Report Title:

Consumers; Gasoline Price Caps

Description:

Amends the proposed maximum pre-tax wholesale price of regular unleaded gasoline by determining the baseline price to be the national weighted average spot price of unleaded gasoline as reported by the Oil Price Information Service; repeals the maximum pre-tax retail gasoline price; and establishes maximum pre-tax wholesale prices for mid-grade and premium gasoline; requires by 1/1/06, not less than 85% of all gasoline sold in the State contain 10% ethanol by volume; establishes a task force to investigate the petroleum industry and its operations on the neighbor islands; and makes an appropriation for the auditor to carry out duties under this Act. (HD1)

THE SENATE

S.B. NO.

3193

TWENTY-SECOND LEGISLATURE, 2004

S.D. 2

STATE OF HAWAII

H.D. 1


 

A BILL FOR AN ACT

 

RELATING TO CONSUMERS.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. In response to long-standing and serious concerns over the high price of gasoline in Hawaii, the legislature enacted Act 77, Session Laws of Hawaii 2002, which established maximum pre-tax wholesale and retail price limits on regular unleaded gasoline to be sold in the State, on a self-serve basis. In enacting Act 77, the legislature found that, contrary to the claims of the oil companies, the high gasoline prices were not attributable to the high cost of doing business in the State. Rather, the legislature found then that the Hawaii market was an oligopolistic and highly concentrated market void of competition. The legislature further determined from evidence obtained in Anzai v. Chevron et al., the State's antitrust lawsuit, that:

(1) Retail gasoline prices in the State were much higher than prices observed in other oligopolistic and equally concentrated markets;

(2) Retail gasoline prices in the State exhibited far less volatility in comparison to prices observed in other oligopolistic and equally concentrated markets; and

(3) The major oil companies were realizing profit margins far in excess of the margins realized in other oligopolistic and equally concentrated markets.

The legislature determined that unless something was done the structure of the gasoline market in the State would perpetuate high and rising prices, supra-competitive margins, and a continued lack of competition.

In accordance with Act 77, the maximum pre-tax wholesale price was to be determined on a weekly basis, based on the average of spot pipeline daily prices for regular unleaded gasoline for the markets of Los Angeles, San Francisco, and the Pacific Northwest. The limits were to become effective July 1, 2004.

The legislature finds that the spot pipeline prices for the markets of Los Angeles, San Francisco, and the Pacific Northwest may be too volatile and may not provide an appropriate basis for determining maximum gasoline prices for Hawaii. A more appropriate basis for determining maximum gasoline prices may be the national weighted average spot price for unleaded gasoline as reported by the Oil Price Information Service. However, the legislature finds that the auditor should address the question of determining the most appropriate method for setting the baseline gasoline prices for the State.

The legislature also finds that it may be appropriate to set maximum pre-tax wholesale prices for mid-grade and premium gasoline. Without mid-grade and premium gasoline price limits, these prices could see increases with the imposition of price limits on regular unleaded gasoline through supply manipulations.

Further, due to the small size and unusual characteristics of the fuel markets on the islands of Molokai and Lanai no price limits should be imposed at this time. In similar manner, due to its remote location and inadequate highway access, the Hana district on the island of Maui should also be exempted from the price limits.

The legislature further finds that the problem of high gasoline prices is principally due to a lack of vigorous competition at the wholesale level among the members of the oligopoly that was acknowledged in the testimony and unsealed documents in Anzai v. Chevron et al. and described in the study of fuel prices and legislative initiatives for the State of Hawaii, prepared by Stillwater Associates for the department of business, economic development, and tourism.

For refiners, non-refiners, and jobbers at the wholesale level, gasoline is the primary source of profit. By contrast, there is far greater competition at the retail level where there are three hundred thirty-nine gasoline stations in Hawaii. Further, as stated on page 62 of the Stillwater Associates study, "Today, service stations in Hawaii derive revenues not just from the c-stores (convenience stores) that first replaced the service bays, but from multiple sources, ranging from car rentals to fast food, and discount stores to car washes." Many of these service stations could compete vigorously for gasoline sales by accepting lower margins on gasoline in order to bring in more customers for these other profitable products and services.

These conclusions were also supported by the United States District Court in Chevron U.S.A., Inc. v. Cayetano, Civil No 97-00933, in which the court held that the lease rent cap statute in Act 257 passed by the legislature in 1997 was unconstitutional. In its findings of fact, the court found that "Hawaii's gasoline market is an oligopoly at the wholesale level but very competitive at the retail level."

Accordingly, the legislature finds that it should be sufficient to limit gasoline prices solely at the wholesale level in order to allow competition to flourish at the retail level.

