The SubCommittee on Transportation was called to order at 3:40 p.m., on Tuesday, March 2, 1999. Chairman David Parks presided in Room 3143 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

SUBCOMMITTEE MEMBERS PRESENT:

Mr. David Parks, Chairman

Mr. Jerry Claborn

Mr. Tom Collins

Mr. Kelly Thomas

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Chairman Parks began the subcommittee meeting by explaining the committee was formed to gather more information regarding dyed fuels and the collection of appropriate revenues for dyed fuel mentioned in A.B. 28.

Mr. Parks invited the Motor Carrier Division of the Department of Motor Vehicles and Public Safety (DMV & PS) to present some background on the issue first, then offer any recommendations they might have regarding what the state could do to collect appropriate revenue and prohibit the use of dyed fuels on the highway.

Teri Baltisberger, Tax Administrator II, Motor Carrier Division, DMV & PS, explained she also testified for the S.C.R. 53 interim committee on the dyed fuel issue. The recommendation, to her recollection, was to be a resolution and not a bill draft. She stated the DMV & PS Motor Carrier Division had always given any requested information to the legislature, however the Nevada Highway Patrol (NHP) would cover roadside enforcement so that information would have to come from them. The Motor Carrier Division would supply any information on the administration of the fuel tax, since they tracked both dyed and clear fuels.

Mr. Parks stated the concern the S.C.R. 53 committee had was the enforcement of dyed fuels tended to be pretty thin and there seemed to be a likelihood tremendous amounts of vehicles were traveling on highways with dyed fuel in their tanks. He would like to use the subcommittee to get recommendations on what it would take for the State of Nevada to implement a program that would, first of all alert highway users to the fact there would be an enforcement program. And second what it would take to put in place an enforcement program to go after those individuals who were running dyed fuels on the highway.

Clay Thomas, Assistant Chief, Motor Carrier Division, DMV & PS, explained the Motor Carrier Division was attempting to identify fuel tax evasion by implementing a fuel tracking system, if they received the funding. The system would track loads within Nevada’s boundaries and identify all movements of the load. If there were any siphoning the system would identify it and would allow the Motor Carrier Division to take action through auditors, who would conduct investigations. It should be noted the Motor Carrier Division had been working with the NHP and the Attorney General’s Office to establish a fuel evasion program. The idea was presented to the legislature through Bill Draft Request (BDR) 32-1073.

• Bill Draft Request 32-1073 – Makes various changes to provisions governing special fuels (S.B. 349).

Mr. Thomas explained the BDR would give the NHP the authority to conduct roadside stops for the evasion of the dyed fuel program by dipping the tanks. The Motor Carrier Division had also been in contact with the Nevada Department of Transportation (NDOT) for their input on the program, as well as the Nevada Petroleum Marketers and Convenience Store Association and the Nevada Motor Transport Association to resolve some of the industry’s concerns.

Mr. Parks asked if BDR 32-1073 included a fiscal note for the fuel tracking system and any additional staff requirements the legislation would entail. Mr. Thomas relayed BDR 32-1073 did not require any additional funds. All the legislation would do was give the authority, through statute, to the NHP to dip the tanks to identify whether dyed or clear fuel was being used. The fuel tracking system was already in the budget for Motor Carrier Division operations and they would implement the program if the budget was approved.

Mr. Parks mentioned he sat on the audit subcommittee, which was comprised of both houses, and the fuel tax evasion was an issue which caught their interest in a year when every additional dollar that could be generated was needed.

Mr. Collins wondered when both the fuel tracking system and the roadside testing would begin. Mr. Thomas indicated he could not speak on behalf of the NHP as to when their side of the program would be up and running. But the Motor Carrier Division would be able to implement the program soon after funding was available. The department had a system in place, developed by Lockheed Martin, which was being used in Montana, Colorado, and Arkansas. The Motor Carrier Division would only have to adopt the fuel tracking systems those states had in place. Ms. Baltisberger stated the DMV & PS had worked with Lockheed Martin in the past, and had been able to implement new systems within 3 to 6 months.

Mr. Collins reiterated his question, stating if funding was approved the system would be in place by December. He explained his concern over the time frame because when the legislators left certain programs were generally placed on a lower priority list. Ms. Baltisberger informed the committee of another program the Motor Carrier Division instituted during the past interim. The Motor Carrier 45 (MC 45) form was developed for dyed fuel users to request a refund from the department if clear fuel had to be purchased then used in a non-taxable manner. An audit program was developed for requests over $5,000. The audit section was able to go out in the field to look at the records that were kept to verify all clear fuel was used in a non-taxable manner.

