STAND. COM. REP. NO. 358-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 1977
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Energy and Environmental Protection, to
which was referred H.B. No. 1977 entitled: 

     "A BILL FOR AN ACT RELATING TO GASOLINE DEALERS,"

begs leave to report as follows:

     The purpose of this bill is to create an exception to the
gasoline retail divorcement law by allowing a manufacturer or
jobber to operate a former dealer-operated retail service station
where the current or new dealer:

     (1)  Is in agreement with such an operation; and

     (2)  Has a contract interest in the operation.

     The original divorcement law was designed to protect
gasoline dealers from being forced out of business by oil
company-owned and operated gasoline stations.  Currently, a
manufacturer or jobber is prohibited, with certain exceptions,
from operating a former dealer-operated service station.  This is
known as the "once a dealer-operated station, always a dealer-
operated station" arrangement.

     FastLube, Inc. dba Flagship Auto Service Center, the Western
States Petroleum Association, Chevron Products Company, two
independent dealers, and one individual testified in support of
this measure.  Four dealers and one individual opposed passage of
this bill.  Two independent dealers offered comments.  Former

 
 
 
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                                 Page 2

 
Senator Donna Ikeda offered her insight and comments on the
legislative intent and history of this complex issue.

     Supporters of this bill contend that the law fails to
consider the small business person who has built a successful
service business while operating under a "contract dealer" or
"fee operator" arrangement with the oil company.  Under such an
arrangement, the small business person negotiates a fee that will
be charged to the oil company to operate the gasoline facility.
The oil company purchases the fuel inventory, pays the taxes on
the fuel, pays the credit card discount fees, and provides the
fueling system, equipment, and the real estate.  In turn, the
contract dealer maintains the facility, employs the personnel,
and pays the oil company a fair market rent for the service bays
or retail area which is used in the business person's business
venture.

     Others believe that under the current law, such contract
dealers should be considered an oil company operated station
given the fuel arrangements.

     Supporters believe that this bill will allow a dealer the
greatest flexibility to make the best business decision for the
station.  They contend that this will allow the best buyer, which
in most cases is the oil company, to run the station for more
than two years.  While this arrangement could provide the
outgoing dealer the best chance of receiving some compensation
for the station, it may also jeopardize the existence of other
dealers by circumventing the intent of divorcement.

     Your Committee has amended this bill by:

     (1)  Reducing the time period for a manufacturer or jobber
          to operate a former dealer operated retail service
          station from twenty-four months to sixty days;

     (2)  Deleting the provision that authorizes the manufacturer
          or jobber to operate a former dealer operated service
          station when the current or new dealer is in agreement
          with or has a contract interest in the operation;

     (3)  Requiring the manufacturer or jobber to report all
          changes to the ownership or type of operation involving
          a branded service station to the Petroleum Advisory
          Council (Council) within 14 days;

     (4)  Requiring the Council to make these reports available
          for public inspection; and


 
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                                 Page 3

 
     (5)  Directing the Department of Commerce and Consumer
          Affairs to update its 1991 study on the impact of
          direct retailing of motor fuel by refiners and
          distributors in competition with franchised and
          independent service stations.

     It is your Committee's intent to use this bill as a vehicle
to further discuss this complex issue.

     As affirmed by the record of votes of the members of your
Committee on Energy and Environmental Protection that is attached
to this report, your Committee is in accord with the intent and
purpose of H.B. No. 1977, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as H.B. No.
1977, H.D. 1, and be referred to the Committee on Consumer
Protection and Commerce.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Energy and
                                   Environmental Protection,



                                   ______________________________
                                   HERMINA M. MORITA, Chair