Question (13) of the Resolution requests the views of survey
participants on the following: 	
    
    (13)  The effects of active enforcement of the Petroleum
          Industry Information Reporting Act of 1991 and Act 291,
          Session Laws of Hawaii 1991 (codified as chapter 486I,
          Hawaii Revised Statutes).503 


     State Government

	PUC:  The Petroleum Industry Information Reporting Act has never been
implemented by the Public Utilities Commission, which maintains that it
has not received sufficient resources to undertake its
implementation.504 	
	
	AG:  The Attorney General noted that funding and enforcement of Act
291 would greatly expand the State's ability to conduct antitrust
enforcement and responsible legislative oversight of Hawaii's petroleum
product markets, which would benefit consumers:
	
          The chief effects of funding and enforcing the
     Petroleum Industry Information Reporting Act of 1991
     would be the establishment of a data base about the
     supply of and demand for petroleum products in Hawaii.
     In particular, the data base would enable:

          a.  The PUC to evaluate the eight items listed in
     HRS §486I-4 and thereby make the reports to the
     Governor and the Legislature required by HRS §486I-
     5(a).  This, in turn would enable the Legislature to
     enact appropriate legislation and the Governor to
     initiate appropriate executive actions.

          b.  The Attorney General to evaluate whether any
     person or persons doing business in the petroleum
     product markets in Hawaii are violating any antitrust
     laws.

          Currently, there is no comparable data base
     available to the Legislature, the Governor, or the
     Attorney General.

          The Department of the Attorney General currently
     possesses investigative powers sufficient to collect
     the information.  But the Department has neither the
     funds, the equipment, the storage space, the personnel,
     nor the expertise necessary to gather, analyze, and
     interpret such data except on a basis limited in the
     extreme.

          In other words, the funding and enforcement of the
     Petroleum Industry Information Reporting Act would
     significantly expand the ability of the state
     government to do appropriate law enforcement and
     legislative oversight in the petroleum product markets
     in Hawaii, especially the gasoline markets.  The result
     should be highly beneficial to consumers.505 

	DBEDT:  The department noted that the supply and demand data requested
by chapter 486I would be duplicative of that already provided by the
petroleum industry to the department under chapter 486E, and that
consumer prices could increase to enable the industry to comply with
additional reporting requirements. Moreover, the expenditure of
substantial resources would be required to provide for the
implementation of chapter 486I by the Public Utilities Commission:
	
     It is difficult to speculate what effects might be felt
     as a result of active implementation of Chapter 486I
     (Hawaii Revised Statutes (HRS)).  Inasmuch as the
     petroleum industry already provides supply and demand
     data to the Director of Business, Economic Development,
     and Tourism, as required by Chapter 486E, HRS, active
     implementation by the Public Utilities Commission (PUC)
     of Chapter 486I, HRS, would result in a duplicative
     burden on industry for at least the supply and demand
     data required under Chapter 486E.  With respect to the
     reporting of the petroleum industry's financial
     information, this would constitute an additional burden
     on industry heretofore unfelt in Hawaii.  It is unclear
     what, if any, effects active implementation of this law
     would have on end-user prices.  However, it seems
     reasonable to speculate that the additional
     administrative burden placed on the petroleum industry
     could actually cause product prices to increase to
     enable the industry to support these new requirements.

     We believe that our response ... to Question 7 ... of
     this survey is relevant to the likely effects active
     enforcement of Chapter 486I, HRS, might have on its
     implementing agency -- the PUC.  The analytical skills
     and resources required to effectively implement the
     requirements of Chapter 486I, HRS, would likely be far
     above those required currently by the PUC to regulate
     the electric and gas utilities.  Skills in economics,
     chemistry, petroleum logistics, international politics,
     petroleum industry-relevant law, and so forth would be
     required of the Commission's staff.  More important,
     during this period of economic and budgetary
     constraints, it is highly unlikely that sufficient
     revenues can be obtained to provide the resources
     necessary for the PUC to effectively implement this
     law.506 


     Gasoline Dealers
	
	HARGD:  "Since the information provided or not provided to the State
under these legal requirements are confidential, we do not know what
affect they have had on the industry, franchised dealers, or the
consumer."507
	
	
	Jobbers
	
	HPMA:  The Association argued that chapter 486I is unnecessary and
inappropriately interferes with private enterprise, and that the costs
of reporting will inevitably be passed on to consumers:
		
