    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

              EXXONMOBIL AND SHELL ANSWER QUESTIONS ABOUT HOT FUEL

    =======================================================================

                                    HEARING

                                   before the

                        SUBCOMMITTEE ON DOMESTIC POLICY

                                     of the

                             COMMITTEE ON OVERSIGHT
                             AND GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 25, 2007

                                   __________

                               Serial No. 110-158

                                   __________

    Printed for the use of the Committee on Oversight and Government Reform

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                  COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                     HENRY A. WAXMAN, California, Chairman
    TOM LANTOS, California               TOM DAVIS, Virginia
    EDOLPHUS TOWNS, New York             DAN BURTON, Indiana
    PAUL E. KANJORSKI, Pennsylvania      CHRISTOPHER SHAYS, Connecticut
    CAROLYN B. MALONEY, New York         JOHN M. McHUGH, New York
    ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
    DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
    DANNY K. DAVIS, Illinois             TODD RUSSELL PLATTS, Pennsylvania
    JOHN F. TIERNEY, Massachusetts       CHRIS CANNON, Utah
    WM. LACY CLAY, Missouri              JOHN J. DUNCAN, Jr., Tennessee
    DIANE E. WATSON, California          MICHAEL R. TURNER, Ohio
    STEPHEN F. LYNCH, Massachusetts      DARRELL E. ISSA, California
    BRIAN HIGGINS, New York              KENNY MARCHANT, Texas
    JOHN A. YARMUTH, Kentucky            LYNN A. WESTMORELAND, Georgia
    BRUCE L. BRALEY, Iowa                PATRICK T. McHENRY, North Carolina
    ELEANOR HOLMES NORTON, District of   VIRGINIA FOXX, North Carolina
        Columbia                         BRIAN P. BILBRAY, California
    BETTY McCOLLUM, Minnesota            BILL SALI, Idaho
    JIM COOPER, Tennessee                JIM JORDAN, Ohio
    CHRIS VAN HOLLEN, Maryland
    PAUL W. HODES, New Hampshire
    CHRISTOPHER S. MURPHY, Connecticut
    JOHN P. SARBANES, Maryland
    PETER WELCH, Vermont

                         Phil Schiliro, Chief of Staff
                          Phil Barnett, Staff Director
                           Earley Green, Chief Clerk
                      David Marin, Minority Staff Director

                        Subcommittee on Domestic Policy

                       DENNIS J. KUCINICH, Ohio, Chairman
    TOM LANTOS, California               DARRELL E. ISSA, California
    ELIJAH E. CUMMINGS, Maryland         DAN BURTON, Indiana
    DIANE E. WATSON, California          CHRISTOPHER SHAYS, Connecticut
    CHRISTOPHER S. MURPHY, Connecticut   JOHN L. MICA, Florida
    DANNY K. DAVIS, Illinois             MARK E. SOUDER, Indiana
    JOHN F. TIERNEY, Massachusetts       CHRIS CANNON, Utah
    BRIAN HIGGINS, New York              BRIAN P. BILBRAY, California
    BRUCE L. BRALEY, Iowa
                        Jaron R. Bourke, Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on July 25, 2007....................................     1
    Statement of:
        Soraci, Ben, U.S. retail sales director, ExxonMobil Fuels
          Marketing Counsel; and Hugh Cooley, vice president and
          general manager, National Wholesale and Joint Ventures,
          Shell Oil..................................................    21
            Cooley, Hugh.............................................    28
            Soraci, Ben..............................................    21
    Letters, statements, etc., submitted for the record by:
        Cooley, Hugh, vice president and general manager, National
          Wholesale and Joint Ventures, Shell Oil, prepared statement
          of.........................................................    30
        Cummings, Hon. Elijah E., a Representative in Congress from
          the State of Maryland:
            Letter dated August 14, 2007.............................    74
            Letter dated August 16, 2007.............................    77
        Issa, Hon. Darrell E., a Representative in Congress from the
          State of California:
            Prepared statement of....................................    15
            Prepared statements of the Ohio Petroleum Marketers and
              Convenience Store Associations.........................    12
        Kucinich, Hon. Dennis J., a Representative in Congress from
          the State of Ohio:
            Letter dated February 5, 2008............................    57
            Prepared statement of....................................     4
        Soraci, Ben, U.S. retail sales director, ExxonMobil Fuels
          Marketing Counsel, prepared statement of...................    23

              EXXONMOBIL AND SHELL ANSWER QUESTIONS ABOUT HOT FUEL

                                  ----------

                            WEDNESDAY, JULY 25, 2007

                      House of Representatives,
                       Subcommittee on Domestic Policy,
                  Committee on Oversight and Government Reform,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 10:05 a.m. in
    room 2154, Rayburn House Office Building, Hon. Dennis J.
    Kucinich (chairman of the subcommittee) presiding.
        Present: Representatives Kucinich, Cummings, Davis of
    illinois, Watson, Higgins, Issa, and Bilbray.
        Staff present: Jaron R. Bourke, staff director; Charles
    Honig, counsel; Jean Gosa, clerk; Evan Schlom, intern; Leneal
    Scott, information systems manager; Natalie Laber, press
    secretary, Office of Congressman Dennis J. Kucinich; Larry
    Brady, minority senior policy advisor; and Alex Cooper,
    minority professional staff member.
        Mr. Kucinich. Good morning. The Subcommittee on Domestic
    Policy of the Committee on Oversight and Government Reform will
    now come to order.
        Today's hearing will continue the subcommittee's
    examination of hot fuels and effects they have on consumers and
    dealers. This time we will hear from two oil companies and get
    their views on thermal expansion of gasoline and the
    possibility of automatic temperature compensation at the retail
    level in the United States.
        I ask unanimous consent that all opening statements,
    written statements, and other materials be able to be placed in
    the record.
        Without objection, the Chair and ranking minority member
    will have 5 minutes to make opening statements, followed by
    opening statements not to exceed 3 minutes by any other Member
    who seeks recognition. Without objection.
        Without objection, Members and witnesses may have 5
    legislative days to submit a written statement or extraneous
    materials for the record.
        I want to thank the ranking member, Mr. Issa of California,
    for his presence here today, and I look forward to our
    participation and cooperation in this hearing. Mr. Issa, I have
    always appreciated the opportunity to work with you. Thank you.
        Good morning, gentlemen and ladies. This is the second half
    of our June 8th hearing on Hot Fuels. We had invited ExxonMobil
    and Shell to testify at that hearing; unfortunately, they
    refused. So at my request, the full committee chairman, Mr.
    Waxman, sent ExxonMobil and Shell invitation letters asking
    again for their testimony before our committee, but this time
    it was in order to avoid the necessity of a subpoena. We are
    happy that ExxonMobil and Shell reconsidered their earlier
    reluctance to testify.
        The oil industry has known for 100 years that gasoline
    expands and contracts with temperature. As it warms, gasoline
    expands by volume but not by weight or energy content. As it
    cools, gasoline contracts.
        At the turn of the last century, the oil industry developed
    a standard and method for compensating for temperature
    variations, and they use it to this day in most wholesale
    transactions.
        Regardless of the actual temperature of the gasoline, its
    volume is adjusted mathematically prior to sale, according to
    the known physical properties of gasoline. If the actual
    temperature of the gasoline is above a reference temperature of
    60 degrees fahrenheit, its volume is adjusted downward. If the
    actual temperature is below 60 degrees Fahrenheit, the volume
    is adjusted upward. As a result, neither the seller nor the
    buyer receives an advantage in wholesale transactions of
    gasoline due to the temperature. That has been the standard for
    wholesale transactions--wholesale transactions--since the
    1920's.
        But retail sales of gasoline are a very different story.
    The oil industry does not compensate for temperature in retail
    sales to consumers. In fact, it refuses to do so. One of the
    leading manufacturers of automatic temperature compensation
    equipment applied for and received certification for sale in
    the State of California. No oil company would buy it.
        This is the first apparent double standard we hope to
    clarify today. How do the oil companies justify opposing
    temperature compensation at retail while conducting most
    wholesale transactions with temperature compensation?
        But that is not the only apparent double standard. While
    they refuse to use temperature compensation for retail sales in
    the United States, this subcommittee has learned that the
    industry does the opposite in Canada, where nearly all the
    gasoline sold at retail is measured in temperature compensated
    volumes.
        The majority of gasoline pumps in Canada are equipped with
    technology that adjusts the volume dispensed according to
    temperature. We have, furthermore, learned that the industry
    moved voluntarily to install temperature-compensating equipment
    in Canada. This is the second instance of what appears to be a
    double standard. How does the oil industry justify refusing to
    use temperature compensation for retail sales in the United
    States while universally and voluntarily embracing temperature
    compensation at retail in Canada?
        But even that is not where the apparent double standards
    end. We have learned that the oil industry applies one standard
    to the retail sale of some hydrocarbons, while applying a
    different standard to others. Throughout the United States
    today, liquified petroleum gas, such as propane, is dispensed
    for retail sale using automatic temperature compensation.
    Liquefied petroleum gas is a fossil fuel product like gasoline.
    Large, integrated oil companies like those represented by our
    witnesses, produce liquefied petroleum gas, as well as
    gasoline, and they sell those products. But, as we don't need
    now to be reminded, when it comes to selling gasoline as
    opposed to liquefied petroleum gas, the industry refuses to use
    temperature compensation. So here is the third instance of an
    apparent double standard.
        It has long been the position of the National Institute on
    Standards and Technology--and they testified to this effect at
    our last hearing--that compensating for temperature ensures the
    most accurate way of measuring volume. So what could be the
    industry's reason for opposing accurate measurement of retail
    gasoline sales in the United States? Well, maybe it is all a
    wash. Maybe the effort involved in using temperature
    compensation is not necessary because, on average, gasoline
    temperatures would average over the course of a full year to be
    60 degrees Fahrenheit, exactly the same as the reference
    temperature that the industry uses for its wholesale standard.
        Well, it turns out that their averages are at a higher
    temperature than the industry wholesale standard. At our last
    hearing, one of our witnesses testified that his company
    routinely monitors the temperature of gasoline in underground
    storage tanks. They do it at gas stations as part of an EPA
    enforcement program to detect leaking underground storage
    tanks.
        My staff tallied the past year of temperature data from
    nearly every State, and weighted it by the amount of gasoline
    sold in that State. Here is the result of that arithmetic: 66.7
    degrees Fahrenheit. The industry standard is 60 degrees
    Fahrenheit. So the actual national average temperature for
    gasoline is higher than the standard temperature the industry
    uses in most wholesale transactions. So it is not a wash.
    Temperature variation of gasoline in the United States
    consistently tilts to the industry's advantage, where retail
    gallons of gasoline have less energy than wholesale gallons.
    That creates a potential for less than accurate measurement and
    the sale of ghost gallons to consumers during the summer
    driving season.
        We hope that today's witnesses will be able to clarify the
    issues for us. Consumers and dealers alike have an interest in
    accurate measurement. Both would appreciate answers. ExxonMobil
    and Shell are large oil companies in both the United States and
    Canadian markets, so who would be better positioned to explain
    to the committee the industry's view of these apparent double
    standards.
        Thank you very much.
        [The prepared statement of Hon. Dennis J. Kucinich
    follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Kucinich. With that, the Chair recognizes the
    distinguished ranking member from California, Mr. Issa.
        Mr. Issa. Thank you, Mr. Chairman.
        I have only the greatest respect for you as a chairman and
    as a friend. Today, however, we are going to agree to disagree
    on some aspects of today's hearing.
        I believe the issue we are addressing here today is an
    important one, but not because it is a legitimate issue on the
    question of temperature correction of gasoline. As I said on
    June 8th, when we had our first hearing on this subject, it is
    important, but it underscores the Democrat majority's
    preference to focus on the tangential matters instead of the
    real discussion on oil and gas supplies and demand situation
    and economic catastrophe that we will face if we do not
    squarely come to a real understanding of how we get more
    gasoline, more natural gas, how we save natural gas for better
    uses, how, in fact, we get to a lower-carbon environment.
        Today I suspect that along the way, as we talk about
    whether or not temperature compensation devices being added to
    pumps is legitimate, we are also going to touch on the question
    of whether the Democrat leadership needs to focus on the
    legitimate issues of providing greater amounts of raw petroleum
    and greater refining capacity so that we can, in fact, reduce
    the high prices that Americans are paying at the pump today.
        I don't believe we would be having a discussion on
    something that has been known since 1920 if, in fact, gasoline
    prices were $1.89 a gallon. We are dealing in the 1 percent
    because of, in fact, we have had a 40 percent rise in fuel in a
    relatively short period of time. That is why I appreciate the
    hearing we are having today, because I believe that, in fact,
    we need every opportunity to talk about the 40 percent, even if
    it is while discussing tangentially the 1 percent.
        Last year back in June our hearing concentrated, quite
    frankly, on those least in the position to control the price of
    gasoline, those who make, to a great extent, some of the least
    amounts on gasoline. We brought up in our press release the
    fact that MasterCard and Visa make more on gasoline than the
    retailer does. Again, let's remember it is the retail location
    that we are dealing with here to day. No matter what price
    Shell, Exxon, or others supply gasoline to the retailer for and
    how much correction there will be, it will have no effect on
    the net earnings of ExxonMobil, Shell, or anyone else. In fact,
    what we are talking about is a new burden for the retailer. As
    far as I can understand, a single-source burden for the
    retailer. An acceptable design? Yes, an acceptable design that
    if mandated would be paid at whatever price the patent holder
    and device certifier would like to charge.
        I do believe there is always an opportunity to bash big
    oil. I suspect that we will do it here today.
        Thank you for representing big oil. It is always brave of
    you to do so.
        I believe, though, that, in fact, we are going to have an
    opportunity to have a lively and positive discussion. I believe
    that the Washington Post has already done a good job by doing
    their article, ``A Full Tank of Hypocrisy.'' I thought that was
    aimed at people not in this room, but I think we will take it.
        I certainly think that Senator Schumer's suggestion that
    breaking up big oil, in fact, is legitimately in play here to
    day, that there are people who feel that if we had smaller oil
    companies somehow we would have lower prices. Can you imagine a
    smaller oil company trying to get through the bureaucracy of
    the deep sea oil drilling permit, or even, in fact, building a
    new refinery here in America?
        I also believe that today is a unique opportunity for us to
    discuss this particular subject, and I will do so in two quick
    inclusions. One is, in fact, recognizing that the National
    Conference on Weights and Measures recently said this was not
    necessary. They didn't say it wouldn't be nice. They didn't say
    that if we chose to do it, let's say, 20 years from now when
    every pump will have been replaced and could simply turn on a
    feature on a given day to where every corner in America 1 day
    would be not compensated, and every corner in America the next
    day would be compensated, so that nobody would be able to gain
    the system between one pump and another.
        I hope we all understand here today that if one pump had
    temperature compensation at 90 degrees and the other didn't,
    then there would be legitimate gaming, because, I fact,
    somebody would be able to shave a point on that transaction.
        I hope today when we are finished that we will agree that,
    in fact, a phase-in over the logical period of time of the
    capability and then a single-day turn-on in America, if this is
    to be chosen both by ourselves and the agencies that review
    this, is, in fact, the only legitimate goal. Having dispensed
    with the legitimate goal here today, I certainly want to talk
    about big oil, the high cost of fuel, and how we get to it, and
    how we are going to get out of it.
        Mr. Chairman, in addition to that, I would like to include
    in the record a statement by the Ohio Petroleum Marketers and
    Convenience Store Associations who have also written on this.
        Mr. Kucinich. Without objection, so ordered.
        [The prepared statements of the Ohio Petroleum Marketers
    and Convenience Store Associations follow:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Issa. Thank you, Mr. Chairman. Mr. Chairman, I know
    that is tough rhetoric. It is not aimed at you. It is aimed at
    the fact that I believe we both owe to America a cleaner
    environment, one that delivers energy at a good price, it
    delivers the appropriate energy from the appropriate source,
    and I know that with your leadership we will be able to work
    together toward that. This may not be the neatest way to do it.
    This may be a little messy, but I know at the end of the day we
    will be heading in the right direction, and I thank you for
    holding this hearing and yield back.
        [The prepared statement of Hon. Darrell E. Issa follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Kucinich. Thank you very much, Mr. Issa. I have no
    question that cooperation on this will find a way to benefit
    American consumers. I thank you.
        Does Mr. Bilbray wish to make a statement? We have a few
    minutes if you wish to do so.
        Mr. Bilbray. Thank you, Mr. Chairman.
        Mr. Chairman, I am really thankful that you are having this
    hearing, because I think that it is an opportunity for us not
    to just talk about one segment of the issue of what may or may
    not help the consumer at the end of the process. I think it
    also gives some of us an opportunity to talk about not only
    what is the private sector doing or not doing to protect the
    consumer, but what are those of us in Government doing and what
    have we done in the last 30 years that has severely impacted
    the price of fuels for the American people.
        So I hope to highlight the fact that, though we may be to
    pointing fingers at certain private sectors that may tweak the
    numbers 1 or 2 percent, I hope at the same time that we are
    brave enough to look in the mirror and look in our own face and
    see that what Government has done in the last 30 years has
    jacked up the price of gasoline at the pump in such
    extraordinary numbers that I will show you exactly what the
    Federal Government has done with misguided policies and not
    only hurt the consumer, hurt the environment under the guise of
    protecting the consumer and protecting the environment.
        As you know, our local government experience, I had the
    privilege of serving for 6 years on the State Air Resources
    Board of California, one of the premier environmental groups
    that worked with the fuel industry. Frankly, the Federal
    Government's history of addressing the issue of affordable,
    clean energy is dismal, to say the least.
        I hope in this hearing that we are able to point fingers at
    the oil industry and say where they can do better, and then by
    doing that open ourselves up to pointing fingers at ourselves
    and saying, physician, heal thyself, and do not find the speck
    in your neighbor's eye when you have a log in your own.
        As this testimony goes over, I hope that we can work
    together at going back to the new majority and say, Hey, we
    really have screwed up, and we screwed the consumer and the
    environment at the same time, and good intentions do not make
    fuel any more affordable or any cleaner.
        I hope to be able to engage in this discussion and I hope
    you join us in taking the leadership of going back and taking a
    look at those mistakes we have made and the things we have done
    wrong or haven't done right that can really help both the
    consumer and the environment if we do them right.
        Thank you very much.
        Mr. Kucinich. Thank you, Mr. Bilbray. I will respond to the
    points that you made. I think that it is important that this
    committee always be open to examining the role that Government
    plays. In this particular case, part of the work of this
    committee has been to examine the role of those who set the
    standards to see if Government actually is in some way,
    directly or indirectly, through commission or omission, playing
    a role in the high price of gasoline.
        I commit to you that this committee is not simply about
    probing the decisions of the private sector, but it is
    important to look at the inter-relationship between the private
    sector and the public sector, and also the public sector's
    policies as they reflect upon and impact upon the private
    sector. Thank you.
        If there are no additional statements, the subcommittee
    will now receive testimony from the witnesses before us today.
    I want to start by introducing our panel.
        Mr. Ben Soraci is the U.S. retail sales director for
    ExxonMobil Fuels Marketing Co., a position that he has held
    since May 1, 2007. Prior to his current position, Mr. Soraci
    was manager of the U.S. company-operated retail sites for 3\1/
    2\ years. Mr. Soraci joined Mobil in its U.S. Marketing and
    Refining Division in 1984, and has held various positions in
    many divisions, including Resale Marketing, Marketing Real
    Estate and Retail, as well as management positions with Mobil's
    International Division in Japan, Africa, and Europe. Along with
    his duties at Exxonmobil, Mr. Soraci is co-chair of the
    American Petroleum Institute's General Marketing Committee.
        Mr. Hugh Cooley is vice president and general manager of
    National Wholesale and Joint Ventures for Shell Oil Co. Mr.
    Cooley has been with the Shell Oil Co. for more than 35 years.
    He has held numerous positions in the areas of sales,
    marketing, and operations management. He became vice president
    and general manager of National Wholesale in March 2002, and
    became responsible for retail joint ventures in 2006. In his
    current position, Mr. Cooley is in charge of managing Shell's
    sale of Shell-branded gasoline at the wholesale level. Mr.
    Cooley also serves on a number of industry boards and is co-
    chair of the American Petroleum Institute's General Marketing
    Committee.
        In introducing the members of this panel, I think we have
    established that these are people who have high qualifications
    and are certainly here to be able to answer our questions.
        I want to welcome you for being here. Please let those who
    you work with at your respective companies know that this
    subcommittee does very much appreciate your presence.
        Gentlemen, it is the policy of the committee on oversight
    and Government Reform to swear in all witnesses before they
    testify. I would ask if you would rise and raise your right
    hands.
        [Witnesses sworn.]
        Mr. Kucinich. Thank you. Let the record reflect that the
    witnesses answered in the affirmative.
        At this time I would ask the witnesses to give an oral
    summary of your testimony, and to try to keep that summary
    under 5 minutes in duration. I want you to know that your
    written statement will be included in the hearing record, and
    any other extraneous materials that you wish to supply. Our
    committee will cooperate with you in facilitating the inclusion
    of those materials in the record.
        Mr. Soraci, thank you for being here. We would like to
    begin with you. You are recognized to proceed. Thank you.

