9 firms face penalties over fuel

June 10, 1994|By Peter Jensen | Peter Jensen,Sun Staff Writer

Nine Baltimore area trucking or fuel distribution companies are facing more than $350,000 in government fines and back taxes for buying and selling high-sulfur heating oil as diesel fuel.

The fines stem from a joint investigation by the state comptroller's office and the U.S. Environmental Protection Agency that benefited from federal regulations requiring diesel fuels to be color coded. By substituting similar fuels, the companies avoided state and federal taxes on diesel, officials said. The clear diesel burned by motor vehicles is assessed a 24 1/4 -cent state tax and 24.4-cent federal tax on each gallon sold.

Heating oil sales are not subject to fuel taxes. But since Oct. 1, the EPA has required that fuel used for heating be dyed blue.

Blue-colored fuel has a higher sulfur content than diesel. Sulfur emissions pollute the air -- motorists will often notice the tell-tale particulate clouds -- and contribute to the formation of sulfur dioxide, which is the precursor to acid rain.

Comptroller Louis L. Goldstein said three Baltimore organizations -- two trucking companies and one fuel oil company -- have been assessed $300,000 in unpaid taxes. Six other companies will be assessed when the investigation is complete.

Mr. Goldstein declined to name the companies. Their identities are protected under state law while they have the opportunity to appeal,said Marvin A. Bond, a spokesman for the comptroller.

The EPA will impose fines of more than $56,000 for eight of the nine companies for illegal fuel use. Officials said it was the first enforcement action in Maryland since high-sulfur fuel was banned from the highways last fall.

"There has generally been a high rate of compliance with the [sulfur content] regulations," said Marc R. Hillson, the EPA's chief of mobile source enforcement.

He said the Internal Revenue Service is also expected to take action against the companies.

State officials said substituting heating oil for diesel fuel to avoid taxes has been a longtime problem, but the color-coding makes enforcement much easier. Investigators from the comptroller's motor fuel tax unit took samples from the fuel tanks of trucks and analyzed them at a state-owned laboratory in Jessup.

Trucking industry officials said they were surprised by the allegations and had little sympathy for any companies that knowingly tried to circumvent the law.

Robert Irvin, president of the Mid-Atlantic Petroleum Distributors Association, said that while he was unaware of the investigation, the "complicated regulations" may have been part of the problem. It's legal to use blue-dyed fuel in farm equipment, for instance, but farmers have to put clear diesel in their pickups.

"It's easy to see how mistakes can be made," he said.

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