The legislature further recognizes that the more remote gasoline retail markets on the islands of Kauai, Maui, and Hawaii are serviced by relatively small and middle sized jobbers. These jobbers lack the economies of scale that the refiners, non-refiners, and large jobbers enjoy. Accordingly, the legislature finds it appropriate that jobbers that service the smaller markets on Kauai, Maui, and Hawaii be given an added neighbor island wholesale adjustment factor.

The legislature further finds that the responsibility to gather and analyze information received from the petroleum industry and to perform periodic audits of the petroleum industry presently rests with the department of business, economic development, and tourism. However, the mission of the department of business, economic development, tourism should not be to collect and analyze petroleum data or perform periodic audits. That responsibility should be with the auditor.

The legislature also believes that consumers and retail gasoline dealers on the neighbor islands are especially in need of assistance, due to the added transportation costs and lack of adequate terminals for the off loading and storage of gasoline on the neighbor islands. To further ensure that the special conditions and concerns with which residents on the neighbor islands are confronted are properly addressed, further study is necessary.

The purposes of this Act are to:

(1) Change the baseline for determining maximum pre-tax wholesale gasoline prices by using the national weighted average spot price of unleaded gasoline as reported by the Oil Price Information Service;

(2) Extend maximum pre-tax wholesale price limits to mid-grade and premium gasoline;

(3) Repeal the price limits on the sale of gasoline on the islands of Molokai and Lanai and the Hana district on the island of Maui;

(4) Repeal the maximum pre-tax retail gasoline price;

(5) Provide a neighbor island wholesale adjustment factor to qualified jobbers servicing the islands of Kauai, Maui, and Hawaii;

(6) Require that beginning January 1, 2006, not less than eighty-five per cent of all gasoline sold in the State shall contain ten per cent ethanol by volume;

(7) Transfer the responsibility for collecting and analyzing information received from the petroleum industry from the department of business, economic development, and tourism to the auditor;

(8) Establish a legislative task force to investigate the petroleum industry and its operations on the islands of Kauai, Maui, Molokai, Lanai, and Hawaii;

(9) Direct the auditor to undertake a study to determine the most appropriate method of establishing a baseline gasoline price;

(10) Extend the effective date for the imposition of the maximum pre-tax wholesale gasoline price limit until July 1, 2005; and

(11) Make an appropriation, to be expended by the auditor, to carry out the purposes of chapter 486J.

SECTION 2. Chapter 486H, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"486H-A Provisions not to be used as a defense. No requirement or provision contained in this chapter may be used by any person, including any manufacturer, wholesaler, jobber, or retail dealer of petroleum products, as a defense in any action brought pursuant to this chapter or chapter 480.

486H-B Same price and equal supply to dealers. (a) Each refiner, wholesaler, and jobber that supplies gasoline products to a retailer shall provide any discounts, deductions, or other price reductions or other incentives uniformly and evenly to all retailers.

(b) During any periods of supply shortage, all refiners, wholesalers, and jobbers shall distribute available supplies proportionately and equitably and not discriminate among retailers, whether company owned, dealer owned, or independent.

(c) Any person who wilfully violates this section shall be:

(1) Subject to a civil penalty not to exceed $500,000;

(2) Deemed to have committed an unfair or deceptive act or practice in the conduct of a trade or commerce; and

(3) Subject to the penalties specified in chapter 480.

(d) For purposes of this section, "person" means, in addition to the definition contained in section 486J-1, any responsible corporate officer."

SECTION 3. Section 486H-13, Hawaii Revised Statutes, is amended to read as follows:

"[[]486H-13[]] Maximum pre-tax wholesale price for the sale of gasoline; civil actions. (a) Notwithstanding any law to the contrary, effective July 1, 2005, no manufacturer, wholesaler, or jobber may sell regular unleaded, mid-grade, or premium gasoline to a dealer retail station, an independent retail station, or to another jobber or wholesaler on the islands of Oahu, Kauai, Maui (except the Hana district), and Hawaii at a price above the maximum pre-tax wholesale prices established pursuant to subsection (b). The commission shall publish the maximum pre-tax wholesale prices by means that shall include the [Internet] internet website for the State of Hawaii.

