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Wal-Mart, Two Other Retailers Settle 'Hot Fuel' Suits

THE KANSAS CITY STAR

Three companies with thousands of retail fuel pumps have agreed to settle lawsuits accusing them of shorting consumers with "hot fuel" -- gasoline and diesel sold without adjusting their volume for temperature.

Attorneys for retail giant Wal-Mart and its Sam's Club subsidiary, along with Valero Energy Corp. and Casey's General Stores Inc., have told the U.S. District Court in Kansas City, Kan., that each has reached an "enforceable settlement agreement" with the plaintiffs, according to orders posted by the court's chief judge, Kathryn Vratil.

Vratil still has to approve the settlements, but if she does they will apply to dozens of hot-fuel lawsuits filed across the country, including in Kansas and Missouri.

In a series of stories in 2006, The Kansas City Star estimated that hot fuel cost consumers $2.3 billion a year, a price tag that is now roughly $3.5 billion at current gasoline and diesel prices. Gasoline and diesel expand in warmer months, so a gallon of fuel contains less energy than what consumers pay for at the pump.

Last week, BP Products North America Inc., ConocoPhillips Co. and Shell Oil Products US reached hot-fuel settlements, although details were not disclosed. All three have sold most or all of their retail stores, so their settlement wasn't likely to include retrofitting fuel pumps to adjust for temperature. But presumably their agreements called for them to help make that happen, instead of opposing it as they have in the past.

Details of the Wal-Mart, Valero and Casey's settlements also were not disclosed, but they could further advance the day when pumps in the U.S. start adjusting for hot fuel. Those three companies own all or some of their stores that sell fuel.

Judy Dugan, research director for Consumer Watchdog, a California public interest group, said Wednesday that selling fuel in a fair manner by adjusting it for temperature appeared to be nearer, at least in some locations.

"The wall of resistance is crumbling, and that is good news," she said.

But Dan Gilligan, president of the Petroleum Marketers Association of America, which represents retailers, said his group remained firmly opposed to temperature-adjusted fuel and would continue to fight it. The association has maintained that the switch won't be worth it, weighing the cost of switching pumps against the scope of the problem.

"It's just not cost effective," he said.

A spokesman for Valero, which owns several refineries and about 1,000 of the retail outlets that sell its fuel, confirmed the settlement but declined to comment further. Casey's, which owns nearly 1,700 stores mainly in the Midwest, and Wal-Mart did not respond to messages seeking comment.

A Valero subsidiary already sells temperature adjusted fuel in Canada, where it has been done for decades. The oil industry, which has been reluctant to discuss the idea for the U.S., embraced it in Canada since "cold fuel" cost them money there.

The volume of fuel is pegged to a 60-degree standard, at which the 231-cubic-inch American gallon puts out a certain amount of energy. If the temperature of that gasoline rises to 90 degrees, though, it expands to more than 235 cubic inches -- but a gallon still gives the consumer 231 cubic inches, which at the higher temperature contains less energy.

Fuel dealers once called the oil companies greedy for refusing to sell them wholesale fuel with the adjustment, and they filed lawsuits and fought for legislation. Texas dealers, at one legislative hearing, said it was unfair that they were unable to buy fuel adjusted for temperature, and they rejected arguments that it didn't matter.

Back in 2009 another defendant company, Costco Wholesale Corp., offered to settle, but that deal had to be redone and is now waiting for judicial approval. Costco agreed to retrofit its fuel pumps to adjust for temperature in warm-weather states. And in cool-weather states, Costco promised to not buy wholesale gasoline adjusted for temperature and sell it to consumers unadjusted.

It isn't known whether the new settlements follow Costco's pattern. Vratil has suggested that there might be some other remedies, including requiring that fuel temperatures be posted.

A judicial order to approve or reject the Costco settlement is expected any day. Some regulatory obstacles could still remain, but the California Division of Measurement Standards, in a letter filed with the Kansas City, Kan., court, said if the Costco settlement was approved it would proceed to make rules and perform tests that would allow fuel pumps that temperature adjust to be used in the state. Other states then could use the California certification standards.

To reach Steve Everly, call 816-234-4455 or send email to severly@kcstar.com