 Good morning, thank you for the opportunity to talk about the transportation climate initiative. Well just briefly for the senators and for members of their watching. What is the Vermont Fuel Dealers Association? We're not profit trade association. 250 members, less than 100 will actually sell fuel. They're members because we do training for heat tax. We train over a thousand tax a year that work on your burners in your basements. We do background testing for truck drivers and drug testing and alcohol testing. Members join the Vermont Fuel Dealers Association because they have access to this which stores a lot of information about Vermont's rules regarding the delivery of fuel propane heating oil gasoline which are very specific to Vermont and very complex. We participate in the transportation climate initiative discussions because many of our members also sell diesel fuel and gasoline. We're everything. Our largest member by employer is efficiency Vermont. Most of our members are 10 employees, you know five trucks sell 2 million gallons, but from the terminals to the jobbers which are the truck transport operators to the rail systems to the to the retailer to the person that sells the hoses and the nozzles to the equipment manufacturers. It's been a good career for me the last 13 years in part because of Vermont regulations are very specific very complex and I happen to know that. Congratulations. Yes so we have a contract so we represent my fuel goes association the executive committee 17 members are mostly comprised of retail propane and oil heat operations but we also have a contract with the Vermont Grocers Association to provide regulatory and legislative assistance with regards to sales of gasoline but from large terminal operators in Vermont like global to small gas stations to large heating oil providers to small propane companies. As you can imagine they all don't agree on many issues but that maybe five hundred dollars a do's a year so they can hear what I have to say. So we've commented on the transportation climate initiative primarily because it is both amazingly simple and extremely complex right. I mean the idea some of the things that TCI gets right. I mean if you're going to put a price at a cost to gasoline and diesel fuel it makes a lot more sense to do it from a national from a federal perspective like the oil spill liability tax that was enacted in 1986 to deal with any spills regarding after Exxon Valdez you know eight cents on a barrel. That makes sense because you're capturing it at the point of production and the point of import. A regional is better is not as good as a national but it's better than a stable average if you're going to collect it unless you do it in the excise tax structure which we currently have for gasoline diesel 56 cents on on diesel fuel 49 cents on gasoline here in Vermont that's federal and state taxes. Our issues with TCI and the administration and all the people working on TCI have been very receptive and very forthcoming and doing great work but our concerns with TCI is fairness right. So it's going to be you want to want to make sure people pay the tax if it's enacted but that they only pay it once but that they at least pay it and because of the complex structure of a regional approach because the way fuel flows into Vermont that's something that we keep an eye on. So for instance a third of our fuel heating oil gasoline kerosene diesel fuel is coming either by train or tanker truck directly from Canada from Quebec from the Villarro finer in Quebec it's going that's being pipelined to Montreal Terminal it's either being put on a rail car and it ends up at the Global Terminal in Burlington or the Villarro Terminal or the Rutland Terminal run by Dead River Company or it's being put on a tanker truck and delivered straight from Port Montreal to Fred's and Newport and it's not going through that system. You also have a scenario where fuels coming from Portsmouth New Hampshire from the from the seaport there much of that fuel coming from the Irving refinery in New Brunswick again Canada. So what I'm basically drawing is the way the fuel flows can come from the non-regulated entities areas. If Massachusetts is in and Barrow's or Fleming picks up fuel and Springfield Massachusetts and brings it back to Vermont either the terminal or the fuel company that retails it in Brattleboro is going to pay the TCI tax fee whatever that's clean that's easy. It gets a little bit more complex when we deal with fuel flows that are coming from New Hampshire if they don't participate in Canada which is a major supplier for Vermont. So those are some of the issues that that frankly the Administration of the Agency Natural Resources has been listening to and they're attentive to it. The idea that terminal operators are going to pay this regardless and Vermonters are going to pay this whether we accept the money or not is flawed in our opinion because if that does happen if you can how do you capture fuel from Canada how do you capture the tax fuel that coming from Canada that's sold in Vermont by retailer if they're not the position holder and if we have no authority to tax Canada and enforce this in Canada and if this is and it gets more substantial than the trucking cost which can be substantial you're not going to drive from Alabama to Canada because you're going to pay 25 cents less a gallon because the trucking cost but at some point you'll divert those trains and those tractor trailer trucks to the non-regulated areas New Hampshire, Canada to the detriment of company selling fuel and or they'll just purchase assets in those areas to ship the way the fuel flows. These are things that we can think about because we want to make sure it's a level playing field whether you do it through a TCI whether you do it through a federal tax a state tax or original tax our concern has always been tax fairness leakage leakage not in the literal sense but the figurative sense tax leakage is when people see an opportunity industry sees an opportunity to get a price advantage by going to a different area and avoiding paying the taxes that we we should be enforcing we should be