Valero Confirms Settlement Reached In ‘Hot-Fuel’ Lawsuit

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San Antonio-based refiner Valero Energy Corp. is among a group of major fuel retailers that have agreed to settle years-old lawsuits over temperature fluctuations that may affect the pump price of their products.

Attorneys for Valero, Iowa-based Casey's General Stores Inc. and Arkansas-based Walmart and its Sam's Club business last month informed U.S. District Judge Kathryn Vratil that they each reached agreements with the plaintiffs on lawsuits dating back to 2007. Litigation against fuel retailers in 26 states, including Texas, has been consolidated in the federal judge's Kansas City, Kan., courtroom.

Fuel expands as its it heats up, meaning a gallon of fuel stored at warm temperatures contains less energy than one stored at colder temperatures, even though it is often sold for the same cost.

While retailers say such fluctuations have minimal impact on individual consumers' fuel costs, the lawsuits maintain drivers lose up to $3 billion annually when they buy gasoline stored at temperatures of more than 60 degrees Fahrenheit.

"It's not a lot on any one fill-up – maybe a few cents per gallon – but it still translates to a few billion dollars a year," says Judy Dugan, research director for California-based Consumer Watchdog, which has followed the litigation. "That can be a real issue in Texas, where the temperature can be 90 degrees in the summer."

Fuel distributors, she adds, adjust for such fluctuations when they sell to retailers and fleet operators, meaning the industry is aware of the issue and takes it into account when conducting transactions with other companies.

Valero spokesman Bill Day says his company strives to deal fairly with customers of its 1,000 U.S. retail gasoline stores, but declined to say how it had agreed to deal with the hot-fuel issue.

"We have agreed to a settlement, but that is all I can confirm," Valero spokesman Bill Day says.

Trucker Blues

Documents detailing the terms of Valero's and the other two companies' settlements were not available from the U.S. District Court in Kansas. Attorneys say the judge is likely to approve the agreements later this year.

Beyond consumers who filed the lawsuits, the issue has raised the ire of independent truckers, for whom fuel is a top business expense. A typical fuel stop for a tractor-trailer operator comes with a $1,000 price tag, meaning even minute volume fluctuations cut into the bottom line.

"At every other phase of the distribution process, there's temperature compensation, except at the retail level," says Norita Taylor, spokeswoman for the Kansas City-based Owner-Operator Independent Drivers Association. "Why not at retail?"

At The Pump

Consumer Watchdog's Dugan says she has not seen the Valero, Casey's and Walmart settlement agreements, but adds that they most likely involve replacing old fuel pumps with new ones that can electronically compensate for temperature fluctuations.

Those replacements would likely take place over time, she adds, as companies retire out-of-date equipment.

"We're not interested in bankrupting gas stations," Dugan says. "We're interested in protecting customers."

If the companies take that approach, they will be mirroring a settlement with Costco Wholesale Corp. that Vratil approved in April.

Washington-based Costco agreed to convert gas pumps in some states during the next five years to automatically compensate for expansion from temperature changes.

Costco won't pay a monetary settlement under that agreement, but plaintiffs' lawyers have asked for $10 million in attorney fees, according to a report in the Kansas City Business Journal, a sister publication.

Vratil says she will not consider awarding legal fees until other hot-fuel cases have been resolved.

"Settlement discussions with other defendants are ongoing and appear promising," Vratil wrote in a legal document available on the court's Web site.

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