(b) On a weekly basis, the commission shall determine the maximum pre-tax wholesale price of regular unleaded, mid-grade, and premium gasoline for each island as follows:

(1) For the island of Oahu, the maximum pre-tax wholesale price of regular unleaded gasoline shall consist of the baseline price for regular unleaded gasoline, plus the location adjustment factor[,] and the marketing margin factor[;], and for mid-grade and premium gasoline, the additional mid-grade and premium adjustment factor; and

(2) For the islands of Kauai, [Molokai, Lanai,] Maui[,] (except the Hana district), and Hawaii, the maximum pre-tax wholesale price of regular unleaded, mid-grade, and premium gasoline shall consist of the maximum pre-tax wholesale price of regular unleaded, mid-grade, and premium gasoline for Oahu, plus, for qualified jobbers, the neighbor island wholesale adjustment factor.

(c) The baseline price for regular unleaded gasoline [for Oahu] referred to in subsection (b) shall be determined on a weekly basis[,] and shall be equal to the national weighted average [of:

(1) The spot pipeline daily price for regular unleaded gasoline for Los Angeles;

(2) The spot pipeline daily price for regular unleaded gasoline for San Francisco; and

(3) The spot daily price for the Pacific Northwest,]

spot price of selected unleaded gasoline as reported and published by the Oil Price Information Service or other comparable service, as determined by the commission, for the five business days of the preceding week.

(d) The location adjustment factor referred to in subsection (b) shall be $.04 per gallon for the first year after July 1, [2004,] 2005, and shall thereafter be subject to annual adjustment pursuant to section 486H-16(a).

(e) The marketing margin factor referred to in subsection (b) shall be $.18 per gallon for the first year after July 1, [2004,] 2005, and shall thereafter be subject to annual adjustment pursuant to section 486H-16(a).

(f) The neighbor island wholesale adjustment factor for qualified jobbers shall be the sum of the neighbor island location adjustment factor, plus the neighbor island marketing factor.

(g) The neighbor island location adjustment factor shall be $.04 per gallon for the first year after July 1, [2004,] 2005, and shall thereafter be subject to annual adjustment pursuant to section 486H-16(a).

(h) The neighbor island marketing factor shall be $.04 per gallon for the first year after July 1, [2004,] 2005, and shall thereafter be subject to annual adjustment pursuant to section 486H-16(a).

(i) The mid-grade adjustment factor shall be $.03 per gallon for the first year after July 1, 2005, and shall thereafter be subject to annual adjustments pursuant to section 486H-16(a).

(j) The premium adjustment factor shall be $.06 per gallon for the first year after July 1, 2005, and shall be thereafter be subject to annual adjustments pursuant to section 486H-16(a).

[(i)] (k) Any manufacturer, wholesaler, or jobber who knowingly violates any requirement imposed or rule adopted under this section shall be subject to a civil penalty, for each [such] violation, [which penalty shall be] equal to three times the amount of the overcharge[,] or $250,000, whichever is greater, and shall be liable for the costs of the action[,] and reasonable attorney's fees as determined by the court. Within two years from the date the commission obtains actual knowledge of the violation, the commission may institute a civil action in a court of competent jurisdiction to collect the civil penalty, the costs, and attorney's fees. In the case of ongoing violation, the two-year period shall start from the date of the last violation. The commission may refer any such action to the attorney general as it deems appropriate. As used in this subsection, "overcharge" means the number of gallons of gasoline sold, times the wholesale price at which the manufacturer or jobber sold regular unleaded, mid-grade, or premium gasoline to a dealer retail station, less taxes assessed, less the maximum pre-tax wholesale price established pursuant to subsection (b).

[(j)] (l) The commission shall have the power to determine the extent to which a manufacturer, wholesaler, or jobber is complying with any requirement imposed or rule adopted under this section, including the power to compel a manufacturer, [[]wholesaler,[]] or jobber to submit documents, data, and information necessary and appropriate for the commission to determine such compliance. The commission may use data collected by the department of business, economic development, and tourism pursuant to chapter 486J, as well as obtain the assistance of that department in determining such compliance.

[(k) The commission shall adopt rules pursuant to chapter 91 as may be necessary to implement this section.]

(m) For purposes of this section, a "qualified jobber" shall be any jobber that:

(1) Is a non-refiner that participates in the distribution of gasoline on the islands of Kauai, Maui (except the Hana district), or Hawaii, sells gasoline and diesel fuel at the wholesale or retail level; and

(2) Is certified as a qualified jobber by the commission, upon the submittal and approval of an application, the form, content, and filing deadline of which shall be determined by the commission, by December 31 of any year in which the jobber intends to qualify as a qualified jobber for the following year."

SECTION 4. Section 486H-14, Hawaii Revised Statutes, is repealed.

["[486H-14] Maximum pre-tax retail price for gasoline sold on a self-serve basis; civil actions. (a) Notwithstanding any law to the contrary, no retail station may sell regular unleaded gasoline at retail, on a self-serve basis, at a price above the maximum pre-tax retail prices established pursuant to subsection (b). The commission shall publish the maximum pre-tax retail prices by means that shall include the Internet website for the State of Hawaii. The commission may also publish the retail prices inclusive of all taxes.