collecting so TCI gets it from a regional approach rather than a state-by-state but there's a regulatory infrastructure that has to be created I don't know how much that's going to cost to ensure that the taxes is paid the fee is paid and that it's paid at least once but only once. I just you first described it as the price of the program which is probably more appropriate than a tax or a fee because it's not a tax or a fee but and your point is well taken about making sure that you were we that the system would reduce leakage and people avoiding participating in what is meant to capture everybody when Peter walk was here giving from the administration's point of view the people who have been at the table trying to give a sense of where things stand and it's not a final deal yet so it's still there's things being fine-tuned to the right but they're still working through different problems and it is it is both complex and simple as you described the concerns you've raised with some in expressing in some more definitive ways we're not the way they were expressed to us by the person at the table who was saying of course we have to be mindful of all these concerns but was but was not here saying that state like New Hampshire if they choose to not participate would somehow pay a different price at the pump for the broader TCI effort and I'm just wondering if if you if your members or your Association knew that states in and out were going to be affected the same way and there was a way to only have people pay once and not you know pay twice and that it captured all the fuel that was coming in would your members then support TCI those are the concerns you've identified if those were issues that the people at the negotiating table resolved satisfactorily in each one of those ways would would the fuel dealers support TCI so let me get to that question but go the end around under that scenario which I think is correct they would have to regulate the entorer not just the terminal right so it's we're not talking about the terminals in Montreal reports myth or Albany Boston we're talking about the entorer which is not necessarily a large player that could be a small player SL Dudley for the tractor trailer truck and Barry that's that is an entorer he's bringing it from a non-entainment area or non-regulated area into Vermont that's that's problematic so that's that's the first reason why first for small companies Vermont companies to be in this field with their purchasing allowances with very sophisticated players that's problematic for me personally if no administrative scheme is created that would simplify that for them yeah simplifying makes the further you push this upstream the more it makes sense right we just approved president Trump just signed in the tax extenders bill putting back into place it was gone for two years the oil spill liability tax which is the most sensible and efficient way to put a price on petroleum at the federal level now I understand we're not going to have this under the current administration but as you go further downstream the more complex it is from a regulatory standpoint our opinion my opinion and the further you have a chance for leakage in the idea that we're putting some of these small players in the soup with some very sophisticated financial entities who are going to be buying trading allowances I don't feel that they'll have much success and I in my heart I support large businesses small businesses but in my heart some Vermont entities who are going to pay this fee allow purchase allowances however you want to find it well to find it it's not a tax or fee because it's not a tax or fee so I'll start by saying what it isn't a tax or okay it might be a quibble there would be a price impact so I do not rush but they will have to purchase allowances it won't be just the terminal operators that purchase allowances it'll have to be the small enterers as defined by the TCI language in and I have no confidence that they'll be able to be play in that sophisticated market with some larger entities and I from their perspective this is not going to work for them it may work for some other more larger sophisticated terminal operators I'm not understanding why it has to be so complicated why can't they just buy the allowances you're bringing in X yeah this is a brand new concept not for the large players but for the small enterers importers truck drivers yeah to go talk to Steve Dudley son first look in Barry the idea of Steve and me walking through through purchasing allowances this isn't a slight on some of our members they're keeping trucks on the road they're keeping fuel in our terminals they're keeping fuel in our tax they're they're making the rotska to be run they're doing important work but to say that they have time to figure out they have the ability to figure out the allowance market that that we're basing this on when we created Reggie we're dealing with power producers we're counting electrons very simply this is different this is different than Reggie and it is there's a level sophistication here that we may understand in this building or across the street or at ANR but the person who's worried about making sure he's got a driver who can pass a drug test and doesn't be felony convictions and is ready to run that's a little bit different than saying okay now you're going to get into an auction a regional auction with a major terminal operators I mean that's where he hands over the key option is the same price and then it can I think it can be simplified the senator points like if we can simplify it so we're not at the border asking the truck driver to do a calculation and enter an auction and figure that out I think it can be simplified towards like here the here the amount of gallons that you're entering here's the allowance price unless you're going to be mixing it with five these are whatever there's different options so you don't have to buy as many allowances and then that that would be the option for them to figure that out right it's my understanding that much like the Reggie auction there'll be quarterly opportunities to purchase and the price will fluctuate much