         STATEMENTS OF BEN SORACI, U.S. RETAIL SALES DIRECTOR,
       EXXONMOBIL FUELS MARKETING COUNSEL; AND HUGH COOLEY, VICE
      PRESIDENT AND GENERAL MANAGER, NATIONAL WHOLESALE AND JOINT
                          VENTURES, SHELL OIL

                        STATEMENT OF BEN SORACI

        Mr. Soraci. Chairman Kucinich, Ranking Member Issa,
    distinguished subcommittee members, I appreciate the
    opportunity to be with you today to talk about automatic
    temperature compensation.
        Let me start by saying that I know people are concerned
    about energy costs and they are looking for answers. The
    question that is before us today is whether we should change
    the way we dispense fuel at the gas pump.
        As indicated, my name is Ben Soraci. I am the U.S. retail
    sales director for ExxonMobil Corp. My testimony today will
    address three key points which reflect ExxonMobil's view on
    automatic temperature compensation. From here on out, I will
    refer to it as ATC.
        First, ExxonMobil's sale of motor fuel to consumers is
    fully compliant with the law, and selling temperature
    compensated motor fuel at retail would violate current laws and
    regulations.
        Second, ExxonMobil supports a comprehensive study regarding
    the use of ATC at retail.
        Third, and very importantly, the investment cost associated
    with implementing ATC at retail will primarily be borne by the
    independent retailers.
        Now, with regard to my first point, as required by law,
    retailers in the United States sell motor fuels by the
    volumetric gallon measurement. With the exception of Hawaii, a
    gallon is defined across the United States as 231 cubic inches;
    in other words, no different than any other liquid. This volume
    measurement method for retail transactions is governed by State
    laws and regulations, based on guidelines from the National
    Conference on Weights and Measures [NCMM]. Therefore, if ATC is
    to be permitted, new laws and regulations would need to define
    a gallon of motor fuel on a temperature compensated basis. ATC
    equipment would need to be certified for retail stations, and
    calibration and special protocols will need to be developed and
    adopted.
        My second point is that ExxonMobil supports a comprehensive
    study to evaluate whether a basis exists to change the current
    retail measurement standard. States such as New York and
    Minnesota have considered and expressly prohibit the sale of
    motor fuel on a temperature compensated basis at retail. On the
    other hand, California and Arizona appear to desire a
    permissive or optional approach.
        At the national level the NCMM considered permissive ATC
    guidelines at its annual meeting the week of July 8th, and they
    voted not to adopt new guidelines pending further study. In
    Congress, the House Science and Technology Committee has asked
    the National Academy of Sciences to conduct a nationwide study
    to determine whether a problem exists and whether widespread
    use of ATC equipment was warranted.
        So there are differences of opinion regarding ATC, and
    there are unanswered questions. This is why we believe a
    comprehensive study will provide an appropriate basis for
    evaluating any potential change to current NCMM guidelines and
    the associated laws and regulations have governed the use of
    ATC.
        There are several fundamental questions that should be
    addressed in such a study. For example, if a change in the
    measurement standard is deemed appropriate, should
    implementation be mandatory or permissive? Should the
    measurement method vary according to the choice of each State,
    or should there be a national standard? And, most importantly,
    what are the costs versus benefits for the consumers and the
    independent retailers?
        ExxonMobil believes a comprehensive study is an important
    prerequisite for making an informed decision with regard to ATC
    at retail.
        My third point is that the investment cost associated with
    the implementation of ATC at retail stations would primarily be
    borne by independent retailers. You heard Tim Columbus, who
    represents the interests of independent retailers through the
    SIGMA and NACS industry associations, makes this same point in
    his recent testimony.
        The fact is, ExxonMobil owns a very small percentage of the
    retail motor fuel stations in the United States. Of the
    approximately 170,000 retail stations throughout the country,
    less than 2 percent are owned by ExxonMobil. Furthermore, of
    the stations that are branded Exxon or Mobil, over 80 percent
    are owned by independent retailers, who would be directly
    impacted by the implementation of ATC. This is a very important
    point to keep in mind. Why? Because as owners of existing
    equipment, they would directly incur the cost of the new
    equipment or any retrofits that might be required.
        As you also heard Mr. Columbus say, many of these
    independent retailers would struggle to make this investment.
    ExxonMobil concurs with his assessment.
        In summary, the three key points of my testimony are:
    first, ExxonMobil's sale of motor fuel to consumers is fully
    compliant with the law, and selling temperature-compensated
    motor fuel at retail would violate current laws and
    regulations.
        Second, ExxonMobil supports a comprehensive study regarding
    the use of ATC at retail.
        And, third, the investment cost of implementing ATC at
    retail would be primarily borne by the independent retailer.
        I thank you for your time, and I would be happy to answer
    any questions on this subject.
        [The prepared statement of Mr. Soraci follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Kucinich. I thank the gentleman.
        The Chair recognizes Mr. Cooley.

