remained elevated in many markets for over
one month until mid to late December.
Between October 25 and their post-
Sandy peak, rack basis differentials to
NYMEX HO at 11 rack locations (Albany,
Newburgh, Linden, New Haven, Harris-
burg, Philadelphia, Baltimore, Providence,
Boston, Springfield, and Newington; using
Oil Price Information Service daily aver-
ages) strengthened by an average of 9.41
cents. By December 11, rack differentials
had fallen by an average of just 4.4 cents
per gallon, and none of the 11 locations had
returned to pre-storm levels.
Since the storm, some measures have
been taken to improve the resilience of
regional energy infrastructure, but it never-
theless remains aging and vulnerable. And,
as we have seen, an increasing reliance on
refined product flows from outside of the
region poses greater risks in both price and
availability from storm activity elsewhere.
Another factor to consider is that supply
of refined products to the East Coast has
to compete with demand from elsewhere.
Even if the supply economics make sense to
ship barrels from the Gulf Coast to the East
Coast due to price differentials exceeding
transport costs, better margins might be
had by transporting product to the Midwest
or abroad as exports.
Although refinery utilization in the Gulf
Coast and Midwest has been running near
all-time highs, East Coast distillate fuel
inventories were at a small year-over-year
deficit and a sharp deficit to their five-year
average in early August; distillate fuel
exports had been running at a strong 1.03
MBD for three weeks.
WET BARREL ADVANTAGES
Atlantic storm activity is one among
the many risks to pricing and availability of
refined products to consider, and one that
highlights the interconnectedness of our
energy infrastructure and geographically
distant markets.
Wet barrel contracts with suppliers can
be one way to mitigate these risks, as they can
not only protect your margins from spikes in
rack basis differentials to NYMEX futures
but give you supply priority at the rack.
Basis differentials in offers for the
upcoming winter have come down con-
siderably since the specification change
in NYMEX HO futures was introduced in
May. Contact your supplier periodically to
see if you are offered differentials you view
as favorable, and consider wet contracts to
limit basis risk as one tool in your arsenal to
protect your margins.
Fleet Management
DOT Changes
Hours of Service
Rules Again
By Matthew Wrobel, Foley Services
They are the rules that just won’t stop
getting revised. Yet again, there is news
about changes to the hours of service reg-
ulations. This time, however, the Federal
Motor Carrier Safety Administration
(FMCSA) is not willingly changing the
rules; they were forced to do so as the
result of a long-standing lawsuit filed by
the American Trucking Associations and
Public Citizen, a safety advocacy group.
Under the newly revised rules, short
haul drivers will not have to follow the
rules requiring a 30-minute break every
eight hours.
THE NEW RULE
On August 7, FMCSA released a
notice on its website with the following
clarification:
“Effective August 2, 2013, FMCSA
will no longer enforce 49 CFR 395.3(a)
(3)(ii) against any driver that qualifies
for either of the “short haul operations”
exceptions outlined in 49 CFR 395.1(e)
(1) or (2). The Agency requests that State
and local enforcement agencies also refrain
from enforcing the 30-minute rest break
against these drivers. Specifically, the fol-
lowing drivers would not be subject to the
30-minute break requirement:
• All drivers (CDL and non-CDL) that
operate within 100 air-miles of their
normal work reporting location and
satisfy the time limitations and record-
keeping requirements of 395.1(e)(1).
• Non-CDL drivers that operate within a
150 air-mile radius of the location where
the driver reports for duty and satisfies
the time limitations and recordkeeping
requirements of 395.1(e)(2).”
OTHER EXEMPTIONS
The 30-minute rule has been one of the
most questioned aspects of the new regula-
tions. Confusion spread in July as FMCSA
launched a special exemption for livestock
haulers in the months of July, August and
September 2013. This was done to pre-
vent the animals from overheating in the
stationary trailer. This exemption is still in
place. Please note that
on October 1, 2013,
this rule will no longer be in effect and
drivers will need to take breaks
(unless
they are short-haul exempt).
TIMING
The timing on the short haul exemption
is interesting. The court passed its ruling
on August 2. The decision gave FMCSA
up to 52 days to implement the changes.
However, the Agency took only five, put-
ting up the notice on August 7. They also
backdated the rule to August 2. This means
that carriers can instruct their drivers to
immediately cease taking 30-minute breaks.
FMCSA has said that it will take action
against any State partner that continues to
enforce the rule.
THE COURT CASE
While it has resulted in a change in
regulations, the court case was largely a
victory for FMCSA, because it had the
potential to completely throw out the rules.
That result had already happened to the
DOT in an earlier court battle the last time
they tried to change hours of service.
With the late ruling (it came more than
a month after it was expected), both sides
can claim a small victory and, hopefully, the
issue will be put to rest. Typically, compli-
ance enforcement issues occur when safety
officials are unclear about the regulations.
When the rules are constantly changing,
errors are common.
EIGHT-HOUR CLARIFICATION
We have also received a large number
of questions about the 30-minute rule on
our blog (
.
For clarification, the driver does not have
to wait eight hours before he or she can take
a break. They merely have to take a break
after eight hours on duty. They could take
it after four hours, for example.
Also note that it is eight hours on duty,
not eight hours driving. That is a common
mistake and one that can trigger some pretty
big fines (and CSA score increases). Make
sure that your drivers are aware that non-
driving, on-duty time does count towards
their eight hours.
September 2013 • 37
