCINICH. So you are saying after certification, you had no

customers. Is that what you are saying?

Mr. GAFINOWITZ. First, it was a relatively limited demand that

we received from customers. And even post certification from California, the equipment is not yet ready for market. There is still

some work that needs to be done.

Mr. KUCINICH. As I listen to your testimony, what occurs to me

is that you have interests from customers 1 day and not the next.

And, Mr. Gafinowitz, I think the question everyone wants to know

is: Are you aware of efforts made by oil companies to pressure customers for your automatic temperature control devices to suddenly

lose their interest?

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Mr. GAFINOWITZ. We have not been pressured not to sell the

equipment. I think the industry’s position on this equipment is

fairly widely stated, that the industry and the number of industry

bodies are not in favor of installing this equipment.

Mr. KUCINICH. Let me just say I can understand that this is a

difficult topic for you to discuss, because the question relates to not

whether they pressured you but pressured the customers. And I

think, after all, isn’t it true that most of your company’s business

is concerned with selling other types of devices to the oil industry

other than ATCs? And your company’s customers for other lines of

business are in the oil industry; isn’t that correct?

Mr. GAFINOWITZ. That is correct.

Mr. KUCINICH. And under these circumstances, believe me, I can

understand that Gilbarco might feel uncomfortable. But it is so important that we have a chance to discuss this, because it is an

issue of great social importance to millions of consumers who drive

to work every day, take family vacations in their car, shuttle their

kids to soccer games.

If there are barriers to the introduction of fair measuring of gasoline in the United States, if there is a coordination in the industry

to keep these automated temperature compensation devices out of

the retail market, I would say that this is something which this

committee and this Nation needs to know. And I want to really see

what the real story is behind the disappearance of automatic temperature control customers in the United States.

Do you have any ability or willingness to tell the committee who

those interested customers were?

Mr. GAFINOWITZ. I do not know who the specific interested customers were.

Mr. KUCINICH. Can you tell the committee who might be able to

help the committee learn who they were?

Mr. GAFINOWITZ. Most of our business is transacted in the U.S.

market through a large number of third-party resellers and distributors. The demand that we received or the inquiries we received is likely to have come through those distributors rather than

direct to our company.

Mr. KUCINICH. I want to say that, you know, we are going to

read your testimony very carefully and consider if we might need

you to come back at a later date. I think that the committee might

be getting a little bit more information here as to why the oil company executives refused to appear before this committee. Because

this question about whether or not the oil companies have taken

any action to frustrate the automatic temperature control device’s

appearance on the market becomes a very serious issue.

Now, I have some other questions, but I am going to defer to

members of the committee right now for their time.

Mr. Davis is recognized for 5 minutes.

Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Chairman.

Mr. Suiter, let me ask you, from a scientific perspective, would

you say that the use of two different methods of measurement for

gasoline is fair?

Mr. SUITER. I am sorry, I didn’t hear the last part of your question.

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Mr. DAVIS OF ILLINOIS. Would you say that it is fair from a scientific perspective to use these two different methods to measure

gasoline?

Mr. SUITER. The work that has been done at NIST is not really

an issue of fairness, though we do strive to achieve equity in the

marketplace. Temperature compensation will provide an equal

measurement of product at the dispenser.

Mr. DAVIS OF ILLINOIS. And would you agree that the equipment

and devices that have been developed provides pretty valid information?

Mr. SUITER. From a standpoint of accuracy of measurement, if a

device has had an approval or a certificate of conformance it would

mean that, yes, it meets all of the legal requirements and can operate accurately.

Mr. DAVIS OF ILLINOIS. Let me ask you, Mr. Seibert, in your testimony, you state that the trucks that your members drive average

6 miles to the gallon and that fuel at its highest operating expense

reaches up to $47,700 a truck that a driver could spend in a year

when the fuel is $2.65 a gallon. You also wrote that small business

truckers examine their income and expenses down to a fraction of

a cent per mile for every mile they travel. Does buying hot fuel that

is not temperature adjusted virtually eliminate the profits of the

small business person who is a trucker?

Mr. SEIBERT. Sir, it doesn’t eliminate the profits, but it certainly

cuts into it. Truckers, especially independent truckers, will be

working as many as 80, 90 hours a week for about $35,000

$40,000; and included in that is their hourly wage and their profits.

They will have about $10,000 worth of profit, and $750—$500 to

$750 off of that $10,000 profit is a sizable chunk of their profit for

the year, yes.

Mr. DAVIS OF ILLINOIS. I understand that about 75 percent of the

retail pumps in Canada actually are using this equipment. And

while you can’t necessarily subscribe the motives of the industry in

terms of what it might or might not do, I wouldn’t imagine, but in

your expert opinion, if the pumps have this technology in Canada

and they are the same businesses, the same industries, the same

corporations, the same companies, why would you think that they

are being used in Canada and not being used in the United States?

Mr. SEIBERT. Because the temperature of the fuel in the tanks

in Canada is generally below the 60-degree standard; and so if you

buy fuel at the rack temperature compensated to 60, you are actually selling more energy per standard Canadian gallon than they

bought. So it was an economic hit for them. They were having to

artificially work within the market to have a price that would give

them a profit.

In the United States, when it is only that way across the northern tier of States and the southern tier and the west primarily

have warm temperatures, it is an economic boon for the oil-producing company and the retailers.

Mr. DAVIS OF ILLINOIS. So it is an economic decision——

Mr. SEIBERT. Absolutely.

Mr. DAVIS OF ILLINOIS [continuing]. That the companies make.

Mr. SEIBERT. Business practice.

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Mr. DAVIS OF ILLINOIS. And if I could just ask, and if you could,

each one of you, answer yes or no, in a way, if you could, do you

think that making use of this technology in any way tampers with

our concept of the free enterprise system?

Mr. SEIBERT. Absolutely not. The free enterprise system is based

on both the buyer and the seller having the same knowledge of the

operation of the product; and when one party in the buying and

selling transaction in free enterprise has particular knowledge

about that product’s operation and doesn’t share it with the other

person, that is considered a violation of the free enterprise system.

Mr. DAVIS OF ILLINOIS. Mr. Gafinowitz.

Mr. GAFINOWITZ. No, I don’t believe it tampers with the free enterprise system.

Mr. DAVIS OF ILLINOIS. Mr. Cleary.

Mr. CLEARY. I don’t believe it tampers with the free enterprise

system at all. I just believe for it to be equitable in the marketplace

a decision has to be made to do it across the board or not. You can’t

possibly hit or miss with temperature compensation. If you had a

service station on one side of the street temperature compensating

and a station on the other side wasn’t, how would the consumer be

able to make a decision as far as, you know, basing their decision

on purchasing a product one way or the other based upon price?

Mr. DAVIS OF ILLINOIS. Mr. Suiter.

Mr. SUITER. No.

Mr. DAVIS OF ILLINOIS. Thank you, gentlemen, very much.

Thank you, Mr. Chairman.

Mr. KUCINICH. All right. Thank you, Mr. Davis.

Mr. Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

I want to pick up on where Mr. Davis left off, and I want to go

to you, Mr. Cleary. The National Conference on Weights and Measures mission statement is to advance a healthy business and consumer climate through fair and equitable weights and measures

standards. Is that correct?

Mr. CLEARY. Yes, sir.

Mr. CUMMINGS. Is the double standard created by different measurement standards for gasoline and diesel fair and equitable, as

the NCWM suggests? I mean, is it consistent with what you all are

supposed to be trying to do?