                        STATEMENT OF HUGH COOLEY

        Mr. Cooley. Good morning, Mr. Chairman and members of the
    subcommittee. My name is Hugh Cooley, and I am Vice President
    and General Manager of National Wholesale and Joint Ventures
    for Shell Oil Products Co. in Houston, TX.
        I am here to testify because for several years I have been
    responsible for managing the relationship with our wholesalers.
    Wholesalers supply most of our local independent Shell stations
    in the United States by independent stations, I mean stations
    which Shell does not own or operate.
        Now let me begin by summarizing Shell's position on some of
    the central concerns and questions about this issue. Shell does
    not believe that the American consumers are harmed in any way
    by not having temperature adjustment at retail dispensers. The
    standard applied by State weights and measures authorities for
    fuel cells to consumers has long been the volumetric gallon, a
    standard that is easy to understand and easy for State
    regulators to enforce.
        This way of measuring gasoline just makes good sense. When
    a consumer purchases a gallon of gasoline, the consumer is
    assured each and every time, winter or summer, that a true
    volumetric gallon of gasoline is being pumped into their car.
    Consumers understand and depend on this methodology, and local
    weights and measures officials easily and uniformly enforce
    regulations requiring that a gallon is, indeed, a gallon.
        If all sellers use the same unit of measure in a given
    local market, then the market will settle on the most
    competitive price in that place, time, and circumstances. The
    idea that temperature adjustment will somehow get people more
    for their money simply does not take into account the realities
    of the retail gasoline market. If gasoline were temperature
    adjusted at the retail level, the intense competition in the
    market would adjust prices to take that into account, as well.
    In other words, if retailers sell larger gallons, you should
    expect they will charge more for larger gallons.
        Now let's talk about energy content. The notion that
    automatic temperature adjustment would guarantee that every
    gallon of gasoline has the same energy content, as well.
        The EPA recognizes that the energy content of gasoline is
    affected by numerous factors in addition to temperature,
    including the percentage of ethanol it contains, the grade of
    crude oil from which it was refined, and the processes used at
    the refinery.
        Another misconception is that all wholesale transactions
    are temperature adjusted. The reality is that temperature
    adjustment does not occur at all wholesale transactions. Some
    States forbid it, some States require it, and some States give
    the buyer a choice. In fact, most of Shell's sales at the
    wholesale level in the warmer States are temperature adjusted,
    and most sales in the colder States are not. This is exactly
    the opposite of what you would expect if the proponents of
    temperature adjustment were correct that it is used only when
    it benefits the oil companies.
        Furthermore, companies like Shell exchange large volumes of
    gasoline between terminals that are often far apart, often in
    markedly different climates, and at varying times of the year.
    All of this does require accounting for the impact of
    temperature variation.
        Now, regarding the question of why most Canadian retailers
    temperature adjust in retail sales, the government of Canada
    legally permitted temperature adjustment for retail gasoline
    approximately 15 years ago, and apparently at the urging of the
    manufacturer of a temperature adjustment device. We believe
    that some Canadian retailers thought that the use of
    temperature adjustment devices would provide them with a
    competitive advantage over other retailers. When their use
    became an industry trend, most other retailers, including
    Shell, followed to avoid a competitive disadvantage.
        After most stations had converted and the market
    essentially had transitioned to automatic temperature
    adjustment, basic economics lead us to believe that the price
    at the street level would have adjusted to take into account
    the new temperature adjusted unit of measure.
        Finally, the cost of installing automatic temperature
    adjustment equipment would hit the independent retail stations,
    which are not owned or operated by the integrated oil
    companies. Independent stations are the major player in selling
    gasoline to consumers, accounting for more than 90 percent of
    such sales.
        As Mr. Columbus testified in the committee on behalf of
    NACS and SIGMA, the temperature adjustment debate is not about
    integrated oil companies; it is about the independent retailers
    and the consumers.
        In summary, Shell believes that the fundamental economic
    principles that dictate the cost of temperature adjustment
    would be incurred predominantly by local, independent retailers
    and passed on to consumers without any economic benefit to the
    consumer.
        On behalf of Shell, I look forward to answering your
    questions today. Thank you, Mr. Chairman.
        [The prepared statement of Mr. Cooley follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Kucinich. I thank the gentleman.
        We are going to go into questions right now. I am going to
    begin the first round with 5 minutes, and then we will go to my
    colleagues, and then we will come back for a second round and a
    third round, if necessary.
        I would like to begin with Mr. Cooley. When new pumps are
    ordered, who determines which pumps with what specifications
    may be bought? You, the oil company, or the dealer?
        Mr. Cooley. Our requirement is that the dispensers, we meet
    all legal requirements, so we do not specify specific
    manufacturers for dispensers. We do specify that they meet the
    legal requirements by different States and Federal authorities.
        Mr. Kucinich. If pumps equipped with temperature
    compensation were to be installed at your branded stations,
    wouldn't you have to agree to that?
        Mr. Cooley. If they were installed in any stations in the
    United States today, we do not believe that the State weights
    and measures people would allow them to utilize temperature
    correction at this time. All the State weights and measures are
    still based on a volumetric gallon.
        Mr. Kucinich. I understand that, but if the pumps equipped
    with temperature compensation were to be installed at your
    branded stations, wouldn't you have to agree to that?
        Mr. Cooley. If they were not activated I would agree with
    that. That is correct.
        Mr. Kucinich. And wouldn't you probably specify which pump
    and which pump maker would get the business? Wouldn't that be
    up to Shell to determine?
        Mr. Cooley. No. We would not determine which pump
    manufacturer gets the business. I think, as the gentleman from
    Gilbarco testified last time, the majority of their purchases
    or sales are to third-party independents, not to the major oil
    companies.
        Mr. Kucinich. Now, at our last hearing on this hot fuels
    issue we heard from the president of a manufacturer of pumps
    and automatic temperature compensation equipment. He said that
    after his company applied for and received certification to
    sell his equipment from the State of California, there was no
    demand from the industry for the automatic temperature
    compensation device. So, just so that I am clear, would the
    decision to purchase ATC have been effectively made by or
    required your approval?
        Mr. Cooley. No, sir.
        Mr. Kucinich. I am going to ask Mr. Soraci, would that
    decision have been effectively made by or required your
    approval?
        Mr. Soraci. The purchase decision is the independent
    retailers' decision.
        Mr. Kucinich. And was your company in any way involved,
    ExxonMobil in any way involved in that kind of decisionmaking?
        Mr. Soraci. No, sir.
        Mr. Kucinich. Now, what about the case of stations which
    are company owned and operated? I will ask the question again:
    would the decision to purchase ATC have been effectively made
    by or required your approval?
        Mr. Soraci. Yes, it would. For company-owned and operated
    locations it would be.
        Mr. Kucinich. Mr. Cooley.
        Mr. Cooley. No. It would have required my concurrence,
    which is very similar to approval under our authorities.
        Mr. Kucinich. So is your answer yes or no?
        Mr. Cooley. No.
        Mr. Kucinich. So you say, Mr. Soraci, yes; and Mr. Cooley
    says no, it wouldn't apply.
        Mr. Cooley. Right.
        Mr. Kucinich. Whose approval would it have required?
        Mr. Cooley. We have a global engineering group, network
    group, and that is the group that technically has the
    responsibility for developing the order standards and would
    approve that or disapprove it. They would ask for my
    concurrence.
        Mr. Kucinich. Let me be more specific. I don't mean you,
    personally. I mean your company.
        Mr. Cooley. Yes. I am sorry. You said you.
        Mr. Kucinich. Right. We will accept in your capacity, you
    are representing Shell, so would it have required Shell's
    approval?
        Mr. Cooley. Yes.
        Mr. Kucinich. OK. So now we are in concurrence here. OK.
    So, Mr. Cooley, the reason that Shell's branded stations in
    California don't have ATC is because Shell decided they
    shouldn't have them?
        Mr. Cooley. I don't know how many dispensers have been
    installed in southern California since the period which you
    reference which a State official said they could be allowed. We
    would not order that equipment unless the State weights and
    measures folks said that we could utilize that equipment to
    dispense gasoline. They have not said that is allowable.
        Mr. Kucinich. But as far as a policy decision with respect
    to Shell, the reason your branded stations in California do not
    have ATC, you are saying that is because of the State, or is
    that because of Shell?
        Mr. Cooley. The State weights and measures officials have
    not changed their certification to allow temperature corrected
    devices on dispensers as a measure that you use. It is a cubic
    inch, 231 cubic inch, measure which they use.
        Mr. Kucinich. I am going to come back to Mr. Cooley and Mr.
    Soraci on the same question, but my 5 minutes have elapsed, and
    so, in keeping with the fairness that we have in this
    committee, I am now going to go to Mr. Issa.
        Mr. Issa. Thank you, Mr. Chairman. Hopefully, as we go back
    and forth, we will pick up each other's questions and answers
    and get a fuller understanding.
        Staying on the core subject of 231 cubic inches--which
    always reminds me of an engine, but I guess in this case we are
    only talking about fuel, although if we could change it to a
    289 it would be popular in Ford families--if we take the
    temperature from 60 degrees to 80 degrees we go up to, what,
    232, 233 cubic inches?
        Mr. Cooley. Roughly.
        Mr. Issa. OK. So less than 1 percent from a typical ground
    fuel to a truly hot fuel. We are going to go up less than 1
    percent.
        Well, let me just understand something here today, because
    I want to put it in perspective for the record. If temperature
    compensation achieves one thing, it achieves fair amounts of
    BTUs being delivered at different temperatures. It is not about
    how much fuel you get; it is about how much benefit you get. So
    if we compensate as the temperature rises, then is there a
    device today that either one of you are aware of--and I am
    assuming in your capacities you would at least be aware of
    them--that would allow us to compensate when we go from 5
    percent ethanol to 10 percent ethanol, depending upon summer
    and winter? Obviously, that is a drop of far greater than 1
    percent of effective BTUs for the purpose of moving vehicles.
    Is there any device that can make those kinds of differences?
        Mr. Cooley. I am not aware of one.
        Mr. Soraci. I am not aware of any, sir.
        Mr. Issa. Now, you both do business in California. We have,
    what, 28 boutique fuel mixtures?
        Mr. Cooley. A large number.
        Mr. Issa. OK. Well, we will just use 28 as a number that is
    thrown around. So those 28 different fuel mixtures, depending
    upon time of year, temperature, depending upon the micro-
    climate you are in, the Los Angeles Basin where the full
    committee chairman is, or San Diego, each of those has a
    different effective value of BTUs, doesn't it, as you mix
    fuels, they don't have the same amount of fuel capability if
    you are talking about how many miles per gallon you would get
    over 100,000 miles?
        Mr. Cooley. Yes.
        Mr. Issa. And we don't have any way of compensating. Do you
    deliver to your retailers when you change mixtures? Do you
    deliver any kind of an analysis that this fuel isn't as good,
    or it is better?
        Mr. Cooley. No, sir. All our Shell quality fuels are good
    fuels, but we do not differentiate them.
        Mr. Issa. And I appreciate the fact that you don't
    determine the mixture except as to meet compliance, and that
    those boutique fuels are directly as a result of certain
    compliance issues.
        So let me just put this in perspective. You have less than
    1 percent difference between 60 degrees and 80 degrees, but we
    have far more than 1 percent difference based on government-
    mandated changes to the fuels just in driving distance, just in
    100 miles of southern California, and there is no effective way
    to determine that, so the consumer may be getting a 2, 3, 4,
    5--Lord knows, with E85 he is getting a 30 percent cut in the
    effective BTUs, and we don't have any warning, do we, in
    California?
        Mr. Cooley. Not that I am aware of.
        Mr. Issa. Mr. Chairman, I am hoping that we can expand
    this. If the goal is to make sure that the consumer gets the
    fair share, we can look. Maybe we can have that gentleman back
    that developed the device and he can develop a device that
    would calculate the BTUs, so that when I buy E85, which I think
    is great, it is a clean-burning, renewable fuel, but I only get
    30 percent less in miles per gallon off of E85, then I
    understand that I am not getting 231 cubic inch equivalent of
    gasoline. Is that right?
        Mr. Cooley. Yes, sir.
        Mr. Issa. OK. Now let me go through one more analysis,
    because I think this is important. I have a dollar bill here. I
    know it is not much any more, but we can still use it. It has a
    breakup, and it really goes--it was designed, really, to talk
    about the earnings of retailer. I know these guys want this
    really badly. Hopefully, you have it. It shows 19 percent is
    taxes.
        I am just fixating on the part the State and the Federal
    Government gets. If you move your fuel average temperature, or
    your temperature for base compensation, if you moved it from 60
    degrees to 68 degrees or 70 degrees or 80 degrees and said this
    is it, and the consumer got 80 degrees, 233 cubic inches, and
    then we go the other direction so that you give them 1 percent
    extra, since the Federal Government taxes based on a gallon of
    gasoline, if you gave everyone an extra two cubic inches, even
    if you charged them more, wouldn't the revenue to the Federal
    Government drop off pretty precipitously by that ratio, that 1
    percent? In other words, the billions of dollars that we take
    in in highway taxes would, by definition, drop off if you
    recalibrated to a higher temperature? Isn't that roughly right,
    because we only collect on gallons?
        Mr. Cooley. If you sell fewer larger gallons, on a gallon
    tax you would collect less revenue.
        Mr. Issa. Perhaps we can score that but, Mr. Chairman, my
    time has expired.
        Mr. Kucinich. We can pursue that later. I thank the
    gentleman.
        The Chair recognizes Mr. Bilbray.
        Mr. Bilbray. Yes. I would just like to correct the
    gentleman from California that ethanol may be beneficial for
    tailpipe emissions, but it is a gross polluter from evaporative
    emissions because of its vapor pressure problems. Since 1992,
    our Resources Board in the State of California has formally
    requested a waiver from the mandate of ethanol use for
    environmental reasons and haven't been able to get as much
    response on that. We have been able to lower our percentage.
    But I just think we need to make it clear that when we talk
    about ethanol's environmental benefits, it is a tailpipe
    emission reduction but a gross polluter from evaporative
    emission problems.
        My question is this: we are talking about the possibility
    of a 1 percent reduction to the consumer. According to the
    Harvard study that came out a few years ago, ethanol had a