(b) On a weekly basis, the commission shall determine the maximum pre-tax retail price of gasoline. The maximum pre-tax retail price for regular unleaded gasoline shall consist of the maximum pre-tax wholesale price for regular unleaded gasoline established pursuant to section 486H-13(b), plus a retail marketing margin factor.

(c) The retail marketing margin factor shall be $.16 per gallon for the first year, and shall thereafter be subject to adjustment pursuant to section 486H-16(b).

(d) Any retail station that knowingly violates any requirement imposed or rule adopted under this section shall be subject to a civil penalty equal to three times the amount of the overcharge or $25,000, whichever is greater, and shall be liable for the costs of the action, and reasonable attorney's fees as determined by the court. Within two years from the date the commission obtains actual knowledge of the violation, the commission may institute a civil action in a court of competent jurisdiction to collect the civil penalty, the costs, and the attorney's fees. In the case of ongoing violation, the two-year period shall start from the date of the last violation. The commission may refer any such action to the attorney general as it deems appropriate. As used in this subsection, "overcharge" means the number of gallons of gasoline sold, times the retail price at which the retail station sold regular unleaded gasoline, less taxes assessed, less the maximum pre-tax retail price established pursuant to subsection (b).

(e) The commission shall have the power to determine the extent to which a retail station is complying with any requirement imposed or rule adopted under this section, including the power to compel a retail station to submit documents, data, and information necessary and appropriate for the commission to determine such compliance. The commission may use data collected by the department of business, economic development, and tourism pursuant to chapter 486J, as well as obtain the assistance of such department in determining such compliance.

(f) The commission shall adopt rules pursuant to chapter 91 as may be necessary to implement this section."]

SECTION 5. Section 486H-15, Hawaii Revised Statutes, is amended to read as follows:

"[[]486H-15[]] Governor's emergency powers. (a) Notwithstanding any law to the contrary, the governor may suspend in whole or in part[,] section 486H-13[, section 486H-14,] or any rule adopted pursuant to those sections whenever the governor issues a written determination that strict compliance with any section or a rule will cause a major adverse impact on the economy, public order, or the health, welfare, or safety of the people of Hawaii. In the written determination, the governor shall state the specific provision of the section or rule that strict compliance with will cause a major adverse impact on the economy, public order, or the health, welfare, or safety of the people of the State, along with specific reasons for that determination. The governor shall publish this determination in accordance with section 1-28.5. The suspension shall take effect upon issuance of the written determination by the governor.

(b) Except as provided in subsection (c), the suspension under subsection (a) shall remain in effect until the earlier of:

(1) The adjournment of the next regular or special session of the legislature; or

(2) The effective date of any legislative enactment intended to address the major adverse impact;

provided that if the legislature has enacted legislation to address the major adverse impact, and the governor vetoes the legislation, the suspension shall terminate on the date of that veto, and the [pre-tax] maximum pre-tax wholesale [price or the pre-tax maximum retail price] gasoline prices in effect immediately prior to the issuance of the written determination by the governor shall take effect on the day after the date of the veto; and provided further that if no action is taken by the legislature during the regular or special session to address the major adverse impact, then the [pre-tax] maximum pre-tax wholesale [price or the pre-tax maximum retail price] gasoline prices in effect immediately prior to the issuance of the written determination by the governor shall take effect on the day after adjournment sine die of the regular or special session.

(c) If the written determination is issued while the legislature is in session, the suspension under subsection (a) shall remain in effect until the earlier of:

(1) The adjournment of that session of the legislature; or

(2) The effective date of any legislative enactment intended to address the major adverse impact;

provided that if the legislature has enacted legislation to address the major adverse impact, and the governor vetoes the legislation, the suspension shall terminate on the date of that veto, and the [pre-tax] maximum pre-tax wholesale [price or the pre-tax maximum retail price] gasoline prices in effect immediately prior to the issuance of the written determination by the governor shall take effect on the day after the date of the veto; and provided further that if no action is taken by the legislature during the regular or special session to address the major adverse impact, then the [pre-tax] maximum pre-tax wholesale [price or the pre-tax maximum retail price] gasoline prices in effect immediately prior to the issuance of the written determination by the governor shall take effect on the day after adjournment sine die of the regular or special session."

