THE SENATE

S.C.R. NO.

58

TWENTY-FIRST LEGISLATURE, 2002

S.D. 2

STATE OF HAWAII

 
   


SENATE CONCURRENT

RESOLUTION

 

ESTABLISHING A JOINT SENATE-HOUSE review COMMITTEE TO review PETROLEUM FUEL PRICE issueS.

 

 

WHEREAS, the Legislature finds that there is a need to ensure the lowest possible gasoline prices for Hawaii's consumers; and

WHEREAS, although gasoline prices have fallen to their lowest levels in years, and mainland consumers have been enjoying cheaper gasoline prices, there is evidence that Hawaii's consumers still continue to pay a large premium at the pump; and

WHEREAS, there is also evidence that the price of Alaskan North Slope crude oil and Indonesian Minas crude oil, commonly used at the two oil refineries operating on Oahu, has declined fifty per cent since October 2000; and

WHEREAS, further, there is evidence that the prices of other types of crude oil have also dropped by comparable amounts; and

WHEREAS, nevertheless, during the same period, wholesale prices that oil companies charged Oahu retail dealers for gasoline refined from that oil did not decline similarly, and the Legislature further finds that the failure of oil companies to reduce wholesale prices charged to gasoline retailers during this period may have resulted in substantial oil company profits; and

WHEREAS, the Legislature further finds that one possible way to ensure lower gasoline prices is to apply a benchmarking process that establishes an upper limit, or cap, on the wholesale price of gasoline that oil companies may charge to retailers in Hawaii; and

WHEREAS, the Legislature further finds that there are many other possible approaches to controlling or regulating gasoline prices and that more than seventeen of these approaches were discussed in detail, with reactions from some of the key players, in "Regulating Hawai`i's Petroleum Industry," Legislative Reference Bureau, State of Hawaii, 1995; and

WHEREAS, the above report found that there are policy reasons why gasoline prices that are high relative to mainland prices may have positive effects for the environment and public transportation; and

WHEREAS, the Legislature further finds that the issues raised when seeking to control or regulate gasoline prices are extremely complex and require expertise of the highest order, which may not be readily available on call to the Legislature. Thus, a 1990 report by Yamaguchi and Isaak of the Energy Program, East-West Center, entitled "Hawai`i and the World Oil Market: An Overview for Citizens and Policymakers" stated:

At the state level, a number of agencies are involved with energy issues and planning, including the DBED, the DCCA, the PUC, the Department of Attorney General, the Department of Transportation, and the Department of Land and Natural Resources. There exists substantial energy expertise within these agencies and other groups both inside and outside of state government; however, much of this skill is spread over a number of different agencies, and nowhere within the state government is there a concentration of expertise specifically devoted to oil. In part, the reason for this is that oil is a very complicated business, and it is difficult for most government agencies—many of which are understaffed and under budgeted relative to their mandates—to maintain this type of expertise. A good oil team needs to have a command of economics, refinery operations, linear programming, chemistry, shipping, and international politics. Good oil economists are difficult to find outside the oil companies, and they command salaries far in excess of what can be paid in the public sector; and

WHEREAS, the Legislature also finds that issues relating to petroleum in Hawaii have been addressed frequently and in considerable depth in recent years and have indeed resulted in considerable discussion and legislation in the State. A partial list of additional publications on this issue include:

1989 Department of Business, Economic Development, and Tourism - "A Review of Factors Relating to the Establishment of a Regional Petroleum Reserve in Hawai`i."

1990 Department of the Attorney General - "An investigation of Gasoline Prices in Hawai`i: A Preliminary Report."

1993 Department of Economics, SSRI, Miklius and La Croix, "Divorcement Legislation and the Impact of Gasoline Retailing in the United States and Hawai`i."

1993 Department of the Attorney General - "The Impact of Oil Company Divorcement on Consumer Prices."

1994 Department of the Attorney General - "The Attorney General's 1994 Interim Report on the Investigation of Gasoline Prices."

1999 Department of the Attorney General - Senate Concurrent Resolution No. 154, H.D.1, Requesting the Attorney General to Investigate the Reasons Why Gasoline Prices Continue to Remain Significantly Higher than Mainland Prices.