Lieutenant Don Touhy, NHP, explained the roadside checks would begin after the legislature adjourned if BDR 32-1073 passed. The NHP had embarked upon that issue some time back; however, the department discovered there were legal ramifications that had to be addressed and procedures had to be in place. The NHP had trained those who would train the inspectors on how to use the test kits and handle the evidence. The department had worked with the Motor Carrier Division, Department of Agriculture, NDOT, Nevada Motor Transport Association, and Nevada Petroleum Marketers on how to implement a dyed fuel program. Out of those conversations a draft of procedures was developed and being reviewed, so instruction on the correct way to collect fuel could be given to officers. There were Occupational Safety and Health Administration requirements that had to be met, since fuel contaminates had caused cancer on laboratory rats.

Mr. Touhy stated the rough estimate to implement the program was $37,000, most of which would be for machines to test the dyed fuel after an officer discovered it (Exhibit C). The machines were similar to those used for Driving Under the Influence (DUI) tests, which must be used because of legal requirements. The Motor Carrier Division would share part of the cost since the training would be identical. The DMV & PS did not know how much tax was being evaded; they had heard anywhere from millions of dollars to multi-millions of dollars. If BDR 32-1073 was passed the fuel evasion would finally be able to be tracked, since it would strengthen the authority of the NHP to check tanks.

Mr. Parks asked who would be monitoring the dyed fuel. Mr. Touhy explained the NHP would enforce the statute, once BDR 32-1073 passed and the procedures were in effect. The financing for the enforcement of a dyed fuel program came out of the Transportation Equity Act for the 21^st Century, which spelled out that each state’s department of transportation would spend one quarter of 1 percent to fund a dyed fuel program. The director of NDOT, Tom Stephens, had advised the NHP they would comply with that requirement.

Mr. Claborn expressed his concern about the program and wondered if the NHP had spoken with other states which had a dyed fuel program established. Mr. Touhy responded there was a trooper specifically assigned to that and had spoken with both North Carolina and Virginia.

Mr. Claborn asked what would happen if someone was on the road refueling construction equipment and was running low on fuel. The logical solution for the individual would be to refuel their truck with dyed fuel before their tank ran dry. Mr. Touhy explained that situation was strictly illegal and the person would be immediately fined.

Mr. Collins wondered if anyone had ever been cited for violating the dyed fuel law. Mr. Touhy remarked some citations had been written but without the proper procedures in place, which was the intent behind BDR 32-1073.

Mr. Parks recalled the testimony given during the S.C.R. 53 interim committee was 47 citations had been issued and the fines imposed were very limited. He stated the intent was not to pursue a rigorous process of going out and citing everyone, but to first develop an information program to let the industry know the state was going to begin an enforcement program. Mr. Touhy reiterated the comments of Mr. Parks, the state wanted to gain compliance by informing the industry they were going to enforce the requirement.

Mr. Collins recalled the state implemented such a program in 1993 and 1994 because there was a lack of enforcement, and 4 or 5 years later the state was still trying to get the information out to the public.

Peter Krueger, Nevada Petroleum Marketers and Convenience Store Association, expressed support for A.B. 28. He explained the dying of fuel began just prior to the 1993 session when the state moved the collection point. He felt the DMV & PS had done a fabulous job collecting over $11 million in evaded dyed fuel taxes since that time. The problem was adequate procedures were not in place. There had been no enforcement capabilities if an offender wanted to fight the citation, since judges were not educated on the issue the citation was dropped. They were there to support the efforts being made and offered to act as the committee’s watchdog to assure both programs would be implemented after the legislature adjourned. BDR 32-1073 would provide the NHP with the authority to enforce the program, so he recommended the committee might want to set aside A.B. 28 to see what happened to the other legislation.

Georgi Cody, Nevada Motor Transport Association, concurred with Mr. Krueger’s testimony. They had supported similar legislation in the past and would continue to do so. The Motor Transport Association did engage in an education program for their members, which would remain an ongoing effort. She stated the Lockheed Martin program for fuel tracking was demonstrated to the interim committee and would aide in curbing evasion which was their main concern.

ASSEMBLYMAN CLABORN MOVED TO INDEFINITELY POSTPONE

A.B. 28.

ASSEMBLYMAN PARKS SECONDED THE MOTION.

Mr. Parks stated he was inclined to agree, as long as there was a follow-up method to assure by the end of session the authorization for the NHP and the tracking system for the Motor Carrier Division were in place.

Mr. Collins expressed concern and felt the committee should pass A.B. 28 in case something happened to BDR 32-1073.

ASSEMBLYMAN CLABORN WITHDREW THE MOTION TO INDEFINITELY POSTPONE A.B. 28.

ASSEMBLYMAN COLLINS MOVED DO PASS ON A.B. 28.

ASSEMBLYMAN CLABORN SECONDED THE MOTION.

THE MOTION PASSED UNANIMOUSLY.

Mr. Parks adjourned the subcommittee meeting at 4:18 p.m.

RESPECTFULLY SUBMITTED:

Jennifer Batchelder,

Committee Secretary

APPROVED BY:

Assemblyman David Parks, Chairman

DATE: