Header:
CODE OF FEDERAL REGULATIONS
TITLE 10 -- ENERGY
CHAPTER II -- DEPARTMENT OF ENERGY
SUBCHAPTER A -- OIL
PART 221 -- PRIORITY SUPPLY OF CRUDE OIL AND PETROLEUM PRODUCTS TO THE DEPARTMENT OF DEFENSE UNDER THE DEFENSE PRODUCTION ACT
SUBPART D -- A
Date:
08/16/2012
Document:
RULING 1980-2 -- ALLOCATION OF MOTOR GASOLINE AT RETAIL SALES OUTLETS
I. Introduction
The Department of Energy (DOE) has received numerous complaints and inquiries regarding discrimination by sellers of motor gasoline at retail sales outlets. During periods in which motor gasoline is in short supply, discriminatory treatment among purchasers has the effect of withdrawing gasoline from the public market. Granting preferential treatment to selected purchasers disadvantages the general public. Purchasers not engaged in an activity entitled to an allocation level n1 are denied equitable access to motor gasoline when sellers employ illegal discriminatory practices. Such practices frustrate the Mandatory Petroleum Allocation Program, which is based on the equitable distribution of allocated petroleum products among all purchasers. See section 4(b)(1)(F) of the Emergency Petroleum Allocation Act of 1973, as amended Pub. L. No. 93-159 (November 27, 1973) (EPAA). This Ruling is therefore intended to clarify, with particular emphasis on retail sales outlets of motor gasoline, the provisions of the regulations that require sellers equitably to distribute allocated products to all purchasers. This Ruling also addresses certain limited situations in which retail gasoline sellers may establish priorities for certain categories of purchasers, and in which State governments may require or authorize such priorities pursuant to authority delegated under DOE regulations.
n1 The DOE provides priorities in the form of "allocation levels" to users engaged in certain activities. The allocation levels for motor gasoline are set forth in 10 CFR 211.103.
II. Mandatory Petroleum Allocation Program for Motor Gasoline
Section 2(b) of the EPAA sets forth as the overall purpose of the Act to minimize the effect of shortages or dislocations of refined petroleum products on the economy and the American People.n2 In furtherance of this purpose, section 4 of the Act directs the President to promulgate regulations to accomplish the Act's enumerated objectives to the maximum extent practicable. Among those objectives is the equitable distribution of refined petroleum products throughout the United States.n3 Implementing regulations are intended to distribute all allocated products in an equitable manner by establishing certain priority uses. Specifically, 10 CFR 210.62(b) prohibits discrimination by all sellers of allocated products. As indicated in Ruling 1974-6, 39 FR 6111 (February 19, 1974), certain forms of preferential treatment are not considered to frustrate or impair the objectives or purposes of the EPAA and therefore do not constitute discrimination for purposes of § 210.62(b).n4
n2 Section 2(b) of the EPAA provides: The purpose of this Act is to grant to the President of the United States and direct him to exercise specific temporary authority to deal with shortages of crude oil, residual fuel oil, and refined petroleum products or dislocations in their national distribution system. The authority granted under this Act shall be exercised for the purpose of minimizing the adverse impacts of such shortages or dislocations on the American people and the domestic economy.
n2 See section 4(b)(1)(F) of the EPAA, which states that the regulations shall provide for:
* * * equitable distribution of crude oil, residual fuel oil, and refined petroleum products at equitable prices among all regions and areas of the United States and sectors of the petroleum industry, including independent refiners, small refiners, nonbranded independent marketers, branded independent marketers, and among all users * * *.
n4 Ruling 1974-6 explained that the following practices did not frustrate or impair the objectives or purposes of the EPAA:
(1) Uniform application of a State "odd-even" sales program for motor gasoline;
(2) Application of the allocation regulations to make priority allocation levels of motor gasoline available to certain categories of purchasers;
(3) Compliance with a State set-aside order to make certain amounts of gasoline available to a particular purchaser; and
(4) Continuation of a preference in sales of motor gasoline which was established before the effective date of the Mandatory Petroleum Allocation Regulations, by which a firm extended preferential treatment to commercial accounts and bulk purchasers for commercial uses, provided that the preference is not implemented in such a way as to circumvent the objectives of the allocation program.