     [The] Petroleum industry Information Reporting ...
     appears to be designed specifically for Hawaiian
     Refiners and does not directly affect Hawaiian Jobbers
     who are customers of various majors and Hawaiian
     Refiners.  In view of the encumbering reporting
     regulations that the above-mentioned chapter requires
     from the Hawaii Refiners, this appears to be an
     instance of government interfering with private
     enterprise and asking a lot of proprietary information
     for the purpose of a commission review.  It is HPMA's
     view that these types of commissions are not necessary
     and do not act in the best interest of the consumers.
     Staff at the refinery is going to have to spend hours
     of time providing this information.  All these
     additional costs have to be passed on to the consumer.
     The petroleum industry is highly competitive, and the
     consumer should be the ultimate motivating force for
     the decisions that the manufacturers, dealers & jobbers
     make regarding services & expansion of their product
     line.  Government's role is not to interfere in this
     process but to provide the arena that the competitive
     forces will benefit the consumer.508 

	Aloha Petroleum:  Aloha Petroleum believed that active enforcement
of chapter 486I would require additional governmental resources, which
could lead to higher fuel costs:
	
     Chapter 486I, Hawaii Revised Statutes, requires the
     submission of specific information based on
     classification to the Public Utilities Commission
     within the time periods prescribed therein.  It is our
     understanding that Aloha does not currently qualify as
     a major marketer, oil producer, storer or transporter
     and therefore Aloha is unsure of the effect of active
     enforcement of this Chapter.  However, it would appear
     that the reporting, analysis and enforcement provisions
     of this Chapter would require the utilization of
     additional governmental resources which could lead to
     higher fuel costs.509 


     Oil Companies
	
	Shell:  Shell stated that enforcing chapter 486I would increase oil
industry costs, which would most likely be passed on to consumers in
the form of higher gasoline prices:
	
          This statute requires the oil companies doing
     business in Hawaii to report regularly, in a form
     required by the public utilities commission, data
     concerning their business operations, including the
     following:

          -    Feed stock
          -    Petroleum receipts
          -    Refinery stocks
          -    Inventory
          -    Finished product supply and distribution
          -    Exchanges
          -    Refinery capacity
          -    Storage capacity
          -    Amounts transported
          -    Sales

          The effect of such a reporting requirement would
     be to increase oil industry costs.  The increased cost
     burden would be proportional to the quantity and
     frequency of required reporting, and would most likely
     be passed on to consumers in the form of higher prices
     for gasoline.

          There is no apparent need for the government to
     accumulate, maintain and protect such a costly
     database.  Some of the information listed in the Act --
     for example, data with respect to taxable sales of
     gasoline, refining capacity and storage capacity -- is
     already either reported, or otherwise available, to the
     government and reporting it again to the P.U.C. would
     be redundant.  In addition, any information that may
     actually be necessary for legislative or law
     enforcement purposes can be readily obtained when
     needed through the usual processes.510 

	BHP:  BHP noted that additional procedures must be established before
chapter 486I can be implemented:
	
     Any analysis of the "effects of active enforcement" of
     HRS, Chapter 486I, at this time, would be premature.
     Prior to any information being provided under this
     statute, the type of data, its format and the
     procedures for submission and maintenance within the
     commission, must be established.  Steps should also be
     taken to ensure that any required information is not
     duplicative of information already being submitted or
     readily available through other sources.  Once the
     necessary rules have been established if the required
     information is provided there would be no need for any
     type of "active enforcement".511 

	Chevron:  "The Petroleum Industry Information Reporting Act requires
that oil companies and others submit various information to the Public
Utilities Commission.  Chevron is fully complying with that law.  If
the law is not actively being enforced, Chevron is not aware of it."512
	
	
	Discussion
	
	This section discusses the rationale that inadequate information
regarding an industry may in some cases serve as a justification for
government intervention requiring disclosure of certain information. 
Question (13), regarding the Petroleum Industry Information Reporting
Act of 1991, is reviewed in this context as a form of disclosure
regulation.513
	
	Breyer (1979 and 1982) noted that consumers must have sufficient
information to evaluate competing products to allow competitive markets
to function well, and must understand the characteristics of their
buying choices and identify the range of buying alternatives.  In this
context, information is itself a commodity that requires the
expenditure of resources to produce: buyers spend money, time, and
effort searching for alternative suppliers, while sellers spend money
researching, labeling, and advertising to differentiate their product
from other similar products.514  While "[i]n well-functioning markets,
one would expect to find as much information as consumers are willing
to pay for in order to lower the cost or to improve the quality of
their choices",515 regulation may be used to correct for inadequate
information or lower the costs to consumers of obtaining
information.516
	
	Disclosure is an obvious remedy to the problem of inadequate
information.517  While disclosure may be regarded as a form of
classical governmental regulation, Breyer instead views disclosure as
an alternative to regulation, since it does not regulate price,
allocation of products, or production processes, nor does it restrict
individual choice to the extent accomplished by other forms of
regulation.  "Moreover, since freely functioning markets require
adequate information--which disclosure helps provide--disclosure, like
antitrust, can be viewed as augmenting the preconditions of a
competitive marketplace rather than substituting regulation for
competition."518  Some forms of disclosure are not designed to make
competitive markets function more effectively but may instead be used
for noneconomic purposes, such as helping to enforce gambling laws or
informing voters about campaign contributors.  When used for economic
purposes, however, disclosure assists consumers in making more informed
choices.
	