SECTION 6. Section 486H-16, Hawaii Revised Statutes, is amended to read as follows:

"[[]486H-16[]] Adjustments. (a) A manufacturer, wholesaler, or jobber may petition the commission to adjust the maximum pre-tax wholesale price of regular unleaded, mid-grade, or premium gasoline in the event of a change in the value of the baseline price for regular unleaded gasoline, the location adjustment factor, the marketing margin factor, [or] the neighbor island wholesale adjustment factor[.], the mid-grade adjustment factor, or the premium adjustment factor. The petitioner shall bear the burden of proof to establish by clear and convincing evidence the need for and the amount of any adjustment. The adjustments shall be determined as follows:

(1) The value of the baseline price for regular unleaded gasoline shall be equal to the national weighted average [of:

(A) The spot pipeline daily price for regular unleaded gasoline for Los Angeles;

(B) The spot pipeline daily price for regular unleaded gasoline for San Francisco; and

(C) The spot daily price for the Pacific Northwest,]

spot price of selected unleaded gasoline as reported and published by the Oil Price Information Service or other comparable service, as determined by the auditor pursuant to section 9 of S.B. No. 3193 (2004), for the five business days of the preceding week;

(2) The value of the location adjustment factor in effect at the time the petition is filed shall be adjusted to equal the average of the actual acquisition cost to non-refiner marketers to obtain gasoline from refiners or importers for sale on the island of Oahu over the prior twelve-month period, which cost shall be taken from arm's length transactions between non-refiner marketers, and refiners or importers, such as exchange agreements, sales agreements, or other similar agreements; provided that the location adjustment factor shall not exceed the reasonable cost of importing gasoline to the island of Oahu. As used in this paragraph, "actual acquisition cost" means the amount over the base price of regular unleaded gasoline that a non-refiner marketer pays to a third party for delivery of [such] the gasoline into a terminal located on the island of Oahu;

(3) The value of the marketing margin factor in effect at the time the petition is filed shall be adjusted by adding to such value the difference between:

(A) The average of the difference over the prior twelve-month period between:

(i) The dealer tank wagon price for sales for resale; and

(ii) The bulk price for sales for resale, for Petroleum Administration for Defense (PAD) District V,

as reported and published by the Energy Information Administration or its successor in Table 31 - "Motor Gasoline Prices by Grade, Sales Type, PAD District, and State" or other source containing the same information; less

(B) The average of the difference over the period from 1994 until the most current year between:

(i) The dealer tank wagon price for sales for resale; and

(ii) The bulk price for sales for resale, for Petroleum Administration for Defense (PAD) District V,

as reported and published by the Energy Information Administration or its successor in Table 31 - "Motor Gasoline Prices by Grade, Sales Type, PAD District, and State" or other source containing the same information;

(4) The value of the neighbor island location adjustment factor in effect at the time the petition is filed shall be adjusted to equal the actual acquisition cost to non-refiner marketers to obtain gasoline from a refiner or importer for sale on the island of Kauai, [Molokai, Lanai,] Maui[,] (except the Hana district), or Hawaii, over the prior twelve-month period, which cost shall be taken from arm's length transactions between non-refiner marketers, and refiners or importers, such as exchange agreements, sales agreements, or other similar agreements; provided that the neighbor island location adjustment factor shall not exceed the reasonable cost of importing gasoline to the island of Kauai, [Molokai, Lanai,] Maui[,] (except the Hana district), or Hawaii, from any port on the island of Oahu. As used in this subsection, "actual acquisition cost" means the amount over the base price of regular unleaded gasoline that a non-refiner marketer [[]pays[]] to a third party for delivery of [such] the gasoline into a terminal located on Kauai, [Molokai, Lanai,] Maui[,] (except the Hana district), or Hawaii; and

(5) The value of the neighbor island marketing factor in effect at the time the petition is filed shall be adjusted if there are material changes in the cost factors associated with marketing gasoline on the island of Kauai, [Molokai, Lanai,] Maui[,] (except the Hana district), or Hawaii, such as terminaling, storage, or distribution costs.

(6) The value of the mid-grade and the premium adjustment factors in effect at the time the petition is filed shall be adjusted by any increase in the mid-grade and premium adjustment factors as published by the Mean of Platt Singapore.

[(b) A retail station may petition the commission to adjust the maximum pre-tax retail price of gasoline in the event of a change in the maximum pre-tax wholesale price for regular unleaded gasoline, or the value of the retail marketing margin factor. The petitioner shall bear the burden of proof to establish by clear and convincing evidence the need for and the amount of any adjustment. The adjustment shall be determined as follows:

(1) The value of the retail marketing margin factor for regular unleaded gasoline established in section 486H-14(c) shall be adjusted upward only if such value is less than the average of the difference over the prior twelve-month period between:

(A) The "through retail outlets" price for sales to end users for regular unleaded gasoline; and

(B) The dealer tank wagon price, for sales for resale for regular unleaded gasoline, for Petroleum Administration for Defense (PAD) District V,

as reported and published by the Energy Information Administration or its successor in Table 31 - "Motor Gasoline Prices by Grade, Sales Type, PAD District, and State" or other source containing the same information.

