SENATE BILL REPORT

SB 5673

BYSenators Peterson, Halsan, Bender, DeJarnatt, Conner, Hansen, Bottiger and Bauer

Prohibiting motor fuel refiner-supplier from operating retail outlets when total market share reaches twenty percent.

Senate Committee on Transportation

Senate Hearing Date(s):March 3, 1987

Senate Staff:Brad Lovaas (786-7307)

AS OF MARCH 3, 1987

BACKGROUND:

During the 1985 legislative session, independent gasoline retailers raised charges that the major oil companies were using unfair business practices in their role as supplier/landlord to drive competition out of the marketplace.  Senate Resolution 1985-92 established the Select Committee on Petroleum Marketing Practices to investigate the dealers' allegations and to report its findings and recommendations to the 1987 Legislature.

The Select Committee issued four recommendations for legislation in 1986.  This bill represents the findings of the study with respect to the dealers' allegation that the major refiner-suppliers are attempting to monopolize the retail gasoline market.

In 1972 there were 226,500 retail service stations compared to the 124,600 stations which existed in 1985, according to the U.S. Department of Commerce.  This marketing shakeout has eliminated 102,000 conventional stations (full-serve, self-serve, service bays) from the marketplace.  In their place, new or remodeled units have appeared.  These new units, most of which are pumpers (gas only), are capable of doing from 100,000 to 500,000 gallons a month or more, or two to ten times the average of the conventional station.

There are approximately 3,000 gas stations in this state, of which 128 are major refiner company operated stations.  There are approximately 1,200 independent dealers, and 1,700 jobber operated outlets statewide.

There are two types of independent gasoline retailers:  1) a lessee dealer operates under a lease or franchise and supply contract with a refiner, and 2) an open dealer who owns the premises or leases them from a third party, but obtains gasoline from a refiner through a supply contract.

Throughout the study period, the major refiners-suppliers maintained that the restricting of the marketplace was due to market forces which are taking place following more than seven years of federal regulation.  These market forces include a more streamlined approach to marketing gas and the public's acceptance of self-serve gasoline stations.

SUMMARY:

A motor fuel refiner-supplier is defined as one who refines crude oil into gasoline and has an operable refinery capacity of 325,000 barrels a day, as reported to the federal Department of Energy.

No refiner-supplier may operate a motor fuel outlet as a directly controlled company station when the total for all refiner-suppliers has reached 20 percent of the statewide gas volume sold.

Fiscal Note:      requested