6/25/10

CIOMA MEMBER ADVISORY

VST EVR Nozzles & Hold Open Latches
CIOMA Members –

This Advisory is to bring you up to date on the situation with VST EVR fuel dispensing
nozzles and related information from CARB, the State Fire Marshal and VST regarding the
removal of hold-open latches from VST EVR nozzles. We had a meeting with those parties
and CAPCOA yesterday where this situation was discussed at length.

First and foremost, the requirement by CARB to mandate use of the VST nozzles and
subsequent issues related to the safety and performance of those nozzles have put gasoline
dispenser facility owner/operators in a no-win situation. (The estimate is that this affects
30,000+ nozzles statewide.) Due to alleged safety concerns CARB, VST and the State Fire
Marshal have all decided that the hold open latches on VST EVR nozzles be removed
immediately (in the next 2 weeks according to meeting participants, yesterday). It is clear
that the enforcing parties have not sufficiently considered alternative liability, regulatory and
safety issues related to this decision. Nor have they fully considered alternatives that may be
taken absent the removal of the hold open latches.

What this means is that owners and operators are faced with a very difficult, immediate
choice – 1) to allow VST personnel to remove the hold open latches, and take the operational
and legal risks associated with that decision; or 2) refuse to have the hold open latches
removed and take the risks associated with that path. At this time none of the deciding
parties have indicated they will assume and any financial or legal responsibility for the
results from making either of these decisions. This Advisory will attempt to set out what has
led to this situation, and what marketer options might be.

Background
Apparently CARB and VST have known there is an issue with VST nozzles since mid-May. It
appears that there is a failure of the nozzle related to the operation of the hold open latch that
creates a situation where the nozzle, when replaced after fueling, remains in the “open”
condition. When the next fueler activates the pump it can start dispensing before the nozzle
is placed in the tank and the boot secured. At first it was believed to be an uncommon
condition, but more reports of fuel splashing have led to the decision that this is an imminent
and possibly widespread safety hazard. It is important to note that industry representatives
were not consulted nor alerted in any meaningful way regarding the alleged increasing

The information contained herein is an advisory only and not intended to be legal advise nor is it intended to
express compliance with any law, rule or regulation. You are urged to seek your own counsel or expert in
making decisions based on your particular factual situation or circumstance.
gravity of the situation being addressed by VST, CARB or the State Fire Marshal in their
recent communications.

As provided in the previous CIOMA Alert on this issue (6/23/10) CARB issued a Special
Advisory (#418) May 28, 2010 indicating “in rare circumstances” the nozzles could spray.
The Advisory recommended daily inspection of nozzles using a provided checklist and that
any hardware suspected of being involved in a drive-off or customer abuse be inspected and
tested before being put back in operation.

On June 10th the State Fire Marshal (SFM) issued a Statewide Fire Department Alert advising
that owners and operators are to adhere to CARB Bulletin 418. It also advised Fire
Departments that they have the authority to curtail fueling operations if they believed they
were being operated in an unsafe condition. CIOMA did not directly receive this bulletin.

On June 18th CARB issued a letter jointly signed by CARB and the State Fire Marshal
advising of a “solution” with the VST nozzles. The “short term fix”, they advised, involves
the removal of nozzle hold-open clips and noted that VST personnel would be visiting
stations to implement the fix. They asked owners to cooperate. They also indicated that
CARB was suspending the requirement to have an operative hold-open latch on these
nozzles. It appears that CIOMA did not directly receive a copy of this letter and attachments.

On June 21st, VST issued a Product Bulletin that advised that they believed Advisory 418
(daily inspections, etc.) did not go far enough and that they determined that removal of all
hold-open clips on their nozzles were to be removed “until an alternate solution is adopted”.
They also advised that new or rebuilt VST nozzles would not have a hold-open latch.
Finally, they indicated that they were “dispatching a number of contractors and VST
personnel” to remove the latches. The letter also indicated, in VST’s opinion, that many
station owners and operators were not adhering to CARB requirements nor adequately
maintaining equipment is a safe manner. CIOMA did not directly receive a copy of that
letter.

Again, neither CIOMA nor WSPA representatives were directly contacted during the
evolution of these events and development of communications.

Options
At this point, as mentioned earlier in this Advisory, station owner operators have essentially
two decisions:
1. Allow VST personnel to enter the property and remove the latches. Under this option
owners and operators will need to consider the risk of this action on consumer use (and
abuse) of trying to overcome the lack of a hold-open latch, and consequent liabilities from
those conditions. Owners and operators will also need to consider potential business loss
due to consumers avoiding stations with VST nozzles.