Mr. CLEARY. I think the fact that we are actually debating and

trying to resolve the issue shows that we are trying to achieve that

equity, sir.

Mr. CUMMINGS. I want to put a pen in that and come right back

to that.

Mr. CLEARY. Yes, sir.

Mr. CUMMINGS. Using the data provided by NIST, the subcommittee calculated that 513.8 million gallons of gasoline sold in

the summer of 2007 will be attributable to the thermal expansion

of gasoline and that consumers will pay a hot fuel premium this

summer in the range of $1.5 billion—not million—billion. Does the

cost to the consumers violate the concept of fair and equitable that

the NCWM claims to be their mission statement? If what I said

was accurate, does it violate it?

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Mr. CLEARY. If what you said is accurate, I would say we would

be deeply concerned about that issue taking place. And what I can

offer you, sir, is the fact that we have people within the conference

who are passionately in favor of temperature compensation at the

retail level and are working passionately to try to develop and pass

a model law that the States can adopt. We have people at the conference who are equally as passionate feeling as if temperature

compensation is not the correct way to go.

Mr. CUMMINGS. Who is against it?

Mr. CLEARY. Various individuals within the conference. We have

2,400 members, sir.

Mr. CUMMINGS. Well, OK. There have to be groups. The chairman—you know, we have but so much time do these hearings and

to do investigations——

Mr. CLEARY. Yes, sir.

Mr. CUMMINGS [continuing]. And part of our mission is to make

sure the taxpayers’ dollars are spent effectively and efficiently. We

want the people who are against it to come before us so we can understand what their issue is so we can examine them, so we can

make the best use of our time. And so—and we want to be in a

position to be able to look at what the NCWM is doing and make

some kind of determination as to whether or not they are dealing

with this situation fairly.

Now, you are—what is your position? I mean, in other words,

with the NCWM.

Mr. CLEARY. My position, I am the chairman of the conference.

Mr. CUMMINGS. You are the chairman.

Mr. CLEARY. Yes.

Mr. CUMMINGS. You are the man. So what I want to know is,

since you are the chairman, I am asking you for the benefit of all

of us so that we can be efficient and effective in our efforts and so

that we can help consumers who are out there right now trying to

pay for gas that they cannot afford, I am asking you, Mr. Chairman, who is against it? I think that is a fair and reasonable question. And if you want to give us a list in a day or so, by Monday,

so that we can examine those, talk to those people and see who we

are dealing with, I would appreciate it if you would do that.

I don’t want to put you on the spot, but I assume you would

know, and I assume you are supposed to be acting in the best interests of a healthy business and consumer climate through fair

and equitable weights and measures. So consistent with your duties as the chairman, I am begging you, I am not asking you—no,

I am asking you, because I shouldn’t have to beg, for you to provide

us with that information.

Mr. CLEARY. I would like to tell you that the people who have

concerns about temperature compensation at the conference, a lot

of the people are technical people who have concerns based on the

fact that they want to make sure that this equipment operates correctly. And if it is in the marketplace, we need to know how to test

the equipment, how to go out there and check the pump to make

sure it is working properly. They want to know that the devices

that are sold have been approved for use and that they are going

to work. They want to make sure that if the technology is used

fraud doesn’t take place.

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Mr. CUMMINGS. Right. And they are already doing it in Canada.

Is your organization looking at the Canadian model?

Mr. CLEARY. Absolutely, sir. We have membership in our organization from the Canadian regulatory officials, and they have been

helping us tremendously to try and sort this out.

Mr. CUMMINGS. I see my time is running out, but I have to ask

you this. Their suggestions of delaying the July vote on voluntary

standards, how would such a delay be fair and equitable to the consumers you are charged with protecting and who are paying the

$1.5 billion premium?

First of all, is there—have you all—I know you are the chairman,

so you would know this information. Have there been discussions

about a delay of a vote?

Mr. CLEARY. Yes, sir, there has.

Mr. CUMMINGS. And what is the basis of the delay?

Mr. CLEARY. The people who are calling for the issue to be reduced to an informational item for the time being feel that the

issue is not ready yet for a vote.

Now, if you ask me for my personal opinion——

Mr. CUMMINGS. Yes, I would love to hear that.

Mr. CLEARY [continuing]. I feel the issue is ready for a vote, and

it should be voted on in July.

Mr. CUMMINGS. Is there anything you would like for us to do to

encourage a vote, since our consumers are suffering greatly, so that

we can kind of urge you all to do a vote? I mean, is there anything

that we can do, you would like for us to do to help you, since you

are the man?

Mr. CLEARY. I am a volunteer. I just want to state for the record

this is a voluntary organization.

Mr. CUMMINGS. You are the volunteer man.

Mr. KUCINICH. Just remember no good deed goes unpunished.

Mr. CLEARY. Exactly. The chairman of the conference generally

is the person who just doesn’t show up for the meetings, so to

speak. But, you know, certainly your encouragement will be

brought back to the conference, and I will do just that.

Mr. CUMMINGS. Thank you very much.

I see my time has run out. Thank you, Mr. Chairman.

Mr. KUCINICH. Yes, sir. Mr. Cummings, I think your time actually is just beginning.

The Chair recognizes the gentlelady from California.

Ms. WATSON. Thank you very much, Mr. Chairman.

In listening to this past dialog it occurs to me maybe we need

to have a hearing, Mr. Chairman, on the refineries. I am hearing

about the technology and whether or not it is ready to move forward. You know, what is the problem with the refineries? They are

saying the cause of the rise in a gallon of gasoline is due to the

refineries, and they need to be—what is that—remodeled, they

need to be brought up to standards, they need to be repaired.

Maybe we ought to have a hearing on the refineries, since that is

where everyone is pointing their fingers.

Now, back to the questions at hand, think about it, I am going

to suggest that Mr. Seibert answer these questions. According to an

energy watchdog organization, Public Citizen, since 2001, the largest six oil companies operating in the United States—and they are

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Exxon, Chevron, Texaco, ConocoPhillips, BP Shell and Valero—recorded I guess $477 billion in profit. Now do you think it would

bring economic harm to these corporations to drop the double

standard of hot fuel? The finger on the scale?

Mr. SEIBERT. I can’t see how it would. As a matter of fact, the

impact on their profit margin is so small I don’t know why the

thumb is there.

Ms. WATSON. You know, I guess I am just being a little—I am

using a little levity, but we can never get down to the reason for

the rise in prices of gasoline except refineries. It is going to bring

great harm. I think it is calculated and manipulated with an intent

that is, in my estimation, just greed. So because we are having this

hearing that is being recorded, both video and audio, can you—and

you can be cautious—what do you really think is going on?

Mr. SEIBERT. In my heart of hearts, I think that we have an

unspoken collusion. It doesn’t need to be organized. It doesn’t need

to be back room. We have deregulated an industry and told them

that they are in charge of supply, and they have very graciously

taken that and used it in great American entrepreneurship. They

reduced the supply and increased the demand.

Ms. WATSON. We measure our words here because everything we

say goes down. But I think the word ‘‘collusion’’ confirms what I

have been thinking and spoken, unwritten. But the consumer, in

my estimation, is just being simply ripped off; and that is the reason why these hearings are so important, so we can bring out into

the public what is going on in our economy.

I think the biggest offenders are the oil companies that take advantage of people at a time of desperate need and up those prices.

And they say it is the refineries, it is going to be hard on business

and all, and we can never put our finger on the facts. So I do appreciate, you know, measuring your words but honesty at this

panel.

