What is the likely impact on South Carolina businesses and consumers from the Colonial Pipeline disruption? In a wide-ranging conversation, Collins & Lacy Vice President and attorney, Christian Stegmaier, talks with two industry leaders at the heart of fuel distribution. Listen Here.
The views expressed by the guests are their own and do not necessarily reflect that of Collins & Lacy, its management, or employees. This is The Legal Bench.
Michael Burney: Welcome to The Legal Bench. I’m Michael Burney, Director of Business Development at Collins and Lacy Law Firm in Columbia, South Carolina. In the midst of the Colonial Pipeline shutdown, Collins and Lacy attorney Christian Stegmaier sits down with two industry leaders who will be key to keeping the Palmetto state fueled. Joining Christian today is Michael Fields. For 15 years Michael has served as the executive director of the South Carolina Convenience and Petroleum Marketers Association. Also, with Christian is Rick Todd, President and CEO of the South Carolina Trucking Association.
Christian Stegmaier: A cyber attack forced the largest United States fuel pipeline to shutdown last Friday and analysts are worried that this destruction could result in a spike in gas prices. The Colonial Pipeline system spans more than 5,000 miles from Texas to Pennsylvania and transports about 45% of all fuel consumed on the east coast. It transports 2½ million barrels a day of gasoline, diesel, jet fuel, and home health oil, and that’s according to CNN earlier today.
I received an email this morning from Michael Fields telling us about how yesterday afternoon the Federal Motor Carrier Safety Administration (“FMCSA”) declared a regional emergency that included South Carolina in response to the cyber attack on Colonial Pipeline. The FMCSA Declaration provided for hours of service relief for fuel transports. As well, Governor McMaster’s issued an Executive Order that includes transportation waivers. In addition to hours of service, the order gives relief for registration, permitting, length/width/weight of commercial vehicles operating under the Order.
So, let me start first, let me ask a question to Michael Fields of the South Carolina Convenience and Petroleum Marketers Association, what is the latest you are hearing about the status of the pipeline getting up and running again?
Michael Fields: That’s the million-dollar question that nobody really knows the answer. The last thing I saw this afternoon was that it is Colonial’s hope that they’re going to back in full operation by the end of the week. That would be good news, but there’s a lot of work that has to be done, and a lot of hoops they have to jump through on the federal and state government level to get there.
CS: So, folks like me, I’m just looking at the internet and maybe the New York Times or CNN, for information. Is there anything you’re able to get or is there anything that you’re privy to that ordinary folks might not be able to get to or might be able to see to get information about the operation of the pipeline?
MF: I think the thing that I’m trying to get right now is to find out what the impact is on my job or members and on my retailers. How has the shutdown affected them? What are they worried about? And I will say, obviously, there is some concern about getting product, getting supply. Right now, they are fine. There is some concern about later this week that if they don’t get restarted there may be some supply issues in the state. The good news is we have other options. We’re not 100% dependent on that pipeline. There’s another pipeline, the Plantation, it’s a smaller footprint but it’s still there, and also, we have our water born terminals in Charleston. We can also reach into Savannah, Wilmington, those are right now the things that are saving us and so you got to have some extra security measures to get into those terminals, but those jobbers who do that’s what’s keeping product coming into South Carolina right now.
CS: So both for your members on the retail side as well as the consuming public, they can be comforted by the fact that there seems to be a Plan B and a Plan C even.
MF: Those plans B, C, D, and beyond were being drafted and starting to be implemented on Friday when the news first started. That hit full force over the weekend.
CS: So with the Governor’s Order there’s also mention about the empty gouging provisions that exist in our statute as well as previous Orders that have been issued in the pandemic. Talk a little bit about that.
MF: Our price gouging laws kick in when there’s a state of emergency, or there’s a what’s called an abnormal disruption of the products and that comes from the attorney general’s side. Those are the two instances where our price gouging laws come into play and they have been in play since March 13th of last year continuously. So, every 15 days Governor McMaster has issued a new executive order and the one you are referencing is just another one that he has been doing since March. I had several calls about that again, because I reminded our members again that those laws are in tact and they need to make sure that they can justify all their pricing decisions and that’s the key is that you’re going to see if you see a price increase and that petroleum market, or that retailer, or that jobber, can show that is a direct result of something that’s happened. There’s no price gouging involved, they just need to be able to show the state that that’s what’s happened and that’s what I reminded them again bright and early this morning.
