Exxon Mobile reps to visit ASPA next week
There are no new developments regarding the American Samoa Power Authority (ASPA) seeking the expertise and advice of an outside auditor to conduct an internal investigation of the semi-autonomous agency's role as a fuel supplier, except for the fact that representatives from ExxonMobil will be paying ASPA a visit next week. This is according to ASPA Executive Director Utu Abe Malae in an email correspondence to the Samoa News yesterday.
The audit is in line with the mandate from Governor Lolo Matalasi Moliga calling for ASPA to step away from the fuel supply business.
Utu explained that he does not know the specifics of ExxonMobil's visit next week, but it is safe to assume that it has something to do with the fuel supply contract it has with ASPA that expires on November 30.
The five-year sole source fuel supply with ExxonMobil which went into effect in 2008 expires later this year in November. Back in 2008, the envisioned plan was that ASPA, with the support of a major oil supplier, would take over the entire fuel supply for American Samoa, as well as the operation of the government-owned tank farm in Utulei-Gataivai.
Samoa News reported in 2008, when ASPA decided to become a fuel supplier that then Gov. Togiola Tulafono, in support of the sole source contract said this move by the government was to ensure there will always be an adequate supply to provide the territory with petroleum. It was reported that ASPA’s move to become a fuel supplier was in response to Mobil Oil announcing its departure from American Samoa at the time, which would leave BP Southwest Pacific Ltd. without any competition in the territory. At the same time, BP SW Pacific had also indicated it would be selling its Pacific operations, American Samoa included.
In an initial interview with Samoa News, Utu said that the impetus behind the speedy exit is that the American Samoa Government has been denied millions of dollars in corporate income taxes since 2008, when ASPA became a "fuel supplier" by entering into direct contractual relationships with oil suppliers or marketers.
Utu put to rest the rumors that the head of ExxonMobil for the Pacific area is in the territory and looking at a way to resolve anti-trust issues involving ASPA's role as a local fuel supplier. When asked to confirm or deny the allegations, Utu simply replied via email "No. Not true."
Samoa News notes it also reported in 2008 that informed sources said BP- SW Pacific contends the deal between ASPA and Mobil is illegal adding that because ASPA is a semi-autonomous government agency, and a Request For Proposal (RFP) should have been put out allowing fuel suppliers to compete for ASPA’s business. No such RFP was issued.
Other sources further alleged the deal is in violation of federal anti-trust laws and the ‘Court Plan — in which a U.S. court ruled in the early 1990s that the government could not get together with two or three fuel suppliers in order to make it hard for a fourth company to compete. The ‘Court Plan’ was to ensure a level playing field for anyone or any company selling fuel, interested in doing business with government. Sources contended ASPA’s deal with Mobil makes it easier for Mobil to monopolize the local fuel market by making it hard for another party or parties to fairly compete for business in the territory, which is what the ‘Court Plan’ deems illegal. The issue could end up in court, sources told Samoa News at the time.
Since ASPA became a fuel supplier, members of the local Legislature have criticized the move, arguing that it opens the government to legal liabilities. In addition, the move was supposed to result in savings of 8-cents per gallon in fuel costs — savings that were to be passed on to local customers.
But instead of lower utility bills, ASPA used the savings — which amounted to more than $1.5 million per year — to pay off old debts and also debt in a $2.8 million loan relating to its fuel supply operations. They noted that once the loan was paid off, the savings could then be passed along to its customers.
ASPA finally kept its side of the deal — to pass along its savings to customers — beginning with February's utility bill, which revealed the savings as a deduction from the monthly fuel surcharge for each customer.
As a fuel supplier, ASPA's client list includes customers like Clipper and Sunrise, who are also marketers on its behalf. Currently, it has been reported that Clipper Oil has filed an application with the Office of Petroleum Management to become a fuel supplier in American Samoa. Efforts to obtain comments from Sione Kava of OPM were unsuccessful as of press time yesterday evening, but Samoa News understands that the application has been filed and is currently under review. (See background below)
Clipper Oil's decision to become a local fuel supplier coincides with ASPA looking at leaving the fuel supply business.
According to Utu, ASPA has been informed by Clipper and ExxonMobil that Clipper Oil has expressed an interest in being an oil supplier for the Territory.
"It is not a simple matter of just announcing and then showing up on island to start supplying oil," Utu explained. "There are certain conditions that a prospective oil supplier would have to meet."
Utu said that to his understanding, some of the conditions require a supplier to prove that it is actually an oil supplier, and have a secure source of fuel to sell. In addition, the fuel supplier must have contracts, (i.e., secured customers), must be adequately covered by insurance for liability and other risks, including oil spills, must arrange for a fuel supply plan with the tank farm operator, and most importantly, the company must pay corporate income taxes to the ASG Tax Office.
When asked if ASPA has a say in any of this, Utu replied: "No, ASPA does not have a say."
Samoa News inquired if Utu, in his position as Executive Director, and with the support of the current Board, thinks it's right to prosecute the members of the former ASPA board for anti-trust violations, to which Utu did not comment, only saying that they have to wait to see the results of the audit.
Utu went further to deny allegations that Tax Office Manager Melvin Joseph has written a letter to the Internal Revenue Service (IRS) and to ASPA stating that ASPA should be paying federal taxes and local taxes on the fuel ASPA is bringing in as a supplier. Utu said, "No, ASPA received no such letter from the Tax Office." He concluded, "ASPA does not pay corporate income taxes, by law."
Earlier this year during his confirmation hearing, ASPA Board Chairman Fonoti Perelini Perelini told lawmakers that the ASPA Board and Management have a responsibility to follow the Governor's mandate by determining the best way to exit the fuel supply business, given the interlinking fuel supply contracts that ASPA has with other entities. Fonoti said, "The results of the audit will help determine the options for ASPA for the future. If problems are uncovered, then we must solve those problems first."
According to their website, Clipper Oil currently maintains warehouses in Pago Pago, AS, Majuro, Marshall Islands, and Pohnpei, Federated States of Micronesia (FSM).
In a Samoa News report in 2008, we reported that Samoa News has been told by informed sources in the commercial fishing vessel business the bulk of local marine fuel purchases are done with Clipper Oil — a worldwide wholesaler of marine fuels and lubricants, with headquarters in San Diego, Calif.
We noted that Clipper Oil does business in the territory selling marine fuel and products, while the land side of its business is done under the name of Sunrise Oil Company, according to their website: “http://www.clipperoil.com/sunriseoil”.
Sunrise Oil Company’s website explained it was the licensed service station distributor for ExxonMobil in American Samoa and had been operating in Pago Pago since February 2004 and along with Exxon Mobil, they had a long-term interest in American Samoa. In addition to the inland business in American Samoa, operated under the name Sunrise Oil Company, they said they had also been supplying the commercial fishing vessels and other marine vessels with fuels and lubricant oils in Pago Pago for over 20 years, under the name Clipper Oil.”
In its reply to Samoa News inquires about Clipper Oil’s agreement in April 2008, ASPA instead explained about its negotiations in progress with Mobil Oil for their market share, with no mention of Clipper Oil or Sunrise Oil.
Rhonda Annesley, Editor of Samoa News contributed to this story
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