    carbon chain problem to the fact that you need almost--is it a
    gallon and a half of ethanol to every gallon to get the same
    mileage?
        Mr. Cooley. It is 30 percent less energy content, and E85
    would----
        Mr. Bilbray. So 70, 75 percent?
        Mr. Cooley. Right.
        Mr. Bilbray. Mr. Chairman, in California, with the ethanol
    mandate, the consumers are required to have to basically pay
    what is comparable to $6 for a comparable amount of ethanol to
    match what they would rather could have gotten with gasoline.
    So I think we have to say quite sincerely, if we are looking at
    consumer protection here, this is a huge hit, especially when
    you talk about the wholesale price of gasoline in California is
    about $2.20, when the comparable ethanol price in California
    would be about $6. That is something that no one has talked
    about. If we want to talk about protecting the consumer, we
    need to reconsider a terrible mistake we have made and be
    willing to address this issue.
        Ethanol is costing the consumers around this country
    through the nose. They are getting ripped off by it. It is not
    helping the environment. And when they talk about going to
    green fuels, it is interesting that the U.S. Government taxes
    imported ethanol at $0.54 a gallon to be imported. Why? Because
    we don't want imported ethanol? If it is such a great fuel, why
    don't we import that rather than gasoline?
        The fact is, where the consumer is being shafted is by a
    mandate by the Federal Government that says you, the oil
    company, cannot sell gasoline in many parts of this country
    without putting 10 percent of a boutique fuel that causes
    evaporative emissions, causes operational problems, and rips
    the consumer off, and then we wonder why the price of gasoline
    is up.
        I would just say: how many cities and how many regions are
    we talking about right now aren't using ethanol in their
    gasoline?
        Mr. Issa. It is a national mandate.
        Mr. Bilbray. It is a national mandate, right? Can you
    legally sell gasoline in California or in Arizona without
    ethanol?
        Mr. Soraci. To my knowledge not in those States, but there
    are States or areas where there is not an ethanol mandate.
        Mr. Bilbray. I think the air pollution regs were changed
    recently to where you got into it.
        Here is the sad part about it: nobody forces that gasoline
    be in the fuel, but the Federal Government is mandating that
    ethanol be in the fuel.
        For us to be looking at a 1 percent reduction, Mr.
    Chairman, when those kind of numbers have grown, so I would ask
    you to join with us in saying, when it comes to this kind of
    mandate, it has been a terrible mistake that not only may be
    hurting the environment, according to the Air Resources Board
    in California and the EPA, but is ripping off the consumer for
    a certain, small special interest group. I don't think we want
    to change a monopoly by one industry with a monopoly from
    another industry, and I don't think we want to be able to
    justify the fact that we are looking at reduction to the
    consumer of 1 percent when we are talking about maybe we ought
    to be reducing some of the cost by mega-times over that by just
    changing our mandates and our regs.
        But I appreciate the information, gentlemen.
        Mr. Issa. Would the gentleman yield?
        Mr. Bilbray. I would yield to the gentleman from
    California.
        Mr. Issa. You know, the gentleman kept saying 1 percent,
    but to get 1 percent isn't that only if the fuel is incredibly
    hot? If the average fuel is 67 degrees, which is the Chair's
    assertion, and I very much take him at his word, what reduction
    would that be? In other words, how much would fuel expand? You
    may have to get it back for the record. How much would fuel
    expand between 60 and 67 degrees, Mr. Cooley?
        Mr. Kucinich. The gentleman's time has expired, but we will
    permit the witness to answer the question.
        Mr. Cooley. To me this is the big misconception. People
    need to be clear. While temperature adjustment will recalibrate
    the size of a gallon, the consumer who pulls into a service
    station the day after temperature adjustment is enacted on
    those pumps, their gas tank is absolutely no larger. The amount
    of fuel that goes in that car is absolutely the same. It is the
    same temperature as it was the day before. They get no more or
    no less BTUs. They get no more, no less mileage. They get
    exactly what they got the day before, except the unit of
    measure is redefined into a smaller or a larger gallon. That
    is, I think, the most misunderstood part. People actually think
    they are getting more gallons; it is just the unit of measure
    that changes.
        Mr. Kucinich. I thank the gentleman. Of course, the purpose
    of these committee hearings has been to determine whether or
    not the consumers are actually paying for gasoline they are not
    getting. Now, what I would like to do is to begin my questions
    by asking both of the gentlemen here to basically acknowledge
    that you have both stated that, even if you wanted to use
    temperature compensation at retail, in many cases State law
    wouldn't let you. Did you both say that? Did you say that? is
    that a fair characterization?
        Mr. Cooley. What I stated was State weights and measures
    regulations have not adopted temperature correction.
        Mr. Soraci. And our understanding is that across the United
    States a gallon is still defined as 231 cubic inches by law.
        Mr. Kucinich. Well, at the request of this subcommittee,
    the National Institute of Standards and Technology conducted a
    survey of the 50 States and the District of Columbia. The
    National Institute of Standards and Technology contacted the
    lead officials in the States responsible for weights and
    measures. This is what the National Institute found: by and
    large, most States permit temperature compensation at both the
    wholesale and the retail level. In fact, NIST could find that
    automatic temperature compensation is only expressly prohibited
    in nine States for retail.
        So isn't it correct to state that automatic temperature
    compensation could be used right now in retail sales in up to
    42 States if you only chose to utilize it? I mean, there is no
    law against it. Mr. Soraci.
        Mr. Soraci. Our understanding, Mr. Chairman, is that there
    aren't any States in the United States that define a gallon of
    gas as something other than 231 cubic inches, so it would be
    unlawful for us to sell a gallon on a temperature compensated
    basis.
        Mr. Kucinich. So are you disputing the findings of the
    National Institute of Standards and Technology?
        Mr. Soraci. Our understanding is different. Yes, sir.
        Mr. Kucinich. And Mr. Cooley.
        Mr. Cooley. We have the same. State weights and measures
    still, in all but Hawaii, when they come to a station to check
    the independent retailer's dispensers, they measure 231 cubic
    inches as a standard gallon.
        Mr. Kucinich. I just wanted it to be made a matter of
    record that, based on our subcommittee request to the National
    Institute of Standards and Technology [NIST] that NIST
    contacted the lead officials in the States who are responsible
    for weights and measures. These are the people that your
    colleagues deal with on a regular basis. We are hearing
    something a little bit different at that State level than what
    we are being told here, so we need to reconcile that.
        Now, our committee has heard from dealers that the cost of
    installing automatic temperature compensation equipment or
    pumps built with ATC will be costly to them, but isn't it
    true--we will start with Mr. Soraci--isn't it true that if you,
    the refiner, agreed to pay for it, we have the mechanism and
    the precedent for doing so through your development funds,
    image funds, or other supplementary means of financing
    improvements at gas stations that you may so desire?
        Mr. Soraci. The agreements that we have with our
    distributors and our dealers are arm's length agreements only,
    contracts. There are certain obligations that the independent
    retailer has, and there are obligations that we have.
        The assets in these cases are owned by independent
    retailers, and the way the relationship works, it is their
    responsibility to maintain those assets.
        Mr. Kucinich. I understand in your testimony, ``The
    investment cost of implementing ATC at retail would primarily
    fall upon independent motor fuel retailers.'' You just stated
    it is a contract issue. Now, I would like to ask you then, I
    understand that it is fairly routine that the refiner would
    establish a development fund or image fund which would pay for
    certain alterations and upkeep of a retail gas station; isn't
    that right?
        Mr. Soraci. We do have funds for certain items, and it is
    primarily around branding of the facility to carry the Exxon
    and Mobil brands.
        Mr. Kucinich. And what are the kinds of things that a
    development or image fund would pay for?
        Mr. Soraci. Signage, branding-related activities, and
    sometimes different general investment costs if it is a new
    location that is being built or location that is being rebuilt.
        Mr. Kucinich. OK. Then who decides what the development
    fund or image fund may pay for, you or the dealer?
        Mr. Soraci. It is the dealer. We would typically agree on a
    fund, a level of money to be able to secure that business as a
    supplier, and it would ultimately be their decision outside of
    the signage and the branding piece. As I understand that would
    be their decision.
        Mr. Kucinich. And who determines what exactly are the
    specifications of the materials and equipment that can be
    bought with the proceeds of the development fund, you or the
    dealer?
        Mr. Soraci. Again, if it is related to our brand, it would
    be ExxonMobil. If it the equipment at the facility, it would be
    the independent retailer.
        Mr. Kucinich. Mr. Cooley, I would like to go back to you
    with this question. Isn't it true that if you, the refiner,
    agreed to pay for automatic temperature compensation equipment,
    or pumps built with ATC, that you have the mechanism and
    precedent for doing so through your development funds, image
    funds, or other supplementary means of financing improvements
    at gas stations as you may so desire?
        Mr. Cooley. We similarly have a building incentive fund,
    which is only utilized each year by a few hundred at the most
    out of our 14,000 locations that are out there. We also work
    through wholesalers, so we make this fund available to
    wholesalers in order to attract new Shell business, but it is
    not specified down to all the details of what it might be spent
    for. It would typically be a wholesaler who would be asking us
    to help them acquire new business. How they form a relationship
    then with the retailer is up to them. They could or could not
    elect to utilize that for equipment. It is predominantly around
    branding such as signage. Dispensers are not specifically
    included or excluded for how they spend the money.
        Mr. Kucinich. OK. My time has expired. I have actually gone
    a minute over, so I would give Mr. Issa 6 minutes.
        We are going to have a third round.
        Thank you.
        Mr. Issa. Thank you, Mr. Chairman. I am going to followup
    on this.
        First of all, I would like to ask unanimous consent that
    Robert Samuelson's column from a couple of weeks ago in the
    Washington Post be included in the record.
        Mr. Kucinich. Without objection.
        Mr. Issa. Now, Samuelson is an economist. I know the two of
    you probably are not economists, but I am going to push the
    window for a second on big financial calculations.
        If you spent $1 billion of your corporate money changing
    over all the pumps and you didn't pass it on in higher fuel
    prices, then the only two places I can understand it comes from
    is you wouldn't do research and development somewhere else, you
    wouldn't do advertising, you wouldn't buy new signs, you
    wouldn't pay for new buildings, or the stockholders, which
    include union pensions and other retirement funds and so on,
    would simply get less money. Your dividend would fall. One of
    those two things--you would either have to spend less somewhere
    else, including research, or you would have to pay a lower
    dividend and, as we always like to say, the widows and orphans
    would be the losers.
        Is that basically the only two places, if you gave away
    that money, that it could go?
        Mr. Cooley. Some combination of those factors.
        Mr. Issa. So I think what we have to ask is not could
    somebody pay for this. Somebody could. But if it is not passed
    on in higher prices, then we have to assume that, in fact, a
    potentially frivolous expense could lead--because I am calling
    it frivolous. I am calling it frivolous because we are not
    going to do the compensation for all the other things that
    might have an effect. That expense, both initial and ongoing,
    would be basically passed on to the consumer in all likelihood.
    I don't expect you to tell your union pension funds that you
    are going to cut the dividend this year. I don't think that is
    what they want. They certainly plan on retiring like the rest
    of us.
        Mr. Chairman, I think that we should followup with the NIST
    and we should go through another round of questioning there and
    with local municipalities, but my colleague to my right, Mr.
    Bilbray, has good experience with watching them pump three
    gallons of fuel out into a fixed container. If we did
    temperature compensation--and I am looking at it from the
    county level, because the county would have to certify this--
    they couldn't just pump three gallons into a container and look
    at the line; you now would have to read the temperature of the
    fuel and calculate it. In a sense, you would need your own,
    independent little computer, which I suspect the automatic
    machine calibrator would sell to the counties for a lot of
    money; you, in fact, would need to have a very sophisticated
    device to check the device which we are asking to be
    sophisticated. Isn't that one of the considerations your
    companies have?
        Mr. Cooley. It is an ongoing more complex procedure that
    would cost more money for the inspectors in the counties or the
    States.
        Mr. Issa. And if we are going to spend that much money,
    would you say that we ought to figure out what the offset is
    for ethanol and everything else? In other words, if we are
    going to go to a BTU value based and we are going to have an
    expensive computer to figure out whether you are, as a
    barkeeper might say, watering down your liquor--because ethanol
    and other additives at times could be watering down your
    gasoline because of value--then wouldn't we need to have that?
    Wouldn't we need to have sort of the burn test, the way you
    figure calories where you actually burn some and you find out
    the value? That would be the only fair way to find out whether
    a fuel at one station, and across the corner selling for the
    same price, who was giving a better value? Is that pretty well
    agreeable? Is there any research you know of that would lead to
    that capability?
        Mr. Cooley. I hate to say it. I think it is actually more
    complex, because even if you had that, you would have to have
    the ability to look at the price and factor it in and
    understand which is the best value. So you couldn't just look
    at the sign price and look at an energy content; you would have
    to take the combination of the two to understand what the best
    value is.
        Mr. Issa. So when Senator Schumer suggests that if we break
    up your companies into lots of little companies that would
    benefit us, is that going to go anywhere toward us developing
    that very complex BTU capability and understanding exactly how
    much value we get in the fuel by the milliliter we receive?
        Mr. Cooley. I don't believe so.
        Mr. Issa. OK. I just want to understand, because I remember
    at the start of this Congress the first and most important
    hearing that was held by this committee, we started off on
    global warming, and it is amazing to me that we have completely
    left global warming and we are now trying to make sure that
    people get another tenth of a gallon into their tank at
    whatever the cost is, and we seem to have lost track of a lot
    of other issues related to this.
        I guess we haven't given you much time to make your
    statements fully, but let me just ask----
        Mr. Kucinich. Excuse me. Are we not providing them----
        Mr. Issa. No, sorry, Mr. Chairman. What I wanted to say
    was: are there areas that we should be getting out here,
