Consumer Group Letters Charge Conflict of Interest in Oil-Friendly Outcome of California Fuel Temperature Study

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Gov. Schwarzenegger, Assembly Speaker Bass Asked for Action to Protect Consumer Fairness

Santa Monica, CA — Consumer Watchdog has filed a state complaint that a conflict of interest affected the outcome of the California Energy Commission’s study on the costs and befits of fixing the “hot fuel” ripoff in the state. The group also asked Gov. Arnold Schwarzenegger to request the resignation of the energy commissioner who led the study, and in a letter to Assembly Speaker Karen Bass asked that she disregard the recommendations of the conflicted study, which the energy commission approved last week, and pass legislation that is fair to consumers.
“It’s now up to the Legislature to do what was right all along, which is to require that the oil and fuel industry sell gasoline to drivers in the same way oil companies, refiners, wholesalers and retailers buy and sell it,” said Judy Dugan, research director of the nonpartisan, nonprofit Consumer Watchdog. "That means selling gasoline adjusted for temperature to provide the same energy in every gallon sold.”
Click here to see background and explanation of hot fuel.
Consumer Watchdog’ complaint to the California Fair Political Practices Commission charged that  Energy Commissioner James Boyd, the gubernatorial appointee who led the California Energy Commission (CEC) study, should have recused himself because:
His spouse, Catherine Reheis-Boyd, is a top executive of the oil industry trade group Western States Petroleum Association (WSPA) and serves at the pleasure of its oil company members. These oil companies, including BP, ConocoPhillips and Chevron, and refiner Valero, avidly sought to block a consumer-friendly conclusion to the CEC report and hired legal and economic firms to push their arguments.
Mrs. Boyd was also a registered lobbyist for WSPA.
Public documents of internal communications between Mr. Boyd and the CEC staff show that he objected to, and changed, conclusions that favored consumers or put high value on fairness and transparency in the sale of gasoline. The final report gave great weight to oil industry data and arguments, including a paid industry position paper that argued consumers would not benefit from fuel temperature compensation.
Public documents from the California Fair Political Practices Commission (FPPC) show that Mr. Boyd initially received oral advice from the FPPC that he should recuse himself from the hot fuel study. Only after a letter from the chief counsel of the CEC to the chief counsel of the FPPC did the FPPC issue a written decision that Boyd did not suffer a conflict of interest.
Consumer Watchdog’s letter to the FPPC stated, “Several of WSPA’s largest members, including Chevron Corp., Valero, ConocoPhillips and BP, were active in opposition to temperature compensation during the CEC proceedings. Chevron and Valero, California’s largest oil refiners, retained legal and economic advisers to influence the report.”
Click here to see the letter to the FPPC.

The FPPC’s written ruling on Boyd’s conflict of interest relied on a flawed argument, said Consumer Watchdog, namely that Boyd’s participation would not cause any reduction in revenue to his wife’s employer, WSPA, or thus affect her income.
Consumer Watchdog stated to the FPPC that an industry association is no more than the sum of its members, and does not have income independent of its members. WSPA’s income is the dues of its oil company members, and if one of WSPA’s executives is seen as a hindrance or as ineffective, the oil companies would change the executive, not reduce contributions to WSPA.
Mrs. Boyd and WSPA President Joe Sparano were both hired or directly appointed by WSPA’s board of directors in 2003. Mrs. Boyd’s employment is at the pleasure of the board.

Click here to see 2003 hiring announcement.

“The oil industry executives who constitute the WSPA board of directors directly control Ms. Boyd’s employment,” said Judy Dugan, research director of Consumer Watchdog. “The board’s measure of WSPA’s success is not monetary: It is the ability of its executives to influence public opinion and government decisions in a way that favors association members. The board is certainly aware of the influential position of Ms. Boyd’s husband. No matter how good Mr. Boyd’s intentions, this conflict clouds CEC actions that would potentially affect the oil industry.”
The Consumer Watchdog letter said:
“We write to file a formal complaint concerning a deep and disturbing conflict of interest at the California Energy Commission (CEC) that has harmed the integrity of that body and cheated California motorists of fairness in the sale of motor fuel. 

“Last week, the Fair Political Practices Commission advised the CEC that Commissioner James Boyd does not suffer a conflict of interest that would prevent him from involvement in the CEC’s report on the costs and benefits of allowing or requiring automatic temperature compensation of motor fuel. We believe that new facts have arisen, which were not provided to you, that indicate not just a conflict of interest involving Mr. Boyd, whose wife is an executive and long-time lobbyist for the Western States Petroleum Association, but active interference with the work of CEC staff in order to benefit his wife’s ultimate paymaster, the oil companies. …

“As the 2006 Form 990 submitted to the IRS by WSPA indicates, Commissioner Boyd’s wife, Catherine Reheis-Boyd, is an officer of the WSPA corporation. Her income is likely set by the Board, or at least directly by Joe Sparano, who is an Ex Officio member of the Board.  The Board is … constituted of oil company executives and oil companies provide 94% of the revenue to WSPA.  Irrespective of … whether or not Ms. Boyd actively lobbied her husband as a WSPA lobbyist, the fact that her income is subject to the will of the oil companies who run her organization and pay her salary creates an irreconcilable conflict each and every time Mr. Boyd engages on issues in which oil companies have a direct stake.”
Consumer Watchdog’s letter to Gov. Arnold Schwarzenegger asked that the governor request the voluntary resignation of Mr. Boyd, due to Mr. Boyd’s refusal to recognize an obvious conflict of interest.

Click here to see the letter to Schwarzenegger.

In its letter to Assembly Speaker Karen Bass, Consumer Watchdog asked that the Legislature put aside the conflict-ridden and anti-consumer conclusions of the CEC fuel temperature report and do what’s right for the state’s drivers.
The letter to Speaker Bass said:
“Given Mr. Boyd’s actions that favored the oil industry in the CEC study, we ask that you regard the study as the product of an ethically conflicted relationship. We also ask that you require any legislation on fuel temperature to ultimately require the temperature adjustments that would make every gallon of gasoline sold in California equal in energy content to every other gallon. This is the only outcome that puts consumers on an equal footing with the rest of the oil and fuel industries, which adjust for fuel temperature in all internal and wholesale dealings.”
Click here to see the letter to Speaker Bass.

See also:  and

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