CS: And has it been your experience when you’re able to give that type of communication and that kind of directive that folks are pretty compliant?
MF: They are because you don’t want to tick off your customers. They get a lot of, honestly, they’re accused of price gouging 365 days a year and so, that’s just not the case. They just need to be able to show that if they are brought up on some kind of price gouging charge that they can back up the pricing decisions that they’ve gotten. We just remind them to keep your records.
CS: That’s right. Spoken like a true lawyer there. (Laughing) So Rick Todd of the South Carolina Trucking Association, let me ask you this, when something like this arises, for instance like with the Colonial Pipeline and the shutdown, what kind of pressure does a shutdown like this put on our trucking industry?
RT: Our guys are always under pressure. Just depends on what kind and this is just a new type. You can’t run a truck without fuel, so they are very very sensitive to it. Not as much the price, because that just fluctuates constantly and I think that contributes to the suggestions that Michael made about the people are criticizing the retailers all the time, because for no apparent reason to a consumer, prices just seem to fluctuate. They go up and they go down and so, truckers have base rates with a base cost of fuel built in and then they use surcharge mechanisms to get it back. That’s not as big of a concern, but there is a lag from the time they pay a higher price until they can implement the fuel surcharge. But the supply is a concern. Most of the larger fleets have bulk storage capabilities or have guarantees or price negotiations or agreements with the suppliers when their drivers purchase it at retail on the road, at a truck stop or some other facility. The smaller you are the more subject you are to market fluctuations and retail price. So, it depends on what kind of operation you have as to how it hits you. Their antennas pop up pretty quickly when they hear a disruption like this. Frankly, we’re kind of used to it. Michael eluded to it. We have the transportation system, trucking particularly has benefited, if you call it that, from these waivers that are granted either by the federal government or by the state governments. Whether it’s compliance of hours of service, inspection, rules and regulations, drivers-related waivers, or size and weight types of waivers, they’ve been under some type of waiver or emergency declaration literally for the bulk of time over the last 4 or 5 years if you look back at what’s transpired particularly in our part of the country between the hurricanes a number of years ago, the floods the 1,000 year flood, other storms, winter storms, freezes and thaws, and then things like this with the Colonial Pipeline. They’re just adaptable businesses. They’re used to the shock, they’re used to it, but they don’t really want to look forward to a fuel stoppage or having a hard time finding it. You had asked one more point, you had asked Michael about in our positions if we’re privacy to any kind of information. No, not really insider information, not top secret or classified, but we do get reports from the Office of Regulatory Staff. We get forwarded copies of somewhat confidential information from the Department of Energy and their state counterparts, so that we can keep things calm. Educate people and keep people from having a run on the store, something like that.
CS: That’s a really good point that both of you have brought up is that public perception and public thinking about things like there’s already enough tension about the price of gas. We’ve been reading about that for weeks on end. Leading up to this people were worried about inflation and now they see this and you have headlines that say gas could be pushed over $3 a gallon and of course people are forgetting the fact that only several years ago it was 4½ dollars a gallon, so it could always be worse. (Laughing)
MF: They don’t want to hear us say that, I can promise you that.
CS: They don’t want to hear you say that, but you know when we talk about the fact that there’s a plan B, a plan C, a plan D, that’s where both of your organizations become really important and integral to the public conversation by being able to lend that voice and provide that education and just that calming tone to the folks when they say hey listen, this is an ideal but there are backup plans and the other thing too is this isn’t permanent. Like Michael said, hopefully it will be fixed by this week and things will be normal and we’ll be able to resume regular operations. So, I can see a lot of importance and efficacy in the two of yall and your organizations being able to report to your memberships and use the various apparatuses that you’ve got to get the word out about things.
Let me ask this, and I appreciate yalls time today, you talked a little bit about pressures, or I asked you a question about pressures and I think you essentially answered when is there not pressure. One thing that I’m mindful of and I’d like to hear yall talk about even thinking without the Colonial Pipeline, this is a pressure about workforce. Whether there are enough people to drive trucks. Whether there are enough people to man the places or loading the trucks. On the retail side or the __________________ side or with regard to the moving of petroleum, is it fair to say that both of your industries, both of your constituencies are facing real problems as it relates to workforce.
MF: You want the short answer?