Section 210.62(b) provides:
No supplier shall engage in any form of discrimination among purchasers of any allocated product. For purposes of this paragraph, "discrimination" means extending any preference or sales treatment which has the effect of frustrating or impairing the objectives, purposes and intent of this chapter or of the Act, and includes, but is not limited to, refusal by a retail marketer of motor gasoline or diesel fuel to furnish or sell any allocated product due to the absence of a prior selling relationship with the purchaser, or establishment of new volume purchase arrangements where customers or retailers agree in advance to purchase in excess of normal amounts of motor gasoline or diesel fuel and thereby receive preferential treatment. (Emphasis added.)
The DOE and its predecessors have also recognized the importance and desirability of giving appropriate priority to certain purchasers of motor gasoline. Accordingly, various subparts of the Mandatory Petroleum Allocation Regulations applicable to specific allocated products set forth priority allocation levels. With respect to motor gasoline, § 211.103 grants to specified categories of wholesale purchaser-consumers and end-users that qualify as bulk purchasers the right to purchase specified volumes of motor gasoline from their base period suppliers.n5
n5 As defined in § 211.51, the term "wholesale purchaser-consumer" is limited to include only purchasers that receive delivery of the particular allocated product in their own storage tanks. "End-user" is defined in § 211.51 as "an ultimate consumer of an allocated product other than a wholesale purchaser-consumer."
Section 211.103(d) provides in part that end-users which are not bulk purchasers and purchasers not entitled to an allocation level shall be supplied in accordance with the provisions of § 211.10(d)(2). The regulations provide in § 211.10(d)(1) for a first priority to purchasers entitled to an allocation level, and § 211.10(d)(2) requires that the supplier "distribute equitably the remainder of the supplier's allocable supply among all end-users or wholesale purchaser-consumers which are not entitled to an allocation level... " (Emphasis added.) n6
n6 That part of § 211.10(d)(2) not quoted here authorizes the establishment of certain priorities for retail purchasers of allocated products, including motor gasoline, by State governments and is addressed in § III of this Ruling.
Therefore, absent action by DOE or State governments to establish priorities among retail purchasers in accordance with §§ 211.10(d) and 211.103, as discussed in Section III of this Ruling, and except for sales to purchasers entitled to an allocation level under § 211.103, retail gasoline dealers must make motor gasoline available for sale to all purchasers on an equitable basis, without discrimination.
Examples
The following examples address typical situations involving retail gasoline marketing. These examples are not exhaustive and are meant only to be illustrative of violations of § 210.62(b).All of the firms in the examples are retail marketers of motor gasoline, and none of the purchasers (including the commercial customers) are bulk purchasers.
Each example is also based on the assumption that no governmental action of the type described in § III of this Ruling has been taken in the jurisdiction in which a firm conducts its business.
1. Firm A has recently instituted a practice of allowing "regular" customers to be served before other customers waiting in line to be served at the seller's pumps. Previously and during the base period, Firm A sold gasoline on a "first-come, first-serve" basis.
Firm A is in violation of the express language of § 210.62(b), which prohibits discriminating in favor of "regular" customers, i.e., those with a "prior purchasing relationship." The firm must serve the public on a "first-come, first-serve" basis, i.e., all customers must wait their turn in line to purchase gasoline if that was the firm's mode of operation during the base period.
2. Firm B sold motor gasoline on a "first-come, first-serve" basis during the base period and now sells by appointment only. The number to call for appointments is prominently displayed at the retail sales outlet.
The effect of Firm B's practice is to discriminate against non-local customers in violation of § 210.62(b), because a gasoline-by-appointment-only system favors regular and local purchasers who are in a better position to schedule their gasoline purchases in advance while non-local customers, especially traveling motorists, are unable to do so. As the new appointment system was not in effect during the base period, it also violates § 210.62(a).
3. Firm C operates a parking lot as well as a retail sales outlet for motor gasoline and historically sold motor gasoline to any member of the public. The firm recently instituted a practice of selling motor gasoline only to customers that parked their cars in the parking lot.