I have another question, and I will aim this toward Mr. Suiter.

In your written statement, you state that some States prohibit temperature compensation at the retail level, some States do this at all

levels, and still other States regulate temperature compensation by

the particular fuel. So can you provide for this committee a compilation of each State’s regulations concerning temperature compensation for all relevant fuels? Not now, but can you give it to us

in writing? You know, we need to come out of these hearings with

some factual information that we can take public. So if you can do

that for us we would appreciate it. And you might want to comment.

Mr. SUITER. I believe that a search of State weights and measures laws would probably yield that information, and that is something that could be probably done.

Ms. WATSON. Could you provide that for us?

Mr. SUITER. I can certainly try.

[The information referred to follows:]

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Ms. WATSON. Yeah. It is our responsibility here to look at these

issues and try to clarify them and try to discuss them and come

forward with policy. So those of you who are willing to come—as

the Chair said, we couldn’t get representatives of the oil companies

to show their faces here, so we ask you if you can assist us in providing an honest report for us. And of course our staff can do some

of this research as well, Mr. Chairman. But I think we all ought

to come out with a report that can go public and probably get into

some policy.

Thank you so much, and I yield back my time.

Mr. KUCINICH. I would agree with the gentlelady. I just want the

members of the committee to know that, based on the questions

that have arisen from this discussion, we will once again invite

people from the oil industry to come before this committee and to

answer questions relative to the practice of having temperature

control devices measuring the amount of gasoline that people are

paying for in Canada and—as opposed to not having those devices

in the United States—and to determine what the role of the industry has been in frustrating the honest measurement of the amount

of energy that people are paying for in their tank. We really need

to—I mean, I would just want to respond to the gentlelady’s request to say that I think the committee needs to look deeper into

this, because the gentlelady raises some very serious questions.

Mr. Cummings.

Ms. WATSON. Just a moment. Would you yield for just a second?

I want to followup with that.

Mr. KUCINICH. Yes, of course.

Ms. WATSON. At this same time, could we just bifurcate it and

have a discussion of the refineries, too?

Mr. KUCINICH. I think that’s appropriate.

Ms. WATSON. Thank you.

Mr. CUMMINGS. I want to thank the gentleman for yielding.

Mr. Chairman, I just want to say something very briefly while

the panel is up here. You know, as I was sitting here I was thinking to myself, you know, sometimes these kinds of things, these

kinds of hearings are held and people find it so incredible that they

find it unbelievable. People have a tendency to say, well, wait a

minute now. If that is happening, there must be something that I

am missing, because it seems as if they would have addressed this

by now.

That is why I was so pointed, Mr. Cleary, with you. I wasn’t trying to be smart, but I am very serious. I think the American people, they start looking at things, and they become very cynical. And

I am so afraid, I don’t want this to go down the cynical path and

then—and people just say, ‘‘Well, you know, it is just so incredible

it is unbelievable.’’

What I would point out, Mr. Chairman, is all they need to do is

look at the profits of these oil companies and look at the fact that

this same methodology is being used in Canada and look at the fact

that you can buy some gas in a cold month and buy the same

amount of gas in a hot month and you will get less for—am I right,

Mr. Seibert? You will get less energy for the same—when the thing

says five gallons, less energy than if you bought it in a cold month.

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Am I right? Is that it? I am just trying to break it down so that

people understand this is—you know, this is very, very serious.

My constituents are complaining every day. I go to the gas pump,

and I stand there, and I talk to them, and they are saying,

Cummings, we like you, you are a good guy, but, you know, I mean,

you got to do something about this. So it just seems as if this is

one of the many things that we need to be looking at and looking

at very seriously.

With that, I yield back.

Mr. KUCINICH. The gentleman raises a point, and that is why in

the world would they have these devices in Canada that adjust for

the temperature so that the consumers in Canada aren’t being

cheated and yet in the United States, based on this committee report, in one period alone, the summer of 2007, consumers in the

United States will pay $1.5 billion for gasoline they are not getting?

Now the committee has not extrapolated that over the period

that the industry has been taking advantage of this hot fuel, but

this—we are talking about a tremendous amount of money. And

when you take that down to the level of the individual consumer,

it really does matter. It really does matter if people are paying a

dollar more per tank or $3 more per tank for energy they are just

not getting. I mean, this is what it comes down to. This matters

to family budgets.

So the interests of this panel is serious enough that I am just

going to recommend we will go to a 3-minute round here for one

more round for the first panel, and I would like to ask Mr.

Gafinowitz just a couple more questions.

In a letter that you wrote to Senator Boxer on March 14, 2007,

you stated, ‘‘There is concern among our customers and their trade

groups that the use of automatic temperature control on an optional basis will lead to confusion in retail pricing in the marketing

of gasoline and would increase the cost of operations, while net

benefits to the consumers are more dubious.’’

To your knowledge, on what basis does Canada use the automatic temperature control devices? Is it voluntary or mandatory?

Mr. GAFINOWITZ. I believe it is voluntary.

Mr. KUCINICH. And has the fact of voluntary use of the automatic

temperature control devices caused confusion in retail pricing and

marketing of gasoline? Are you aware of any industry concern

which has demonstrated such confusion?

Mr. GAFINOWITZ. I am not sure exactly how it has worked, but

I think it is working quite effectively in Canada.

Mr. KUCINICH. And so isn’t that argument that is being used to

try to defeat it kind of a red herring?

Mr. GAFINOWITZ. I think that argument has been published fairly

widely, and I am clearly not the best placed person to comment on

that argument.

Mr. KUCINICH. I understand.

Mr. GAFINOWITZ. But there are a number of arguments on this,

including whether the cost will really deliver benefit to the consumers.

Mr. KUCINICH. As to the question whether the net benefits to the

consumer are more dubious, are you aware of a survey of actual

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gasoline temperatures taken in every State except North Dakota

and South Dakota?

Mr. GAFINOWITZ. Yes, I am aware.

Mr. KUCINICH. And this would have been data collected as part

of the EPA’s enforcement of leaking underground storage tanks?

Mr. GAFINOWITZ. Yes.

Mr. KUCINICH. And why are you aware of that? How do you

know that?

Mr. GAFINOWITZ. Well, the data was actually collected from one

of the companies in our group as part of some research project we

were doing.

Mr. KUCINICH. And what were the circumstances for the collection of those gasoline temperatures? Does Veeder-Root still collect

gasoline temperatures?

Mr. GAFINOWITZ. I am not sure whether we collect them on a systematic basis. I can confirm them at a later stage. We were collecting them at that point on a systematic basis as part of a product

development we were doing for underground storage tank monitoring devices.

Mr. KUCINICH. Would you be able to provide any of that information to the subcommittee?

Mr. GAFINOWITZ. Yes, we would.

Mr. KUCINICH. We would appreciate that.

[The information referred to follows:]

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Mr. KUCINICH. Now my staff has averaged the temperatures in

2003 on a sales-volume-weighted basis. The average temperature of

gasoline in the United States in 2003 was 66.6 degrees Fahrenheit.

What would your automatic temperature control equipment do if it

read a temperature of 66.6 degrees? Would the consumer get more

gasoline by weight or less for the money?

Mr. GAFINOWITZ. The gasoline devices, presuming that the compensating factor was set to 60 degrees, they would compensate that

for 60 degrees, and you would get an increase in energy level once

you would compensate.

Mr. KUCINICH. So you would get a little bit more for the money?