like buying stock and we're buying a commodity and the more sophisticated players will be able to buy buy buy more allowances for less and the ones that wait until the 45th day whatever that's the 90th day 99th day may not may not perform as well and that will have an impact on their operation so I don't think it's as simple as we want it to be can it be perhaps right and I agree that the smaller operations are gonna have more work to do and it's gonna be a little more difficult for them to figure out on the long term and banking and there are other things that will be part of it there's no doubt but I think it can be simplified towards it's not gonna be that complicated but they might be I don't know if they're gonna be a competitive disadvantage in the auctions but I could see why it'd be concerned but it's not like they're a federal the taxes or say tax I mean there are existing taxes they just or fees or or or I'm sorry I know me to use the language of the I just think it's not accurate if we call it a tax or it's a it's a cost of doing business an added cost of doing business for those that distribute gasoline and diesel fuel there's no question and there's lots of added cost to doing business and that's if the emissions targets aren't met and allowances are even needed and I think when Peter was here one of the other things he said which was actually really interesting was the extent to which all the states who participate meet the emissions goals there might be no price of the allowances because they don't have to sell them now they would reset so they'd be this constant attempt to to move innovation and drive people to have fewer emissions unquestionably but it's the plot is always thicker and I've actually appreciated that the governor's position has been he wants to see the final agreement to know how it would work for all the different small guys big ones and so on and I think that's one of the reasons we're reserving judgment to and I just feel like the more certain people talk about how all the details are going to be worked out the farther it is from where things really stand we don't know how simple or complicated it would be for the small person bringing across the border and I think we'd be concerned really complicated and putting them at a competitive disadvantage but I think April is when they think that there will be a final thing put on the table for states to decide one way or the other and of course that could lead into May these things aren't simple there they are complicated they've got a lot of public input from everybody from mass group to everybody else so I don't know well California is in a different program but the 12 states that are considering it there's still some uncertainty about what would happen to in New Hampshire and I actually I think the governor of New Hampshire is very strange to say I don't support something even though I don't know what it is yet and I don't know if it's good or bad for the people of the state but I oppose it anyways so it's unclear which states will join forces I think it but it seems like April is probably the soonest that the final yes final field be on the table. Matt do you have recommendations like you identified a problem but is your solution just not to do it or do you think there's ways to make it better? Well there's certainly advantages with other for instance California is brought up California is a low-carbon fuel standard what has that effect what's the effect of that? The effect of moving renewable diesel and biodiesel from where it's created in the Midwest to California I mean we play in that market for eating one right we blend renewable diesel and biodiesel into the eating one supply it's a cost advantage or if the customer requested because they want to lower their carbon footprint below carbon fuel standard the way that California has been able to meet its mission goals is through renewable diesel largely for their trucking market for trucks that's another way that we could increase the amount of and then there's buying from the sellers right now what you're asking is can we add a cost to you that will reduce the your sales that's essentially the bargain that we've had we we don't really have an opportunity as sellers in order to encourage our customers to use a renewable option other than to install car chargers but you know based on what we know about our retail industry most people when they convert to car and they will we don't we're not blind here we understand that in the next 10 20 years we're gonna have 50,000 autos that are electrically powered our snowplot trucks the future is good for diesel not so good for gasoline we sell we used to sell 350 million gallons of gasoline we sell 300 million gallons 310 million gallons now we could easily see will be at 260 million gallons once 50,000 cars on the road we understand this you're gonna see changes in the marketplace you're gonna see in rural areas gas stations are gonna close because they can't support the volumes that they're selling now you can see more consolidation in the industry it has to happen when you sell less product business owners have to make a choice so whether they can sell at the increased regulatory costs it's not just the cost of TCI it's the cost of tank compliance piping all these standards that we have so you're gonna see fewer gasoline stations we're gonna see fewer sales of gasoline we our diesel sales will remain constant because there's no adequate substitute for diesel except for renewable diesel and biodiesel and that that at that level you can only go to 20% right now not not what I'm saying I mean yes there there's always a flashy article in American Truck Association's magazines about the new Tesla truck or others but we are going to be using diesel to haul milk for another 50 years we're gonna be using diesel to haul logs out of our woods for another 50 years we won't we won't need gasoline for a car diesel diesel you know propane auto gas they have tried they've tried to encourage that well when it comes when it comes to nitrous oxide it's because we went to an ultra-low sulfur standard both in heating oil and diesel fuel so