Olympia- December 19, 1997 - The State of Washington today joined three other states and the Federal Trade Commission in signing consent decrees aimed at keeping gasoline prices competitive.
The agreement, with Shell Oil Company and Texaco, Inc., is in response to a proposal by the two companies to form a joint venture for their refining and marketing operations in the western United States.
State and federal antitrust laws, which are designed to protect competition, require a review when two competitors, with significant market shares, propose to consolidate assets. Officials were concerned in this case that the joint venture would violate antitrust laws and could result in an increase in gas prices by eliminating competition in the Pacific Northwest refining industry.
About 85 percent of the gasoline in Washington is supplied by one of four major refiners in the state. The four are Shell, Texaco, Arco, and Tosco (BP Oil). A combined Texaco and Shell operation would produce 43 percent of the gasoline manufactured in the Pacific Northwest.
To address antitrust concerns and maintain a competitive atmosphere, the Consent Decree requires Shell to sell its refinery in Anacortes. After the sale, the new owner of the refinery will have an 18.2 percent share of the refining market. Arco's market share will be approximately 34 percent and Tosco, will have just over 17 percent.
"Gasoline prices have a significant influence on Washington's economic vitality," Washington Attorney General Christine Gregoire said in explaining the antitrust concerns about the joint venture. "This action is meant to protect Washington consumers and businesses who need competitively-priced gasoline."
It is estimated that about two million Washington residents buy about 2.5 billion gallons of gasoline a year. Washington consumers already pay the fifth highest wholesale gas prices in the country. "Many people claim we pay more for gas today because of the limited number of refineries in the region," Gregoire said. "We don't want to compound that problem now by reducing competition."
According to Gregoire, the Consent Decree includes a variety of provisions which are aimed at ensuring the buyer of the Shell refinery can be a viable competitor.
While the refinery is up for sale, Shell must keep the refinery as a separate legal entity, provide an experienced management team to make sure the operation remains competitive during the transition period, and retain all current employees and their benefits.
Shell employees have been concerned about the impact of the sale of the refinery on jobs. Once the company is sold, Shell has agreed to cooperate with the new owner to employ current personnel and to transfer bonuses, pensions and other benefits. In response to a request from Gregoire, Shell has stated in a letter that all collective bargaining agreements will remain in place with the new purchaser through at least the year 2002.
Shell has confirmed that it has already received more than twenty expressions of interest from potential purchasers of the refinery.
The Federal Trade Commission also announced its preliminary approval of the deal today based on a consent order containing substantially the same conditions agreed to by Washington, Oregon and other states. Attorneys General in California and Hawaii also announced they have reached agreements concerning retail and wholesale operations in their states.
The Attorney General reached the agreement after an extensive investigation and a review of documents provided by the companies. The action was filed today in federal district court in Seattle.