National Petroleum News Magazine is pleased to highlight the winners of its first annual Industry Champion Awards. After collecting a number of high-quality nominations in the preceding months selecting the winners was difficult, but ultimately the choices were clear. These awards highlight petroleum marketers and dealers who have gone above and beyond the ordinary to promote the industry’s needs in Washington, their home states and local communities.
Subheading: The Legislative Leader Award
The Legislative Leader Award is open to retailers and marketers who have fought for the industry in the legislative and regulatory areas in both the federal and state arenas. This is not to downplay the role associations play in the process, or slight the others who fight hard for the industry every year. No person is an island where government relations are concerned. Rather, these awards showcase individuals who were leaders in the process who gave more time, guidance and focus in moving our team forward. Awards will be presented for each area of activism (federal and state). This year we have two federal award winners.
Sean Cota (federal)
Sean Cota is the president of Vermont-based Cota & Cota, Inc., a third generation family business marketing heating oil and motor fuels in southwest New Hampshire and southeast Vermont since 1941. Cota has served as the president of the New England Fuel Institute; vice chairman of the Petroleum Marketers Association of America; vice chairman of the National Association For Oilheat Research and Education; chairman and treasurer of the National Oilheat Research Alliance and as a member of the Energy and Environment Markets Advisory Committee for the Commodity Futures Trading Commission.
“I've always been involved with legislative issues, starting in the 1980s with the low income heating assistance program as one of the early issues I worked on,” said Cota. “I guess growing up in Vermont, where you get to know all of your politicians; you don't have a proper respect for power and authority. If you have a problem you tell them directly and you tell them why and because they are going to see you again they are probably going to listen more than average. That inspired me to do more.”
Cota was nominated for his efforts to bring to light the enhanced role financial markets and their irregularities are bringing to current fuel prices. He has worked since the mid 2000s on the issue primarily with the New England Fuel Institute and the Petroleum Marketers Association of America in a process that grew from increasing awareness to getting reform language included in the financial reform bill (Dodd-Frank Wall Street Reform and Consumer Protection Act) that was just signed into law.
“In 2004 I noticed that prices had started to change and I didn't understand why they were changing in ways that did not relate to supply and demand,” said Cota. “In 2005 I pretty much confirmed that and at the time I was involved with NEFI’s Legislative Committee and we pursued meetings with the New York Mercantile exchange to try and understand more about how their markets worked. And we learned a lot in the process. What we found out is that the prices were more about money flows into commodities, particularly energy at that time, rather than the fundamentals. And we knew that was a cost that the consumers were paying. In 2006 we started to pursue legislative efforts and began communicating with folks on Capitol Hill that something needed to be done. “
Cota took part in numerous testimonies before both Senate and House committees and worked with both NEFI and PMAA to see that the issue received front burner status. He continued to work in developing the legislative solution to the issue as it moved from an initial concern into policy that was established as law.
“There is no question that Sean went way, way, way over and above the call of duty,” said Shane Sweet, NEFI CEO. “He spent countless hours and countless trips, by and large on his own nickel much to the time, and he was knee-deep in it from the get-go. He obviously enjoys working those issues and if anyone deserves an award it is him.”
In this case it is difficult to give Cota too much credit. When he started the crusade the price of oil was not the alarming issue it became by 2008. Not only was the issue operating relatively under the radar, but the challenges to addressing this issue were monumental.
“It would have probably never gotten the attention that it did in the national arena if it was not for Sean,” said PMAA President Dan Gilligan. “Sean was a voting delegate at PMAA for the state of Vermont around 2004. Sean was also a student of the futures market, though I don't think he did a tremendous amount with it at then. As time went on he began to raise the issue at our meetings that things were just not right – that prices weren’t connected to the fundamentals and that we needed to start paying attention to this. At the time we were thinking, ‘What in the world could we do?’ You're looking at opposition like Bear Stearns and Goldman Sachs. It was one of those things where I think everyone was polite with Sean, but no one really wanted to tackle this. No one really understood it as much as they would've liked to and there was an awful lot of other stuff going on at the time impacting petroleum marketers. But Sean was persistent.”