there's less of that but that doesn't have anything to do with carbon again I take senator ashes point very well we don't know the final I'm pushing back against the narrative this is no Vermont companies ever gonna pay this because I I just see tremendous leakage if I get leakages a term associated with tax it lacks a tremendous ability for Vermont companies to avoid the added additional cost of complying with TCI if they have no burden on themselves because they can go to non-regulated areas very easily they do now the solution of course is at the federal level and we could say the same I would say the same thing about the excise tax I mean at the end of the day we're looking at taxing capacity to fix our roads because those Priuses and those Teslas still use pavement and we still need to fix the roads and bridges I don't need to tell us to this committee I apologize for you know soapbox here but I mean there is there is a taxing capacity we will have we will reduce our gallons by 40 million in the next 10 years we will have to find money to fix those roads the most easiest solution the most equitable solution so we don't have this cross-border nonsense is for the federal government to do something perhaps we'll have something that will achieve that in January I can sender Sanders I'm sure is on board with me TCI right now as presented not finalized is problematic for us fair it's a fair statement I it's a fair statement and it's your right to have that position but you could meet the allowances with renewable fuel like how much renewable there's the 10% ethanol like up to 10% ethanol or so we're at we're at a everyone thinks field is a walker lockstep they do not there's why disagreement about what you sell and where you sell it from right so the ethanol industry wants to and the major producers because the renewable fuel standard federal law want to increase the amount of ethanol in the supply right as retailers on ethanol we want less because that's bad so that's bad so that's why I'm not on ethanol at 10% we have problems with our pumps and our seals and corrosion anything above 10% so if you're a retailer or you're you don't want to sell anything over 10% that's why you always see up to 10% depending on the price of ethanol the major refiners are pushing because they have an alternative compliance payment if they don't meet the renewable fuel standard obligation to blend 9 million or 9 billion gallons into the supply they're pushing as much ethanol as possible some of the best-selling gasoline stations are ones that offer you up and all free gas you know because a lot of people don't want ethanol but the refiners do retailers we don't we just cut us off at 10% no more they're trying to lift that to get to E 15 and we're very much opposed to that of the federal level the biodiesel it's the other side right we need more biodiesel on the heating oil industry we have a pathway to get to net zero we see a possibility where we can sell a hundred percent renewable diesel fuel and heating oil it's the same thing all this difference is culling right we throw a red dye into heating oil and off-road into diesel fuel for off-road and in heating oil use it's just diesel fuel so we see a pathway where we can put hundred percent renewable diesel biodiesel into tanks in our basements or underground where it's warm and we can use it as a heating source we see a bright future for the heating oil industry selling renewable liquid fuels with biodiesel you're capped at 20% you have the 20% because of two things one is the engine manufacturers will not will not go over 20% on current engines now that could change they could they could figure out a way to do it if they're instead of us do it if they realize that the electric tractor trailer truck is not gonna work so let's figure out how to get a more renewable fuel into our engines and number two those trucks are parked outside and the problem with biodiesel as you know is that it clouds and and in the engine manufacturer replacing an engine on tractor trailer trucks gonna cost you upwards $80,000 replacing a burner or seal on a heating oil tank which isn't gonna happen because those tanks are generally warm it's gonna cost $20 so for the heating oil industry we see a real opportunity to bring more renewable fuel back to the East Coast although we're competing with California now we just got the biodiesel tax credit back President Trump signed it we lobbied aggressively for it yeah we do and that's gonna happen and under TCI parameters biodiesel gets a break right so that's positive again I started the same there's some things TCI get right and that's one of them also a regional approach rather than a state by state approach you know but if I'm advocating on behalf of my small transporters retailers interiors and they're told that they're not gonna have to pay anything that's all gonna be done by the big bad terminals down another state I'm saying to them that's not how I read right now they will do something and I the question of who remits dollars to the administrative entity managing TCI is an interesting question ultimately the consumers will bear whatever the cost is and so I in some ways I it's the compliance and treating everyone equally on a level playing field which I think is your most salient point in that regard but but I do want to just express one thing which is you know we might have different views your association and me I'll speak for myself in terms of being positive or pessimistic about whether this can be arranged in a way that is most favorable for the state of Vermont I happen to be positive that it can be done and I hope it is and if it's not I'll say it wasn't done right but I do think that at its core our job is to reduce transportation emissions and that that's where sometimes the details which are critical mask a step back question which is what is the ultimate point of all this which is to reduce transportation emissions in the most effective lowest cost way and that's where it's hard because there are some who say just do nothing and let things take its course maybe maybe the market will figure it out and the the patience and of the