MF: Yes. I’ll read an excerpt from an email I got from one of my members before I came over and it just said we’re doing all we can to get product to the stores and to keep it there and our major oil companies suppliers helping us do that, but things are compounded “by the mess that is with our carriers, having problems with the drivers the fact that this is the worst he’s ever seen it. It’s bad just in general trucking when you’re carrying a hazardous material, like my members are carrying, they have extra things they have to go through, so it is a tremendous pressure on petroleum transports right now. The hours of service waivers, why that’s important. I’ll tell you what one of my members in the upstate told me. Three loads that he got in the last couple of days that usually take him 4 hours to get and get gone took him 15 hours over the weekend. That’s wait time and getting to the dispenser and hoping there’s some product leftover. 15 hours. So, under normal circumstances if you don’t have that hours of service waiver that wait time counts against you. That truckers got to go on. So, the pandemic didn’t help. I think a lot of folks, you know one of the things we’re seeing is they’re not coming back like we need them to come back. Rick, you’ve got stories galore, I’m sure.
RT: Absolutely. You know we represent all the different sectors because whether it’s a private fleet running their own trucks or a for hire company hauling freight for hire. They’re all struggling for qualified drivers and it doesn’t make the struggle any easier when they’re not productive. If they have to wait that just discourages those drivers. They get frustrated for having to wait because in a lot of sectors they are only paid when that truck is rolling. The pay methodology is undergoing some change. A lot of companies have implemented minimum pay, some are going by the hour. Typically, it’s been a percentage of a load if you’re an independent contractor like that long-haul guy or by the mile. So, to Michael’s point, if their typical wait time which they’re kind of used to and are compensated for that, gets doubled or heaven forbid tripled or worse, then that really adds to the driver’s frustration and makes us even less attractive as a career and more difficult to hold on to that driver.
CS: A lot of times when I talk with folks about problems or pressures they’re facing, that are very real, I’ll just ask the question, if you’ve got to waive your magic wand and you’ve got to select the fix, how do we make the fix? Because here’s the thing I mean the economy is hopefully waking up. The country is waking up here. I think you’re seeing changes on a week-by-week basis about folks returning to work, but I think Michael makes a good point where I think the initial assumption as has the economy recovered as everything got back to more normalcy, people would just return back to their old jobs and that’s not necessarily the case. So how do we make it more attractive? What is the fix to get enough drivers on the road to move product?
RT: It’s not an easy answer because there’s so many moving parts. There’s so many variables in keeping the transportation distribution in the logistics industry rolling at full velocity. So many things beyond the driver’s control, but also beyond the fleets control, even beyond the tender of the load of the receiver at the other end. And if all of those aren’t performing as they should, which they rarely do, then it creates frustration for everybody involved, reduced productivity and all that, so our customers have to be mindful of that and treat the drivers with respect, give them access to rest facilities if they need it, parking, availability if they need it if they’re early or late and they miss a window, a restroom, water, or common courtesy. So, the customers need to be cognizant of that so that the driver suffers less stress and they feel appreciated. The companies have got to figure out a way to pay these guys for their time, because time is money, and the industry’s coming around to that. We’re seeing wages increase in one shape or another. We’re advocates for increasing capacity on the highways so that the commerce can flow more freely and it’s safer for the driver. And, you know, I think drivers need to know that the legal system if they make a mistake, if they have an accident which by enlarge are caused by car drivers statistics would tell you, but if they do contribute to an accident that they’re not going to be subject to being hit with punitive damages and their lives and their reputations are ruined. It’s traumatic enough to be behind the wheel of that truck and actually hit someone when you can’t avoid it, but then you add insult to injury with the way they’re treated in the courtroom and that dismays people too. So, there are plenty of other things we could talk about but trying to make the job cooler too, somehow sexy.
MF: Not a whole lot I can add to what he said. I think a lot of the things he talked about on the trucking side we’re seeing it on the retail side on our convenient stores. It’s finding and keeping that qualified person, it’s about pay, it’s about respect, it’s about just a lot of hours, making sure that people don’t have to, you know, I saw an interview of a business owner the other day and he said I had to shut my business down because I don’t have enough employees and I was killing the was I did have, so he didn’t shut it down but he cut it back, cut back some hours just to give his long time dedicated loyal employees an opportunity to go home every now and then. Rick’s right as far as the legal system. We’re seeing that in our industry. We had a big bullseye and it’s there on the trucking side, it’s there on the retail side, and it’s there. All you have to do is drive down the interstate and look at the billboards, or listen to the radio ads, or pull up anything on social media and you will see that our industry has a big bullseye on it and you as a state when we pride ourselves on being pro-business and yet we’ve got a legal system that has taken a segment of our business community and put it under that big bullseye, there should be some concern from top to bottom in our state.
