CIOMA Requests Attorney General Investigation of Legality of Fuels Under the Cap

Posted by Kassy Perry

Letter to Kamala Harris addresses damage to competition in wholesale fuels market due to CARB regulations

SACRAMENTO, Calif.–The California Independent Oil Marketers Association (CIOMA) today requested that the California Attorney General immediately open an investigation into “competition destruction” of the independent oil and fuels industry by the California Air Resources Board as a result of the design of the wholesale fuel market under “Fuels Under the Cap” regulations.

In a letter dated September 8, 2014 addressed to California AG Kamala Harris, CIOMA described the impact of AB 32 cap-and-trade regulations on its members, stating that Fuels Under the Cap will create an anti-competitive, high-risk market for independent fuel distributors, which could cause many of its members’ businesses in California to fail.

“The typical independent fuel supplier cannot pass along the cost of cap-and-trade to its wholesale fuel customers without absorbing significant financial risk,” said Jay McKeeman, Vice President of Government Affairs and Communication for CIOMA. “Instead of absorbing this risk, they are likely to abandon the wholesale fuels market entirely.”

Fuels Under the Cap regulations require wholesale fuel marketers to purchase carbon credits for fuel sold. Small to mid-sized businesses do not have the finances to purchase carbon credits in advance, forcing them to purchase credits after fuel has been sold. Any miscalculation could leave their business paying more for carbon credits than what was earned in fuel sales, creating a high risk marketplace.

Fuels Under the Cap is a part of existing cap-and-trade regulations implemented by the California Air Resources Board (CARB). CIOMA has been in conversation with CARB since December 2013 in an attempt to revise regulations and withdraw small independent fuel wholesalers from obligation under the Fuels Under the Cap regulations.

CIOMA represents small, privately-owned fuel suppliers that offer a low cost alternative for transportation fuels with unbranded fuels. These fuel suppliers comprise approximately 15 to 20 percent of the transportation fuels sold statewide. The type of customers who typically rely on unbranded fuels include farmers, local governments, law enforcement agencies, fire departments, emergency vehicles, school district bus fleets, hospitals and others.

“CARB is not considering the additional price hikes at the pump that would result if there was no market competition,” said McKeeman. “Our hope is that the Attorney General’s office will analyze these issues and examine the negative impact Fuels Under the Cap regulations will have on California fuel consumers’ pocketbooks, as well as the destruction of an industry of small and independent businesses supplying the infrastructure of the state.”

About the California Independent Oil Marketers Association (CIOMA)

CIOMA is a non-profit, statewide association of convenience store owners, independent wholesale and retail marketers of gasoline, diesel fuel, jet fuel, lubricating oils and other petroleum and energy products. Our mission is to promote and defend the trade and traditions of independent energy marketers and related retail operators, thereby preserving the customer’s right to choose.