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Author Topic: Don Corleone - oops, I mean ConocoPhillips Back to Topics
Hannie59

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Appleton

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Message Posted: Mar 20, 2013 9:53:04 PM

In a letter sent today to the Environmental Protection Agency (EPA), the Federal Trade Commission (FTC), the Department of Energy (DoE) and the Department of Agriculture (USDA), RFA requested the agencies investigate the oil industry’s conduct that is “impeding the delivery of renewable fuels to the American marketplace.”

The focus of the letter is a recounting of recent events at Zarco 66, the first marketer in the United States to offer E15.

RFA says that when Zarco 66 began offering E15 last year, ConocoPhillips “threatened to terminate Zarco 66’s franchise agreement and charge Zarco 66 hundreds of thousands of dollars in penalties unless Zarco 66 started offering “premium” gasoline—gasoline that would replace the ethanol housed in one of Zarco 66’s fueling tanks, and a gasoline that is likely to result in far fewer sales than the ethanol blends that would be available if Zarco 66 maintained the current ethanol contents.”

“For franchisees like Zarco 66, the message that the oil industry is delivering is loud and clear: Stop selling renewable fuels, or face the consequences,” said RFA president and CEO Bob Dinneen in the letter, requesting that the aforementioned agencies “investigate and put an end to the oil industry’s highly discriminatory and unlawful conduct—conduct that is impeding the delivery of renewable fuels to the American marketplace. Otherwise, Zarco 66 will simply represent the first casualty in the oil industry’s war against the marketing and delivery of cheaper, more sustainable renewable fuels.”
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borsht
Champion Author Oakland

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Message Posted: Mar 30, 2013 12:03:00 PM

What is a franchise agreement? What is an agreement?It is a contract that both parties have agreed. If one party violates the agreement, the other has regress and may be entitled to compensation.

The franchise agreement is the cornerstone document of the franchisee-franchiser relationship. It is this document that is legally binding on both parties, laying out the rights and obligations of each. A sample agreement may either be attached to the disclosure statement or presented separately. Either way, you are entitled to receive it as a prospective franchisee five business days before signature. You should have it reviewed by a lawyer familiar with franchise matters, especially since most agreements are extremely one-sided in favor of the franchiser. No one should enter into a franchise and expect to have an evenly drawn contract.

The agreement will contain provisions covering, in considerable detail, the obligations of the franchiser (the company) and franchisee (you) regarding operating the business; the training and operational support the franchiser will provide (and at what cost); your territory and any exclusivity; the initial duration of the franchise and any renewal rights; how much you must invest; how you must deal with things such as trademarks, patents and signs; what royalties and service fees you will pay; tax issues; what happens if you should want to sell or transfer the franchise; advertising policies; franchisee termination issues; settlement of disputes; by the company, operating practices, cancellation, and attorney fees.
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tdioiler
All-Star Author Detroit

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Message Posted: Mar 24, 2013 11:02:15 PM

Why would any company make a business decision to cut-off their short-term revenue unless there was a larger near risk at not taking action.

Only in the early days of railroads and oil did owners make such decisions. Today the only ones who do are no longer around.
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brerrabbitTX
Champion Author Houston

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Message Posted: Mar 23, 2013 11:05:02 AM

And no one from the pro ethanol group wants to comment on this?

Do you think there is a possibility of a contract violation?

Or is it purely Big Oil squashing ethanol again?
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brerrabbitTX
Champion Author Houston

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Message Posted: Mar 21, 2013 11:56:57 AM

Without the specifics of the contract and the dispensor situation I can't really say. However in many cases the Dealer/Oil Company Agreement calls for three distinct blends and the assumption is that relates strictly to octane value, however since Cononco/P66 claims tier 1 fuel status it also relates to the amount of additive injected into the delivered fuel. So from what is written it appears that he took a premium tank out of premium and into E-85 status to allow for the E-15 blend. While on a pure octane basis if the dealer has a blending pump he could theoretically attain a large variety of octanes, what he could not produce would be the specific concentrations of additive needed in the various octanes because all of the E-85 would have the same additive concentration. So an E-15 with blended E-85 might be a higher octane it would be under additized thus violating the contract. This situation would cause the fuel to not qualify for tier 1 fuel status. This in terms of the contract would cost Cononco money because they pay for the independent testing to qualify for tier 1 status, pay for the research on the additive, and utilize their status in advertising. The lost expense of all research, advertising and testing costs could theoretically be claimed as damages in the potential lawsuit for violation of the contract between Conoco and Zarco. That would be a very large sum of money.
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SilverStreaker
Champion Author Twin Cities