Firm C's practice not only constitutes discrimination under § 210.62(b) in favor of patrons of its parking lot in which space is necessarily limited, but also violates § 210.62(d), which prohibits the sale of gasoline contingent upon the purchase of any other service. Firm C may not refuse to sell motor gasoline to any interested purchaser during whatever normal business hours it currently maintains for retail sales of motor gasoline.
4. A group of investors proposes to form an entity, Firm D, to purchase a retail sales outlet from Firm E and to sell or transfer all of its motor gasoline only to members of the group or other individuals selected by Firm D.
Firm D's proposal would violate § 210.62(b) because it would discriminate in favor of privately selected members and purchasers of motor gasoline by directing transfers of motor gasoline only to those customers. In addition, the investors would not succeed to the allocation entitlement for the retail sales outlet, since by so altering the basic commercial practices of their predecessor, the investors would have failed to establish the same ongoing business required by § 211.106(e) for a transfer of allocation entitlement of a successor on the site.
III. Establishment of Allocation Priorities at Retail Sales Outlets by State Governments
Section 211.10(d) is addressed to the supply obligations of a supplier whose purchasers are end-users or wholesale purchaser-consumers, when these purchasers include some purchasers that are entitled to an allocation fraction and others that are not. This regulation establishes that the first priority of each supplier is to fulfill its obligation to those purchasers entitled to an allocation fraction in accordance with § 211.10(c) and further provides, in pertinent part:
The second priority for each supplier shall be to distribute equitably the remainder of the supplier's allocable supply among all end-users or wholesale purchaser-consumers which are not entitled to an allocation level. A state may require or authorize priorities to or among such end-users or wholesale purchaser-consumers purchasing the allocated product for the uses listed in the allocation levels for that product in the subpart of this part applicable to the particular allocated product.( § 211.10(d)(2)).
With respect to motor gasoline, priority uses and the allocation levels to which they are entitled are set forth in § 211.103.
Based on § 211.10(d)(2) a State may establish priorities for purchasers and require or authorize sellers to supply them on a priority basis. The State may, for example, establish a priority for purchasers driving vehicles involved in emergency services or passenger transportation services as listed in § 211.103(b) and defined in § 211.51, by exempting such purchasers from any maximum purchase limitations imposed on all other purchasers. The State may allow sellers to serve such priority purchasers outside of the hours during which others may purchase motor gasoline, or the State may direct that such priority purchasers not have to wait in line with other purchasers to be served. The State is not required to grant priority treatment to all of the uses listed for the allocation levels in § 211.103 or to arrange priorities in the order set forth in that provision. Section 211.10(d)(2) merely enables a State to respond to its particular needs by establishing priorities with respect to end-users that are not otherwise entitled to allocation levels and whose uses correspond to those listed in § 211.103 (b) and (c).
The State may not adopt its own priority levels, i.e., give priority at retail sales outlets for uses other than those specifically listed in § 211.103 (b) and (c). Furthermore, it should be noted that this regulation is supplemented by the State set-aside program (set forth in § 211.17) and by other specific delegations of authority made to the States by the executive branch. One such delegation has taken the form of an executive order of the President permitting States to establish odd-even license plate plans for designated purchasers of motor gasoline. n7
n7 Executive Order No. 12140, 44 FR 31159 (May 31, 1979), as amended by Executive Order No. 12162, 44 FR 56665 (October 2, 1979), delegated authority to the Governors to establish an odd-even license plate plan, to require minimum purchases of gasoline, and to regulate the hours and days of operation for retail sales outlets.
A State may establish priorities either by utilizing existing State authority or by utilizing the authority delegated to States by § 211.10(d)(2). Section 501 of the Department of Energy Organization Act, Pub. L. No. 95-91 (August 4, 1977 applies to a State's use of delegated authority to achieve the objectives of the EPAA. Such official action should be taken in writing, and full notice of that action should be given to the public and to all sellers affected.
When establishing priority treatment for certain purchasers in accordance with § 211.10(d)(2), State governments are exempted from the prohibitions of § 210.62. In that regard, Section 211.10(d)(2) states:
Priority treatment, per se, when granted in accordance with the provisions of this subparagraph, shall not be considered a form of discrimination among purchasers or any other prohibited conduct under § 210.62 of this chapter.
This provision therefore permits sellers to provide preferential treatment to priority end-users where directed by their State government in accordance with § 211.10(d)(2).
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