[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

                               __________

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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.
    [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    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.
    [The information referred to follows:]

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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.]
    [Additional information submitted for the hearing record 
follows:]

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