Consultant’s report calls
Hawaii gas market
‘disciplined competition’

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By Tim Ruel
truel@starbulletin.com

A consultant's report used by Tesoro Petroleum Corp. to test the waters before it entered Hawaii in 1998 describes the state's retail gasoline market as being marked by "disciplined competition," a statement that drew controversy yesterday in the state's gas price-fixing lawsuit.

The confidential report, prepared for Tesoro by Andersen Consulting, was made public for the first time yesterday in the 3-year-old case, in which the state accuses Hawaii's major oil companies of conspiring to fix prices. The firms are seeking to dismiss the case through motions for summary judgment, saying the state does not have any evidence.

The Tesoro report was prepared in February 1997 by a former employee of BHP Hawaii Inc. who had left the firm to join Andersen Consulting, said Spencer Hosie, the state's lead attorney in the antitrust case. Tesoro entered Hawaii when it acquired BHP Hawaii in May 1998. Tesoro and BHP were originally named as defendants in the suit, but settled the case last year by paying the state $15 million.

An attorney for defendant Chevron Corp. took strong exception to the Andersen Consulting report, saying the document is not worthy of going before a jury as evidence. For starters, the experts who prepared the report have not been questioned under oath, said Robert Mittelstaedt, a San Francisco attorney who represents Chevron.

The reference to "disciplined competition" doesn't mean anything was legally wrong, Mittelstaedt said. The report also contains a major flaw in one of its conclusions: that certain gas products were secretly exported from the state, he said. Rather, the materials were actually oil by-products that were used in Hawaii to make other products. "Whoever wrote this didn't know what he was doing," Mittelstaedt said.

The state and the oil companies closed their arguments yesterday afternoon after four days of testimony before senior U.S. District Judge Samuel King. It is not clear when King will issue a ruling on the motions. He discussed pushing the case's trial date back two months to April 15 from Feb. 5, but noted that the date won't be set until he rules on the motions.