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CFTC Proposes Revised Rule
to Limit Commodity Speculation
The Commodity Futures Trading Commission (CFTC) recently approved
a Notice of Proposed Rulemaking for a revised rule to establish speculative
position limits for commodities including crude oil, heating oil and
gasoline. Once the proposed rule is published in the Federal Register,
the public will have 60 days to submit comments. In a recent press release,
a NEFI-led coalition applauded the action and said it will “encourage all
member organizations – including groups that represent farmers,
petroleummarketers, truckers and airlines – to submit comments” on
how the rule can be improved.
“We view position limits as necessary to combat extreme price volatility
and to guard against potential manipulation of vital U.S. commodities,
from oil to corn,” said Jim Collura, Vice President for Government Affairs of
NEFI and a spokesman for the coalition. “Excessive speculation threatens
the welfare of the U.S. economy, harms American consumers and
jeopardizes the ability of hedgers to guard effectively against price risks…
Congress clearly understood this when it first authorized position limits
nearly 80 years ago and when it mandated them in 2010,” he said.
Position limits disappeared from energy markets thanks in large part to
massive loopholes created by a federal law in 2000. After years of effort,
NEFI and its allies were able to
mandate
position limits in the Dodd-Frank
Wall Street Reform Act of 2010. The CFTC first published a rule to fulfill this
requirement in October 2011, but Wall Street groups successfully
challenged it in court. The District Court vacated the rule last year, citing a
failure by the CFTC to resolve perceived “statutory ambiguities.” The newly
proposed rule seeks to resolve these ambiguities and address the Court’s
concerns. NEFI will read the rule thoroughly and engage with members
and coalition allies in the near future.
Senate Hearing Examines Fugitive Methane Emissions
A Senate Environment and Public Works Subcommittee recently held
a hearing entitled “Fugitive Methane Emissions from Oil and Gas
Operations.” The hearing was held in response to pushback against
Environmental Protection Agency (EPA) proposals to regulate fugitive
methane emissions from natural gas production and distribution facilities
and infrastructure. “The federal government needs to do more to limit the
release of methane and other pollutants from the production and
distribution of natural gas,” said Dr. Vignesh Gowrishankar, a Staff Scientist
at the Natural Resources Defense Council (NRDC). He went on to warn
lawmakers that “increased use of natural gas will aggravate smog, expose
the public to more carcinogenic chemicals and worsen climate change.”
At the hearing Sarah Dunham of the U.S. Environmental Protection
Agency (EPA) said the latest Intergovernmental Panel on Climate Change
report estimates the 100-year warming influence of one ton of methane is
28 times greater than one ton of carbon dioxide. According to
Gowrishankar, that figure is 34 times greater than carbon dioxide and 86
times greater over a 20-year period. In 2010, methane emissions
accounted for 14 percent of global greenhouse gas (GHG) emissions and
approximately 9 percent of domestic GHG emissions. However, Dunham
added that fugitive methane emissions are projected to increase over the
next two decades. According to Gowrishankar, in order to have a GHG
advantage over diesel fuel, natural gas leakage rates must not exceed 1
percent of production. However, leakage rates are at least 1.5 percent,
which is “equivalent to annual greenhouse gas emissions from 35 million
passenger vehicles or 50 coal-fired power plants.” Some estimates even
put the figure much higher (even upwards of 6-12 percent) and vary due
to disagreements over methodology.
President Obama has tasked the EPA to spearhead a multi-agency
workgroup to address fugitive greenhouse gas emissions resulting from oil
and gas production and natural gas distribution (including the thousands
miles of aging or obsolete pipeline infrastructure). Many environmental
groups and their allies in Congress are looking for more to be done, given
the severity of the problem.
Enforcement Alert: IRS Continues to Levy Hefty
Fines for Failure to Display Dispenser Tax Labels
NEFI is continuing to receive calls about IRS enforcement of dispenser
labeling requirements. IRS fines for incorrect or missing labels are
significant. The IRS requires all dyed diesel and dyed kerosene dispensers
to have a specific label indicating that the fuel is for nontaxable use only.
The labeling requirement has been in place for dyed diesel dispensers
since 1993 and for dyed and clear kerosene dispensers since 1998. The IRS
has recently stepped up enforcement of the dispenser label requirements
nationwide. Please note that the EPA’s LSD and ULSD dispenser labels,
which also provide notice on nontaxable uses of these fuels, are not a
replacement for the IRS labels. Both the IRS and EPA labels are required
despite their apparent redundancy.
The following IRS labels must be posted on any retail dispenser or other
delivery facility (skid tank, consumer dispensers at bulk plants or card locks)
where dyed diesel fuel and/or dyed kerosene are dispensed for use by a
purchaser/consumer:
“DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR
TAXABLE USE”
or
“DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR
TAXABLE USE”.
In addition, the following label must be posted on all blocked pumps
that sell clear, untaxed kerosene:
“UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY”.
The labels must be affixed to the dispenser in a conspicuous place
within easy sight of the person dispensing the fuel either on the face of
the dispenser (on both sides) or on the side of the dispenser just above the
nozzle housing.
Heating Oil Dispensers:
Some heating oil dealers provide heating oil
dispensers at their bulk plant for residential customers who wish to buy
smaller quantities of fuel for heating. The IRS regulations do not address
heating oil dispensers specifically. However, since heating oil is a dyed fuel
and capable of being dispensed in the fuel tank of an off-road vehicle, it is
recommended that these dispensers be labeled with an IRS diesel label as
well. If the heating oil in the dispenser meets the EPA LSD sulfur content of
500-ppm or less or the ULS sulfur content of 15-ppm or less, it is
recommended that the heating oil be sold as “diesel fuel” using the
corresponding EPA and IRS dispenser labels. For high sulfur heating oil
that cannot be used as an on-road or off-road diesel fuel product,
attaching the IRS dyed diesel fuel label is not recommended – at this time.
However these dispensers still have the appropriate EPA heating oil decal.
The penalty for failing to display the dyed fuel notification is severe.
CONTACTS:
Michael Trunzo, President & CEO:
Jim Collura, NEFI Vice President for Government Affairs:
Mark S. Morgan, Esq., New England Fuel Institute Regulatory Counsel:
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