An Active Year Ahead

With the presidential election approaching in 2016, the federal legislative environment this year will be much more active, especially on those issues that are politically charged.

?Remember, the presidential campaign has already begun so the Republicans are going to pass a bunch of legislation ? budgets, war-related ? that they know [President Obama] will have to veto so they can force their narrative on those issues and use it against Hillary [Clinton] in the campaign,? said Joe Kefauver, managing partner of Parquet Public Affairs, a national issue management, communications, government relations and reputation assurance firm specializing in service-sector industries. ?Most will come from the social-agenda side of things.?

This year?s federal regulatory environment will likewise be more active because of the continued logjam in Congress, as Obama has demonstrated his willingness to forcefully use his executive and regulatory powers to bypass Congress, Kefauver noted.

?Look at his announcements on immigration, minimum wage and Cuba, and how his NLRB [National Labor Relations Board] is singlehandedly revitalizing the union movement in this country,? he observed. In fact, Kefauver puts the NLRB at the top of his list of the federal regulatory issues convenience store retailers should watch out for in 2015, particularly in regards to ambush elections, micro-unions and joint employer/franchisee rulings. Still, the biggest hazards to the convenience store industry may not be at the federal level at all, but rather at the local level. ?The biggest threats to the business model ? wages, paid leave and potential organizing ? are all happening in city halls and county commissions, not a gridlocked Congress,? according to the government affairs expert.

Minimum-wage battles are happening on the state and federal levels, and local districts have the potential to use their authority in ways that could have a disproportionate effect on c-stores, such as the proposed ban on tobacco sales that was narrowly quashed in Westminster, Mass., last year. Even a local city council election in Richmond, Calif., recently received major attention from Chevron Corp. due to the presence of its refinery there.

Thus, getting involved in government relations at all levels is a must, stressed Steve Loehr, vice president of operations support at La Crosse, Wis.-based Kwik Trip Inc. and current chairman of NACS, the Association for Convenience & Fuel Retailing.

?The bottom line is this: Elections have consequences ? both in who we actually elect for an office and then who they put in charge of regulatory agencies and who they appoint as judges,? Loehr said. ?We must get to know our legislators, at both the state and national levels, so we educate them about our industry and about the consequences of the laws they pass. Visit them at their office and invite them to your business when they are back in their home districts.?

THE ISSUES TO WATCH

As part of this year?s expanded Industry Forecast Study, Convenience Store News spoke with industry experts, government relations specialists, c-store retailers and association heads to find out which legislative and regulatory issues are of most importance for 2015.

The list is a long and varied one, including:

• Corporate tax reform
• Interchange fees
• Banking industry pushback on credit and debit card successes
• Immigration
• Minimum wage
• Food and Drug Administration (FDA) activism in the obesity space
• Menu labeling
• Health care and the Affordable Care Act
• Union activity
• Data security
• Tobacco deeming regulations
• Menthol tobacco regulation
• Renewable Fuel Standard
• Underground storage tank rules
• Natural gas standards

Convenience store retailers with foodservice programs across the nation were dealt a blow late in 2014, when the FDA released its finalized rules for menu labeling that require menus to display caloric information. Now treated as though they are restaurants, c-store operators can?t help but wonder what further legislative and regulatory changes lie ahead for them.

Tom Robinson, president of Santa Clara, Calif.-based Robinson Oil Corp., believes additional regulations or changes to existing regulations are more likely to happen this year than substantial legislative changes, mainly due to the gridlock between Congress and the Obama administration.

?They don?t seem to be able to get out of their own way,? the retailer said.

There is potential relief from the FDA?s menu-labeling requirements in the form of H.R. 1249, the Common Sense Nutrition Disclosure Act, and S. 1756. According to Kwik Trip?s Loehr, this legislation ?would codify a less burdensome approach to menu labeling? by limiting the provision to establishments that derive 50 percent or more of their revenue from food intended for immediate consumption, or prepared and processed onsite. Both bills remain in limbo.

C-store retailers also face uncertain ground in the area of health care as they work to comply with the Affordable Care Act (ACA). Industry insiders cite concerns about adequate coverage, restrictions on work hours and rising costs. Although the Supreme Court upheld the ACA in 2012, there is the potential to change certain aspects through legislation.