	In order to implement the disclosure requirements, however,
regulators must set standards specifying what is to be disclosed and in
what manner, which may involve problems associated with other forms of
classical regulation:  "In setting those standards, [the regulator]
will have to deal with those very problems of information, enforcement,
anticompetitive effects, and judicial review that plague other forms of
standard setting."519  Other problems include burdensome paperwork
requirements and disclosure's ineffectiveness in dealing with
environmental and other issues.520  Disclosure nevertheless allows for
greater freedom of consumer choice than classical regulation.  While
classical regulation may specify the type of product that must be sold
or the process that must be utilized, at the worst, disclosure may seek
too much information or the wrong information.521
	
	The Petroleum Industry Information Reporting Act of 1991 (PIIRA)
requires refiners and each major marketer, oil producer, oil
transporter, and oil storer to submit to the Public Utilities
Commission certain information relating to petroleum and petroleum
products with respect to their areas of specialty within specified time
periods.  Under the PIIRA, the PUC is required to publish annually and
submit to the Governor and Legislature a summary, analysis, and
interpretation of the information received from the petroleum
industry.522  The PUC's analysis is to include such items as the
nature, cause, and extent of petroleum or petroleum products shortages
or conditions affecting supply, the economic and environmental impacts
of any petroleum and petroleum product shortages, and emerging trends
relating to supply, demand, and conservation of petroleum and petroleum
products.523
	
	The disclosure of data required by the PIIRA does not necessarily
seek to benefit consumers in decisionmaking directly, but rather
indirectly by assisting state policy makers in formulating both
economic and noneconomic decisions on behalf of consumers, including,
presumably, enforcement of the antitrust laws, since information
obtained by the PUC is to be shared with the Attorney General.524  The
stated objective of the PIIRA is to aide state policy makers in
developing and administering energy policies "in the interest of the
State's economy and the public's well-being."525
	
	Proponents of the PIIRA argue that the disclosure of the information
required by that Act is cost effective and necessary for energy
planning.  In testimony submitted to the Senate Committee on Consumer
Protection and Business Regulation in support of Senate Bill No. 1329
(1991) (later enacted as the PIIRA), Drs. Yamaguchi and Isaak of the
East-West Center Energy Program noted that the bill was modeled after
California's PIIRA legislation, which was enacted in that state in
1980.526  They note that PIIRA data collected in that State, which is
summarized and published for public use by the California Energy
Commission in their Quarterly Oil Report, has been "very useful" in
California and that a similar program in Hawaii would be a more cost
effective means of data collection than the initiation of ad hoc
investigations in response to crises.  They further cited the following
reasons in support of this reporting requirement:
	
     The oil companies may find the new requirements
     somewhat cumbersome, but PIIRA may actually be to their
     long-term advantage.  First, filing PIIRA data will
     enhance State and public understanding of the industry,
     which may reduce the number of accusations and charges
     levelled at the companies each time the price of oil
     goes up.  Second, the PIIRA forms will be standardized,
     so that filling them out on a monthly basis should
     become increasingly convenient once the companies
     develop efficient internal data collection and
     reporting methods.  Filing the data with the State may
     also reduce the number of data requests fielded by the
     companies on a day-to-day basis, since a single state
     entity will then be responsible for handling public and
     inter-agency requests.  Third, each oil company should
     feel more secure in the knowledge that its competitors
     are required to provide the same data, and that
     proprietary data will be held in confidence so that
     cooperation with the State will not jeopardize its
     ability to compete in the market.527 

	Yamaguchi and Isaak further commented that the data obtained could
"feed into energy demand forecasting, comprehensive energy planning,
evaluation of alternative and renewable energy resources, and energy
emergency preparedness planning", and that establishing such a data
base was "a vital element in the State's current efforts on integrated
energy planning."528  In an earlier report, they noted that the
importance of obtaining accurate information has been undervalued, and,
given Hawaii's almost total dependence on oil, is critical in the
likely event of future gasoline shortages.529  A 1974 report to the
Hawaii House of Representatives investigating Hawaii's gasoline market
also noted shortages of both gasoline and data, and recommended the
collection of information to prepare the State for future
contingencies.530  The lack of data has also hampered the Attorney
General in its investigation of gasoline prices in the State.531
	