CS: I agree with you wholeheartedly about that. Somebody represents these businesses on a day in and day out basis. I completely agree about that. Let me ask you, this is a bonus question, this is the bonus round since I’ve got you both in the room and you were talking about capacity on the roads. One of my things is infrastructure in this state. So, this is the bonus question. What do we have to do to get a third lane on I-95 and I-26? I tell people sometimes, it’s kind of a joke, you ask somebody from up north why they don’t like South Carolina so much and they’ll say well yall started the Civil War and I-95, and you know, you cross over the Savannah River and you go from 3 lanes to 2 lanes and we’ll leave the condition of the road out of it, but just the very fact that you have to go down to that 2nd lane, that slows down travel that much more and you can see the same thing from Greenville to Charleston on I-26. What do we have to do to encourage the General Assembly to get serious about infrastructure?
RT: Well, I’ll go first on that one. You talk about pressure, well Michael in his position and me, myself in my position, these are real pressure point issues, because it all comes down to money and how quickly you can deliver the projects. Those two, if you lived in the upstate I-85, they’d tell you despite all the work that’s been done up there, there’s times a day when you need it too, because it’s wall-to-wall trucks being stuck between Charlotte and Atlanta major markets like that and all the manufacturing we’ve got. 26, it’s going to be 10 years probably before we see all that corridor completed. The money is programmed but it just can’t be delivered because DOT has to spread their resources out around the state. They can’t just concentrate it on one corridor. It is probably the most important corridor and if they could use some of these federal funds that have been just given to the states, they could probably accelerate it. If they had $800 million dollars from those federal stimulus funds and I can’t think of a better real long-term stimulus than jobs rebuilding our highways. They could shave 6 years off that project. I-95 is really a thoroughfare and so unfortunately the state is really just been loathed to spend those precious highway dollars on I-95 because they just think it’s through truckers and tourists. But the southern leg of that from where the interchange is with I-26 and the Georgia line needs it. DOT has programmed, it’ll be a number of years, but they have programmed the first twenty something miles when it gets up to 17 from the Georgia border to 17 for six laning. That’ll provide some relief and maybe a little bit of PR image enhancement to your point about how bad it makes the state look. It comes down to money and the construction industry has to have the capacity to be able to deliver the jobs.
MF: When we were passing, finally pass after what 30 years, an increase on the state motor fuel user fee, that’s what they call it in the code. We warned folks that it’s not going to change overnight and so people, the same people that were fussing I think a lot of times on social media about the increase are the same ones that are fussing when they see the slowdowns because some of that money is actually starting to get out there. That was a tremendous fight. My organization opposed it forever and about scared the whole place down when I testified for the first time in it’s history that our organization would support a reasonable increase, because it was impacting us and it continues to do that because we don’t have what we need in order to transact businesses from coast to coast and other states. We’re not where we need to be, and we got to get there. Timing wise, I don’t know, you said how many years Rick, 10, 6, I mean that sounds like a long time.
CS: Well, you know, every journey starts with that first step and we’re probably in the top 2 or 3 fastest growing states in the country right now and it’s just something that has to happen, because of, and Rick was talking about all this, especially the industry in the upstate as well as the industry that goes all the way from the upstate to the coast, you’ve got all those trucks on the road too and you’ve got all these new people living here and new people doing business in South Carolina and the reality is until we build the big huge monorail, and I’m being facetious about that, we’re going to have the roads to accommodate all that traffic.
RT: Yeah, like Michael, I spent half my career fighting tax increases and I spent the last half of my career begging them to raise the fuel taxes so that we could fund it, and it’s never going to be enough because the needs are just so great.
CS: Well, I appreciate yall coming. Michael Fields, South Carolina Convenience and Petroleum Marketers Association, Rick Todd of the South Carolina Trucking Association. We appreciate your insight on the Colonial Pipeline as well as just the issues involving workforce and infrastructure. Thank you so much for your time!
RT: Thanks for having us.
MF: Enjoyed it.
MB: For the latest news and information of interest to South Carolina businesses, join us right here for the next episode of The Legal Bench.
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