(c)] (b) If the commission adjusts the maximum pre-tax wholesale [price or the maximum pre-tax retail price of regular unleaded gasoline,] gasoline prices, the commission shall publish its findings and the adjusted prices by means that shall include the [Internet] internet website for the State of Hawaii.

[(d)] (c) In its discretion and without a petition having been filed, the commission may adjust the maximum pre-tax wholesale [price or the maximum pre-tax retail price of regular unleaded] gasoline prices if an adjustment is necessary as a result of a change in the value of the baseline price for regular unleaded gasoline, the location adjustment factor, the marketing margin factor, the neighbor island wholesale adjustment factor, [or the retail marketing margin factor.] the mid-grade adjustment factor, or premium adjustment factor.

[(e)] (d) Nothing in section 486H-13 [or 486H-14] shall be construed to prohibit the filing of a petition during the first year after July 1, [2004.] 2005."

SECTION 7. Chapter 486J, Hawaii Revised Statutes, is amended as follows:

1. By amending section 486J-1 by adding two new definitions to be properly inserted and to read:

""Auditor" means the person appointed pursuant to article VII, section 10 of the state constitution.

"Ten per cent ethanol by volume" means a blend of gasoline and ethanol that has an ethanol content, exclusive of denaturants and permitted contaminants, that is not less than 9.2 per cent by volume and not more than 10.0 per cent by volume of the blend, as determined by an appropriate United States Environmental Protection Agency or American Society of Testing Material standard method of analysis of alcohol content in motor fuels."

2. By amending section 486J-1 by repealing the definition of "petroleum commissioner" or "commissioner":

[""Petroleum commissioner" or "commissioner" means the administrator of the energy, resources, and technology division of the department of business, economic development, and tourism."]

3. By amending section 486J-3, Hawaii Revised Statutes, by amending subsection (a) to read:

"(a) Each distributor [shall], at such reporting dates as the [commissioner] auditor may establish, shall file with the [commissioner,] auditor, on forms prescribed, prepared, and furnished by the [commissioner,] auditor, a certified statement showing separately for each county and for the islands of Lanai and Molokai within which and whereon fuel is sold or used during the last preceding reporting period, the following:

(1) The total number of gallons or units of fuel refined, manufactured, or compounded by the distributor within the State and sold or used by the distributor, and if for ultimate use in another county or on another island, the name of that county or island;

(2) The total number of gallons or units of fuel imported or exported by the distributor or sold or used by the distributor, and if for ultimate use in another county or on another island, the name of that county or island;

(3) The total number of gallons or units of fuel sold as liquid fuel, aviation fuel, diesel fuel, and other types of fuel as required by the commissioner;

(4) The total number of gallons or units of fuel and the types thereof sold to: federal, state, and county agencies, ships stores, or base exchanges, commercial agricultural accounts, commercial nonagricultural accounts, retail dealers, and other customers as required by the commissioner;

(5) Monthly Hawaii weighted average prices and sales volumes of finished leaded regular, unleaded regular, and premium motor gasoline, and of each other grade of gasoline sold through company-operated retail outlets, to other end-users, and to wholesale customers;

(6) Monthly Hawaii weighted average prices and sales volumes for residential sales, commercial and institutional sales, industrial sales, sales through company-operated retail outlets, sales to other end-users, and wholesale sales of No. 2 diesel fuel and No. 2 fuel oil; and

(7) Monthly Hawaii weighted average prices and sales volumes for retail sales and wholesale sales of No. 1 distillate, kerosene, finished aviation gasoline, kerosene-type jet fuel, No. 4 fuel oil, residual fuel oil, and consumer grade propane.

[The commissioner shall prescribe by rule when the first report shall be submitted.]"

4. By amending section 486J-5, Hawaii Revised Statutes, to read:

"486J-5 Analysis of information; audits and inspections; summary reports. (a) The [petroleum commissioner,] auditor, with the [commissioner's] auditor's own staff and other support staff, including private consultants, with expertise and experience in, or with, the petroleum industry, shall gather, analyze, and interpret the information submitted to it pursuant to sections 486J-3 and 486J-4 and other information relating to the supply and price of petroleum products, with particular emphasis on motor vehicle fuels, including, but not limited to, 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 wholesale and retail motor vehicle 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.