Mr. GAFINOWITZ. Correct.

Mr. KUCINICH. That would be a net benefit for the consumer. Is

that correct?

Mr. GAFINOWITZ. I believe that would be.

Mr. KUCINICH. I want to thank Mr. Gafinowitz for his participation, as well as all the panelists.

Mr. Davis, do you have any other questions?

Mr. DAVIS OF ILLINOIS. I will just ask Mr. Suiter one question.

Who primarily uses the information that NIST generates? I am trying to see if there is any way to make more effective use of the

work that you and your colleagues do. It is primarily for whom?

Mr. SUITER. Primarily what?

Mr. DAVIS OF ILLINOIS. The information that you generate is primarily for the use of whom? Who uses it? What does it cause to

happen as a result of the information?

Mr. SUITER. OK. In this instance, the information that I think

you are referring to was generated and presented as an educational

tool for weights and measures officials, primarily to allow them to

make an informed decision on the issues before the National Conference of Weights and Measures based on sound technical data.

Mr. DAVIS OF ILLINOIS. And, Mr. Seibert, it seems to me that I

heard you saying that one of the best ways for the free enterprise

system to really work is when the consumer has the same information and understanding as the supplier so that decisions are being

made on the basis of best interests from both vantage points.

Would you say that is kind of accurate?

Mr. SEIBERT. Extremely accurate, yes.

Mr. DAVIS OF ILLINOIS. And so education, public education probably is also going to be greatly needed in order to make sure that

the balance is there that seemingly we are looking for.

Mr. SEIBERT. Certainly. And, in Canada, the oil producers and

retailers were instrumental in helping Measurement Canada in

their campaign, in their public information campaign to get that

public acceptance and understanding of the system.

Mr. DAVIS OF ILLINOIS. Thank you very much; and thank you,

Mr. Chairman.

Mr. KUCINICH. Thank you.

Mr. Cummings.

Mr. CUMMINGS. Yeah. Mr. Cleary, I want to come back to you.

I just literally got your statement hot off the press, and I haven’t

even had a chance to read it, but this did catch my eye. It said,

‘‘On January 16 and 17, 1905, the National Bureau of Standards,

today known as the National Institute of Standards and TechVerDate 11-MAY-2000 10:37 Oct 19, 2009 Jkt 000000 PO 00000 Frm 00102 Fmt 6633 Sfmt 6633 U:\DOCS\51987.TXT KATIE PsN: KATIE
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nology, invited the States to participate in the development of uniform weights and measures for the United States. The relationship

grew into what is known as the National Conference on Weights

and Measures. The United States is one of the only countries in the

world without a Federal weights and measures regulatory agency.

In the United States, each jurisdiction funds its weights and measures program based upon budgetary priorities in that particular

State.’’ And then it goes on and on. But it is a nice piece for me

to start to—just a few questions I want to ask you.

When I go to the gas pump, they have these little stickers on

there saying that this has been checked by the weights and measures or something like that. And I take it that what that means

is if I get a gallon of gas at the Exxon station, for example, at Vine

and Main Street, if I go up the street to Kossuth and Main, the

gallon is the same gallon. Is that right?

Mr. CLEARY. That is correct, sir.

Mr. CUMMINGS. And what do you all have to do with that, if anything?

Mr. CLEARY. Generally, each State has regulatory officials, either

at the local level or the State level, that goes out routinely, perhaps

once a year, and tests that pump to set specifications to make sure

that the pump is delivering accurately.

Mr. CUMMINGS. And so what do you all—your organization does

what with regard to that?

Mr. CLEARY. Our organization, with regards to that, works with

the States to develop model laws and specifications and tolerances

that they accept as their State laws for testing those devices.

Mr. CUMMINGS. So that means if I was in Minnesota a gallon of

gas—and I am not even dealing with the issues we are dealing

with here. One of the major concerns, if I am in Minnesota—a gallon of gas is a gallon of gas in Florida. Not even dealing these

issues. But, I mean, as far as the liquid is concerned. Am I right?

Mr. CLEARY. Yes. That is why we exist, is to try to make sure,

through this voluntary effort, that States develop uniform specifications so that doesn’t occur, so that you don’t drive from Minnesota

to another State and have a different standard for a gallon of gasoline.

Mr. CUMMINGS. OK. I asked you a little bit earlier about a vote

possibly being delayed, and you said there has been discussion of

it. Who votes in your organization?

Mr. CLEARY. The regulatory community votes, sir.

Mr. CUMMINGS. And is that—so that, based upon what you just

answered a moment ago, that would be State folk; is that right?

Mr. CLEARY. State directors and local government officials, yes,

sir.

Mr. CUMMINGS. So does industry play a role in this at all?

Mr. CLEARY. They play a role with regard to testifying, being

part of the consensus process, being able to sway opinion one way

or the other, but they don’t have a voting role at the conference.

Mr. CUMMINGS. Mr. Chairman, I just need 2 more minutes, because he just said something that I just have to get in. I couldn’t

sleep tonight if I didn’t.

Mr. KUCINICH. The gentleman may proceed.

Mr. CUMMINGS. Thank you.

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You said they have a lobbying role. What did you say?

Mr. CLEARY. They are participants in the conference. They are

members, and they are allowed to state their opinions for the

record.

Mr. CUMMINGS. And you said sway.

Mr. CLEARY. Sometimes their arguments are persuasive, based

on technical data that the regulatory officials don’t have.

Mr. CUMMINGS. But they have no vote?

Mr. CLEARY. No, sir.

Mr. CUMMINGS. Do they sponsor travel or resort trips or anything like that?

Mr. CLEARY. They don’t sponsor travel, no, sir. They occasionally

will donate to a banquet or something at a conference. Their association will occasionally help out with an event that we are trying

to do for the membership.

Mr. CUMMINGS. Would you be kind enough to get us the information over the last, say, 3 years as to what they have donated to the

industry? You know what the industry is, right? I mean, you used

the word.

Mr. CLEARY. Yeah, they have a group within the organization

itself. I can get you any information that we have relative to that.

Mr. CUMMINGS. Staff will get you some written questions, because we want the American public to know, you know, what their

State—how their State folk are being swayed. And, you know, they

need to know that.

And do they provide meals and gratuities, too?

Mr. CLEARY. No, sir, they don’t provide meals to us, no.

Mr. CUMMINGS. So they just send you to a resort and say see you

later?

Mr. CLEARY. No, the conference dues pay for all meetings. If you

are traveling on business for the conference, the conference itself

is incorporated and pays for those things. They are not sponsored

or paid for by industry folks.

Mr. CUMMINGS. Well, why don’t you tell me what does industry

pay for?

Mr. CLEARY. Occasionally, the industry group within the organization will help sponsor, say, for instance, an after-hours event

that takes place at the annual meeting. For instance, this year in

Utah we are having a conference. There will be a reception with

some food and some drinks provided for the membership that will

be helped by the association. But the conference itself pays for the

great majority of that.

Mr. CUMMINGS. Wouldn’t it make sense, though, when we are

talking about something like this where the industry—I mean,

based upon these votes or the delay of a vote can make, in the

words of all of us, billions upon billions of dollars, that so that your

State folk who are the voting members, who come from Maryland

and Ohio and places like that, so they can feel that they have not

been swayed at all—I mean, based upon any kind of—you follow

what I am saying?

