San Diego The fact that diesel fuel prices in San Diego are now as low as they've been for a while does not allay Michael Morgan's anxiety. Morgan owns AFM Transportation, a trucking company in Point Loma. He is chairman of the San Diego/Imperial section of the Sacramento-based California Trucking Association (CTA), an organization of small and medium trucking companies.
Morgan is angry that trucks coming into California from Mexico -- around 2000 daily at the Otay Mesa crossing -- are engaging in "unfair competition," because his counterparts south of the border pay less in wages and benefits and because they buy cheaper diesel fuel.
Diesel is selling for about 20 cents a gallon less in Tijuana than in San Diego, but in the past year it has been as much as 50 cents cheaper. Should U.S. fuel prices rise again, or should the peso slide, the price variance could widen. What galls Morgan is that the diesel fuel being sold in the border towns of Baja is, he's convinced, coming from California oil companies.
The trucking association is opposed to that part of the NAFTA agreement that would permit Mexican trucks to travel California (and, ultimately, the entire country) without the U.S. companies immediately being allowed to do business in Mexico. Because of political pressure and the strong opposition of the Teamster's Union, that section of NAFTA that allows Mexican trucks access to all of California has been on hold since December 1995; however, Mexican trucks can travel some 25 miles into the U.S. border states, as they've been permitted to do for years.
"A tractor with a dual set of 400-gallon saddle tanks can run the length of California without refueling," says Morgan. While the Mexican government has been pressing the U.S. to open the border states to their trucking, Morgan claims that the current 25-mile limit is still being violated. "U.S. companies with Interstate Commerce Commission certificates lease the Mexican trucks and the drivers. They don't need green cards because they're not paid in this country. The company on this side of the border pays the Mexican company in Mexico. With that permit, the Mexican trucks can run anywhere in the United States."
Morgan states that because of the diesel-costs issue and because company expenses such as Workers' Compensation don't exist for Mexican truck drivers, his members are opposed to spending money on road improvements near the border, "when the primary users of these roads will be people who don't pay a penny of tax in this state." And because of the difference in diesel prices, "our own oil companies are fueling this problem."
The trucking association has been fretting about the cost of diesel fuel (cheaper than gasoline until this decade) since 1993, when California law mandated refineries produce and market in this state only a super-clean, low-aromatics vehicular diesel fuel. The process is regulated by the California Air Resources Board, or CARB, and the clean fuel is known as "CARB diesel." The older diesel fuel, still sold in all other states, is called "national" or "EPA diesel." (The gasoline version of this clean fuel was introduced in California in 1996.)
According to Stephanie Williams, an environmental scientist who also acts as spokeswoman for the CTA, tests done by her association showed that some CARB diesel was being shipped to Nevada and Arizona and sold there for a lower price than in California. In terms of costs, this allows trucks that enter California after fueling up in those states a competitive edge.
Last year, just before a conference attended by trucking companies, oil companies, and state and federal environmental agencies, Williams sent 15 truck drivers into Tijuana, Mexicali, and Rosarito to collect diesel samples at Pemex stations, the retail outlets for the Mexican petroleum company (Petróleos Mexicanos) owned by the Mexican government. Her intention was to contrast the difference between the "dirty fuel" coming from Pemex stations and that of the more costly diesel in California.
Williams invited representatives of Pemex to this conference, offering to pay travel expenses. She said she received promises from some Pemex executives to attend, "but then their public affairs guy said, 'Don't call here anymore. We don't want to get involved.' "
The CTA sent the nine good samples of Pemex diesel to core Laboratories in Los Angeles for testing. Williams says the lab report showed that "the fuel sold in Mexico is exactly like the fuel sold in California." In other words, CARB diesel.
For the trucking association, it was no longer a question of Mexican trucks fouling California air, but of unfair competition from below the border.
Industry sources say that the main producers of diesel fuel in California are Chevron, Tosco (the company that owns unocal and Arco. A spokesman for the latter, reached by phone, said that his company had a contract with Pemex to supply the Rosarito facility with premium gasoline, but not diesel. Pemex, he said, "comes to the San Diego distribution terminal [the pipeline and storage tanks in Mission Valley] to pick up and sell it in Mexico." The price that Arco sold it for was proprietary information, he stated. He did acknowledge that the am/pm mini-markets that now attach to the newer Pemex stations in Baja are operated by an Arco subsidiary.
Last June, Tosco never returned calls inquiring about the matter, and a Chevron spokesman, while noting the absence of a pipeline from Mexico's interior to Baja, said he knew nothing about any diesel sales to Pemex in Rosarito.
Francisco de la Garza Andrade, the superintendent of the Pemex facility, acknowledged that all the premium gasoline sold by Pemex stations in Baja came from California, as well as some of the regular gas. But Pemex did not import diesel fuel, he said. "The diesel we are selling is Mexican diesel. It's of good quality."
While the matter rested there, the trucking association, over a period of six months, collected seven more samples of diesel fuel from Tijuana and vicinity, at different stations and on different days. Once again the independent petroleum testing lab in Los Angeles reported results that people in the industry said were consistent with being CARB diesel, not EPA and not likely even a blend. (Some in the California petroleum business, such as jobbers who distribute the fuel to retail stations and critics of the industry, believe that California refiners regularly export a blend of CARB and EPA diesel fuel, or that they produce and export a lot of "off-spec" fuel, supposedly due to mistakes during the refining process.) But no one from big oil or the Mexican petroleum bureaucracy was publicly admitting to anything.