2000 Department of the Attorney General - "Report to the Legislature - Progress Report of Gasoline Overcharge Antitrust Case"; and

WHEREAS, the relevant legislation, as of 1995, is listed in Appendices D through I of the Legislative Reference Bureau report "Regulating Hawai`i's Petroleum Industry," referred to above; and

WHEREAS, the Legislature further finds that notwithstanding the existing legislation and the Attorney General's gasoline overcharge antitrust action against the oil companies, the problems of excessively high gasoline fuel prices seem to continue to burden Hawaii's citizens; and

WHEREAS, the Legislature is also mindful that excessively high gasoline prices at the pump are a significant factor in raising the general high cost of living in Hawaii since virtually every business uses motor vehicle transportation which consumes motor fuel; and

WHEREAS, ironically, the high cost of gasoline raises prices even for the necessary goods and services purchased in Hawaii by companies in the oil business, creating a pyramid-type effect, and the high cost of living in Hawaii acts like inflation in lowering the value of Hawaii salaries which, on the whole, are generally lower than those in equivalent cities on the United States mainland; and

WHEREAS, the Department of Business, Economic Development, and Tourism has already been given the responsibility to collect, review, and interpret petroleum industry information with respect to the supply and pricing of petroleum products under the Petroleum Industry Reporting Act, chapter 486J, Hawaii Revised Statutes; and

WHEREAS, in particular, section 486J-5, Hawaii Revised Statutes, allows the Department, with its own staff and other support staff with expertise and experience in or with the petroleum industry, to gather, analyze, and interpret the information submitted to it and other information relating to the supply and price of petroleum products, with particular emphasis on motor vehicle fuels, including all of the following:

(1) The nature, cause, and extent of any petroleum or petroleum products shortage or condition affecting supply;

(2) The economic and environmental impacts of any petroleum and petroleum product shortage or condition affecting supply;

(3) Petroleum or petroleum product demand and supply forecasting methodologies utilized by the petroleum industry in Hawaii;

(4) The prices, with particular emphasis on retail motor fuel prices, and any significant changes in prices charged by the petroleum industry for petroleum or petroleum products sold in Hawaii and the reasons for such changes;

(5) The income, expenses, and profits, both before and after taxes, of the industry as a whole and of major firms within it, including a comparison with other major industry groups and major firms within them as to profits, return on equity and capital, and price- earnings ratio;

(6) The emerging trends relating to supply, demand, and conservation of petroleum and petroleum products;

(7) The nature and extent of efforts of the petroleum industry to expand refinery capacity and to make acquisitions of additional supplies of petroleum and petroleum products; and

(8) The development of a petroleum and petroleum products information system in a manner which will enable the State to take action to meet and mitigate any petroleum or petroleum products shortage or condition affecting supply; and

WHEREAS, section 486J-5, Hawaii Revised Statutes, also allows the Department of Business, Economic Development, and Tourism to conduct random or periodic audits and inspections of any supplier or suppliers of oil or petroleum products to determine whether they are unnecessarily withholding supplies from the market or are violating applicable policies, laws, or rules, and to analyze the impacts of state and federal policies, rules, and regulations upon the supply and pricing of petroleum products; and

WHEREAS, in addition, the Department is already required to publish annually and submit to the Governor and the Legislature twenty days prior to the first day of the current legislative session a summary, including any analysis and interpretation, of the information submitted to it pursuant to the Petroleum Industry Reporting Act; and

WHEREAS, federal government-imposed price controls on gasoline were enacted into law in the 1970s, creating market inefficiencies and gasoline shortages, resulting in long lines at gasoline pumps; and

WHEREAS, the removal of federal price and allocation controls permitted operational changes consistent with emerging technologies and consumer demands, including a shift away from full-service sales to lower-priced self-service sales, which had been constrained by federal regulations; and

WHEREAS, before implementing a price cap on the wholesale price of gasoline in Hawaii, or any other type of price control on gasoline, there is a need to ensure that similar problems will not result on the state level, thereby leading to market inefficiencies in Hawaii, such as reduced competition, increased costs of gasoline and other petroleum-based products, such as jet fuel, and longer lines at the pump; and

WHEREAS, one company that has offered competition with the oil companies, Aloha Petroleum, has indicated that it would have a difficult time remaining in business if the price cap proposed in S.B. No. 2179, S.D. 2, H.D. 1, were to be enacted into law; and

WHEREAS, another reason the Legislature should proceed cautiously in enacting price controls is to avoid possible constitutional violations in light of the federal court's decision overturning the State's attempt to impose rent control on refiners' gasoline stations; and

