A petroleum fuel storage terminal at the Port of Anchorage is up for sale as part of an effort by the state to prevent monopolistic practices in the gasoline market, the Department of Law announced Tuesday.
Tesoro acquired additional fuel-terminal storage as part of a recent asset purchase from Flint Hills Resources. It will now be required to sell some of its original storage under an agreement with the state.
Ownership of the former Flint Hills terminal, which contains 580,000 barrels of usable storage, gives Tesoro the power to prevent rival fuel importers from bringing gasoline through the Port of Anchorage, the state found.
Tesoro already owns the port's two other fuel terminals and is the sole refiner of gasoline in Alaska. Its agreement with the state requires Tesoro to divest one of those, its Terminal 1 facility, with a fuel capacity of 220,000 barrels.
Regulators and some politicians feared total ownership over storage at the port would allow the San Antonio-based company to eliminate any competition and potentially inflate Alaska's already-high gas prices.
"If you're a wholesale purchaser of gas, if you're not happy with Tesoro's price, what are your other options?" said chief assistant attorney general Ed Sniffen.
The idea is that selling the terminal to another company — or leasing it if no qualified buyer steps forward — would force Tesoro to go up against other importers of fuel. Petroleum product from its refinery in Kenai is made of crude sourced from Cook Inlet, the North Slope, the Lower 48 and international markets.
"One of the main requirements of importing gas is that you need to be able to store the gasoline in large amounts. If Tesoro was going to be in control of all that capacity, it could say who could import fuel and who could not," Sniffen said. "It could structure its operations so no one else could import."
The facility holds gasoline and ultra-low sulfur diesel. The type of fuel stored there would be a decision left to the new owner, Sniffen said.
A six-month investigation by the Department of Law found no evidence that Tesoro was "acting in a noncompetitive manner or violating our anti-trust laws," Sniffen said.
He said the department didn't look at whether Tesoro's gas pricing was unreasonable.
"We just wanted to preserve a competitive environment and allow someone an alternative to purchasing their fuel from Tesoro," Sniffen said.
Under the terms of the agreement, the company has one year to sell the terminal. If no seller can be found, Tesoro must lease it out. Any buyer or lessee must be approved by the state.
Tesoro spokeswoman Kate Blair said the company intends to find a qualified buyer within the one-year time frame.
"We are still in the early stages of the divestment process, and any prospective buyers will be kept confidential until one is selected and a sales agreement is signed," Blair said in an email.
Even with the sale, Tesoro will control a large portion of the gas market in Alaska. And although a gasoline oligopoly would in theory benefit consumers more than would a monopoly, the market is still far from perfectly competitive.
"It's not the perfect solution, but I think it will keep costs from spiraling out of control," said Sen. Bill Wielechowski, D-Anchorage, who expressed concern about the Flint Hills sale in a letter earlier this year. "Will it result in a huge drop in gas prices? Probably not. But the potential exists now for hundreds of thousands of barrels of storage capacity to be made available to companies that can have lower-priced gas shipped from Outside."
Wielechowski said that price gouging, which the company has been accused of repeatedly, is hard to prove and not illegal in Alaska.
"There's no illegal price-gouging because we don't have a price-gouging law," he said.
Correction: An earlier version of this story mistakenly said that Tesoro would be required to sell the 580,000-barrel storage facility it purchased from Flint Hills. In fact, Tesoro agreed to divest its Terminal 1 storage, containing about 220,000 barrels of storage.