?I tend to believe health care is here to stay, but certainly see opportunities to improve pieces of it,? Robinson said. ?It would be nice if legislators could figure out ways to make it less of a burden.?

Also speaking of burdens, interchange fees are an ongoing issue that will certainly extend into 2015 as the c-store industry keeps fighting back against rising credit card costs. ?At stake here is, do we as an industry want to control our future, or are we going to let the credit card companies continue to make more total profit from our industry than we do?? said Loehr.

TOBACCO FEELS THE HEAT

The tobacco category is no stranger to legislative and regulatory attention, and that is expected to stay the case in 2015. Several tobacco-related issues weigh heavily on the minds of c-store players.

The FDA caused quite a stir in late April when it finally released its long-awaited proposed deeming regulations, which would allow the agency to regulate electronic cigarettes, cigars, pipe tobacco, nicotine gels, water pipe (or hookah) tobacco and certain dissolvables not already under its authority. Now, three years after waiting for the proposal, the tobacco industry ? retailers and manufacturers alike ? will have to wait even longer for final guidance.

?The likelihood of getting clarification on what the potential regulations would be for e-cigarettes and cigars in 2015 is somewhat low,? said David Bishop, managing partner of Barrington, Ill.-based Balvor LLC, a sales and marketing firm.

As he explained, there were a number of events that occurred in 2014 that indicated it?s not going to be a quick process. First, in July, U.S. District Court Judge Richard Leon in Washington, D.C., ruled that the FDA Center for Tobacco Products? (CTP) Tobacco Scientific Product Advisory Committee (TPSAC) had substantial conflicts of interest.

In his ruling, Leon indicated the agency could not rely on its 2011 Menthol Report, which recommended the consideration of removing menthol cigarettes from the market. In addition, as a result of Leon?s decision, the FDA had to reconstitute the composition of the TPSAC panel to remove those members that had conflicts of interest (the doctors or scientists had been expert witnesses against the tobacco industry or in support of the pharmaceutical industry).

?In one way, it was a reshuffling of the members of TPSAC to be more objective and fair. At the same time, all the work that TPSAC had done up until that time was basically discarded and it had to start over,? according to Bishop.

The August 2014 deadline set for the public comment period on the FDA?s proposed deeming regulations also plays into the unlikelihood of any final rule in 2015. By the deadline, the Center for Tobacco Products had received nearly 80,000 comments and, under the law, the agency has to review all those comments ? which takes time.

What?s more, the deeming regulations center around two main areas, electronic cigarettes and cigars. The main sticking point with cigars is whether or not to include premium cigars in the final rule. The more complicated factor in the proposed regulations is that the tobacco industry ? and Bishop believes the FDA ? recognize that e-cigarettes are something different, albeit still tobacco, and could potentially advance the public interest by reducing the risk or costs associated with the consumption of traditional tobacco products.

?I think the FDA, or specifically the CTP, recognizes they really do have to pursue an objective, evidence-based approach, especially with e-cigarettes,? Bishop said. ?The FDA is in the middle. There are the real staunch anti-tobacco advocates out there that want nothing short of absolute prohibition, which we know legally the FDA doesn?t have the authority to impose. On the other side, you have the industry ? or primarily the product manufacturers ? who want to ensure they can operate in more of a free-market economy and not be restricted in terms of how they innovate or go to market with unfair or overly burdensome regulations.?

Whatever form the final regulations take, there is the potential for litigation from both sides, Bishop added. While the agency is not interested in litigation, the industry has its own vested interest and it was very vocal in the overturning of the TPSAC report.

Circling back, the TPSAC report also leads Bishop to believe a final determination on menthol cigarettes is somewhere down the road. Not only does the CTP have to reconstitute TPSAC, but it also has to start the exploration process over.

The questions in front of the panel include: Are people more or less likely to start smoking if menthol is available vs. not? Does the presence or absence of menthol cigarettes increase or decrease the likelihood people will quit smoking? Is the risk with using menthol cigarettes more likely to lead to disease vs. those who smoke non-menthol cigarettes?

The 2011 TPSAC report, which has essentially been put on the shelf, did not find any evidence to support that menthol is more likely to lead to disease, Bishop explained. From the manufacturers? position, that should almost single-handedly be the determining factor: if menthol products do not increase the risk of disease, then initiation and cessation are really secondary because it doesn?t necessarily increase the harm to the overall population.