    because from what I can tell today we are arguing over 1
    percent and we are not dealing with any of the others. Are
    there issues we are not talking about altogether, like what
    would happen if ANWR and two million barrels of oil a day were
    coming down? Would that reduce the likely cost of fuel in
    America by 1 percent or more? Just a guess. I mean, I know you
    are not experts on that, but would two million barrels a day
    more coming into America be favorable in knocking that $74 a
    barrel down?
        Mr. Cooley. Well, I am here to talk about ATC. I will tell
    you on supply and demand and my understanding of economics,
    more supply and/or less demand would absolutely do that.
        Mr. Soraci. And, again, on the issue of ATC, I think there
    are a lot of complexities in that area and a lot more has to be
    looked at, and that is why we are suggesting that we look at it
    in a comprehensive way to make sure that we make the right
    decision on ATC.
        Mr. Issa. Thank you both. If we have a third round, I will
    be back for more clarification.
        Thank you, Mr. Chairman.
        Mr. Kucinich. We will. I thank the gentleman.
        Mr. Bilbray.
        Mr. Bilbray. Thank you.
        Mr. Issa, I am sure that when the chairman joins with us in
    eliminating the rip-off of the consumers by the Federal mandate
    to burn alcohol in our gasoline we will have more than enough
    savings to be able to investigate all kinds of devices.
        For the record, I want to make it clear that I didn't sit
    and watch somebody do this. As chairman of the county, I went
    out and worked 1 day a month in the different departments,
    small county of three million people. There were a lot of
    different departments, but one of them was to go out to every
    gas station and pour the three gallons and make sure that it is
    at least more than three gallons.
        The concern there is that, as a supervising agency, if we
    have now I show up in February and I pour the three gallons,
    and because of the temperature drop--it gets cold in San Diego.
    It actually gets down in the 50's sometimes. [Laughter.]
        Mr. Kucinich. Back in Cleveland they will be really
    mourning that news.
        Mr. Bilbray. Yes. But the fact is, during the February
    period it might show below, and that would trigger our
    enforcement on the retailer. So then I am trying to figure out,
    do we now have to have each county--and we did do it State by
    State. Actually, the counties do this directly. How do we
    regulate a measurement device and how do we tool up for that?
        I am sure with our local government background you
    recognize that the oversight by the local agencies is something
    we have to figure into this in how we do it, and right now we
    are not tooled up for this.
        I look forward to talking to my Department of Weights and
    Measurements to specifically see that, because right now it is
    a simple system based on averaging three gallons. As long as
    you make sure the consumer gets more than the gallon on that
    day of whatever the temperature is, it qualifies. We can
    measure that. We start getting into a hard formula, my question
    is: is there a portable device that we could purchase, that we
    could acquire for local government to be able to do this
    monitoring?
        Mr. Cooley. I don't know if there is a portable device
    today. I am sure one could be put together. As previously
    stated, it would be a factor of changing the calculations,
    understanding the temperature of the fuel that was being
    dispensed, to then make the calculation of what that would
    represent in cubic inches.
        Mr. Bilbray. So it looks like we are going to have to have
    a much more sensitive measurement, a larger volume, and then
    try to then have a fixed financial management that probably
    could be fed into a hand-held computer that would calculate
    what measurement equates to what at a certain temperature,
    because you would have that all Federal in.
        In all fairness to the men and women I work with, they
    might be very good at what they are doing, but I am not so sure
    that higher calculus is one of their strong points in school. I
    know it definitely wasn't for myself.
        One of the things, Mr. Chairman, in this is we see a
    problem or a perceived problem, we perceive that there may be
    an answer, but the practical execution of the answer is one of
    the places that Washington falls down flat on its face for so
    long. I mean, where do we go? Thirty years on war on poverty,
    and after billions of dollars we have more poverty than we had
    when we started out. I want to make sure that the end result
    reflects the stated goal as we start reviewing this process.
        Gentlemen, I appreciate your time and your dollar.
        Mr. Kucinich. If I may respond to my good friend, Mr.
    Bilbray, I am not a mathematician, but the kind of calculus
    that I am familiar with is the kind that produces pain if
    consumers are paying for gasoline they are not getting, which
    is why we called this hearing.
        I also want to say that, with respect to the gentleman,
    both of you have spoken of the need for a comprehensive study
    regarding the use of ATC at retail. Has ExxonMobil ever done
    such a study of what that would cost?
        Mr. Soraci. Not that I am aware of, Mr. Chairman. But, as I
    mentioned earlier, from an ExxonMobil perspective, less than 2
    percent of our stores are company owned. Historically, while we
    felt as though the costs associated with this would be
    significant, it is not something that would impact us.
        Mr. Kucinich. But you are saying the cost would be
    significant, but you have never really done a study to
    determine what the costs would have been? ExxonMobil has no
    such studies?
        Mr. Soraci. We have not done a study. What I am referring
    to is the other testimony that we have heard that is $8,000 to
    $12,000 per store, and we think for an independent retailer
    that is fairly significant.
        Mr. Kucinich. Mr. Cooley, has Shell ever done a study of
    the cost of ATC at either the wholesale or the retail level?
        Mr. Cooley. Not that I am aware of.
        Mr. Kucinich. Have you ever done a study of the impact of
    ATC in Canada with respect to your profits or your taxes?
        Mr. Cooley. We have in the last 2 weeks, preparing for this
    hearing, looked at what we believe the impacts were for Shell
    Canada and what we believe they would be here in the United
    States, which led us to the conclusions that there is no
    consumer benefit that would come out of this.
        Mr. Kucinich. And Mr. Soraci, have you ever done a study of
    the impact of ATC on your profits or losses in Canada?
        Mr. Soraci. No, sir, not that I am aware of.
        Mr. Kucinich. OK. I would like to have my next question be
    about Federal excise tax liability. We will begin with Mr.
    Cooley. Now, as I understand it, you stated in your testimony
    Shell's choices of where they use temperature compensation, and
    you chose to use temperature compensation in the south but not
    the north. So I want to ask about this Federal tax liability,
    excise tax liability.
        As I understand it, this tax is assessed at the wholesale
    level and paid by the position holder at the terminal rack;
    namely, the refiner. The question is: would your tax liability
    be greater or lesser if the gasoline's volume were determined
    in gross gallons that are not temperature adjusted versus net
    gallons, assuming the actual temperature of the gasoline
    exceeded 60 degrees?
        Mr. Cooley. You have a long question there, so could you
    just repeat the question one time?
        Mr. Kucinich. About Federal excise tax liability, tax
    assessed at the wholesale level. It is paid by the position
    holder at the terminal rack. That is the refiner. Would Shell's
    tax liability be greater or lesser if the gasoline's volume
    were determined gross gallons that are not temperature adjusted
    versus net gallons, assuming the actual temperature of the
    gasoline has exceeded 60 degrees?
        Let me help you a little bit more. You have excise tax
    assessed on a per gallon basis, and gasoline warmer than 60
    degrees occupies a larger volume than the same weight of
    gasoline at a lower temperature, or adjusted to be as if it was
    at a lower temperature. So let's say the actual temperature of
    the gasoline was 90 degrees Fahrenheit. Would a volume of
    gasoline at 90 degrees be about 2 percent greater than in a
    temperature adjusted volume? And wouldn't that have an affect
    on your tax liability?
        Mr. Cooley. If you were in a rack situation where the
    volume was sold on gross, and if it were in a warmer climate
    where you sold warmer gasoline on gross, you would have more
    gallons.
        Mr. Kucinich. So there is a potential of decreasing your
    Federal tax liability. I just wonder if there was ever a reason
    you would offer choosing one method of measurement over
    another.
        Mr. Cooley. Again, Mr. Kucinich, I am not a tax expert, but
    what I would say is I believe we comply with all State and
    Federal laws as it relates to taxes on gasoline. A significant
    number of States mandate how we sell gasoline on the tax bases
    in which we sell it. I believe it is around half of the States
    absolutely mandate it and in the other States we actually give
    our wholesalers the choice of how they purchase the gasoline.
        Mr. Kucinich. Now, it is our understanding that the
    automatic temperature compensation at the retail level enjoys
    wide use in Canada. This is from both gentlemen. According to
    Measurement Canada--that is the government entity that is
    equivalent to our National Institute of Standards and
    Technology--the rate of utilization of automatic temperature
    compensation is about 90 percent. To ExxonMobil, according to
    your affiliate in Canada, ExxonMobil sells its Esso brand
    gasoline from 1,960 stations. Now, how many of them use ATC?
        Mr. Soraci. I believe all of them.
        Mr. Kucinich. And then, to Shell, according to your
    affiliate in Canada, you have 1,681 stations in Canada. How
    many of them use ATC?
        Mr. Cooley. The large majority. I am going to say in excess
    of 90 percent.
        Mr. Kucinich. Do you know the names of the manufacturers of
    your pumps in Canada which are mostly outfitted with automatic
    temperature compensation?
        Mr. Cooley. I do not recall the name off the top of my
    head.
        Mr. Kucinich. Mr. Soraci.
        Mr. Soraci. I believe Krause was the distributor of the
    equipment in the early 1990's.
        Mr. Kucinich. Does Gilbarco Veeder-Root ring a bell?
        Mr. Cooley. I would expect they are selling that equipment
    there.
        Mr. Kucinich. And do you have any reason to believe that
    they are anything but accurate, Mr. Cooley, the ATC? Do you
    believe they are accurate?
        Mr. Cooley. As far as I know.
        Mr. Kucinich. Mr. Soraci.
        Mr. Soraci. That is my understanding, as well.
        Mr. Kucinich. And those manufacturers make a product that
    temperature compensates accurately; is that correct?
        Mr. Cooley. I believe that is correct.
        Mr. Kucinich. Mr. Soraci.
        Mr. Soraci. That is my understanding. Yes.
        Mr. Kucinich. And they voluntarily purchased the equipment
    which might have cost a little bit more than pumps without
    automatic temperature compensation; is that correct, Mr.
    Cooley?
        Mr. Cooley. Yes, sir.
        Mr. Kucinich. Mr. Soraci? I mean, the Canadian government
    didn't force you to do that? You chose to do it; is that
    correct, Mr. Soraci?
        Mr. Soraci. Imperial Oil in Canada, yes.
        Mr. Cooley. And Shell Canada.
        Mr. Kucinich. All right. So you have a long history with
    the makers of automatic temperature compensation in Canada, and
    then in January 2007, the State of California certified a
    Gilbarco ATC device for sale and use in California, but
    ExxonMobil and Shell did not purchase it. Why was that, Mr.
    Soraci?
        Mr. Soraci. Well, while the State, as we understand it,
    certified the equipment, the laws and regulations have not yet
    changed to define a gallon of gas as anything other than 231
    cubic inches. So to the point I was making earlier, it is our
    understanding it would still be unlawful to sell a gallon of
    gas on a temperature compensated basis.
        To the gentleman's point earlier, if the laws were to
    change, quite a bit would have to happen to be able to actually
    implement that change through different inspection protocols,
    calibration protocols, and all that would need to be done to
    ensure that it is done correctly.
        Mr. Kucinich. Staff has just informed me that the State
    director in California who enforces this matter has a
    difference of opinion with what you just testified to. Do you
    then acknowledge that you may be at a variance of opinion with
    the people in California?
        Mr. Soraci. I acknowledge that we have a difference of
    opinion. Our understanding----
        Mr. Kucinich. OK. I just wanted to clarify that for the
    record.
        Mr. Soraci. Yes, sir.
        Mr. Kucinich. Now, did you purchase or specify the purchase
    of pumps by your distributors and dealers without ATC in
    calendar year 2007?
        Mr. Soraci. I am sorry, sir?
        Mr. Kucinich. Did you purchase or specify the purchase of
    pumps by your distributors and dealers without ATC in calendar
    year 2007?
        Mr. Soraci. No.
        Mr. Kucinich. I have exceeded my time here. We are going to
    have one more round, but I am now going to go to Mr. Bilbray
    for another 5 minutes of questions, and then we will go to Ms.
    Watson from California.
        Mr. Bilbray. Chairman, the gentlelady hasn't had a round,
    so I would yield at this time.
        Mr. Kucinich. The gentleman is correct, and I thank the
    gentleman for yielding that time, or not yielding the time, but
    for acknowledging that. With Mr. Bilbray's indulgence, we will
    go to Ms. Watson, the distinguished gentlelady from California.
        You may proceed.
        Ms. Watson. Thank you, Mr. Bilbray, for allowing me to go
    before you. I appreciate that. And thank you, Mr. Chairman, for
    holding this hearing that will provide, I hope, very essential
    information, because I find it alarming that, due to gasoline's
    hotter temperatures, consumer losses in one State, such as my
    home State of California, can be $30 to $50 a car for gasoline.
    In California, the average temperature of gas is 75 degrees, 15
    degrees about the industry standard. A 25-gallon fill-up at 75
    degrees of gasoline equates to a loss of nearly one quart. The
    inaccuracy equals about $0.03 per gallon. However, those
    pennies add up.
        As you know, California consumes most gasoline in the
    Nation, and we judge our success by the number of cars we have.
    So everyone has one, two, three. Our Governor has six Hummers,
    Mr. Chairman. [Laughter.]
        The cost of consumers for not adjusting gasoline volumes
    for temperature is more than $500 million per year. Just
    recently Canada moved quickly to adopt automated temperature
    compensation at the retail pump, but in the United States,
    where temperatures are often considerably warmer than the in
    standard of 60 degrees, the auto industry has resisted
    equipping gas stations with temperature compensating
    technology.
        I would like to read several relevant quotes and show you a
    slide and ask that you tell the committee, both of you, if you
    agree with them or if you disagree with them. They are up on
    either side.
        ``Compensating for temperature in the sale of petroleum
    products ensures that the energy content of a gallon of gas is
    the same, regardless.''
        Now, would you agree or disagree with that statement, Mr.
    Soraci, and then Mr. Cooley?
        Mr. Soraci. Representative Watson, I would not agree with
    that statement because no two gallons of gas have the same
    energy content. There are a number of factors that influence
    energy content, and while temperature could be one it is also
    items such as the type of crude that was used to make it, the
    manufacturing process, what the formulation is, whether there
    is ethanol in that product or not. So there are not two gallons
    of gasoline that have the same energy content.
        Ms. Watson. Mr. Cooley.
        Mr. Cooley. Ms. Watson, I would say the same thing. We
    would not agree with that statement. There are a number of
    factors that are much more significant than the temperature
    that impact the energy content, particularly ethanol.
        Ms. Watson. We have an authority on this issue, and we have
    written testimony, and we had it before our subcommittee on
    June 8, 2007, by Mr. Richard Suiter. I am going to go on to the
    next one.
        ``Selling fuel adjusted to the volume at 15 degrees
