Mr. Sean Cota 

Co-Owner & President, Cota & Cota, Inc. 

Northeast Chair, Petroleum Marketers Association of America 

President, New England Fuel Institute 

Testimony before the 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, NW, Washington, DC 

September 18, 2007 

Honorable Acting Chairman Lukken and Commissioners Dunn, Sommers and Chilton, 

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

provide insight as both a petroleum marketer and on behalf of two trade groups 

representing motor vehicle and heating fuel dealers nationwide. 

First, we would like to congratulate both Ms. Sommers and Mr. Chilton on their recent 

Senate confirmations. Congratulations are also in order in light of Mr. Lukken’s recent 

nomination as Chairman of the Commission. We are encouraged by recent enforcement 

activities and by this hearing, and we look forward to working with you all as the 

Commission and the United States Congress continue to evaluate the need for new 

oversight and new partnerships with key market players, from the energy trader down to 

the American consumer. 

I currently serve the Petroleum Marketers Association of America (PMAA) as its 

Northeast Regional Chair. PMAA is a national federation of 45 states and regional 

associations representing some 8,000 independent fuel marketers that collectively 
Testimony of Sean Cota before the Commodity Futures Trading Commission Page 2 of 5 

account for approximately half of the gasoline and almost all of the distillate fuel 

consumed by motor vehicles and heating equipment in the United States. 

I am also President of the New England Fuel Institute (NEFI), a 60-year-old regional 

trade association located just outside Boston, and as such, I am here representing over 

1,000 fuel dealers and related services companies located throughout Northeastern United 

States. NEFI member companies deliver over 40 percent of the nation’s home heating 

oil, and many market biodiesel, bioheat, propane, kerosene, jet fuel, diesel fuel and 

gasoline. 

I am Co-Owner and President of one of those companies, Cota &Cota, Inc. of Bellows 

Falls, Vermont. Cota & Cota is a third generation family-owned and operated home 

heating fuel provider in southern Vermont and western New Hampshire. Unlike larger 

energy companies, most fuel dealers like me are small, second and third generation 

family-run businesses. Also unlike larger energy companies, heating fuel dealers deliver 

directly to American homes and small businesses, and therefore have developed close 

relationships with our customers, their families, and our local communities. 

The average full service heating fuel provider has approximately 30 employees and 4,000 

heating oil customers, delivers approximately 3.3 million gallons of heating oil per year, 

and those selling propane average about 2,000 customers and deliver 800,000 gallons per 

year.1

 

1

 Information courtesy the “2006 Oilheat Survey,” Gray Gray & Gray,LLP, Westwood, MA, 2006. 
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In a survey of NEFI and PMAA member companies earlier this year, excessive volatility 

and the need for greater transparency and accountability in the energy commodity 

markets ranked as a top public policy concern for our member companies. This issue 

resonates with them so strongly due to the fact that many of these companies, including 

mine, hedge for the benefit of the consumer. 

Because of our hedging activities, we strongly support the exchange of commodity 

futures on open, transparent and well-managed exchanges subject to the rule of law. In 

fact, it is essential to businesses like mine. In an effort to protect my customers against 

roller-coaster-like price volatility on the energy commodity markets, I must resort to 

hedging programs. 

My company began offering fixed price programs to our customers twenty years ago. It 

is commonplace at my company, and many others, to enter into New York Mercantile 

Exchange (NYMEX) based futures contracts with our suppliers, who purchase contracts 

for future delivery and resell these contracts to me for a profit. In this way, companies 

like mine are able to financially hedge heating fuels for the benefit of our customers, and 

help protect them against uncertainty and volatility. 

However, as the influence of price-setting functions on unregulated or under-regulated 

markets continues to grow, and as trading on over-the-counter and foreign-based 

exchanges continues to become the norm, American consumers are forced to ride the 

same roller coaster as the energy trader. Because the Commodity Futures Modernization 
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Act (CFMA) created a new breed of markets – the exempt commercial market (or ECM) 

- and deregulated over-the-counter markets as a whole, this roller coaster has become 

more unstable and the volumes of products controlled by one market player alone can 

determine the direction of the ride. 

In a letter to Congress earlier this month, the Energy Market Oversight Coalition, which 

represents over 70 national, regional and state consumer and trade groups, including 

NEFI, PMAA and their member states, said that recent allegations against Amaranth 

Advisors, LLC and other large hedge funds “have put to rest the notion that the market is 

too big and too complex to be manipulated.” The letter pointed to a broad array of 

actions that Congress can take to strengthen the Commission, aid in its enforcement 

efforts and create a more stable trading environment. 

In addition to reiterating the need for reform as called for in that letter, we specifically 

urge that the Commission to: 

(1) Revisit the use of “no-action” letters and revaluate the need to withdraw existing 

no-action letters held by foreign boards of trade that perform price discovery 

functions for U.S. destined energy commodities; 

(2) Ensure that current and future regulation of ECMs is sufficient to regulate trades 

of all energy commodities essential to the health and welfare of American citizens 

and the American economy; and 
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(3) Include in its Advisory Committees interests and perspectives not currently 

represented, including those of small businesses, consumers, energy distributors, 

storage companies, and noteworthy academics. 

Finally and perhaps most importantly, we ask that in these deliberations and in evaluating 

the need for additional oversight, the Commission consider the well-being of American 

small businesses, struggling families and the economy at-large. We ask that you 

vigorously enforce existing regulations and that you work closely with Congress, key 

market players and groups like those represented on today’s panels to establish new 

oversight requirements that would provide a level regulatory “playing field” for all 

market participants. We ask you take all measures necessary to rein in excessive 

speculation, to minimize market volatility, to prevent market manipulation before it 

occurs and to close the door to those that would otherwise artificially inflate prices for 

their own personal gain. 

I thank you again, Mr. Chairman, and to your colleagues for this opportunity to share my 

insight on this issue. I am open to any questions that you might have.