WHEREAS, a legislative review would allow the Legislature to review relevant data, studies, and other information, consultation with experts, and other necessary tasks in order to develop appropriate and responsive legislation and provide relief for Hawaii's consumers; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-First Legislature of the State of Hawaii, Regular Session of 2002, the House of Representatives concurring, that:

(1) The Legislature hereby establishes a joint Senate-House review committee to review petroleum fuel price issues as they relate to gas prices in the State;

(2) The joint Senate-House review committee shall be composed of twelve members, of which six shall be members of the State Senate, appointed by the Senate President, and six shall be members of the State House of Representatives, appointed by the Speaker of the House of Representatives; provided that the Senate President shall select the Senate co-chair of the committee from among the six Senate members, and the Speaker of the House of Representatives shall select the House co-chair of the committee from among the six House members;

(3) The purpose and the duties of the joint review committee and the subject matter and scope of its authority shall be to gather and review publicly available information, studies, and reports, including unsealed documents in Chevron et al. v. Cayetano et al. and the Attorney General's investigation of the petroleum industry, assess and evaluate this information, and make recommendations to the Legislature concerning:

(A) Proposed remedies and solutions available to reduce gasoline prices in Hawaii, including but not limited to proposals to impose a price cap on wholesale gasoline prices and to amend State laws to facilitate the prosecution of oligopolies; and

(B) With respect to any solution identified, the costs and benefits in terms of economics, human well being, business advancement or disruption, and other outcomes that may be associated with each such remedy;

(4) The joint review committee may, subject to available funds, employ professional, technical, clerical, or other staff, including experts, as necessary for the proper performance of its duties; and

(5) The joint review committee shall be appointed by the Senate President and Speaker of the House of Representatives exclusively from the membership of their respective bodies;

(6) The joint review committee is authorized to meet continuously throughout the interim period between the 2002 and 2003 Regular Sessions, and shall thereafter be dissolved unless further extended by the Senate and the House of Representatives; and

(7) The joint review committee may continue beyond the period set forth in paragraph (6) for the purpose of monitoring and, if necessary, to propose the amendment or repeal of any legislation enacted as a result of the committee's efforts; and

BE IT FURTHER RESOLVED that the Senate President and Speaker of the House of Representatives, from time to time, may refer to the joint review committee specific matters that are within the scope of the Committee's jurisdiction, and that the Committee shall work in cooperation with the President and Speaker for the purposes stated in this Concurrent Resolution; and

BE IT FURTHER RESOLVED that the Department of Business, Economic Development, and Tourism, with its own staff and other support staff and particularly those having expertise and experience in or with the petroleum industry, is requested to gather, analyze, and interpret the information submitted to it under the Petroleum Industry Reporting Act and other relevant information relating to the supply and price of petroleum products, with particular emphasis on motor vehicle fuels, pursuant to section 486J-5, Hawaii Revised Statutes, and report this information to the joint review committee; and

BE IT FURTHER RESOLVED that the Department of Business, Economic Development, and Tourism is further requested to work under the direction of the joint review committee and provide such technical, staffing, and other assistance to the joint review committee as may be necessary, including providing assistance in collecting, reviewing, analyzing, and interpreting documents, testimony, and other evidence obtained by the committee, and in coordinating the day-to-day work of the committee; and

BE IT FURTHER RESOLVED that the Legislative Reference Bureau is requested to assist the joint review committee in conducting legal and policy analyses, as appropriate, including a review of laws and studies in other jurisdictions, to the extent this work is not conducted by the Attorney General, and in drafting appropriate implementing legislation as requested by the committee; and

BE IT FURTHER RESOLVED that the Department of the Attorney General is requested to provide the joint review committee with copies of documents relating to the Attorney General's investigation of the petroleum industry during the 1990s, as may be available, and in providing legal analyses and advice as needed, to the extent that the Attorney General's participation in the work of the committee does not conflict with any litigation of which the Attorney General is a party; and

BE IT FURTHER RESOLVED that all other departments, agencies, and offices of the State, as appropriate, are requested to cooperate with and provide assistance to the joint review committee; and

BE IT FURTHER RESOLVED that the joint review committee shall submit to the Legislature its findings and recommendations, including, to the extent feasible, any proposed legislation, no later than January 15, 2003; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the President of the Senate, Speaker of the House of Representatives, the Governor, the Attorney General; the Director of the Department of Business, Economic Development, and Tourism; and the Acting Director of the Legislative Reference Bureau.