Beasley Allen has taken on a leadership role in the Hot Fuel Multi-District Litigation, a massive legal action encompassing 26 states and consolidated in Kansas City, Kansas. These lawsuits center on the simple notion of fairness – when consumers purchase motor fuel by the gallon, they expect to receive a gallon’s worth of energy. Unfortunately, in hot states like Alabama, Texas or Florida, consumers are receiving less motor fuel than they are paying for at the pump.
Simple physics dictates that when liquids like gasoline are heated, they expand in volume while the fuel’s initial energy stays the same. This phenomenon, known as thermal expansion, actually creates “expanded gallons” of fuel that harbor less energy than the initial gallons the fuel once was before expansion.
The oil industry has known about the effects of thermal expansion on motor fuel liquids for decades. In fact, to ensure fairness and consistency in their own wholesale and supply markets, the oil industry helped establish the U.S. Petroleum Gallon, where a gallon of fuel is equal to 231 cubic inches measured at 60 degrees Fahrenheit. Thereafter, the oil industry utilized a method called temperature compensation, a process where the temperature of the fuel is used to compensate for the thermal expansion that occurs when the fuel’s temperature exceeds 60 degrees. This measure is used at every level of the motor fuel distribution process to ensure fairness in transfer – everywhere, that is, except with the consumer at retail. Considering the average temperature in most states exceeds 60 degrees, many consumers are purchasing less fuel than they are paying for.
How much are consumers losing due to hot fuel? A federal study conducted by the National Institute for Standard and Technology (NIST) found that the average temperature of gasoline in California underground storage tanks was 75 degrees year round. Acknowledging them The Santa Monica-based Foundation for Taxpayer and Consumer rights (FTCR), pointed out that if gasoline is at 90 degrees in temperature, the consumer has lost about 2 percent of mass and energy. Based on a price of $4 per gallon, that translates to a loss of eight cents for every gallon. However, in places like Florida, Georgia, Alabama, Texas, Arizona or California, the Defendants could easily be selling motor fuel to consumers with a temperature in excess of 105 degrees.
The Defendants, comprised mostly of the world’s largest oil companies, argue that temperature compensation is too difficult to implement in the United States. Interestingly, automatic temperature compensation, or ATC, has existed for many years. In fact, the same oil companies lobbied to install the devices in Canada, where consumers actually get more fuel than they pay for because of the lower temperatures.
The oil companies also say that installing ATC would be too expensive. All the while, the same companies are raking in world record profits. On the other hand, researchers suggest that consumers are overpaying in the billions for hot motor fuel every year.
On June 8, 2007, Chairmen Dennis Kucinich (D-OH) held a Domestic Policy Subcommittee hearing to examine the impact on consumers and attitudes of industry toward the effect of thermal expansion in gasoline. The hearing adjourned until July 27, 2007, where the Committee examined the views of ExxonMobil and Shell on two key issues: (1). How do they justify opposing temperature compensation at retail, while conducting wholesale transactions with temperature compensation; and (2). How do they justify opposing temperature compensation for retail sales in the United States, while universally and voluntarily embracing temperature compensation at retail in Canada.
Rhon Jones and Parker Miller, lawyers in Beasley Allen’s Toxic Torts Section, along with some of the best environmental law firms in the nation, have submitted motions to certify the numerous actions into sub-classes. Previously, the District of Kansas Court denied the Defendants’ consolidated motion to dismiss, and is preparing to rule on many new motions as well as class certification. Furthermore, Costco Wholesale agreed to settle pending court approval and retrofit Costco gasoline dispensers in the states it adjusts on an intra-company basis. While a difficult road lies ahead for this litigation, the Settlement with Costco is a good start in ensuring fairness for consumers.