What that doesn?t necessarily speak to, though, and what TPSAC has to evaluate is the impact on the population. ?This is really going to be watched for a couple of reasons,? Bishop said. ?The magnitude of this is extremely large. If 90 percent of tobacco use is in cigarettes, one quarter of it is in menthol.? It is a significant portion of the overall market in the United States and has the potential to create an illicit trade if menthol is prohibited, he added.

FUELING MATTERS

Like tobacco, the motor fuels category is another legislative and regulatory landmine. Multiple retailers interviewed by CSNews expressed concern about the Renewable Fuel Standard, which mandates how much renewable fuel has to be produced and blended each year. In November, the Environmental Protection Agency (EPA) announced it would not finalize standards until 2015.

?We?re going into 2015 not knowing what the requirement was for 2014, so 2015 becomes obviously problematic, too,? Robinson commented.

The Renewable Fuel Standard is one of five key legislative and regulatory issues that the Petroleum Marketers Association of America (PMAA) intends to focus on this year. ?The ethanol mandate has reached the point where we can?t reach the statutory mandate blending to an E10 level,? relayed PMAA President Dan Gilligan. ?So, we?ve asked the EPA to hold the line for the foreseeable future because out of 700,000 gasoline dispensers in the country, fewer than 5,000 have been approved for anything higher than E10.?

SIGMA: America?s Leading Fuel Marketers also has the Renewable Fuel Standard on its hit list of issues to tackle in 2015. For the most part, the association was happy with the EPA?s proposed 2014 rule and is advocating the agency issue a final rule as quickly as possible.

?With respect to alternative fuels, SIGMA is fuel agnostic, provided the fuel can be sold in a lawful manner to customers that want to purchase it. As more and more new fuels enter the market, SIGMA looks to be a thought leader and active participant in that discussion,? said Tom Gresham, president of the association.

Both SIGMA and PMAA have the EPA?s proposed revisions to underground storage tank regulations in their sights as well. SIGMA continues to advocate that any new requirements not unfairly burden tank owners and operators.

PMAA has asked the EPA to conduct a small business study to determine the costs of underground storage tanks for gas station operators. If necessary, the trade organization is willing to go to court to compel the EPA to conduct such a study, Gilligan said.

?We?ve been working with the EPA for five years on this. We are hoping the new requirements are reasonable,? he noted. ?The EPA originally projected the costs of underground storage tanks would be $900 a year per gas station, but we project the cost would be closer to $7,000 per gas station.?

The other issues on PMAA?s 2015 agenda are:

• Restoring the 40-hour workweek as defined under the Affordable Care Act. As of press time, the House of Representative had voted to restore the 40-hour workweek definition, with Obama still vowing to veto the move and keep it at 30 hours.
• President?s Obama recent statement that c-store managers should make $50,000 a year or more to be exempt from overtime; the current standard is approximately $24,000. ?We are going to request [to the Department of Labor] that if an increase is necessary, do so gradually over multiple years so convenience store owners can budget it in,? said PMAA?s president.
• The tightening of ground-level ozone standards. Price differences at the pump when comparing areas that require reformulated gasoline to those that don?t can be significant, even within the same state.

The other issues on SIGMA?s 2015 agenda are:

• Data security. ?No one wants to suffer a breach, but it is clear that all merchants are vulnerable,? Gresham said. ?I think this could be one of the most serious challenges our industry has faced in a long time.?
• The Keystone XL Pipeline. SIGMA supports the Keystone XL Pipeline because infrastructure is needed to deliver product to the markets where it is needed.
• The development of standards for the sale of compressed natural gas (CNG) and liquefied natural gas (LNG). SIGMA has worked closely with Congress in support of a gallon-equivalent position, so consumers can easily compare the price of a gallon of gasoline or diesel fuel to an equivalent gallon of CNG or LNG.
• Support for legislative efforts to lift the ban on crude oil exports. This is a new issue for SIGMA, voted upon during its annual meeting in November. ?While we are certainly cognizant of the potential effect on prices that lifting the ban could have, SIGMA?s support for a free market and open access to supply make it necessary to side with those that want to eliminate the export ban,? Gresham explained.