Anderson proposes
state oil firm

Hawaii should combat high
gasoline prices by entering the
business, governor candidate says

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By Tim Ruel
truel@starbulletin.com

D.G. "Andy" Anderson, a former Republican party leader who is running for governor as a Democrat, is proposing that Hawaii combat high gas prices by creating a new state-run agency that would sell gas and compete with Chevron and other oil companies.

The Hawaii Fuel Authority would be financed with the sale of special purpose revenue bonds, and would import foreign-made gasoline into the state for sale directly to state-owned gas dealerships at prices that would undercut oil companies at the pump, Anderson said yesterday at a Star-Bulletin editorial board meeting. The state's sale of gasoline, in turn, would pay the debt on the tax-exempt revenue bonds, and would not be used to generate a profit.

Based on 2001 import prices, Anderson's proposal suggests that the state could sell gas to consumers at $1.34 a gallon on Oahu, $1.43 on Maui and $1.39 on Kauai and the Big Island. The savings comes from the reduction of profit normally taken by the oil companies on a gallon of gasoline. Chevron made an average of 18.8 cents a gallon between 1991 and 1998, according to an export report that was based on the company's financial data.

Anderson said the state could use its power of eminent domain to condemn a site already designated for the shipping and storage of gasoline. A facility would cost $25 million to $30 million to build, he estimated.

Anderson's theory is that if the state begins selling gas at discounted prices, oil companies like Chevron, Shell Oil and Tesoro would have to lower their prices. Even if the companies didn't cut their prices right away, isle consumers would have the choice of lower-priced gas, he said.

The problem with the proposal is that a state government would not have the necessary relationships with gasoline suppliers and other business entities, said Spencer Hosie, the state's lead attorney in its now-settled antitrust lawsuit against the major oil companies.

"(The state) might not be perceived as being in the business long term and might well be resented by other companies in the business," Hosie said yesterday.

The only other state that has delved into the gasoline business is Alaska, which lost a lot of money in an experiment the early 1980s, Hosie said.

Anderson is the second Hawaii gubernatorial candidate who has weighed in on the controversial topic of local gas prices, which have long been among the highest in the nation.

Just last week, Democrat Rep. Ed Case threw his support behind a price control that would tie wholesale gas prices to a mixture of market crude oil prices.

Hosie said he supports price caps as being a simpler way of dealing with high gas prices than having the state go into the oil business. However, Hosie has proposed a slightly different cap, one that would tie wholesale gas prices to West Coast market prices posted by the industry-followed Oil Price Information Service.

Anderson nixed the idea of price caps, saying that Chevron would undoubtedly sue if they were passed by the Legislature. "We think Chevron would be a formidable opponent in the courts," Anderson said.

Walter Heen, a former Democratic Party chairman who is working on Anderson's campaign, said there could be constitutional problems with price controls that Chevron could take advantage of. "They can hold us up for years. They're big enough to do it," Heen said.

In January, the state settled its nearly 4-year-old lawsuit against the oil companies for $20 million, 1 percent of the $2 billion the state had sought.

Last month, Chevron also won a round in a five-year legal battle against a 1997 state law that capped the amount of rent that oil companies can charge to gas dealers.

In that case, however, the judge found that the state had a legitimate public interest in seeking lower gas prices through legislation, which paves a more solid constitutional path for specific price caps at the pump, Hosie said.

Chevron had no immediate comment yesterday, but has generally opposed price controls.

Former Maui Mayor Linda Lingle, who is running for governor as a Republican, could not be reached for comment on the proposals.

However, during a speech last week at the University of Hawaii's Manoa campus, Lingle said it would be fiscally irresponsible for the state to hire new government workers for jobs that could be done by the private sector.

During the last gubernatorial election, which took place a month after the state sued the oil companies, Lingle said she would review the lawsuit to see whether it was worth fighting.

Anderson's proposal calls for employees that are exempt from civil service requirements, though it's not yet clear how many workers would be needed.