    centigrade or 60 degrees fahrenheit through the distribution
    system is the most equitable way fuel can be sold without the
    buyer or seller gaining a competitive advantage.''
        Would you agree or disagree with that statement? Let's
    start with Mr. Cooley and back with Mr. Soraci.
        Mr. Cooley. I do not agree that is the most equitable way a
    fuel could be sold. I would refer to the earlier questions
    regarding BTU content as the value of a gallon. This takes none
    of that into consideration.
        Ms. Watson. Well, this information comes from the National
    Conference on Weights and Measures, and would you say that they
    are incorrect?
        Mr. Cooley. Yes, ma'am.
        Mr. Kucinich. What about you, Mr. Soraci?
        Mr. Soraci. I have some trouble with the statement a little
    bit because it is by itself, and maybe I have a bit of context.
    I think what it may assume is that, whether you sell a gallon
    of gas on the volumetric basis or you sell that volume of gas
    on a temperature-adjusted basis, the price is constant. We
    don't believe that would be the case.
        Ms. Watson. This is a direct quote from the National
    Conference on Weights and Measures, the CWMA and LNR Committee.
    It was their 2005 Interim Report of September 19, 2005. So you
    would have a disagreement with the Weights and Measures Report?
        Mr. Soraci. I would. Yes.
        Mr. Kucinich. The gentlelady's time has expired. We will
    come back for another round.
        Ms. Watson. I just wanted to ask this, Mr. Chairman. Could
    we have these statements sent to the two witnesses and have
    them respond in writing and date it, please.
        Mr. Kucinich. The Chair will take the prerogative of asking
    the witnesses, would you be willing to respond in writing to
    the gentlelady's question?
        Ms. Watson. Give your justification.
        Mr. Soraci. Yes, ma'am.
        Mr. Cooley. Yes.
        Ms. Watson. And then I would like to send it to Weights and
    Measures and Mr. Suiter.
        Mr. Kucinich. The committee thanks the gentlemen for their
    cooperation.
        The Chair now recognizes Mr. Bilbray for his question.
    Thank you.
        [The information referred to follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Bilbray. Thank you, Mr. Chairman.
        Mr. Chairman, I am just going to close my part of this
    hearing by requesting that, as we address this issue and the
    possibility of up to 1 percent of the consumers' dollars being
    led astray, that we do a hearing about the Government
    regulations that are impacting the consumer by much larger
    percentages. Maybe this committee will be able to bring some
    reason to Washington, DC, about the fuel mandates and the way
    we are doing oversight with fuel mandates.
        As pointed out before----
        Mr. Kucinich. Would the gentleman yield?
        Mr. Bilbray. Go ahead. I yield.
        Mr. Kucinich. I just want the gentleman to know that your
    ranking member, Mr. Issa, and I are continuing to cooperate on
    all topics that relate to hearings that are appropriate to this
    subcommittee, just as he and I worked together, even though I
    wasn't a ranking member, in talking about some of the hearing
    topics in the past, so let's work together to figure out how we
    can satisfy the concerns that you just addressed. I thank you
    for bringing it up. Thank you. I appreciate that.
        Mr. Bilbray. Mr. Chairman, I really got involved in the
    fuel issue from the environmental point of view, working on the
    Air Resources Board. It was the central part of our California
    policy of trying to fulfill the Federal mandates for clean air,
    and was frustrated with the fact that the same agency that was
    mandating that we clean up our air was forcing us to use
    material that was contrary to the environmental clean air
    strategy.
        Hopefully, with your help and your type of leadership, we
    will be able to shine some light on this.
        I would also like to point out that the ethanol mandate is
    not only affecting the consumer at the gas station, but at the
    grocery store. Just in last May, directly tied to the ethanol
    increase, seeing that production of livestock is 40 percent
    tied to corn production, you actually had in 1 month the
    increase in food prices by 5 percent. This hits the most needy,
    and it is all part of a strategy to subsidize one small group
    with a huge windfall that is hurting the environment, hurting
    the consumers who buy gasoline, and now hurting the consumers
    who buy food.
        With your leadership, I think that we will be brave enough
    to say about this issue that, though we want to find a speck in
    the oil company's eye, that we need to find the log in the
    Federal Government's eye that has created impacts far beyond
    what any private sector has done. Hopefully, we will be able
    to, as the saying says, physician heal thyself--correct this
    mistake and move forward with it.
        With that, Mr. Chairman, I appreciate it and yield back.
        Mr. Kucinich. Thank you.
        The Chair recognizes the distinguished gentleman from
    Illinois, Mr. Davis.
        Mr. Davis of Illinois. I know, I will go to California.
        Mr. Kucinich. I know that. I have everybody else from
    California here.
        Mr. Issa. We are confident in time you will retire in
    California.
        Mr. Kucinich. Mr. Davis.
        Mr. Davis of Illinois. I had better stay in Illinois.
        Thank you very much, Mr. Chairman. Let me thank you for
    holding this hearing, as well as express my appreciation to
    your efforts, your unrelentless efforts, I think, to try and
    give all of us a better understanding of this issue and the
    problems which confront us.
        I would like to engage both the gentlemen at the same time
    and talk a little bit about the retail sales of branded
    gasoline. Retailers, whether they are dealers or distributors,
    are long-term contracts with refiners like yourselves. My staff
    and I have learned that these contracts are multi-year, and it
    is not unusual for these contracts to be of four to five, even
    10 years in duration. Is that correct?
        Mr. Cooley. Essentially, yes.
        Mr. Davis of Illinois. These contracts do not specify the
    wholesale price of gasoline, though they do tie retailers and
    distributors to buying exclusively from you; is that correct?
        Mr. Cooley. Not exactly.
        Mr. Davis of Illinois. Could you explain the difference or
    the variation there?
        Mr. Cooley. Sure. The contractual arrangement between us is
    predominant with our wholesalers. That is the largest portion
    of our network. About 85 percent of our network is wholesale
    supplied. We have a relationship with the wholesalers--some
    people call them distributors. That is our relationship. And
    then they go out and sign up, build, develop individual service
    stationsites, so the individual locations or the vast majority
    of the network relationship is between the wholesaler we supply
    and the retailer, not a contract with us.
        Mr. Davis of Illinois. Mr. Soraci, is that----
        Mr. Soraci. Congressman, ExxonMobil also has both
    distributors and dealers as independent retailers, and our
    distributor class of trade could own and operate their own
    facilities and also sell on to a dealer of their own.
        Mr. Davis of Illinois. Thank you. I also understand that
    you would typically inform dealers of wholesale price changes,
    usually by e-mail, and that price variations are not the result
    of negotiation; is that correct?
        Mr. Cooley. In the case of our wholesalers, the bulk of the
    network, they are notified of price changes via e-mail, and
    then they have the responsibility to communicate that to their
    dealers. For dealers, then we would have the responsibility to
    communicate that, and that would be by electronic means, over
    the Web or e-mail.
        Mr. Davis of Illinois. I also understand that in some cases
    the refiners are able to exert control over the retail price of
    gasoline, and that you might tell the dealer what price he is
    to charge on a daily basis. I understand that is not always the
    case, but that it does happen sometimes. Can you tell us in
    what circumstances you would tell the dealer what price to
    charge on the retail basis?
        Mr. Cooley. I am not aware of any circumstances where
    independent dealers are told what to price.
        Mr. Soraci. Congressman, independent dealers make the
    pricing decision on an independent basis. We do not direct them
    in that area.
        Mr. Davis of Illinois. What if they are company-owned and
    operated dealers?
        Mr. Soraci. If they are our company-owned and operated
    stores, they would not be dealers, they would be store managers
    and employees of the company, and we set the retail price at
    the company-owned and operated locations.
        Mr. Davis of Illinois. And if there is a commission
    relationship, does that still hold?
        Mr. Soraci. In the case of ExxonMobil, we do not have a
    commission relationship with any of our independent retailers
    that I am aware of.
        Mr. Davis of Illinois. Mr. Cooley.
        Mr. Cooley. We don't have a commission relationship. We do
    have some locations where an independent contractor operates
    the location and they sell our gasoline for us. In those cases,
    we set the price of the gasoline and they receive a flat fee, a
    cents-per-gallon type fee, for selling our gasoline.
        Mr. Davis of Illinois. My time is about to run out, but let
    me just ask, Mr. Chairman, one additional question. This is for
    either one of you. Have you ever reimbursed a dealer for
    inventory loss if a dealer is not making money?
        Mr. Cooley. That is an extremely broad question. Have we
    ever reimbursed a dealer for inventory loss? I am aware in
    situations where someone has had an equipment malfunction where
    we own the equipment, that we may have made someone reimburse
    someone for that loss of product. I am not aware of
    circumstances other than that.
        Mr. Soraci. I am not aware of any circumstance where we
    have reimbursed for inventory loss relating to an operator not
    making money.
        Mr. Davis of Illinois. Thank you, gentlemen, very much.
        Mr. Chairman, I see that my time has ended, so thank you.
        Mr. Kucinich. The Chair recognizes Mr. Issa. Thank you.
        Mr. Issa. Thank you, Mr. Chairman. I appreciate the fact
    that this is going so well and so quickly. We are getting a lot
    of information.
        You know, I was looking over the National Conference of
    Weight and Measures votes on automatic temperature
    compensation, and as I read it, 16 States voiced their support
    for eventual compensation, but felt that further development of
    this issue was needed for successful implementation. Is that
    your understanding, from what you know of their meeting? And
    Ms. Watson I think has very aptly asked for more detail in your
    answer, and I would like you to also give us the detail,
    because I am interested in sort of over the long horizon. We
    are talking, and I have made a little bit of fun of what would
    you do about ethanol, what would you do about every mixture,
    how would you deal with our 28 boutique fuels, but I would
    like, with your continued indulgence, Mr. Chairman, ask when
    you are answering Ms. Watson's question to include my concern
    of over two decades do you see that we would be able to deliver
    fuel based on BTU value potentially, and is that, in the long
    run, if we are going to have lots of different fuels--and, by
    the way, let's include in our minds hydrogen, something that is
    talked about but is not practical because, to be honest, taking
    natural gas and turning it into hydrogen isn't all that much of
    an improvement today because of the source stock being so rare.
    But that basic concept that two or three decades from now we
    are going to be delivering on a BTU basis rather than on a
    gallon basis.
        I would like your thoughts on that for the long run, the
    leap, because, as somebody who wants to have value, I am
    personally insulted every time I go to the grocery store and I
    am comparing two products and there are two different sized
    packages and they are both selling me based on pack rather than
    based on ounce or some other common unit.
        I realize that today, from the hearing today and from June
    8th, that we are dealing with an effective standard unit that
    we have become comfortable with that works for us pretty well,
    that even on a 90-degree fuel day a $3.50 gallon of gasoline is
    only $3.57 effectively, and we are dealing in pennies, and that
    may not be worth the dollars to save the pennies that occur
    only on the hottest day once in a while.
        I do have two other things I want to followup on on this
    round. One of them, quite frankly, is double tanking, double
    hull tanking that you have underground now. Is it your
    understanding that when we had the classical metal fuel tanks
    in the ground, that the temperature probably was cooler for the
    fuel than when they are sitting in the thermos bottle? I know
    you are not scientists, but that is my understanding, that, in
    fact, we mandated that you put two sets of hulls of fiberglass
    to make sure the fuel doesn't leak and that we don't
    contaminate groundwater, but hasn't that, in fact, potentially
    warmed the fuel by putting it in the thermos instead of in a
    heat sink?
        Mr. Cooley. That is the influence it would have.
        Mr. Soraci. That is my understanding, as well. Yes.
        Mr. Issa. OK. So I think for the chairman who found a six
    or seven degree difference, it may very well be that we
    mandated that difference without ever looking at a
    compensation.
        And then last, but not least, Canada. Canada is kind of an
    interesting place for me that they went to this, and I just
    want to deal with this. They were approached by the
    manufacturer, who had a patent. It was an exclusive company
    that could provide these temperature compensation devices, and
    he said, Boy, this is a great idea. And they went to the
    government, and the government said, Yes, we want you to do
    that.
        Now, let me just ask you a question. I know this is
    conjecture, but Canada is a cold country, so isn't it true that
    his product actually increased the government's tax revenues as
    a result of that? They were often below that temperature, and,
    in fact, the government benefits by having temperature
    compensation for their revenue. Isn't that, in your
    understanding, part of why Canada thought this wasn't a bad
    idea, that they could get more tax revenue on cold days?
        Mr. Cooley. I can't say that was their idea, but, in fact,
    you would sell more smaller gallons with that situation.
        Mr. Issa. You know, I would suspect that if it was colder
    in the United States, that Members on this side of the dias
    would probably be much more enthused at the idea of more
    revenue without having to do a tax increase. Mr. Chairman, I
    think we are known for that on a bipartisan basis. Ronald
    Reagan called it revenue enhancement.
        I just want to make it clear that, between the manufacturer
    wanting something and the Canadian government getting a
    benefit, even if it was unintentional, that may have
    contributed to their benefit.
        In our case, we would get overall no such thing. You would
    gain it in one part of the country and lose it in the other
    part of the country; is that correct?
        Mr. Cooley. From a tax revenue perspective?
        Mr. Issa. From a tax revenue perspective.
        Mr. Cooley. I don't know how the balance would work. You
    would have to do a weighted average of all the sales and the
    different taxing authorities probably.
        Mr. Issa. My time has expired, and so I guess I will just
    make a prediction: that once that study is done, if it
    increases revenue to the Federal Government without a tax
    increase, you probably will be asked to put these devices on.
    And I am quite sure that if it doesn't, we will lose interest.
        Mr. Chairman, I yield back.
        Mr. Kucinich. Let me say to my good friend that when you
    were out of the room I did raise the issue of decreasing the
    oil companies' Federal tax liability as being one of the
    potential reasons why they would choose one form of measurement
    over another. So it could be that, on the one form of
    measurement, their tax exposure is more favorable to them, as
    opposed to another form of measurement. That is one of the many
    issues that has come up here.
        I also want to say that I think that you and I have found
    agreement on this topic. If I heard you correctly, you said
    that you are tired of not being able to compare products
    because of different packaging, and that you like products to
