If the Department of Revenue and Taxation has its way Guam consumers will join Hawaiians in getting a few more drops of gas for their gallon. The gas companies claim giving consumers the perfect Guam gallon amounts to make-work and they will raise prices to maintain their customary profit margins.
The move could mean a considerable loss in revenue for petroleum companies on-island; two companies said they would raise prices at the pump to cover the cost of implementation. An industry source said gas sales of about $7.35 million per month which is pumped at civilian and military stations would be reduced by abou $88 000 per month.
Ray A. Leon Guerrero supervisor of the Weights and Measures division of the Department of Revenue and Taxation said the department would like to move forward with ensuring petroleum companies recalibrate their pumps to account for the effect of temperature on fuel. However a date has not yet been set because the division is waiting for Sen. Edward B. “Eddie” Calvo of the 28th Guam Legislature and chair of the Committee on Finance Taxation and Commerce to return to Guam. Calvo is off-island until August. Leon Guerrero said that Calvo planned to hold a public roundtable discussion with all the petroleum companies regarding the issue and a start date.
The law (26-114) that required temperature calibration at 85 degrees did not include a start date which has confounded the Department of Revenue and Taxation and the oil companies. Mobil pointed out that the proposed amendment in the last legislature again failed to include a start date.
Gas expands in high temperatures and Vicente C. “Ben” Pangelinan speaker of the 27th Guam Legislature author of the law and the amendment argued that this phenomenon allows petroleum companies to sell less than a gallon of gas for the full gallon price.
Pangelinan is the author of the Petroleum Sale Accounting and Inspection Law. The law attempts to have fuel companies account for the expansion of gas due to the rise in temperature.
Leon Guerrero said the U.S. calibrates its fuel pumps at 60 degrees Fahrenheit in order to get an accurate reading of fuel being pumped into vehicles. In Hawaii fuel pumps are calibrated to 80 degrees Fahrenheit. The calibration is intended to account for the rise in temperature and the expansion of the gas. He said petroleum companies in Guam calibrate their pumps at the 60-degree mark. He said “What you have to do is take five gallons of gas from the pump and run it through what they call a prover. This prover is set at 85 degrees [Fahrenheit] and then you make the adjustments on the meter either electronically or mechanically to reflect the reading.”
Leon Guerrero said he spoke with technicians working for Guam’s three petroleum companies and each indicated they could have the fuel pumps adjusted with the new calibration of 85 degrees Fahrenheit within two weeks of an order from the government. Leon Guerrero said Mobil Oil Guam Shell Guam Inc. and South Pacific Petroleum Corp. have “provers” in their possession. “They already have some in hand. All of them have one — I’ve been speaking to their technicians and all of them have made their orders for them already.” Leon Guerrero said his agency bought two provers at $1 500 each.
While Leon Guerrero said the cost is minimal for getting a “true gallon of gas” by calibrating fuel pumps one petroleum company continues to stand by statements made during a hearing to discuss an amendment to the Petroleum Sale Accounting and Inspection Law. SPPC said the law could have an opposite effect. Brian Y. Suhr president and chief executive officer of SPPC told the Journal “What the government intended to do is different from what will actually happen. Ultimately prices will increase.”
During the last days of his term in the 27th Guam Legislature Pangelinan attempted to amend the Petroleum Sale Accounting and Inspection Law including the section of definitions of petroleum products. Pangelinan’s term expired before the bill could be heard on the floor of the legislature.
In response to the proposed amendment Suhr submitted written testimony on Dec. 13 2004 to Sen. Antoinette “Toni” Sanford chairwoman of the Committee on Economic Development Retirement Investments Public Works and Regulatory Functions. The testimony Suhr provided reads “Our pricing is based on recovering the costs of supply freight and taxes the cost of our local value added services (salaries and wages of our employees and other operating expenses) and a small profit margin. None of these components will change because of this bill except to add yet another cost to recalibrate our service station meters to over-supply. The result will be that our business will have to recover these existing costs on a smaller delivered volume and the price on the price board will increase.”
Suhr said the same price structure would exist following enactment of the law. “The apparent impact of this law and the proposed amendment will be to further exacerbate the current extreme price of supplies by adding 1.5% (3¢ to 4¢) to the price shown on the price board. This comes at a time when gasoline prices are already at a historic high.”
Phillip Stalker president and finance director of Shell Guam Inc. provided testimony on the bill. “In simple terms the Act as amended by Bill 412 will require us to deliver approximately 2% more volume and label it as a gallon. It is unreasonable to expect any company to do this without recovering cost. Our retail price of gasoline will rise immediately upon implementation to adjust for the changed volume delivery requirement.” Shell called for a repeal of the law. “The Petroleum Sale Accounting and Inspection Act as amended by this Bill reduces tax revenues increases GovGuam costs increases Shell’s operating costs and introduces needless complexity to inventory control. Most pointedly it delivers no benefit to consumers.”
Jeffrey C. Borja president of Mobil Oil Guam also provided testimony for the Pangelinan amendment. A portion of it reads “It [Bill 412] allows for calibration of meters to compensate for an assumed ambient temperature of 85° as opposed to devices which automatically compensate for temperature. The issue here however is that there is no provision for specific gravity for product.” Borja added “In order to compensate for temperature by calibration or calculation two variables must be taken into account. These are ambient temperature and specific gravity. These vary from shipment to shipment or location to location or from time to time. Without an assumed specific gravity it will still be impossible to comply with the provisions of the bill.”
Pangelinan conceded that the oil companies may raise the price of fuel but argued that petroleum companies account for the heat and expansion when tankers come in to provide them with fuel. “All we’re asking for is for the petroleum companies to treat their customers the way they are being treated.” MBJ