Bootleg Gas Costing New York Millions

UNIONDALE, N.Y. -- Nassau and Suffolk counties in New York are losing millions of dollars in gasoline tax revenues each month because of shipments of "bootleg oil" coming in illegally from New Jersey, an industry representative told Suffolk legislators yesterday.

Kevin Beyer, president of the Long Island Gasoline Retailers Association, told the Suffolk Legislature's Consumer Affairs Committee the problem is particularly acute in times of high prices, like now, New York Newsday reported.

Normally, crude oil shipments are stored at refineries in New Jersey, where companies, such as Shell or Mobil, send trucks to pick up shipments for New York vendors. When they load the trailers, the tanker truck operators are supposed to prepay all the New York state and local sales taxes, as well as federal excise taxes. The fuel companies then truck supplies to local service station operators who are again supposed to include those taxes in their payment.

In times of high gas prices, however, "black market" truckers not affiliated with major companies pick up fuel in New Jersey and avoid the New York taxes, Beyer said. Saying they will sell the fuel in New Jersey, and often setting up what Oil Heat Institute of Long Island chief executive Kevin Rooney called a "daisy chain" of phantom non-New York companies they say they will sell to, they eventually sneak it out to gas stations in New York whose owners wind up pocketing the state and local tax money.

"This has been going on for as long as I can remember," said Beyer, an 18-year veteran of the gas business. "And when prices are higher it's going to be more prevalent. People are desperate for cheaper gas."

A 12,000-gallon truckload of tax-free fuel yields about $3,600, as fuel purveyors can save up to 30 cents a gallon, Beyer said. The black marketers can either take that money directly or undersell their law-abiding competition. The uncertainty of how long the U.S.-led invasion of oil-rich Iraq will last has made for skittish and bargain-hunting consumers as well as drops in gas consumption.

Shell Oil spokesman Tim O'Leary did not comment on the frequency of the bootleg fuel problem, but did say his company expects "everybody we do business with to obey the law."

Cameron Alden (R-Islip), chairman of the Consumer Affairs Committee, said Suffolk had requested that New York State patrol the border separating New York and New Jersey to ensure that tanker drivers have the proof they have paid the taxes. "It's a larger question because the whole thing hinges on interstate commerce," Alden said, suggesting that the federal government should also be monitoring the problem.

He also suggested working with District Attorney Thomas Spota to set up sting operations to flush out local service station owners.

Beyer said, however, that the burden of controlling the black market lay with the state. "Right now, there's such a deficit ... [Gov. George] Pataki's looking to tax or cut everything," Beyer said. "Here's a blatant obvious solution to our problems."