Mr. CLEARY. I understand completely what you are saying, but

ethically we would never tolerate any particular industry doing

that. I mean, that would not be tolerated. I mean, our people are

ethical people who don’t make decisions on the basis of the type of

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food that you would get at a reception that occurs in one of our conferences, sir; and I would invite you to try some of that food to determine whether or not you would be swayed one way or the other.

Mr. CUMMINGS. Are you trying to tell us the food isn’t good?

All right, just one last thing.

Mr. CLEARY. Yes, sir.

Mr. CUMMINGS. Has industry ever refused to comment on temperature compensation when asked to by the National Conference?

I mean, have you all had formal discussions with industry on this?

Formal?

Mr. CLEARY. Yes, we have had formal discussions with industry

at our open hearings. Our open hearings are the basis where we

provide anyone who has comment about a particular issue to come

forward and debate it and discuss it. And, yes, they have.

Mr. CUMMINGS. So they have made it clear that they are for or

against?

Mr. CLEARY. Certain groups within the organization, for instance, API, have made a statement that they are against temperature compensation. They have testified to that fact at our open

hearings, yes.

Mr. CUMMINGS. Do they have any oil companies for it?

Mr. CLEARY. We haven’t had any one as yet come forward from

the oil community to testify for it, no.

Mr. CUMMINGS. Thank you, Mr. Chairman.

Mr. KUCINICH. I thank the gentleman; and I think it would be

of use for this subcommittee to have Mr. Cleary provide us with information that you just spoke about, perhaps minutes of meetings,

any letters or e-mails or logs of phone calls relating to the oil industry objection to the automatic temperature control technology.

If you could provide the committee with that information, and our

staff will send you a followup request.

Mr. CLEARY. Yes, sir.

Mr. KUCINICH. Thank you, sir.

I want to thank the panel for its participation and for this discussion. The first panel is dismissed, and we are very grateful for

what you have done to help enlighten us about this matter relating

to consumers paying a billion and a half dollars for gasoline they

are not getting.

We are going to go to the second panel, and we are fortunate to

have an outstanding witness on this second panel. I say ‘‘witness’’

because we had intended to have the executives of ExxonMobil and

Shell here, and they are obviously not appearing.

Let the record show that Mr. Rex Tillerson, CEO of ExxonMobil,

was invited and declined to attend; that Mr. John Hofmeister,

president of Shell, was invited and declined to attend; and let the

record reflect that this subcommittee will be persistent in its efforts

to continue to extend invitations to ExxonMobil, Shell, and the executives of other oil companies so they will have an opportunity to

be able to put their position on the record.

Mr. Columbus, I want to apologize. You are the lone witness on

the panel. As I stated in my opening statement, it was our intention that you would be accompanied by ExxonMobil and Shell. But,

judging from your resume, I have no doubt you will be able to hold

your own nevertheless. I want to thank you for coming.

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It is the policy of the Committee on Oversight and Government

Reform to swear in witnesses before they testify. I would ask you,

Mr. Columbus, if you would rise, raise your right hand.

[Witness sworn.]

Mr. KUCINICH. Thank you. Let the record reflect that Mr. Columbus has answered in the affirmative.

Mr. Columbus, as with panel one, I ask that you give an oral

summary of your testimony and keep the summary under 5 minutes in duration. Bear in mind that your complete written statement will be included in the hearing record.

Mr. Columbus, the floor is yours.

STATEMENT OF R. TIMOTHY COLUMBUS, GENERAL COUNSEL,

NATIONAL ASSOCIATION OF CONVENIENCE STORES, AND

GENERAL COUNSEL, INDEPENDENT GASOLINE MARKETERS

OF AMERICA

Mr. COLUMBUS. Mr. Chairman, thank you. Members of the committee, thank you for showing up today. And Congressman

Cummings, I am the guy that you are waiting for; and I tell you

I look forward to your questions much the way a piata looks forward to being the center of the party.

But I, in fact, am Timothy Columbus. I am a member of the law

firm of Steptoe & Johnson, and I appear today in my capacity as

the General Counsel of the National Association of Convenience

Stores and the Society of Independent Gasoline Marketers of America. The collective membership of these two trade associations sells

approximately—I don’t know—somewhere between 60 and 85 percent of the gasoline and diesel fuel sold at retail in the United

States.

There have been a number of things upon which parts of your

inquiry have been premised that I think I would like to set

straight.

The first one is that automatic temperature correction is an issue

really centered around the motivation and interests of big oil. And

by big oil I assume we are talking, Mr. Chairman, about the integrated oil companies to whose profits you previously made reference.

The reality is this isn’t about big oil. This is about little oil. Big

oil owns and/or operates under 10 percent of the retail outlets in

the United States. The retail segment is overpoweringly dominated

by independent businessmen and women, most of whom are small

businesses. For example, NACS estimates that approximately onehalf of the convenience stores in the United States are operated by

single-store operators. So, from our view, the claims that big oil is

doing something nefarious here are misdirected. If you have a problem, it is with us, not the integrated oil companies today; and I

think after a little discussion I hope you will feel that you don’t

have a problem with us.

I sincerely appreciate the focus of the committee’s questions

today, because what you have aimed at is consumer welfare, and

I think that is where we should start. As in all inquiries relating

to marketing practices, consumer welfare really is supposed to be

the primary value that we are seeking some certainty on. And, historically, the role of government in this kind of inquiry has been

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to identify deceptive and/or fraudulent practices, to act to enhance

market transparency so, as Mr. Davis pointed out, well-informed

consumers can make well-informed and self-interested decisions,

and to minimize consumers’ costs by assuring that consumers benefit from efficient and competitive markets.

I believe the review of the facts relating to each of these policy

objectives indicates that government action mandating a change in

retailers’ marketing practices in selling non-temperature corrected,

‘‘gross gallons,’’ would produce no, no increase in consumer welfare,

is more likely to harm consumer welfare than help it, because I

think what you are going to do in net, net is raise consumer prices.

Retailers selling gross gallons of motor fuels does not constitute a

deceptive practice.

Let’s talk about what a deceptive practice is. It is a broken promise. A deceptive practice I think is when someone looks up and says

I am going to sell you this and delivers something other than the

promised good.

The transaction at a retail motor fuel outlet is simple. The consumer comes in and purchases a standard gallon, defined as 231

cubic inches of a hydrocarbon mixture which meets the definitional

standards of gasoline or diesel fuel as set out by ASTM for that

standard gallon and pays the price posted on the big sign out in

front of the outlet. I submit that is exactly what happens and that

all consumer expectations as to what they are going to get have

been fulfilled.

Mr. Chairman, the fact that many—in fact, most retailers buy

gasoline—and let’s just talk about gasoline. We will get to diesel

fuel if you want to focus on that, too—on a net gallons basis as opposed to a gross gallons basis is of interest, but it is not dispositive

as to different transactions. And we can talk about—and I am sure

I am going to get a chance, based upon your prior questions—about

why people use net and gross at different levels. The terms upon

which the retailers bought motor fuel are not relevant to the terms

of the transaction, which is a retail sale.

Now some have asserted even today that consumers have an expectation of a certain number of British thermal units in a gallon

of gasoline and that ATC, automatic temperature correction, will

assure that the same amount of energy is in each gallon. Mr.

Chairman and members of the committee, I deny that is going to

happen. And it is not because anybody has anything nefarious

about it. It is because today there are virtually no two gallons of

motor gasoline which have the same number of Btu’s in them. The

number of British thermal units in a gallon of gasoline is going to

be a function of what crude oil was processed at a refinery, what

machines took the off-put of the distillation towers and turned it

into whether that is a catalytic cracker or reformer or an alkalization unit. There are a whole lot of them.