planet is probably not there's something there's something misaligned there in terms of what we can really expect the market to just figure out and I've actually been very impressed by your members over the years I'm thinking specifically about the I don't know if the word innovation is the right one but the reimagining their businesses to also get into repair and servicing and transitioning fuel supplies within homes and businesses and that's obviously if there's gonna be more of that coming up what on the transportation and the home heating side and you know I I you know I I don't think we take lightly that there are impacts and entities which will have to change and will be impacted for good or bad and I think one of the commitments that we make is to not prop up harmful transportation emissions as a policy goal but rather to make sure we're providing opportunities for those businesses to be playing in the areas where we're trying to direct people and I I know that a number of your members are attending efficiency Vermont's trainings to get people certified in certain home heating things down at VTC and there's probably more things like that we should be doing but I think we're we're not on different pages in terms of understanding that there can be impacts to members and trying to make sure we're mitigating that to the best extent possible I just wanted to express that I appreciate that if someone give me a this a bit of cost is what this might be per gallon at the pumps because that's going to be a big factor because people don't judge it by was 10 cents a gallon or 4 cents a gallon or 8 cents a gallon because we know the headlines are going to be a carbon tax or increased gasoline would anybody know at this time what that figure might be they reported 5 to 17 gasoline 5 to 17 depends which depends if you take the least aggressive reductions as the agreed upon amount or the most aggressive amount so it's not like if we do the least aggressive it'll range from 5 to 17 they're saying if you pick the least aggressive that's tackling emissions 4 cents for 4 cents for gas 6 4 cents for gas that's at the 20 you know they had the three different target amounts that and it's not clear which one the states will say that they're going for if they say the least aggressive of the 3 it was 4 cents gasoline and 6 diesel if I'm not sure correct and that's if and that's if the states don't meet the targets and require the full allowance amount to be on the market and the money is spent by decided by some by the states states you know it would be it would be each states appropriation process would decide how to spend the funds and they haven't figured out the formula of how much each state gets yet so that's another one of those variables we're still waiting to see but the range we heard was about 15 to 20 million here if I don't remember if it was specific to one of those targets or if it was just a general estimate if I may if the legislature or the governor decided it was in their interest to use the proceeds from TCI to spend on pension reform pension or transportation or roads and bridges yet no one no one is no one there's no restriction about using the money for you know I'm just saying no there's no restriction placed on individual states to spend the money in ways they see fit and presumably under this legislature the way it seems that is to incentivize ways to get people to stop using gasoline and diesel state signs on we would have legislation directing the money to be used for transportation investments I can't see a different realistic that and the other point to make about the cost which is it's not to be not to be sarcastic here I'm already risking enough here but when did you buy Bitcoin you know when did you buy your allowance in Reggie as I understood it I understand it when it first came out the people that bought too many allowances were left with allowances they didn't need at the beginning of the Reggie option you know there will be a time the price of the allowances will flow during that 90-day period where you have that option and depending on when you purchase your allowances that might change you know might be half a cent but that might mean something in terms of who who successfully uses this TCI in order to improve their efficiencies and delivering this with this added compliance obligation that's a cage away of saying it's going to cost different position holders and different different different amounts of money depending on when they play in the option if you wait until the last minute you didn't buy any options allowances there's none left whoever bought them in the beginning is going to raise the price you're going to get that's just how an option works and that's a good I think it's good because it provides more efficiency in the system it allows the market to work and encourage innovation encourage biodiesel and there are opportunities in those markets yeah and which is your point some people will be sophisticated that's it they can do if we can simplify I think it's something we should think about or that the negotiators and as Peter Walks said that Vermont has an equal vote to the bigger states you know our vote isn't the same as Pennsylvania's even out there so we can we can try to work on that whether we have a say I get the feeling we're not going to be able to deal with some of those rules we're going to say yes or no but there's things that we can do to support those small importers or interest and I think we should appreciate that's a lot of policy areas that need to be thought through and I was thinking to some extent our small businesses the extent to which they are purchasing now when you have bigger volume you have more leverage within the market I was thinking about the companies that offer if you pre-buy and what they offer for rates to some extent there's got to be some similarities in terms of the sophistication the volume within the big players this is a good opportunity for the Vermont fuel dealers association to offer this allowance trading services to your members you can help to figure this all out I appreciate the advice thanks man thank you very much