Fines for non-compliance set at $250,000
Cayman Islands lawmakers Wednesday unanimously approved a bill that seeks to force fuel importers to reveal their pricing structure for gasoline and diesel fuel shipped to the islands, massively increasing fines for noncompliance in the process.
The changes to laws governing the handling and storage of dangerous substances, including fuel, require all importers to provide detailed information upon request to the Cayman Islands Petroleum Inspectorate.
Fines for noncompliance initially had been set at $20,000 per instance. In amendments to the Dangerous Substances Handling and Storage (Amendment) Bill, 2015, the fines were increased to $250,000 per instance of noncompliance.
Planning Minister Kurt Tibbetts warned last week that the Cayman Islands’ two large fuel importers, Sol Petroleum and Rubis, would not be the only entities caught up in the pricing regulation.
“Once we know what it’s costing [the importers], … then we’ll know [the retailers’ mark-up] and if it comes to that point, we will be in a position to say to the retailers ‘hold on a minute, you’re making too much now,’” Mr. Tibbetts said. “If [the importers] so choose to up and leave all the infrastructure that they have here … go. They have alluded to that by way of a sideways threat.
“I had meetings with them until I was sick of having meetings with them. I spoke to the then-country managers and whoever else they brought down, all kinds of foreign language people dressed in suits. Every single time, some of them couldn’t even talk English good enough to say the word proprietary … but you knew what they meant.”
Historically, fuel companies Esso and Chevron-Texaco, and more recently operators Sol Petroleum and Rubis, have refused to release the kind of data that would be required by proposed amendments to the Dangerous Substances Handling and Storage Bill, saying it is proprietary commercial information.
Changes to the legislation were approved Wednesday in a 15-0 vote of the Legislative Assembly. Two members were absent.
According to the Dangerous Substances Handling and Storage (Amendment) Bill, 2015: “The chief petroleum inspector shall … collect from importers, and compile, analyze and abstract, information on fuel prices and pricing methods and provide such information to the minister.”
The minister in question would be the elected official in charge of the petroleum inspectorate. Currently that is Mr. Tibbetts.
At the request of the petroleum inspector, the importer is required to provide information on the price of all fuel imported and sold and the “pricing methods” used by the importer in the sale of fuel to retail operators and consumers. Those costs can include: initial costs, cost of freight, insurance and brokerage fees, customs duties, estimates of fuel in stock, and the amount and type of fuel to be imported in the next shipment.
In addition to the fine, the bill would allow government to sue the importers to force them to provide the information required. The legislation does not require that the information be made available to the general public.
Mr. Tibbetts said in August that government regulators must have a clear idea of what the companies are charging local retailers for fuel before they can make any assumptions about “fair” prices at the pump. In addition, Mr. Tibbetts said regulators must have that data to determine whether Cayman’s two petroleum distributors are actually in competition with one another.
“If it is determined that the market is not competitive, as I suspect it will be, then the government will promote and ensure effective competition,” Mr. Tibbetts said. “If these measures fail to ignite price competition amongst the participants … then the government’s next step will be outright market price regulation.”
Price control legislation for retail gasoline and diesel fuel is something petroleum distributors have long warned the government against, stating that it could lead to fuel shortages in the local market. In January, Alan Neesome of Sol Petroleum urged the government to reconsider taking such a step.
“In a regulated market, the regulator [government] must guarantee a reasonable return to the regulated industry,” Mr. Neesome said. “Sol shares the government’s objective of making fuels available at competitive prices, and the current free market in Grand Cayman is undoubtedly accomplishing this objective. Pump pricing here overall [has] decreased substantially, in line with international pricing, whereas prices in other jurisdictions in our region, especially those with regulations, are in many cases higher when compared to the equivalent price per imperial gallon for the same product.”
The amended law also creates a new government body and specific rules for incident reporting when a fuel spill or other hazardous chemicals incident occurs.
Mr. Tibbetts said these amendments were largely driven by two fuel spills over the weekend on Grand Cayman that apparently were not initially reported to authorities.
The amendments to the dangerous substances bill approved Wednesday would levy fines of up to $10,000 and potential jail terms for those guilty of not reporting a petroleum spill or other chemical product.
“[This is] to ensure that everybody understands their responsibility to report these incidents,” Mr. Tibbetts said.
The amendments also create a five-member Fuel Standards Committee to carry out the new mandates created under the law. The committee, to be chaired by the chief petroleum inspector, will include directors of the Department of Environment, the Department of Environmental Health and the Water Authority-Cayman. An officer in the Ministry of Planning will be appointed as committee secretary.