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Message Posted: Mar 21, 2013 11:39:03 AM

brerrabbitTX, you bring up a good point about this being a contract issue. I wonder if Zarco could have called his E15 "Premium" if the octane level in the E15 met the "Premium" octane requirement. Sunoco Green E15 is 98 octane, way more than premium, but is distributed as a race fuel, so may have other octane boosters.
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brerrabbitTX
Champion Author Houston

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Message Posted: Mar 21, 2013 8:59:38 AM

One other quick note, I am not sure where Zarco operates but would bet that they were already selling E-10 and if that was the case the how can Conoco's message be "Stop selling renewable fuels" if they were already selling renewable fuels.

This is just a case of lets take a contract issue and turn it into a ralling cry against the oil companies specifically Conoco.
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brerrabbitTX
Champion Author Houston

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Message Posted: Mar 21, 2013 8:55:40 AM

While I understand that ethanol supporters will see this as Big Oil's attempt to squash the sale of renewable fuels let me interject how the retail/ oil company relationship works contractually before everyone jumps on this.

Dealers such as Zarco 66 makes a decision to brand his stations and in this case he chose Phillips66/ Conoco. He signed a contract with them. Depending on the number of sites and the amount of business they do P66 paid the dealer a substaintial amount of money up front to improve the appearance of his stations and change the signage and look of the sites to match P66. Included in the contract was a discounted price for gas for anywhere from 3 to five years. So Zarco would receive gas products for a price lower than other P66 sites in his area that were established. It was the price P66 paid to gain market share in the area. Also included in the Marketing Agreement with P66 that Zarco no doubt signed was a provision that said the sites would sell three seperate grades of product. The seperation was by octane, not ethanol vs non ethanol. These contracts are fairly equivilent across the industry and I have personally read many of them for many different brands.

So what has essentially happened in this case is that Zarco by converting his premium tank to E-15 has violated the contract and essentially invoked the penalty clauses in the contract. Zarco could have just simple converted his E-10 tank to E-15 and still had his premium tank to work with and not been in violation of the contract. But here is the rub. If he converted and lost his ability to sell E-10 then he would have probably lost about 70% of his sales at his sites. Obviously for financial reasons he was unwilling to do that.

This is part of what I say when I refer to the infrastructure needed to facilitate increased ethanol blends. At one point stations had three tanks, regular, midgrade, and premium. Then because of environmental risks and ease of operations stations were built with two tanks, regular and premium and the midgrade was blended at the pump. Now with the impending growth of E-15 changes will need to be made at the stations that will include new tanks and new dispensors. I know that it would seem the obvious answer would be to bring in E-85 and have pumps that could blend to what ever level the customer wants but the issue with that is that the vast majority of terminals in the country do not have the capabilities to deliver that much E-85 blend. They were built and geared for E-10. So there needs to be a lot of money spent to make the system capable of delivering those products.

As far as the Zarco case goes that is straight up contract law. The two parties signed a contract exchanged money and went on their ways. Now it appears that case will wind up in court. While some may view it as the suppresion of renewable fuels, it's really just straight up contract law.
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tdioiler
All-Star Author Detroit

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Message Posted: Mar 20, 2013 11:21:39 PM

Of course RFA is going to drag the DoE into the fray since they paid grant money (That would be a direct subsidy) to install new pumps to handle E-85. That is direct from RFA's own press release. BTW - I hate CP!

So your grand-pooba of dirt spews words that are conjecture. Until you and I and others know the facts behind the case, you are not to judge.

Isn't there another law about that? Oh yeah, you want to tread on that as well to get your ethanol party going at the expense of others.

You want to use it, go ahead. But please, don't bring up more lies and slander to make your case plausible. Leave that for the 'Mythbusters', they are better at blowing things up!
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