As it turned out, the price of oil would soon eclipse every other issue the industry faced and become a matter of pure survival for many in the industry. With all of the challenges that exist with the Great Recession, the drop in oil prices it ushered in was a silver lining that cannot be underestimated at both the marketer and retailer levels. The groundwork laid by Cota supported PMAA and NEFI and eventually hundreds of other partners as they brought their case to Congress before and after the financial collapse. While the Financial Reform Act itself has faced some notable criticism about its overall effectiveness, the industry was able to get some solid measures in place on the energy front.
Some specifics of the new law include aggregate position limits on speculative oil traders; mandated clearing of OTC commodity derivatives; exemption of end-users (petroleum marketers for example) from clearing and margin requirements if they are doing so for commercial purposes; and Commodity Futures Trading Commission authority to regulate swaps, OTC, energy-related, and electronically-traded transactions by closing the so-called “Enron,” “Swaps,” and “London” or “Foreign Exchange” loopholes.
Financial institutions would also have to separate their commodity derivatives trades into a separately capitalized entity walled off from federally insured deposits. This will essentially reduce the amount of leverage speculators take in trading West Texas Intermediate crude oil, RBOB, and heating oil contracts.
For his part, Cota is more than willing to share the credit for the accomplishment. “The Financial Reform Act is a huge bill that covers a lot of areas,” he said. “PMAA and NEFI were among the leaders in writing the derivatives and commodities rules. We eventually built a coalition of about 400 to 600 organizations who all supported financial reform. The important thing we did is that we were not ideologically centered in regard to do it because it's a Democratic idea or do it because it's Republican idea. We took a middle-of-the-road, rational approach to creating transparency so you know what is going on and putting in some systemic risk solutions that are a part of that.”
The specific rules that will form the nuts and bolts of the regulation still have to be drafted. That process will likely continue until the end of 2011.
Bill Douglass (federal)
Douglass is the CEO of Texas-based Douglass Distributing, which employs over 280 employees and distributes commercial fuels (130,000,000 gallons of fuel annually), lubricants and propane. Its retail division now owns and operates 14 co-branded Lone Star Convenience Stores and is an Exxon Mobil “On the Run” area franchisor. Douglass has served the industry as the director, Exxon Financial Board (Tiger Mac); National Distributor Advisory Board; director Texas Petroleum and Convenience Store Association; and the director, committee chair, vice chairman, chairman, executive committee, National Association of Convenience Stores.
Douglass has been heavily involved for many years in Washington supporting the National Association of Convenience Stores and the industry on numerous issues. This was a natural for Douglass who worked in government relations for Exxon in his previous career before striking out on his own. “Bill was involved from the very beginning at NACS helping us chart our legislative mission and our positions and everything,” said John Eichberger vice president of government relations for the National Association of Convenience Stores. “But beyond that he, more than probably anyone else in the past 10 years has come to Washington and met with the EPA and with members of Congress. I couldn't tell you how many times he's testified. He's always been a calm, reasonable but forceful voice.”
Douglass was specifically nominated for his successful efforts to educate key members of Congress over what each entity contributes to the price of a gallon of gasoline – from the extraction and processing of crude oil to refining, marketing and retail. This started as an effort to offset action on “price gouging” legislation in the volatile early 2000s and culminated in the first major cracks in credit/debit interchange fees.
“We had an eight-hour hearing in the fall of 2004,” said Douglass. “You're going to think I’m kidding, but it went so long I missed my airplane. They just kept going. It was a full house Energy and Commerce committee chaired by Joe Barton [R -TX]. They brought us there to fry us, to be honest with you, because we were ‘price gougers.’ The hearing was on C-SPAN, and whenever you have C-SPAN, you know it's a public display. If they really want to know information, they invite you in privately.”