    be sold by weight. So I hope this means that you and I agree,
    since ATC ensures that, no matter the actual temperature of
    gasoline, a given quantity will always weigh the same.
        Mr. Issa. You know, Mr. Chairman, I would certainly agree
    with you up to a point, and the point where I change is I was
    talking about, when I am buying a gallon of milk, I want it in
    ounces. It is really hard to figure all those different new
    ones.
        No, in all seriousness, it is the fact that they don't use
    the same standard, and if they use ounce rather than package,
    then at least you can compare ounces, but ounces aren't always
    weight, sometimes they are volume.
        Mr. Kucinich. But what I understand is that milk is
    actually temperature compensated at 40 degrees.
        Mr. Issa. So what happens if I get milk that is a little
    warm, besides it goes bad sooner, Mr. Chairman? [Laughter.]
        Mr. Kucinich. Being a vegan, I can't help you on that one.
    [Laughter.]
        Mr. Issa. Thank you, sir.
        Mr. Kucinich. Now, what I would like to do is to go back to
    the question that I asked about Canada. Just to refresh the
    witnesses' memories about their answers, both of you agree that
    you are using ATC in Canada. Both of you agree that most of
    your stations in Canada use ATC. Both of you agree that the
    manufacturers are making a product that temperature compensates
    accurately. And both of you agree that you voluntarily
    purchased the equipment and that you have a history, a long
    history, with the makers of automatic temperature compensation
    in Canada. That essentially is what you have testified to.
        Now I want to get back to this point. To start all this,
    you chose not to buy ATC in California from the same company
    you bought ATC from in Canada. Can you tell the committee why
    you might do one thing in Canada and another in the United
    States? Mr. Soraci.
        Mr. Soraci. I think the first comment there, Mr. Chairman,
    is that there is a fundamental difference between the United
    States and Canada, and that is in the United States a gallon of
    gas, with the exception of Hawaii, our understanding is it is
    still defined as 231 cubic inches. So if we were to sell a
    gallon of gas on a temperature-compensated basis in the United
    States, we would be breaking the law.
        In Canada the laws changed in the early 1990's, as you have
    mentioned, and selling temperature-compensated product in
    Canada is permissive.
        Mr. Kucinich. Mr. Cooley.
        Mr. Cooley. I would say the same statement. As I
    understand, the question was why we might have gone there in
    Canada and why we did not in the United States. With the
    understanding that the Canadian law changed in the early 1990's
    to allow temperature compensation on a permissive basis, for
    several years no one put in temperature compensation, and then
    some retailers started installing temperature compensation.
        As locations started putting in temperature compensation,
    now there was the potential for them to gain an advantage over
    locations that did not have temperature compensation. They were
    actually selling smaller gallons, but the gallons on the street
    just showed a per liter in Canada, so, in fact, the consumer
    had no way to know. In fact, if they were paying the same price
    for a temperature-corrected gallon than someone's non-
    temperature-corrected gallon, then that individual or location
    could make more money. Or they could lower their price and keep
    the same margin and appear to have a better price than a non-
    temperature-corrected location.
        This caused the industry, as we would see it, to start to
    swing toward temperature correction. Once the majority, most of
    the locations in the industry had shifted to temperature
    correction devices, then everyone was back to competing on an
    equitable basis then.
        Mr. Kucinich. Did anyone from corporate ever come to you
    and say, Mr. Cooley, we are losing a lot of money on this
    temperature correction device in Canada?
        Mr. Cooley. Mr. Chairman, we have operated as totally
    separate companies. Shell Canada was a separate entity on the
    Toronto Stock Exchange. We did not correspond on those type
    items. We are, at this time, changing and that company is
    coming into the Shell group, but we were not involved and they
    would not have come to me.
        Mr. Kucinich. So I am sure you have had a chance to talk to
    them about it at some point. I want to go back to Mr. Soraci's
    answer. Mr. Issa had talked about maybe another hearing where
    we go into the NIST. I really am having trouble understanding
    where the National Institute of Standards and Technology
    conducts a study, surveys 50 States and the District, talks to
    the lead officials in all the States who are responsible for
    the weights and measures, and they are saying that most States
    permit temperature compensation at both the wholesale and the
    retail level.
        Now, this is what I am having trouble understanding. Here
    are the enforcers. They are saying one thing and your testimony
    is saying something to the contrary as to why, for example, in
    California you can't implement it even though our staff has
    talked to people in California and they are saying, you know,
    the oil companies don't want to do this.
        We are trying to see if this is a decision made by the oil
    companies that is really frustrating the introduction of
    temperature controlled devices at the pumps in some of the
    States that say that we permit it, most of the States. Mr.
    Soraci.
        Mr. Soraci. Congressman, I am not sure if the enforcers
    that you are talking to, the officials, are the same ones that
    actually vote in NCMM and are the same ones that actually
    change the law. Our understanding of the law, as I stated
    earlier, is that the laws and regulations in California have
    not changed to allow for a gallon of gas to be sold on
    something other than a volumetric volume, and for them to do so
    would be unlawful.
        Mr. Kucinich. Sir, I just want to say this before I go back
    to my friend, Mr. Issa. I looked at your testimony, and Mr.
    Soraci's testimony says, ExxonMobil's sale of motor fuel to
    consumers is fully compliant with the law, and selling
    temperature-compensated motor fuel at retail would violate
    current laws and regulations. That is your testimony.
        Mr. Soraci. Yes, it is.
        Mr. Kucinich. Now, as you know, an activity that is not
    expressly prohibited is permitted by law. I am quoting NIST.
    They find, first of all, that ``States do permit this
    compensation, temperature compensation, both at the wholesale
    and retail level.'' I just want to point that out.
        Now, I do think again, Mr. Issa, that it is important that
    we get NIST up here and go over this, and we will. So to Mr.
    Issa, it is now your----
        Mr. Issa. Mr. Chairman, I am looking forward to that. As
    Mr. Bilbray said, and I very much agree when you responded, you
    know, you and I have worked together for 4 years very, very
    well. It has been a real pleasure. Ms. Watson was the ranking
    member, but you were every bit as in attendance and supportive,
    and I believed then as now if something is of interest to one
    of us it is of interest to all of us, so I do expect that we
    will followup on that, and I hope we will bring in, perhaps as
    a suggestion, the person responsible for doing that in my
    county, in San Diego County, because in California, although
    you can make something legal, the counties have to administer
    it, and they have the ultimate decision.
        I think it is important to do, and I want to followup
    specifically on----
        Mr. Kucinich. Would the gentleman yield for a response?
        Mr. Issa. Yes, Mr. Chairman.
        Mr. Kucinich. I would absolutely cooperate with you in
    holding our next hearing there. Thank you.
        Mr. Issa. Thank you.
        I want to followup because I want to look long run for a
    moment, because you are young men, you are at the top of your
    game, and you are going to be around in 20 years just like the
    chairman and myself. I am predicting it here today. [Laughter.]
        Now, which one of us is chairman in 20 years is somewhat in
    doubt. [Laughter.]
        But we are going to have both of you back as chairmen of
    your corporations. Twenty years from now do you believe that,
    in fact, further refinements of how we deliver fuel as to its
    value, potentially including temperature compensation,
    potentially considering alternate fuels, all of which go into a
    single gas tank, do you believe that is likely on the horizon?
    This is looking forward as oil companies.
        Mr. Soraci. It would be obviously speculation, but I think
    it is fair to say that further refinement would continue to
    happen. Yes.
        Mr. Cooley. When you say that, I think of my grandchildren,
    and they are small and young. Twenty years from now they are
    going to be in their twenties. I think it is a little more
    complex. I don't disagree with what you said, but I think we as
    a government, as an institution, have to understand not just
    energy content but the environmental tradeoffs, the impacts on
    our economy.
        It is very complex, as this committee knows. I don't
    disagree that BTU content and more specific labeling could be
    helpful. At the same time, this committee and others may be
    making tradeoffs environmentally and in other ways that you
    would have to take into consideration.
        Mr. Issa. Mr. Cooley, I appreciate that, and I am going to
    followup by saying I believe that your point is one that will
    be very futuristic, which is the greenness of a fuel should and
    will, I hope, be something that is available to us at the pump
    so that we can weigh comparative fuels, even comparative fuel
    mixtures, to find out. When I bought my last automobile, they
    told me exactly what the U.S. content was. It didn't have as
    much as I would have liked, but at least I was informed. I hope
    that we will do both BTU content and the green factor that goes
    into the entire process.
        I want to make another thing clear for the record, because
    I am looking at this 1 percent or less that occurs 20 percent
    of the time, 10 percent of the time, and we know on the
    average, according to the staff's work, we are dealing with 67
    degrees, so it is pretty de minimis in expansion between 60 and
    67, and the rest of the time it is above or below that. So we
    are dealing with the fraction of that fraction of 1 percent.
        But is it your understanding--and this came out of last
    month's hearings--that the fees paid by Americans, by the
    station but passed on in way of the cost of gasoline, is
    running better than 2 percent to Visa and MasterCard, which the
    committee next door has identified as a likely monopoly, that
    they are making more by far than we are talking about here to
    day, aren't they?
        Mr. Cooley. Merchant service fees on a credit card sale is
    2 percent or slightly more, around 2 percent.
        Mr. Issa. You know, the amazing thing I find here today is
    that we are not really thinking in terms of the fact that the
    consumer has no awareness of that unless they happen to be
    watching C-SPAN today, that there is 2 or more percent hidden
    cost in the credit card they are using in that gallon of
    gasoline.
        Mr. Cooley. Our wholesalers and retailers are very aware of
    it.
        Mr. Issa. They have come to see me, too. That is not a
    surprise. [Laughter.]
        And I am concerned and I know the chairman would be
    concerned because both of us have real concerns about
    monopolies.
        I just want to close by saying, you know, would I like to
    see 100 little oil companies be able to deliver a better
    product less expensively? If I thought it would, we would be
    talking. It is clear that we do have real competition in the
    oil and natural gas industry. There are plenty of independents.
    There certainly are globally lots and lots of players. But it
    is also clear to me here today, and I just want to make this
    for the record, even though it is tangential to what we are
    talking about here today, that there is only Visa and
    MasterCard. For all purposes they work in unison. Their fees
    have been growing while their costs of delivering the product
    have been going down.
        Although this hearing is going to be followed up with lots
    of other considerations looking forward on how we deliver fair
    weights and measures, I hope that the chairman and I can find
    ways to also bring in what we are doing over on the Antitrust
    Committee in Judiciary, bring it over here and start looking at
    whether or not monopolistic forces such as Visa and MasterCard
    are affecting the consumer in hidden ways every day.
        Mr. Kucinich. I want to respond to my colleague. I think
    that you have raised an issue that is worthy of this
    subcommittee. As we discussed before we took over our
    respective duties on this subcommittee, this is the one
    subcommittee that has the broadest jurisdiction of any
    subcommittee in the entire U.S. Congress. The only others that
    we do not have jurisdiction over are Department of Defense and
    Department of Homeland Security. Every other single department,
    agency, board, commission we have jurisdiction.
        So, Mr. Issa, I just want to say that you raise a point
    that needs to be looked at, and I personally thank you for
    doing that. Let's do this. Let's get into that issue, because
    that is something that this committee has the ability to do,
    and I think we can work together well on that.
        Mr. Issa. Excellent. Thank you, Mr. Chairman. Thanks for
    holding this hearing today.
        Mr. Kucinich. I thank the gentleman.
        We are going to go to Ms. Watson.
        I want the committee members to know that after Mr. Davis
    concludes asking his questions, we will have one final round
    and then we will have concluded the business of this committee
    for today.
        Mr. Issa. Mr. Chairman, I apologize, but I will be going
    over to Judiciary, so this is going very well. I apologize I
    won't be there for the close, but I very much appreciate your
    holding this hearing on a bipartisan basis.
        Ms. Watson. Would you yield for a minute, Mr. Issa. I just
    want to thank you, because when he chaired, we agreed that we
    would followup. I am very pleased that the chairman has, and I
    am pleased that you have continued your interest in this
    subject matter and that you are applying that interest to our
    inquiries, so thank you very much.
        Mr. Issa. Thank you.
        Mr. Kucinich. We are grateful for having such a dedicated
    ranking member here, and we are going to work together. Thank
    you, Mr. Issa.
        The Chair recognizes Ms. Watson.
        Ms. Watson. Thank you, Mr. Chairman.
        I just want to make this comment. I am really puzzled at
    your earlier disagreements with weights, measures, and so on,
    so that is the reason why I asked that you put it in writing. I
    think we need to have further debate so that we can be sure of
    the accuracy of what they are doing, too. If you find
    information that we mention here inaccurate, we need to discuss
    that if we are really going to get to the bottom of this and
    suggest some policy.
        I would like to, Mr. Chairman, continue on. I think that
    you have the quotes up. This is information that was published
    by Canada's measurement, and it comes from the government of
    Canada. This is the statement. I will read it: ``Our consumers
    benefit from the knowledge that temperature compensation is a
    more accurate system of measurement, which ensures that the
    amount of energy they purchase is not affected by the
    temperature of the fuel. ATC allows consumers to make
    meaningful price comparisons between retailers. Posted prices
    at the non-ATC-equipped retailers can be misleading because of
    variations in product temperatures.''
        I think it--and we are talking about temperature
    compensation--is working quite effectively in Canada, and
    probably, as you have responded before, you probably would
    respond the same way, so let's start with Mr. Cooley and see
    what you feel about that statement.
        Mr. Cooley. And the question is do I agree with this
    statement?
        Ms. Watson. Yes.
        Mr. Cooley. No, ma'am, I do not.
        Ms. Watson. OK. And Mr. Soraci.
        Mr. Soraci. I don't agree with the statement, either.
        Ms. Watson. OK. And, again, Mr. Chairman, I would ask that
    we add these questions to our letter that we send them for a
    response.
        Mr. Kucinich. So ordered. The gentlemen indicated that they
    will cooperate and respond, and we appreciate that.
        Ms. Watson. And, ``The use of temperature compensation to a
    common-reference temperature allows retailers to sell product
