Hearing set to settle 'hot fuel' cases for $23 million

By David Tanner, Land Line senior editor | 1/26/2015

Pending the outcome of a hearing in June, the battle over so-called hot fuel could largely be over. A U.S. District Court judge in Kansas has given preliminary approval to a $23 million settlement offer from fuel companies to retrofit their pumps with equipment that adjusts the pump price based on the temperature of the fuel.

Nearly 50 lawsuits in 26 states dating back to 2006 were filed on the notion that fuel companies are profiting unfairly on a simple law of physics that says liquids expand and contract due to temperature, and on the fact that a U.S. gallon is defined as 231 cubic inches regardless of temperature.

Fuel at 90 degrees, for example, contains less energy per gallon than fuel measured at 60 degrees. Refiners and wholesalers have used a 60-degree standard for transactions above the rack for more than a century, but no such standard exists at the retail level.

In the mid-2000s, owner-operator truckers began to notice that they were getting fewer miles out of a tank of fuel if they filled up in warmer states or during the summer months and they wanted to know why.

A number of truckers and OOIDA members signed on as lawsuit plaintiffs around the country, seeking damages and asking the court to require retailers to add automatic temperature compensation, or ATC, to their fuel pumps. The plaintiffs say ATC on fuel pumps would make sure that consumers get the exact amount of fuel energy in a gallon that they pay for.

Many of the cases were consolidated in U.S. District Court for the District of Kansas under the jurisdiction of Judge Kathryn Vratil.

Three of those cases went to court in 2012 against QuikTrip, 7-Eleven and Kum & Go. A 10-member jury sided with the fuel retailers in those cases, saying they did not believe the retailers used “willful deception” in their sales practices.

BP, ConocoPhillips, ExxonMobil, Shell, Chevron and Sinclair Oil, have offered $23 million to settle and place ATC technology on their fuel pumps. An additional 22 fuel retailers would chip in $1.6 million for the ATC effort.

Judge Vratil rejected a prior settlement offer in 2012, but according to recent court filings she has set a final settlement hearing for June 9 in Kansas City, Kan., barring any objections.

The plaintiffs appear ready to settle on the notion that the movement toward ATC on all fuel pumps has at least been jumpstarted.

Attorney for the plaintiffs Robert Horn of Kansas City says the June hearing will set the tone for states to require or simply ask retailers to accommodate pumps with ATC.

“I think everyone is waiting until these settlements to be approved and for the states to begin to determine whether they’re going to implement ATC,” Horn told Land Line Magazine on Monday, Jan. 26.

Individual states would be left to determine how far to go with permission or a requirement.

“The big difference is, if it’s permissive, a party can choose not to do it, but the idea that as more and more choose to do it, it will become more commonplace in a state,” Horn said. “The problem with mandatory is that you have some small stations that it would become difficult to implement ATC on a cost basis.”

Fuel retailer Costco was the first company to offer to put ATC on its pumps voluntarily. Even with Costco’s offer out there, states must still sign off on it.

“All of this requires a state to make the determination – on a state by state basis – if they will allow it to occur,” Horn said.

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