(b) The [commissioner shall] auditor may 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. The [commissioner] auditor may solicit assistance of the department of taxation in any such audit. The [commissioner] auditor shall cooperate with other state and federal agencies to ensure that any audit or inspection conducted by the [commissioner] auditor is not duplicative of the data received by any of their audits or inspections which is available to the [commissioner.] auditor.

(c) The [commissioner shall] auditor may analyze the impacts of state and federal policies, rules, and regulations upon the supply and pricing of petroleum products.

(d) The [commissioner] auditor shall publish annually and submit to the governor, the department, 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 this chapter, and any other activities [taken] undertaken by the [commissioner,] auditor, including civil penalties imposed and referrals of violations to the attorney general under section 486J-9[.]; provided that the auditor shall report to the governor and the legislature, in a timely manner, on any significant aberrations, trends, or conditions that may adversely impact the gasoline consumers in the State. Any person may submit comments in writing regarding the accuracy or sufficiency of the information submitted. [At the option of the director, this report may be combined with reporting required by section 196-4(11), in the director's role as state energy resources coordinator.]"

5. By amending section 486J-6, Hawaii Revised Statutes, by amending subsection (c) to read:

"(c) Unless otherwise provided by law, with respect to data provided pursuant to sections 486J-3 and 486J-4, neither the [commissioner,] auditor, nor any employee of the [department,] office of the auditor, may do any of the following:

(1) Use the information furnished under sections 486J-3 and 486J-4 for any purpose other than the statistical purposes for which it is supplied;

(2) Make any publication whereby the data furnished by any particular establishment or individual under sections 486J-3 and 486J-4 can be identified; or

(3) Permit anyone to examine the individual reports provided under sections 486J-3 and 486J-4 other than the public utilities commission, the attorney general, and the consumer advocate, and the authorized representatives and employees of each."

6. By amending section 486J-10, Hawaii Revised Statutes, to read:

"486J-10 Ethanol content requirement. (a) [The commissioner shall adopt rules in accordance with chapter 91 to require that gasoline sold in the State for use in motor vehicles contain ten per cent ethanol by volume. The amounts of gasoline sold in the State containing ten per cent ethanol shall be in accordance with rules as the commissioner may deem appropriate. The commissioner may authorize the sale of gasoline that does not meet these requirements as provided in subsection (d).] Beginning January 1, 2006, not less than eighty-five per cent of all gasoline sold by each distributor for use in motor vehicles in the State shall contain ten per cent ethanol by volume on an annual basis.

[(b) Gasoline blended with an ethanol-based product, such as ethyl tertiary butyl ether, shall be considered to be in conformance with this section if the quantity of ethanol used in the manufacture of the ethanol-based product represents ten per cent, by volume, of the finished motor fuel.

(c)] (b) Ethanol used in the manufacture of ethanol-based gasoline additives, such as ethyl tertiary butyl ether, may be considered to contribute to the distributor's conformance with this section; provided that the total quantity of ethanol used by the distributor is an amount equal to or greater than the amount of ethanol required under this section.

[(d)] (c) The [commissioner] director may authorize the sale of gasoline that does not meet the provisions of this section:

(1) To the extent that sufficient quantities of competitively-priced ethanol are not available or insufficient ethanol production capacity exists to meet the minimum requirements of this section; or

(2) In the event of any other circumstances for which the [commissioner] director determines compliance with this section would cause undue hardship.

[(e)] (d) Within ninety calendar days following the close of each calendar year, [Each] each distributor[, at such reporting dates as the commissioner may establish,] shall file with the [commissioner,] director, on forms prescribed, prepared, and furnished by the [commissioner,] director, a [certified] statement for the previous calendar year showing:

[(1) The price and amount of ethanol available;

(2)] (1) The amount of ethanol-blended [fuel] gasoline sold by the distributor[;] to fleets or gasoline retailers;

[(3)] (2) The amount of non-ethanol-blended gasoline sold by the distributor[;] to fleets or gasoline retailers; and

[(4)] (3) Any other information the [commissioner] director shall require for the purposes of compliance with this section.

[(f)] (e) Provisions with respect to confidentiality of information shall be the same as provided in section 486J-7.

[(g)] (f) Any distributor or any other person violating the requirements of this section shall be subject to a fine of not less than $2 per gallon of nonconforming fuel[, up to a maximum of $10,000 per infraction].

[(h)] (g) The [commissioner, in accordance with chapter 91, shall] director may adopt rules for the administration and enforcement of this section. Such rules shall be exempt from the requirements of chapter 91."