Price gouging accusations were a notable issue at the time. There was little leeway between distributable supply and demand, particularly during peak seasons. Further complicating things was the “balkanization” of the gasoline supply with numerous EPA Clean Air Act approved (and not necessarily interchangeable) fuel blends being mandated in local markets. As a result any refinery fire, pipeline break or Gulf Coast hurricane (Katrina and Rita being the most notable examples) would have an impact, at least regionally, on supply and the price of gasoline. The swings would be severe and immediate and to the public, media and local and federal politicians – difficult to understand. While this remains an issue today, the role financial markets play in setting the price of gasoline has eclipsed such short-term supply and demand concerns as a front-burner issue.
“Chairman Barton looked me in the eye and said he had (one of my) stores across from his office and he noted the price went up $.10 Tuesday and I think it went up another $.10 on Thursday,” Douglass said. “And I said, ‘Mr. Chairman, my price went up $.50.’ Barton didn't call me a liar, but he looked at me like – sure. He just felt that my retailer was gouging. The reality was the retailer didn't even get replacement cost. They invited in the refiners and an economic watchdog group and the retailers. They somewhat expected that the refiners were gouging and the retailers were gouging. But I brought in a bunch of charts and I showed them starting with the shareholders and moving down through the producers and refiners and credit card companies and marketers and showed how each one was making per gallon moving forward to establishing the retail price of gasoline. I decided to leave the government and its piece out of it for self-defense.”
Eichberger remembers the hearing well. “On the panel you had Bill Douglass, you had the pipelines, you had the API, you had NPRA and you had a consumer group,” he said. “And Bill Douglas presented the case for our industry in terms of how we operate more specifically and more effectively than anyone has ever done before or after, in my opinion. This is why our margins are so slim and this is why we have no control over the price. We have a cost and our margins are just a couple of pennies above the cost.
“But during that hearing Bill also introduced Congress to credit card fees and at that point Chairman Barton looked up and said, ‘Wait a second. Let me see if I've got this right. Every time someone buys a gallon of gas the banks make more than you do?’ And Bill said, ‘Yes, Mr. Chairman.’ And Barton went, ‘That's not right!’ And from that point on – it was like a couple of weeks later – the 2005 energy bill was being voted on and we were able to get an amendment in it telling the FTC to do a study on the relationship between energy fees and gas prices. It got stripped out, but that was the first shot across the bow.”
As NACS has publicized, for some years now interchange fees have ranked as one of the top issues facing the industry. Swipe fees have been the convenience and petroleum retailing industry’s top pain point and second largest expense item — behind only labor costs — for a number of years. “We (as a company) pay $1 million in credit card fees, and what do they do? If there's fraud they charge it back. It's bizarre,” said Douglass.
Provisions within the financial reform bill (Dodd-Frank Wall Street Reform and Consumer Protection Act), known as the Durbin Amendment, direct the Federal Reserve to issue rules to ensure that debit card interchange fees, also known as swipe fees, are reasonable and proportional to the processing costs incurred. Visa and MasterCard currently charge debit swipe fees of around 1 percent to 2 percent of the transaction amount — among the highest rates in the industrialized world.
The legislation includes a provision directing the Federal Reserve to issue rules preventing card networks from requiring that their debit cards can only be used on one debit card network — ensuring that retailers will have the choice of at least two networks upon which to run debit transactions. In addition, the amendment would allow merchants to choose to decline credit cards for small dollar purchases because swipe fees often exceed profits on such sales. The amendment also clarifies that retailers can offer discounts to consumers who choose to pay with cash, check or debit card.
Mike Newman (state)
Mike Newman is executive vice president of New York-based NOCO Energy Corp. serving western New York, Canada and New England. NOCO distributes a full line of commercial fuels, industrial lubricants, bio-products, home energy fuels, and heating & cooling systems and service. NOCO now also provides natural gas and electricity to residential and commercial customers in New York State. The company also operates more than 30 NOCO Express convenience stores throughout western New York.
