Federal Update
‘Hot fuel’ settlements speak volumes
Six companies agree to pay $21.6 million to adjust fuel pumps for temperature. Companies that don't settle still face a trial on Aug. 27.

By David Tanner, associate editor

Ten fuel companies have agreed to settle with consumers in a class-action lawsuit over the sale of “hot fuel.” Six of the companies agreed to pay a combined $21.6 million, and all of the companies agreed to take steps to account for fuel temperature at retail pumps and ensure that consumers get precisely the amount of energy they pay for.

“The settlements provide different routes to modify a method of retail sale for motor fuel that Class Plaintiffs have alleged violate state consumer protection and other laws – the sale of motor fuel at retail without accounting for temperature or disclosing to the consumer meaningful information about the effects of temperature on motor fuel,” states an unopposed motion filed June 15 in U.S. District Court for the District of Kansas.

Shell, BP, ConocoPhillips, ExxonMobil, Citgo and Sinclair agreed to pay a total of $21.6 million into a fund that retailers will use to install automatic temperature compensation equipment, known as ATC, on their pumps. A portion of the fund will help state weights and measures agencies implement an inspection process and oversight for the program.

Casey’s, Sam’s and Dansk agreed to a “gradual conversion” to ATC-equipped pumps at their retail stations and agreed to placing stickers on their pumps describing how temperature affects the amount of fuel energy being sold.

Valero agreed to post the actual temperature of the fuel at their pumps and underground storage tanks and to educate consumers about how temperature affects fuel. The company agreed to install ATC at the pump in the future “when certain market conditions are present.”

In return, the plaintiffs agree to release those companies from claims and complaints relating to the hot fuel issue.

Understanding hot fuel boils down to simple physics, in that liquid expands or contracts due to changes in temperature.

Oil and fuel refiners and wholesalers have known for decades about the expansion of fuel in warmer regions and how fuel can stay warm in insulated tanks. They have voluntarily regulated themselves by buying and selling their products based on a 60-degree standard.

Remarkably, the retail location remains the one point in the fuel chain that does not require, or adhere to, a 60-degree standard.

Truckers, who track their fuel costs and mileage as a business practice, were among the first to notice that some fill-ups did not take them as far as others. The OOIDA Foundation helped piece things together, showing that the temperature of the fuel – due to expansion in warmer regions – had something to do with it.

An investigative series in The Kansas City Star showed that retailers were likely profiting an extra $2 billion or more each year from hot fuel. OOIDA members taking temperature of the fuel at stops have recorded temperatures exceeding 100 degrees.

From 2006 through 2008 consumers, including truckers and OOIDA members, filed a total of 51 lawsuits against fuel companies. The U.S. District Court consolidated the case and certified the class during the next two years.

The companies agreeing to settlements continue to deny wrongdoing despite agreeing to the terms of the settlement.

BP, ConocoPhillips, ExxonMobil and Shell will pay $5 million each, while Citgo and Sinclair will each pay $800,000. The companies also agree to publish information about fuel temperature and energy content.

According to the court document, the plaintiffs can apply to recover legal fees up to 30 percent of what the companies pay to the settlement fund.

Settlement terms are subject to court approval. U.S. District Judge Kathryn Vratil continues to preside over the case. Companies that have not settled are scheduled for trial

Aug. 27 in Kansas City, KS. LL