One of the things that is absolutely going to positively affect how

many British thermal units there are in a gallon of gasoline is

whether or not you blended ethanol with it. A 90–10 blend of ethanol is going to diminish the number of British thermal units in a

gallon of gasoline.

So if that is our principal point of inquiry today, Mr. Chairman,

I urge you to run right over to the Commerce Committee, because

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they are on their way to a 38 billion gallon ethanol mandate. And

if Btu’s is the coinage of choice, we should be concerned about that.

The fact is that the standard definition of gasoline, which is an

ASTM definition, doesn’t even reference Btu’s. It is a performance

standard.

Now, in summary, as long as the product meets the appropriate

definition performance characteristics set out by the association—

the American Society of Testing and Materials, I think it is—and

the consumer gets 231 cubic inches of that, I believe the retail

transaction has not been deceptive and the consumer has purchased what he or she intended to.

Now the question is, would ATC, automatic temperature correction, equipment being installed at retail enhance consumer welfare? I think the answer to that is no.

First of all, as I pointed out, we still are not going to know, based

upon temperature, how many Btu’s there are in the gallons sold on

the east side of the street as opposed to the gallons sold on the

west side of the street. They may come with different—I know I am

running long, Mr. Chairman, but give me a break here. I am asking for some leniency before I take my whipping.

Due to different API-specific gravities, there is going to be an increase in cost. And you can talk whether it is $2,000 or $3,000 per

pump—the average outlet in the country has four pumps, all right?

So you are talking $8,000 to $12,000 for a retrofit.

Now, last year, the average convenience store in the United

States made under $34,000 of pretax profit. That is the average

store. So that means there are a bunch who made less than that.

So you put that kind of capital requirement onto those stores and

you are going to see the marginal outlets in the market leave.

The loss of those outlets may or may not have an upward price

pressure, but two things are true. No. 1, normally increased concentration results in higher prices. No. 2, it is certainly a loss of

consumer choice. And consumer choice has historically been viewed

as a primary consumer benefit. The higher capital costs imposed on

the remaining retailers are going to be recovered in higher product

prices. And permissive with respect, Mr. Chairman, and I would be

happy to talk to you about this today, I believe that the permissive

use of ATC in this economy would be a nightmare for consumers.

So, finally and most importantly, I am telling you what I am

hoping you are going to understand. The allegation from Mr.

Seibert is that somehow consumers are not getting what they are

paying for and that really what ought to happen is that when

somebody buys a gallon they ought to get more product. Well, OK.

You can define a gallon of gasoline any way you want. You can define it as Hawaii has, as 234 cubic inches; you could define it as

500 cubic inches. One of the things I am pretty sure of is, if a

greater measure of value passes out in a transaction, the price

term is going to change on that. You know, if you buy a 4-ounce

candy bar as opposed to a 3-ounce candy bar, my guess is you are

going to pay more for the 4-ounce candy bar. Mandating or permitting on an unrestricted basis ATC at retail motor fuel sales I believe will deliver no increase to consumer welfare and very well

may risk consumer welfare by generating a loss of consumer choice

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and, in fact, increased consumer confusion in the event of permissive and higher prices.

You have been very patient. Thank you, Mr. Chairman.

Mr. KUCINICH. Thank you very much, Mr. Columbus, for your

testimony.

[The prepared statement of Mr. Columbus follows:]

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Mr. KUCINICH. Before I ask my questions, I would just like to say

that you spent a lot of time talking about the differences between

Btu’s here and Btu’s there.

Mr. COLUMBUS. Right.

Mr. KUCINICH. And I would like to suggest that this isn’t so

much about the Btu’s as it is about the b-u-t’s.

Mr. COLUMBUS. OK.

Mr. KUCINICH. But Canada has this technology, and the United

States does not. But Americans are paying more for gasoline they

are not getting and Canadians are not. But oil companies are gaining a windfall of $1.5 billion, according to this staff report, just in

the summer of 2007, and but there is no evidence that the retailers

are getting this money from this scheme. And but you are saying

that customers may have to pay more if you have this automatic

temperature control, but they don’t have it and they are paying

more? So the oil companies apparently have the people coming and

going.

No, that’s not acceptable. I don’t think that we can let the American consumers be hostage.

I have some questions here that relate to your testimony. We

have heard from retailers who claim that the profit they make on

a sale of gasoline is slim to nonexistent.

Mr. COLUMBUS. That is correct.

Mr. KUCINICH. We have heard that the profits are in the food

and other concession sales at the convenience mart. Now is that

generally true for your members?

Mr. COLUMBUS. I believe that is so.

Mr. KUCINICH. OK. At the same time, they are making slim to

no profits on the sale of gasoline.

Mr. COLUMBUS. Correct.

Mr. KUCINICH. ExxonMobil, Shell, and other integrated oil companies are making very significant profits. In 2006, ExxonMobil

made $39.5 billion in profits alone. They are the envy of every business, and I bet your members are wondering how it is they sell the

gasoline and ExxonMobil earns the profits. What do you tell them?

Mr. COLUMBUS. Actually, they don’t ask me that question because they already know the answer.

Mr. KUCINICH. But what do you tell them?

Mr. COLUMBUS. What do I tell them? They don’t manufacture

this. They are price takers at the wholesale level, and in a special

way they are price takers at the retail level. The market sets the

wholesale price. It is what it is.

If we had a lot more gasoline supply in this country, Mr. Chairman, my bet is those wholesale prices would be lower. As a representative of buyers of gasoline at the wholesale level, we love

long supply situations. We don’t have that today. I suspect that my

people will do what they have continued to do, which is they will

buy gasoline at the best price that they can find it in the market,

and they will sell it at the best price at which they can sell it in

the retail market and, by trying to control their costs, maximize

the profit that they realize out of the difference between those two

prices.

Mr. KUCINICH. OK. So what we have established here is that

these retailers are making slim to no profits. They are not the ones

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keeping the profits in gasoline sales. So it would stand to reason

that they are not the ones keeping the profits from hot fuel sales.

Mr. COLUMBUS. Well, if I may respond, sir?

Mr. KUCINICH. Of course.

Mr. COLUMBUS. The theory is that retailers—I mean, when we

are talking about automatic temperature correction, we are talking

about it at retail. So the theory must be that the retailers are

somehow making a lot of money on this.

Your staff I think in briefing you, Mr. Chairman, if I understand

the premise of your question, has suggested that somehow these

guys are getting free gallons. I think if you go into—and I am talking about the retailers. If you go into the retailers’ books, what you

will see is that any inventory gain on expansion fundamentally

goes to reduce costs of goods sold.

And that is how they will account for it. But the reality of it is

that the profitability on motor gasoline of the retail segment of this

country’s petroleum industry is very, very thin.

Mr. KUCINICH. Let me ask you this. How do you think the

Exxons and the Shells get the hot fuel premium once they have

sold the gasoline to retailers in temperature compensated gallons?

Mr. COLUMBUS. I believe they don’t, sir, because I believe that

the, ‘‘hot fuel premium,’’ is a characterization of something that I

think my people disagree exists.

Mr. KUCINICH. OK. Now we are getting existential. Is there such

a thing as thermal expansion?