Newman directly oversees the NOCO Retail Division, including NOCO Express, NOCO Real Estate, and NOCO Franchising. He is also involved with the Amherst Chamber of Commerce; New York Association of Convenience Stores; Buffalo Niagara Enterprise; Erie County Charter Review Commission; and the Society of Independent Gasoline Marketers of America. Newman is a member of The Enforce the Law, Collect the Tax Coalition that is calling on Governor David Paterson to enforce the law and collect taxes from cigarette sales on Native American Territories. His brother Jim Newman serves as NOCO Energy Corp. president.
Newman has been a leading figure representing the industry in the fight against the non-taxed Native American sales of tobacco products in New York. He has worked in conjunction with his brother Jim Newman (who he credits equally) representing the interests of NOCO Express and with the staff and fellow members of the New York Association of Convenience Stores looking out for the interests of the industry in the state.
He Newman is in his second year as NYACS chairman and has been involved in all legislative activities for the past eight years. As a company, NOCO has been involved for many years beyond that. “This is really about what our parents have always said about not standing on the sidelines complaining,” Newman said. “If you want to see change or protect your interests you have to be involved. It's not a passive game by any stretch of the imagination. Our parents were very instrumental in our involvement.”
His activities with the media are particularly notable. “He has held press conferences in the store and held interviews with newspapers and radio stations,” said James Calvin, NYACS president. “He has appeared at meetings and has worked to inform the public about how they are impacted by the situation.”
The Native American reservation issue is only one part, but a major one, in the tax issues faced in New York. The primary point of contention is that any tax breaks on the reservation should only be applied to Native Americans and not the general public. There has long been sympathy for the plight of Native Americans and the desire to continue to “make things right.” Similarly, cheaper cigarettes (approaching $5 per pack) have a strong appeal among the smoking public. And, the Native American lobby has been generous with its political funding in the state in amounts that far outreach the industry’s resources. However, though the education process perceptions have started to change.
“It's a misnomer that this is a tax-free sale,” Newman said. “On a PR basis this tax-free thing has a degree of appeal. But if the budget doesn't change then the revenue is simply redistributed among all the other residents of New York that pay taxes. Our state association estimates some $1 billion in tax revenue that is redistributed amongst the citizens of New York. Even if you do not smoke you are subsidizing cigarettes on the reservation because if the state government can't collect those taxes on cigarettes sales they will make it up somewhere else.”
Calvin underscores the team effort that has been involved on the issue, but credits Newman with his insight and his attitude in pushing the industry to keep fighting even though it can be a frustrating process where the opposition holds many advantages.
“I don't blame the consumer for finding cheap cigarettes when there is (nearly) a five dollar difference per pack and I don't even blame the Native Americans for taking advantage of the system,” said Newman. “Our state simply has a dysfunctional tax situation. People still recognize our hardship and I think some of them feel bad for us in some regard but there's also a great deal of sympathy for the plight of the Native Americans on the reservations and that history. But when they hear tax-free and you have that five dollar per pack difference—who doesn't want that? Quite honestly that has great appeal. The real point is that it is the state's tax policy that has hurt our business and that is the only issue at play here. If I was a Native American I would be doing the same thing in taking advantage of whatever retail opportunities I could. But the state has really dropped the ball and failed to remedy this.”
The efforts made by Newman and his peers and the NYACS staff have recently achieved some guarded success. As reported at Buffalonews.com, New York Gov. David Paterson recently renewed a pledge to collect taxes on cigarettes sold by Native Americans. The situation is so tense that he acknowledged that "violence and death" might result for this action. The mechanism would be up front through the wholesalers that supply the reservations. While this is an industry cause for celebration Newman is cautious. “I suppose I’m overall more skeptical than ever,” he said. “I see them using the courts to keep it tied up and they have the resources to do that. But I have to think at some point the state is going to step up and say we can't afford to not do this. All of these lost taxes are simply killing our budget and I don't think they have the freedom anymore.”
Subheading: The Community Leader Award
The Community Leader Award is a company-specific award open to retailers and marketers that have made a substantial effort to support worthy causes in the communities in which they do business.
