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    Regional Report: SOUTH UPDATE

    Below-cost selling of gasoline is emerging as a major concern in Virginia and Alabama. In Florida, a new law places petroleum marketers in a critical position to help meet future weather emergencies. In Oklahoma a plea is made for parity in cigarette taxes, and from Georgia we hear a call (in vain?) for common sense standards in the petroleum industry.

    In Virginia, the specter of below-cost selling of gasoline has raised its unpretty head again. "We're seeing it mostly in exurban areas right now," reports Mike O'Conner, president of the Virginia Petroleum, Convenience and Grocery Association, "and although it's an isolated phenomenon right now, we're very concerned because four years ago it was rampant and we don't want it happening again. In spite of our urging, the state legislature has refused to pass a law banning below-cost selling, so we will be monitoring the situation carefully as we approach the 2007 General Assembly session."

    In Alabama, selling gasoline below-cost has been banned by law for over 20 years but an attempt to repeal the ruling may be in the offing, according to Arlene Alexander, executive director of the Alabama Oilmen's Association/Alabama Association of Convenience Stores.

    "A coalition tried to get the law, known as the Alabama Motor Fuel Marketing Act, overturned two years ago," she notes, "but they were defeated in a state legislative committee. However I fully expect them to try again. This time they'll probably wait until the state elections in November are over before making the attempt, since it's a very controversial issue. In the meantime, we will do everything we can to keep the law on the books. Below-cost selling of gasoline is destructive to our retailers and we don't want it in Alabama."

    Florida may have been handled a bit roughly by Mama Nature lately, but it takes more than a few blow-hard hurricanes to dampen the collegial spirit of the state's c-stores and petroleum marketers. If anything, the drive to move on to better times has been strengthened, evidenced by the enthusiastic response to this year's trade show and convention in Orlando, July 22-25, sponsored by the Florida Petroleum Marketers and Convenience Store Association; as we go to press the expectation is that it will be the biggest of all 64 conventions held in the past.

    "The response has been fantastic," declares Jim Smith, FPMA's CEO. "We rented out no less than 283 ten-by-ten foot booths, with 1,200 to 1,400 attendees expected. We've even sold several booths for next year."

    One of the issues sure to be discussed will be the state's new Generator Law, designed to make certain that when the next weather "incident" occurs, certain critical gas stations will be able to pump gas for first responders, evacuees and everyone else who needs fuel.

    The law requires stations within a half-mile of an interstate, turnpike or state and federally designated evacuation route, to install an "appropriate" transfer switch capable of accepting a generator to operate pumps, dispensing equipment, life-safety systems and payment acceptance equipment. The deadline for installing the transfer switches is June 1, 2007.

    In Oklahoma, where state cigarette taxes are $1.03 per pack, c-stores are continuing to feel the effect of sales made at many smoke shops on Native-American lands where the tax is equivalent to six cents a pack. "Two hundred smoke shops on tribal lands account for fifty percent of cigarette sales in Oklahoma," notes Vance McSpadden, executive vp of the Oklahoma Petroleum Marketers and Convenience Store Association, "so we're going to continue the fight in the state legislature to get parity. The cigarette buyer is one our most important customers and this uneven tax treatment is grossly unfair to our members."

    Cigarette sales, according to NACS's 2005 State of the Industry Report, accounts for 35 percent of in-store sales on average, far ahead of the Number 2 category, non-alcoholic beverages, at 12 percent.

    And, as if that weren't enough to contend with, about 100 Oklahoma petroleum marketers will soon have to find another supplier as Citgo prepares to move out of the state. Citgo, owned by Venezuela's state oil company, claims that it cannot meet the demand of all its customers, so it's moving out of Oklahoma and nine other states: Iowa, Kansas, Kentucky, Minnesota, Missouri, Nebraska, North Dakota, Ohio and South Carolina. It will also end distribution in parts of Indiana, Illinois, Arkansas and markets in Amarillo, Dallas, Fort Worth and Wichita Falls, Texas.

    Finally, in Georgia, Roger T. Lane, president of the Georgia Oilmen's Association (GOA), echoes the feeling of many throughout the country when he reports that in his twenty-five years in the industry, he's never seen it as difficult to stay in business as it is today.

    "The public thinks that with rising prices, petroleum marketers are making money hand over fist, when actually our margins are shrinking and product costs keeps going up. Sure, the credit card companies are doing great as well as refiners, but not distributors. We had over 500 distributors in our association several years ago; now we're down to 225, and one reason is that family members are finding better ways to make a living.

    "What we really need in this industry is for the President or Congress or someone to set petroleum standards: one product, with one sulphur content, one reed vapor pressure – general uniformity, in other words, so we can stop producing so many variations and boutique fuels, which only drive up costs. Ethanol and biodiesel? Fine. But we have to adopt one energy policy for the whole country, instead of a different one in every state. And let's get going on drilling in Alaska and off-shore in Florida. Trouble is, it's all common sense, and common sense never seems to make it to the table."

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