    on the same basis as if it was purchased. This common basis of
    measurement eases the reconciliation, of product inventories,
    and permits the early detection of smaller leaks from
    storage.''
        Would you agree or disagree with that statement? We will
    start with Mr. Soraci.
        Mr. Soraci. I would disagree with that statement.
        Ms. Watson. OK.
        Mr. Cooley. I would disagree with that statement, also.
        Ms. Watson. All right. We are pulling out what we feel is
    pertinent information from these reports that are required, and
    there has been scientific research, and so since you disagree
    with it we had better continue these debates.
        I would think that----
        Mr. Kucinich. Would the gentlelady yield?
        Ms. Watson. I certainly will.
        Mr. Kucinich. The ranking member and I are both agreed that
    we have some of these regulatory agencies and boards that have
    had certain findings that appear to be at a variance to the
    understanding of the gentlemen representing Exxon and Shell, so
    we are going to call them in on a subsequent hearing in order
    to achieve that kind of reconciliation.
        Ms. Watson. Yes. And I would hope that the witnesses would
    come to that hearing, too, because I think we need to have this
    dialog going on.
        Mr. Kucinich. I am sure they will be represented.
        Ms. Watson. OK, because in Canada they feel that it is
    working effectively, and so if you want to dispute it I think
    we ought to have you sitting face to face and allow for that
    dialog.
        Mr. Kucinich. That is an excellent suggestion, Ms. Watson.
    I think what we will do in structuring the next hearing, our
    staffs will get together and provide that there would be
    representatives from the oil companies to respond and testify
    under oath on any matters that appear to be at variance for the
    NIST and others, just to make sure that we have some kind of
    understanding about how we would like to proceed.
        Thank you, Ms. Watson.
        Ms. Watson. If I can just have one last quote, these slides
    are from the NIST presentation of 2004. ``Effective temperature
    change on product.'' You can see that what is depicted here in
    this slide prepared by the National Institute of Standards and
    Technology is that 100 gallons of fuel occupies different
    volumes, depending on temperature. I would imagine that you
    disagree with these statements?
        Mr. Cooley. I do agree.
        Ms. Watson. You do agree? OK. Mr. Soraci.
        Mr. Soraci. I agree that there is----
        Ms. Watson. We got an agreement. With that, thank you very
    much, gentlemen, for your patience and your input, and thank
    you, Mr. Chairman.
        Mr. Kucinich. Thank you.
        The Chair recognizes Mr. Davis.
        Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
    Gentlemen, let me ask you, is it true that each one of your
    companies produce liquefied petroleum gas?
        Mr. Cooley. Shell produces LPG gas.
        Mr. Soraci. ExxonMobil produces gas, yes.
        Mr. Davis of Illinois. And how about propane?
        Mr. Soraci. I believe we produce propane, as well.
        Mr. Cooley. And the same for Shell. We also have propane.
        Mr. Davis of Illinois. Could you tell us how volume is
    measured in retail transactions of those hydrocarbons? And is
    temperature compensation used or not?
        Mr. Cooley. I would have to give this not as an expert on
    LPG or propane. When I buy propane at retail myself, I buy it
    by weight.
        Mr. Soraci. And in the case of ExxonMobil, Representative
    Davis, I don't believe that we sell propane gas at retail at
    our company stores.
        Mr. Davis of Illinois. Well, let me just read from the NIST
    Handbook 130, Section 2.21. ``Liquified petroleum gas: all
    liquified petroleum gas, including but not limited to propane,
    butane, and mixtures thereof, shall be kept, offered, exposed
    for sale or sold by the pound, liter, cubic foot, or vapor,
    defined at one cubic foot at 60 degrees fahrenheit, or the
    gallon defined as 231 cubic inches as 60 degrees fahrenheit.
    All metered sales by gallons shall be accomplished by use of a
    meter and device that automatically compensates for
    temperature.''
        So when temperature compensation is used in measuring LPG,
    is it true that a result is that the seller and buyer are both
    assured that neither one has an advantage, and that, regardless
    of the actual temperature of the gas, both are assured of
    accuracy? Would you agree with that statement?
        Mr. Cooley. I would agree that when selling gasses that is
    correct and it is essential.
        Mr. Davis of Illinois. Good.
        Mr. Soraci. I would agree with that portion of it, but I
    would also go back to a comment I made earlier, which is you
    have to be careful not to assume that if we sell a gallon on a
    volumetric basis and we sell it on a temperature-compensated
    basis, that necessarily means that the price will remain
    constant. So we introduce what is the value to the buyer versus
    the seller. That is hard to determine.
        Mr. Davis of Illinois. Can you tell the committee when
    propane started being sold on a temperature-compensated basis?
        Mr. Soraci. I am not aware of that, sir.
        Mr. Cooley. I do not know.
        Mr. Davis of Illinois. My understanding is that it was in
    1986.
        Mr. Chairman, I would like to suggest for the record that
    LPG is a hydrocarbon product, as is gasoline. When the oil
    industry sells liquified petroleum gas and propane to retail
    customers, they do so in temperature-compensated volumes, but
    when the same industry sells gasoline to retail customers, they
    refuse to sell in temperature-compensated volumes.
        I would like to ask if the witnesses would explain what
    appears to be a double standard. I mean, why would it make
    sense to do one and perhaps not do the other?
        Mr. Cooley. As I said, I am not a propane or LPG expert. I
    am wholesale gasoline in the United States. I do believe I can
    explain. It is the fact that one is a liquid. Gasoline is a
    liquid at the point we are selling it. The other is a gas that
    is compressed. A consumer buying a 5 pound container of propane
    would not know if someone had put 2\1/2\ pounds, 2 pounds, or 5
    pounds in there unless it was done by weight. So that is a
    calibration that has to be done by weight, which is the density
    measure that we are talking about.
        A gas I believe would have to be done that way versus a
    liquid, as has been defined as 231 cubic inches.
        Mr. Davis of Illinois. Mr. Soraci, would you agree
    essentially with that statement, or would you have other?
        Mr. Soraci. Well, I can say that from the retail standpoint
    for motor fuel we sell on a volumetric basis the 231 because,
    as I stated, that is our understanding of what the law
    requires. I am not familiar enough with our gas business to be
    able to comment about that.
        Mr. Davis of Illinois. Is it true that both liquids and gas
    expand with temperature? So if one is expanding, then the other
    one also would expand?
        Mr. Soraci. I believe that both products would experience
    both thermal expansion and thermal contraction.
        Mr. Cooley. That is my understanding, also.
        Mr. Davis of Illinois. Well, would it seem reasonable to
    treat both the same way in terms of what you are buying and
    what you are selling, or what you are actually getting?
        Mr. Cooley. I would say it is--and this is with all
    respect--it is almost like apples and oranges. You know, for
    all propane sales I agree they should be calibrated on the same
    basis. For all fuel sales, if they are calibrated on the same
    basis of 231 cubic inches, then I don't see that it applies.
        Mr. Soraci. You know, our belief on this is that, again,
    when we look at retail it is done a certain way because it is
    what is required by law today. Wholesale and other products, it
    is permissive to sell in a temperature-compensated basis. Our
    position has been that we need to look at it in a comprehensive
    study to determine whether or not the laws ought to change at
    retail.
        Mr. Davis of Illinois. I thank the gentlemen.
        Mr. Kucinich. The gentleman's time has expired.
        Mr. Davis of Illinois. Thank you very much. Mr. Chairman, I
    won't be here for your finish, but again thank you for raising
    this issue and continuing to pursue it.
        Mr. Kucinich. I thank Mr. Davis.
        The Chair will recognize the gentleman from Maryland, Mr.
    Cummings. I just want to say Mr. Cummings' questions will be
    the last of this particular hearing, and then I will have a
    brief concluding remark, and then we will adjourn.
        Mr. Cummings, you are recognized.
        Mr. Cummings. Thank you very much, Mr. Chairman.
        Gentlemen, first of all thank you for your testimony. I was
    very disappointed to learn that the National Conference on
    Weights and Measures held its annual meeting, and a proposal to
    issue a rule on automatic temperature compensation at retail
    gasoline pumps narrowly failed to garner the necessary super
    majority. As a matter of fact, at the last hearing that we held
    on this issue, the chairman and I and other Members strongly
    urged them to take that vote as soon as they possibly could.
        During that last hearing, we talked about lobbying the
    conference. Chairman Cooley talked a bit about that. I am just
    curious about something. Did either of your companies have
    representatives at the conferences here?
        Mr. Soraci. ExxonMobil did not.
        Mr. Cummings. You did not?
        Mr. Cooley. I believe Shell Pipeline Co. had a
    representative at the last conference.
        Mr. Kucinich. All right. And you are talking about the one
    where they voted; is that correct?
        Mr. Cooley. Yes, sir.
        Mr. Cummings. Did you have a position on that vote? Did
    Shell take an official position on which side you came out on
    on that?
        Mr. Cooley. Not with the Conference on Weights and
    Measures, no.
        Mr. Cummings. So you all were just there just hanging out?
        Mr. Cooley. I can't represent what the pipeline
    representative--he is not from retail. He works in the
    measurements division of our pipeline entity.
        Mr. Cummings. Was this person being paid? Was he being paid
    by you all?
        Mr. Cooley. He is on salary. He is a Shell employee, yes.
        Mr. Cummings. Well, let me ask a different way. Did you all
    sponsor any official events at the conference?
        Mr. Cooley. No, sir. None that I am aware of.
        Mr. Cummings. And did you purchase any meals or did you
    have any give-aways?
        Mr. Cooley. No, sir. None that I am aware of.
        Mr. Cummings. And do you know whether your company has ever
    financed any of those type of activities at the conference?
        Mr. Cooley. I do not know and I do not believe we have.
        Mr. Cummings. Well, I am going to give you some written
    questions, and I would like for you to followup on that.
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        Mr. Cummings. Now what about you, Mr. Soraci? Same
    questions. I know you didn't have a representative there, but
    do you all sponsor--what is your relationship with the National
    Conference on Weights and Measures, because I was shocked, to
    be honest with you, that we had a very good hearing and it
    seemed as if things were moving in the right direction, said
    they were going to vote, they voted, and it was narrowly
    defeated. I am just wondering, just trying to figure out what
    part you all play in all this.
        Mr. Soraci. I am not aware of any sponsorships of funding
    that we have done with the National Conference on Weights and
    Measures.
        Mr. Cummings. And so you all basically don't have any
    opinion that you get to the voting folks of the conference?
    They don't hear from you? Is that it? You don't take a
    position?
        Mr. Soraci. At this particular conference we did not
    participate.
        Mr. Cummings. Any of them that are dealing with this issue,
    this kind of issue.
        Mr. Soraci. I am not aware of any positions advocated in--
    --
        Mr. Cummings. I will provide you with some written
    questions, also, because we would really like to know.
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        Mr. Cummings. I understand that it is routine that the
    dealers' underground tanks are monitored by you electronically
    for the purposes of scheduling tanker deliveries; is that
    correct?
        Mr. Soraci. In the case of ExxonMobil, yes, it is.
        Mr. Cooley. For those small number of stations that are
    operated on that basis, you essentially.
        Mr. Cummings. Now, isn't it also true that the monitors
    report the temperature of the gasoline in the tanks as well as
    the levels; is that right?
        Mr. Cooley. That is my understanding.
        Mr. Cummings. Is that yours also?
        Mr. Soraci. That is my understanding, yes.
        Mr. Cummings. So you are in a strong position, are you not,
    vis-a-vis your dealers, to monitor their inventory and to give
    them a wholesale price which they are bound to pay as long as
    the contract is in force; is that right?
        Mr. Cooley. We do establish the price that we sell to them
    under.
        Mr. Cummings. And what about you, sir?
        Mr. Soraci. I would like to hear that question again,
    please.
        Mr. Cummings. Well, what I said was that you are in a
    strong position, vis-a-vis, your dealers to monitor their
    inventory and to give them a wholesale price which they are
    bound by long-term contract to pay; is that right?
        Mr. Soraci. Well, if we are talking about our dealers----
        Mr. Cummings. Yes.
        Mr. Soraci [continuing]. Our dealers are typically on a 3-
    year contract. Yes, we do manage inventories at our dealer
    locations and we know what the inventory levels are. But I
    would add that the dealer population, the lessee dealer
    population of our business is a very small percent of our
    business.
        Mr. Cummings. I see my time is up, but just one last
    question. When you price your wholesale gasoline, do you have
    in mind a target margin that you want your dealers to be
    earning, Mr. Cooley?
        Mr. Cooley. When we price our wholesale gasoline, when we
    price to wholesalers we are competing at a rack, and at that
    rack we always would like to make the margin, but the
    marketplace determines if there is a margin there or not. But
    we do establish the rack price.
        Mr. Cummings. All right. And what about you, Mr. Soraci?
        Mr. Soraci. We are in a very competitive market and the
    market sets the price based on a number of different factors.
        Mr. Cummings. How many?
        Mr. Soraci. A number of different factors: supply and
    demand, competitive landscape.
        Mr. Cummings. All right.
        Thank you very much, Mr. Chairman.
        Mr. Kucinich. All right.
        I want to thank the gentleman and just say that I would ask
    the representatives of ExxonMobil and Shell to be responsive to
    Mr. Cummings' written questions so that the committee will feel
    that your cooperation is continuing.
        I also want to thank you for your participation here today.
    I hope that you both feel that the process of this committee
    has been respectful and has been inviting for you to be able to
    get your testimony on the record so that the opinions, as well
    as the position, of both Shell and ExxonMobil have had a
    hearing.
        The purpose of this hearing is to and has been to examine
    the views of Shell and ExxonMobil on what appears to be a
    double standard in the measurement of gasoline; namely, how do
    they justify opposing temperature compensation at retail while
    conducting wholesale transactions with temperature
    compensation, and how do they justify opposing temperature
    compensation for retail sales in the United States while
    universally embracing temperature compensation at retail in
    Canada. We have had an extensive discussion here. It has been a
    bipartisan discussion.
        This committee will continue to delve into this matter. We
    will do so in cooperation with the industry, regulatory bodies,
    those who are involved in weights, measures, and standards.
        I want to thank Mr. Issa. I want to thank the staff of the
    minority as well as the majority for the work that they have
    done on this and all my colleagues for participating.
        I am Dennis Kucinich, Chairman of the Domestic Policy
    Subcommittee of the U.S. House of Representatives. This has
    been a subcommittee hearing on Hot Fuel, and I want to thank
    all of you for participating.
        This committee stands adjourned. Thank you.
        [Whereupon, at 12:20 p.m., the subcommittee was adjourned.]
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