7. Except as provided by items 1 to 6 of this section of this Act, by amending chapter 486J, Hawaii Revised Statutes, by replacing every reference to "petroleum commissioner" or like term and "commissioner" or like term wherever found, with "auditor" or like term, as the context requires.

8. By repealing section 486J-12, Hawaii Revised Statutes.

["486J-12 Rules. The commissioner shall adopt, amend, or repeal such rules as [the commissioner] may deem proper to fully effectuate this chapter."]

9. By repealing chapter 486J, part II, Hawaii Revised Statutes.

SECTION 8. (a) There shall be convened a special task force comprised of eight members of the legislature to investigate the petroleum industry and its operations and impacts on the islands of Kauai, Maui, Molokai, Lanai, and Hawaii.

(b) Four members of the task force shall be appointed by the speaker of the house of representatives and four members shall be appointed by the president of the senate. Of the eight members, the speaker of the house of representatives and the president of the senate shall each select a co-chairperson for the task force.

(c) The duties of the task force are as follows:

(1) Obtain an inventory of petroleum facilities serving each of the islands of Kauai, Maui, Molokai, Lanai, and Hawaii, including, but not limited to, ships, barges, and other modes of transporting, loading and off-loading facilities, storage facilities, and pipelines and rolling stock for the movement and distribution of petroleum products;

(2) Meet with persons involved in the petroleum industry on the islands of Kauai, Maui, Molokai, Lanai, and Hawaii, including, but not limited to, shippers, wholesalers, jobbers, retailers, and consumers;

(3) Determine the special needs and concerns of the petroleum suppliers and consumers on the islands of Kauai, Maui, Molokai, Lanai, and Hawaii;

(4) Determine what, if any, special barriers to competition exist on the islands of Kauai, Maui, Molokai, Lanai, and Hawaii;

(5) Review the need for a tax credit program to encourage the development of additional fuel storage terminal facilities on the islands Kauai, Maui, Molokai, Lanai, and Hawaii;

(6) Consider the need for a Hawaii fuel authority that would own and operate a fuel import terminal, buy gasoline in the world market, and resell the gasoline at retail at cost throughout the State; and

(7) Consider any other issues or concerns that it may have relating to the petroleum industry in the State.

(d) The auditor shall provide necessary staff and logistical support to serve the task force.

(e) The task force shall prepare and submit a report with recommendations, including any proposed legislation, to the legislature twenty day before the convening of the regular session 2005.

SECTION 9. The auditor shall undertake a study, including, but not limited to, a review and analysis of the information it collects from the petroleum industry pursuant to chapter 486J, Hawaii Revised Statutes, to determine the following:

(1) Whether there may be a more appropriate method of determining a baseline for regular unleaded gasoline, other than the national weighted average spot price of selected unleaded gasoline, as reported and published by the Oil Price Information Service;

(2) Whether there may be more appropriate methods for establishing the location adjustment factor, the marketing margin factor, the neighbor island location and marketing adjustment factors, the mid-grade adjustment factor, and the premium adjustment factor;

(3) Whether maximum pre-tax retail gasoline prices should be imposed;

(4) Whether maximum pre-tax wholesale and retail diesel fuel prices should be imposed; and

(5) Whether the neighbor island wholesale adjustment factor is necessary, and if so, whether it is adequate.

The auditor shall retain necessary staff, including professional consultants, to complete its study and shall report its findings and recommendations, including proposed legislation, to the legislature twenty days before the convening of the Regular Session 2005

SECTION 10. Twenty days before the convening of the Regular Session of 2005, the public utilities commission shall report to the legislature recommending the number of new staff positions, the cost for the new positions, and other anticipated costs required for the implementation and operation of chapter 486H.

SECTION 11. Twenty days before the convening of the Regular Session of 2005, the auditor shall report to the legislature on any concerns it has or impediments it has encountered in carrying out any duties assigned pursuant to chapter 486J, Hawaii Revised Statutes.

SECTION 12. There is appropriated out of the general revenues of the State of Hawaii the sum of $          , or so much thereof as may be necessary for the fiscal year 2004-2005, to carry out the purposes of chapter 486J, Hawaii Revised Statutes, and sections 8 and 9 of this Act, including the hiring of necessary staff and the retaining of professional consultants. The sum appropriated shall be expended by the auditor.

SECTION 13. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act, which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 14. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 15. In printing this Act, the revisor of statutes shall substitute in the amendment made to section 486H-16(a)(1), Hawaii Revised Statutes, by section 6 of this Act, the number of this Act for the bill identified therein.

SECTION 16. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 17. This Act shall take effect on July 1, 2004.