Additionally, station owners will be dealing with angry customers, and may be in

The information contained herein is an advisory only and not intended to be legal advise nor is it intended to
express compliance with any law, rule or regulation. You are urged to seek your own counsel or expert in
making decisions based on your particular factual situation or circumstance.
 violation of disabled access provisions.

2. Prohibit VST personnel from removing the latches. Under this scenario
owners/operators need to consider the possibility of the local fire department curtailing
fueling operation at the station. When VST personnel are not allowed to remove the
latches at a station, that information is being forwarded to the State Fire Marshal and then
being distributed to the appropriate local fire department. Under the advisory issued by
the State Fire Marshal, local fire departments are given latitude to mark components “out
of order” until it has been demonstrated that the component is safe.

At a minimum, if this path is chosen, owners and operators should maintain written
evidence that their nozzles are being inspected frequently for any operational errors.
Based upon comments made yesterday, the once-daily inspection is not believed to be
adequate.

Owners should consider the possible ramifications of this decision, including operation of
equipment that has not been adequately and frequently inspected, the possibility of
running afoul of your local fire department and, of course, the potential liability involved
if one of your nozzles is involved in a spray incident.

In either case, owners of VST nozzles should immediately inspect all their nozzles to
determine if any are operating in an unsafe condition and should frequently inspect nozzles
for tampering or drive-off evidence.

During the meeting the role of VST personnel was investigated. They are not operating in
any official capacity; the owner has the right to refuse the latch removal service. It is not clear
that the VST personnel are making an attempt to contacting the owner or operator – they are
contacting the personnel at the station. Owners and operators should be aware of this
situation and advise their employees on how to proceed if contacted by VST personnel.

Other related information

At the end of yesterday’s meeting it was agreed to establish a working group composed of
VST, CARB, SFM, CAPCOA and the regulated community. CIOMA will provide
participants on this working group. Please let Jay McKeeman, jaymck@cioma.com, know if
you want a representative involved – we need both owner/operator representatives and
people familiar with the VST and other dispensing technology to serve. Please provide
contact information ASAP as the working group may begin discussions immediately.

During the meeting alternatives to removing the hold-open latches were discussed. At this
point there are no sanctioned alternatives available. Ideas including the use of pre-EVR
nozzles or other brands of EVR nozzles, were discussed. However, CARB must do testing to
determine any operational issues related to the use of non VST nozzles. According to a CARB
representative, the latest regarding review of using other nozzles is as follows, “We are

The information contained herein is an advisory only and not intended to be legal advise nor is it intended to
express compliance with any law, rule or regulation. You are urged to seek your own counsel or expert in
making decisions based on your particular factual situation or circumstance.
currently evaluating solutions for both the short and the long term time frame. As discussed
yesterday, one short-term option would be the use of pre-EVR balance nozzles. The use of pre-EVR
nozzle would require technical and legal review before we can determine that they can be allowed as
replacement nozzles. If after technical and legal evaluation, it is determined that the nozzles can be
allowed, then these replacement nozzles would only be available until a certified balance nozzle
becomes available.

“The technical review would ensure that the pre-EVR balance nozzles do not present the possibility of
unexpected spray as documented with the VST nozzles. We are currently evaluating nozzles from
Husky and Emco Wheaton and are trying to procure nozzles, for evaluation, from OPW and EZ Flo.
We are developing a test plan for the pre-EVR nozzles and expect to complete preliminary evaluation
by early July. The legal review will address whether the pre-EVR balance nozzles can be allowed as
replacements without violating current statutes.

“In the long-term, we will be working with VST as they redesign their nozzle and get it certified.”

VST is working on trying to determine the cause(es) of equipment malfunction. They state
they are working on this 24-7. They are hampered, however, by lack of nozzles that have
been first-hand determined to be involved in a fuel splashing event. Only five actual cases of
fuel splashing have been verified and only four nozzles have been sent for examination.

VST was asked what solutions are being worked on, and what kind of time frames are
involved. Since they do not have a good idea of exactly what is happening to create this
condition (and importantly to them whether owner/operator issues are involved) they do
not have a specific remedy in mind at this time – other than the removal of hold-open latches.
They continue to investigate what may need to be done. However, they believe it may take
at least 3-6 months if a product component needs adjustment or replacement, depending on
any CARB-related testing or verification requirements. They are also uncertain on whether
this will entail additional cost to the owner/operator.

During the discussion yesterday it was clear that the state agencies involved believe they
have no liability or financial responsibility for this situation or its ramifications.

We will provide you with additional information as it becomes available.

Communications addressed in this Advisory from CARB, SFM and VST are included for
your further information.

The information contained herein is an advisory only and not intended to be legal advise nor is it intended to
express compliance with any law, rule or regulation. You are urged to seek your own counsel or expert in
making decisions based on your particular factual situation or circumstance.