Issue link: https://read.dmtmag.com/i/743325
28 Oil Prophets H. Dean Mooty, Jr. Mooty & Associates, P.C. As I write this on September 19, 2016, Governor Bentley has declared a state of emergency in Alabama stemming from the Colonial Pipeline leak in Shelby County. As most of you know by now, when the Governor declares a state of emergency pursuant to his authority under the Alabama Emergency Management Act of 1955 found in Ala. Code §31-9-1 (1975), as amended, one of the consequences of such declaration is the triggering of Alabama's Unconscionable Pricing Act under Ala. Code §8-31-1 (1975), as amended, our "Price Gouging" law. As you certainly are aware, in the last five (5) to ten (10) years, we have had states of emergency declared as a result of hurricanes, tornadoes, pipeline leaks, sinkholes, and other expected and unexpected issues around the state. In each instance, the Governor declared a state of emergency, and our price gouging act was triggered. In a number of these instances – sinkholes being classic – there were no issues with regard to fuel supply, and no logic whatsoever for the triggering of Alabama's price gouging act. We have had a number of discussions with the Attorney General's Office over the years about the price gouging act and how and when it should be enforced. There remains, however, a lot of confusion and ignorance in law enforcement around the state regarding exactly what the law provides. While I hope when you read this this current state of emergency has long since passed, it is a recurring issue, and I thought I would take a few lines to make sure we know what the current act provides. One of the principal reasons I send this, there is obviously a pervasive belief in our industry that when a state of emergency is declared, that no price increases particularly for fuel, may be made. That could not be further from the truth. While the statute is not as clear as it should be, and I suspect your Association Board will look hard at some needed changes, what it says is this: "It is prima facie evidence that a price is unconscionable if any person, during a state of emergency declared pursuant to the powers granted to the Governor in §31-9-8, charges a price that exceeds, by an amount equal to or in excess of 25 percent of the average price of which the same or similar commodity or rental facility is obtainable in the affected emergency area during the last 30 days immediately prior to the declared state of emergency; and the increase in the price charged is not attributable to costs incurred in connection with the rental or sale of the commodity." Stated simply, if your average retail price of regular unleaded gasoline in the 30 days preceding the declaration of the state of emergency was $2.00 per gallon, it is not until any price increases you implement exceed 25 percent of that average or $2.50 per gallon in my example, that the state would or could conclude the pricing unconscionable. What the legal terms "prima facie" as used in the above provision means is that if you exceed that 25 per cent parameter, there is a presumption of unconscionability to such price. What does that mean? That means that the State satisfies its burden that you are price gouging if your price exceeds by 25 percent that prior 30-day average, and the burden to prove otherwise shifts to you, the "pricer" of that product. At this point, it's relatively straightforward. However, the typical scenario is your cost of fuel goes up for your supply during these times, and the question becomes what if that fuel that was costing me $1.75 a gallon before the state of emergency is now costing me $2.50 a gallon during the state of emergency. What are the pricing parameters then? Logic would suggest the same 25 percent parameter should apply to those price increases, but the statute simply does not say that. It does clearly recognize the reality of your cost going up; note the last phrase of the above. What is clear, and we have gotten these concessions from the Attorney General's office in past SOEs, you certainly do not have to sell that product at or below your cost. How much above that cost you can go, which, in my example is now at $2.50 a gallon, is LEGAL CORNER States of Emergency in Alabama and