Mr. COLUMBUS. There is. There is also thermal contraction. And

earlier you asked someone else why do people in Canada do this

on a permissive basis? Because for years retailers in Canada saw,

saw, actual inventory shrinkage because they bought at 60 degrees

and they were selling something less than 60 degrees. And if they

were competing with someone whose sole source of profit was not

retail sales and therefore did not feel a need to recover that shrinkage in the retail market they were being penalized. So when the

Canadians went to this it was in the retailers’ economic interest to

get rid of that inventory shrinkage. That doesn’t make them bad

people; that makes them business people.

Mr. KUCINICH. Do oil companies buy and sell to each other at

wholesale at the 60-degree standard?

Mr. COLUMBUS. Yes, sir, they certainly do. And there is a good

reason for that.

Mr. KUCINICH. And at retail isn’t it true that oil companies buy

at one temperature and sell to consumers at another.

Mr. COLUMBUS. My people are oil companies, and they sell retail

at gross. So the answer is yes.

Mr. KUCINICH. Thank you. Mr. Davis.

Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Chairman.

The more I listen and the deeper we get into this discussion it reminds me of a limerick that says never ask of money spent where

the spender thinks it went. Nobody was ever meant to remember

or invent what they did with every cent.

As I guess for the consumer trying to figure out who got my money, I mean you spend $50 to fill up the tank and you are trying

to figure out, well, if the convenience store operator didn’t get it because they are barely making it, I mean their profit margins are

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not that great, if the guy who brought it to the station isn’t getting

it, he is just a regular working person who is hauling or transporting gasoline, the person working at the foundry——

Mr. COLUMBUS. Didn’t get it.

Mr. DAVIS OF ILLINOIS [continuing]. Didn’t get it, where is it.

Well, the oil companies when we look at their profit margins must

have gotten something that produce these tremendous profits. Now,

we know that the cost of living, the cost of things are constantly

rising. But have other things risen as much as the price of gasoline

seems to be rising?

Mr. COLUMBUS. The short answer, what I can focus on for you,

and I hope I help you with, is how it works at retail, because ATC

is really focused at retail. And if it turns out that the good dog is

hunting the wrong beast then my mission has been accomplished

here today. Something that has gone up a lot faster than retail and

gasoline prices is credit card fees. At $3 a gallon that retailer is

sending any place from 61⁄2 to 9 cents a gallon to credit card com- panies. Because at $3 a gallon people want to use that card, they

don’t want to use cash any more, Mr. Davis.

When I started working for this industry I had hair, I had a jaw

line, I had a waist. That is 30 some years ago. At that time the

domestic industry’s manufacturing capacity overhung demand by

about 2 to 5 percent. Today we are a net importer of gasoline. And

if you are looking for what happened to gasoline prices, I urge you

to start there because it is the old saw, it is supply and demand.

When product is tight, prices go up whether or not the cost to manufacture it does. The market prices this product. And if we were

to look at all these retailers and say, OK, now we are going to automatically temperature correct every gallon that you sell, OK, if

rather than 231 cubic inches that customer gets 234 cubic inches,

I believe, maybe I am a pessimist, but I believe the price for that

234 cubic inches is going to be different and higher than it was for

the 231. That is exactly what has happened at the wholesale level.

As to the chairman’s inquiry about why are we using net gallons,

temperature corrected gallons at wholesale as opposed to retail,

most of it is the nature of the transactions for which this was

aimed. And that is bulk transactions. We are talking pipeline

tenders, cargos, barges, moving between terminals. And not just

within the same market area, Mr. Chairman. These guys balance

their supply imbalances normally by trading. You may tradeoff

with somebody. You can put a pipeline tender in the Colonial Pipeline system, which is the major source of gasoline for this city, in

Pasadena, TX and it comes by us, goes up to Linden, NJ. That is

21⁄2 weeks. In that time it will all change. So when these guys were

settling their books at the end they wanted a constant temperature

up, down, north, south, east, west. I think that is why it happened.

In contrast, retail motor fuels in this city all come from one of

three terminals. They either come from Baltimore, they come from

Fairfax or they come from Newington down south on 95. They go

into trucks through the same ambient air temperature with the

possible exception of differences in water tables. They have the

same ambient water temperature. We don’t see those kinds of differentials that require that. So the guy across the street probably

has gasoline that came from the same terminal via the same route

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and went into a tank with the same temperature. So it really is

apples to apples.

Mr. DAVIS OF ILLINOIS. Let me just finally make sure that I just

heard you suggest that it would be a nightmare if we went to utilization of this system.

Mr. COLUMBUS. On a permissive basis, that is right. Let’s assume that you and I are across the street from each other, you are

a retailer, I am a retailer. I decide to put ATC in, you don’t. Now,

I am going to have my gallon priced on a temperature corrected

basis and you aren’t going to have that done. What is that going

to mean to the consumer? This isn’t going to the Safeway and saying here’s the 10-ounce can of peas and here is the 8-ounce can of

peas and I have unit pricing to tell me which is the better deal.

Most people buy gasoline on a decision that takes place while they

are doing 25 to 50 miles an hour. And how are you going to compute? Am I going to know that temperature corrected gallon because I have 234 cubic inches as opposed to 231 on a per cubic inch

basis is going to be better?

Mr. DAVIS OF ILLINOIS. Or would the consumer go where they

thought they were getting the best price?

Mr. COLUMBUS. The consumer is going to go where he or she

thinks. Today everybody is buying 231 cubic inches of the same

product across the street from each other. They are getting that.

This has been the most price transparent and, from my perspective, consumer friendly in the sense that there is very little consumer confusion about what you buy in the commodities market in

the United States. I think it has served the consumer well, sir.

Mr. DAVIS OF ILLINOIS. Thank you very much and thank you, Mr.

Chairman.

Mr. KUCINICH. Thank you, Mr. Davis. The Chair recognizes Mr.

Cummings.

Mr. CUMMINGS. I tried to hang with you, I tried. And it has gotten—I mean, I am just confused, but I am going to straighten myself out with your help.

Mr. COLUMBUS. I am going to do the best I can for you, sir.

Mr. CUMMINGS. You made the argument that retrofitting existing

pumps and buying new pumps with temperature compensation

technology would be a burden, is that right?

Mr. COLUMBUS. Yeah. It is a cost and it is not a productive

source in the sense if you put a new computer in your business you

may be able to cut down costs. This is just a cost. I am not going

to sell one more drop than I did before I put it in. So yes, sir.

Mr. CUMMINGS. So I take it that you consider it a benefit when

we put in card readers enabling customers to use their credit

cards? That is the difference you are making?

Mr. COLUMBUS. The short answer is yes, we put them in because

that is what the consumer wanted. Paying the current credit card

fees that we are paying, Congressman, we do not view as a benefit.

Mr. CUMMINGS. Well, you are helping me because I tried to give

you a softball to hit a home run and you just said something that

you are putting them in there——

Mr. COLUMBUS. Right.

Mr. CUMMINGS [continuing]. But you are saying that doesn’t help

you.

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Mr. COLUMBUS. It helped take unnecessary traffic out of our

stores which was slowing down the time of a transaction at the

counter. The fact that we are dealing with people who have very,

very substantial market power, perhaps monopoly market power in

terms of charging us what the consumer—you know, we are paying

a multiple in the United States on credit card fees of what they pay

in Australia or Canada or Europe, sir.

Mr. CUMMINGS. I got you. Do gas pumps last forever?

Mr. COLUMBUS. I’m sorry, sir?

Mr. CUMMINGS. Do gas pumps last forever?

Mr. COLUMBUS. No, they don’t. My understanding is unless there

is some huge technological breakthrough that renders everything

obsolete, these things are normally good any place from 8 to 12

years. The gentleman from Gilbarco probably knows a lot more

about that than I do.

Mr. CUMMINGS. Isn’t it a normal business operation to phase old

pumps and install new ones?

Mr. COLUMBUS. Well, it is. But what you may have noticed

around town in the retail market is that there are a lot of retail

outlets that companies have turned over to other people because

they can operate them less cheaply. They don’t have to have labor

24/7 because you have a little entrepreneur who is sitting there.

That person will hang onto those pumps as long as he or she can,

Congressman, because to replace that pump is a solid five figure

investment. I bet, what is it, 10, maybe 20 percent of, for example,

the pumps in the country are still mechanical.

Mr. CUMMINGS. Some of them will be replaced, that is my point.

Mr. COLUMBUS. Yes, sir, they will be.

Mr. CUMMINGS. So how come temperature compensation is being

singled out as a burden? And let me just tell you where I am going.

Let me give you a shortcut. You know, I am sitting here and I have

to tell you when I go home I don’t know whether this is on C–

SPAN or not. But I can tell you today when I go to the Safeway

buying my fruits and vegetables somebody is going to say I saw you

on television and they really must think you are not bright. I am

telling you, that is what they are going to say. They are going to

say because we heard all those arguments, but the gas price is still

going up. And do you know what, they are going to talk about

Davis, they are going to talk about him. And they will say Davis

said the right thing, somebody is making some money. And the

question is, they are going to say, hey, Cummings, where is the

money going? And then they are going to say, you had that guy Columbus, was that his name, that is what they are going to say, he

tried to tell you. I can hear them now. You are going to be big time

popular in the city of Baltimore. Then they will say that he sat

there and tried to tell you that these gas stations aren’t making

money. And then I remember you reading from his testimony on

page 2 where he said that government should take no action related to this matter we are discussing today.

Mr. COLUMBUS. Automatic temperature correction, sir.

Mr. CUMMINGS. So my folks are going to say you know why are

you there, Cummings?

Mr. COLUMBUS. If you want, and this is free counsel, so take it

for what you are paying for it.

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Mr. CUMMINGS. I need your help.

Mr. COLUMBUS. I will suggest that you should answer that one

of the reasons that the chairman and you all came to this hearing

today was to try to find out if this was the beast that could really

help you provide some relief to your folks on that issue. And I love

the limerick because I am telling you my folks would love more of

this money. I mean they would love a lot more of this money. And

they are not getting it. And if I look up at you and I think I can

document to all your satisfaction that we are not the people taking

this money, the question is well, then if temperature correction is

a retail issue and they are not getting the money now, what the

dickens am I doing jumping on this? And the answer is I think that

you have been offered a very attractive proposition that somehow

the consumer is getting short-changed something here. And the terrible thing about my task, Congressman, is this is a 30-second complaint and like a 40-minute answer, and that doesn’t play as well

on C–SPAN as I would like it to.

Mr. CUMMINGS. Mr. Chairman, I just have one more thing. The

fact is that—if I could boil your argument down, it is that the retailers are not getting anything out of this.

Mr. COLUMBUS. Correct.

Mr. CUMMINGS. Second, that the reason why you are sitting

there and you are against this—there are two reasons, one, you

don’t think the information is necessarily accurate, although you

did answer the chairman’s question saying there is a difference, I

don’t know which you think, and two, that it would be a burden

for your folks, is that right, the retailers?

Mr. COLUMBUS. Yes. And I will add one other thing. I don’t think

the consumer is going to know more after this than before, and

therefore there is no increase in consumer benefit.

Mr. CUMMINGS. And that leads me to my final point. Is it possible that if we had the machinery—let me tell you something. I

have people in my district that make $300, $400 a week, a family

of three and four, I have a lot of single mothers that drive long distances to get to work.

Mr. COLUMBUS. That is brutal.

Mr. CUMMINGS. And there is a flip side to your argument. And

that is that we have a radio station in Baltimore, and I am sure

that they are popular everywhere, where they tell you where the

lowest gas is. And everybody tunes into where is the lowest gas.

And when you go to that gas station people are lined up, lined up

trying to get some gas because it may be 3 cents cheaper than anywhere else. And I guess what I am saying to you is I think you underestimate the consumer. I think you underestimate maybe, just

maybe if they had this machinery and people knew that they were

going to get more miles, do you follow what I am saying, for that

gallon or whatever, maybe just maybe when they are on a limited

income they would say, just like when they listen to the radio station and they line up, they would say, well, maybe I need to go

somewhere where I can get an extra 3 or 4 miles because I don’t

have this kind of money, I can’t go on vacation, I can’t take my kids

on vacation, I can’t even go shopping, they may be saying, because

I have to reduce the number of trips that I make because I have

a limited income. And so they take the moments to try to educate

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themselves so that they can say, ‘‘a penny saved is a penny

earned.’’

I know people don’t believe people live like this. Let me tell you

they do. And lot of Americans do. People sitting in this room may

not, but a lot of Americans are pinching pennies and a lot of those

pennies are falling into those billions upon billions of dollars that

these companies are making.

I am sorry, Mr. Chairman. It just aggravates me when it seems

as if folks don’t understand that people are in pain and they are

suffering.

Mr. COLUMBUS. Congressman, let me respond. No. 1, I agree

with you completely, I think people really are pushed today. I think

a lot of people are pushed. No. 2, I think anybody who underestimates the wisdom and intellect of the consuming public is crazy

and destined to bankruptcy. Now, No. 3, there is a fact assumed

in all this that is not in evidence, and that is if we had this equipment someone would get 3 cubic inches more of gasoline at the

same price that they got 231 before. And that is the premise that

I challenge, sir. It is not that they wouldn’t be motivated economically and smart enough to go find the best value for themselves.

They do. They do the best job they can. I just don’t think they are

going to get the value bump that the proposition postulates.

Mr. KUCINICH. Mr. Cummings, you raise an excellent point here,

which further justifies the purpose of this hearing. When any of us

are looking for a place to buy gas we are looking at the signs and

we are looking at what they are paying for regular or premium, depending on the kind of gas we buy, and we will study the corners

or we might drive down the road and decide we are going to get

a better deal here.

Mr. COLUMBUS. Yes, sir.

Mr. KUCINICH. When consumers learn that because of this thermal expansion they end up paying for gasoline they are not getting,

that choice that they make becomes somewhat questionable because they see whether they go one place or another place, they are

still paying anywhere from $1 to $3 a tank for gasoline they are

not getting.

Now, here is what we found out from this hearing today that is

very interesting. We heard from an industry association that hasn’t

wanted the automatic temperature control devices, we have heard

from retailers who do not want the automatic temperature control

devices, we know the oil companies don’t want the automatic temperature control devices and yet the oil companies are making as

much as a billion and a half dollars off of consumers for this summer alone for gasoline that they are not delivering. This committee,

this Domestic Policy Subcommittee is going to continue to explore

this vital consumer issue, and we will once again invite the oil companies in to testify.

I want to thank all the members of the committee for their participation. Mr. Columbus, thank you and all the witnesses. Today’s

hearing of the Domestic Policy Subcommittee, the title has been

‘‘Hot Fuel: Big Oil’s Double Standard for Measuring Gasoline.’’ I

am Congressman Dennis Kucinich of Cleveland, OH, chairman of

the subcommittee. Thank you for all attending. This committee

stands adjourned.

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[Whereupon, at 11:15 a.m., the subcommittee was adjourned.]

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