For 50 years Kansas-based CarterEnergy has had a history of being an innovative leader and trend-setter in the petroleum marketing business. They currently supply gasoline, diesel and bio-fuels to over 1200 retail and commercial customers in 11 states, and operate a fleet of fuel distribution trucks in 4 states.
What may not be as widely known, however, is that CarterEnergy is also a leader in philanthropy, with a long history of corporate giving combined with associate giving and volunteerism. They, along with their 140 associates, support a wide variety of not-for-profit causes, selecting those that support their local communities such as homeless and battered women's shelters; those that support national causes such as the American Cancer Society and the Special Olympics; those that support global causes such as the Aga Kahn Foundation; and those that support scholarship and education such as the American Royal. “Bryan Beaver, the CEO and president of CarterEnergy, has always had a firm belief that you give back to the communities that make you a thriving business,” said Kerry Oliver, CarterEnergy's executive vice president and general manager. “We do that in two ways. The first is volunteerism and the second is financial support.”
To celebrate its 50th Anniversary this year, Beaver asked the company to come up with a concept that would not focus on the past, but on the future. In this vein, CarterEnergy developed
its “What Will Fuel the Future?” RoadShow which visited public events and schools throughout the Dallas,Oklahoma City, Denver and Kansas City areas. This multiyear celebration is designed to give back to those to whom they credit their long-term success-namely their associates,
customers and communities. “This is entirely tied into our culture,”Oliver said. “We have six core values and the top core value is strong relationships. We respect the communities in which we do business and this is our way of upholding our end of the strong relationship.”
The Roadshow, housed in a 34 foot trailer, seeks to stimulate adults and children of all ages to think about one of the biggest questions in society today: “What kinds of energy will be needed to fuel the future?” It is focused on both traditional and alternative energy sources and educates the public via 6 hands-on and interactive exhibits. Once visitors have traveled through the trailer, they are invited to test their knowledge at the “Energy
Interactive”, which then earns them a Pit Pass to participate in the highly popular “Fuels of the Future Racing Game,” featuring remote-controlled cars. So far, the RoadShow has visited 33 different events with some 23,000 visitors. One of the amazing things about this program is that the entire staffing for the RoadShow has been provided by Carter associates, friends and family - which equates to over 1900 hours of service, above and beyond what the associates regularly do.
On Carter's corresponding website, www.WhatWillFueltheFuture.com, they provide McREL standards- based energy curriculum for grades K-8, which teachers can download to use in conjunction with a RoadShow visit or as stand-alone learning. The interactive website also features a “Virtual RoadShow” for those guests who may not have had the opportunity to experience the real thing. The combination of the RoadShow and the website provides both education, fun and good community relations-a win/win for the company, the community and the industry.
Visitors to our website are invited to upload their picture and comment on what they think will fuel the future,” said Oliver. She noted that the company tracks those comments for business intelligence on the perceptions of the public and to mine ideas for the future direction of the company.
The entire “What Will Fuel the Future?” program is focused more on education than on company promotion.
“We only have CarterEnergy branding in a couple of places,” said Oliver. This lends credibility to the educational component and assures schools that, by bringing the RoadShow to their students, they are not exposing themselves to a big advertising campaign. “Most of the visitors don't directly relate to CarterEnergy because we are not a consumer brand.
You only know our name if you are in the industry.”However, the company did receive sponsorships from some of its suppliers and vendors.
The feedback from Carter's customers has also been positive. A retailer can arrange for the RoadShow to visit their location.
“Our customers love it,” said Oliver. “Our goal is to help our customers create a well-planned customer appreciation event that will drive business and customer loyalty to their store, as well as to help them create goodwill in their communities.”
The retailer must meet certain criteria in order to be considered for a RoadShow visit including promotional and advertising efforts to make sure there good attendance for the visit.
Another component of the 50th year celebration was the creation of the Fueling the Future Educational foundation that Bryan and Nancy Beaver set up to provide scholarships for Carter's associates and their children.
This project is developed to run for three years and will be evaluated at the end of that time to see if it will be continued or redesigned.