	Opponents of the PIIRA, however, object to that Act as intrusive and
burdensome.  In particular, industry officials noted their concerns
over Senate Bill No. 1329 (1991) relating to the confidentiality of
data and the additional burdens that would add to their costs of doing
business in the State.  For example, with respect to the issue of
confidentiality, testimony provided on Senate Bill No. 1329 by both
Chevron and P.R.I. noted that the information requested was proprietary
and that confidentiality requirements in the bill were insufficient to
safeguard company data.532
	
	Moreover, additional expenditures would be necessary in order for the
Public Utilities Commission to implement the PIIRA. Additional
government expenditures may be deemed impractical, it may be argued,
given the State's current budget problems.  The PUC is apparently
understaffed relative to the responsibilities requested of it under
that Act.  Yamaguchi and Isaak commented (in the related context of the
proposed regulation of the oil industry) that the PUC, among other
things, lacks the resources necessary to analyze oil industry data:
	
          In Hawaii, both the Public Utilities Commission
     (PUC), and the Division of Consumer Advocacy are
     understaffed relative to their mandates.  Many states
     have economic and operations models of the electric
     power sector that rival or even exceed the complexity
     of the analytical tools found within the utilities.
     Oil analysis is more complicated than electric-power
     analysis by an order of magnitude.  Good oil economists
     are difficult to find outside the oil companies, and
     they command salaries that are far higher than can be
     paid in the public sector.  Even if oil analysts were
     readily available, it would require at least a
     doubling, and probably a tripling, of the size of the
     PUC to tackle the problem of oil-industry regulation.
     It is not the kind of job that can be performed by
     merely hiring a few economists to monitor the
     situation.  A good oil team needs to have a command of
     economics, refinery operations, linear programming,
     chemistry, shipping, and international politics.
     Seemingly minor details--such as the percentage
     paraffin content of the naphtha produced from a new
     crude in Indonesia--can have critical effects on the
     market.  Oil companies themselves, which employ large
     staffs of planners and analysts, still pay hundreds of
     thousands of dollars per year for specialized
     consulting services. ...533 

	In an effort to determine the amount of money that would be necessary
to implement the PIIRA, the Bureau asked the Public Utilities
Commission to provide estimates of the annual and start-up costs for
such implementation; however, the PUC was unable to provide estimates
within the time requested.534  The Department of Business, Economic
Development, and Tourism was also requested to provide the same
estimates, assuming that: (1) the responsibility for implementing the
PIIRA was (hypothetically) transferred from the PUC to DBEDT; and (2)
the Department's costs reflected only those necessary to implement the
provisions of the PIIRA that were not already being implemented by the
Department under chapter 486E, Hawaii Revised Statutes.535  The
Department stated that first year start-up costs would total $104,396,
while recurring subsequent year annual costs would amount to $88,196,
if the Department was required to implement the PIIRA.  The
Department's cost estimates are contained in Appendix J.
	
	Moreover, the Department concluded that implementation of the PIIRA
would be redundant of data gathering, analyses, and reporting
activities already conducted by other state and federal government
agencies, including DBEDT and the United States Energy Information
Administration (EIA).  The Department further concluded that "[w]hile
not all of this information is reported within the structure of a
regular monthly report or other periodic basis, it is available to the
state when and if it is needed and does not constitute an excessive
resource burden on industry or state government when it comes to data
reporting and analyses."536  Presumably, the PUC's start-up and
recurring costs to implement the PIIRA would exceed those of DBEDT,
since the PUC is not currently involved in the type of oil industry
data gathering or analysis already being conducted by DBEDT.
	
	Finally, it may be questioned whether the PIIRA exceeds the scope
of disclosure legislation and is (in part) quasi-regulatory in nature. 
Certain provisions of that Act, it may be argued, may be viewed as
exceeding the kind of information necessary for the State to develop
and administer energy policies on behalf of the citizens of the State. 
For example, the Department commented that section 486I-3(h), Hawaii
Revised Statutes, requests price information that may be viewed as
having a regulatory purpose:
	
     [Section] 486I-3(h) requires reporting of petroleum
     product prices and sales volumes by end-use sector and
     petroleum product.  Again, consumption information is
     available from data gathered under Chapter 486E, HRS.
     With respect to the reporting of price information,
     unless this information is to be used for regulatory
     purposes, it is unclear as to its utility, especially
     when market price information on various petroleum
     products is also available through EIA reports and
     other private sources....  If this price information is
     desired for a regulatory purpose, we do not believe it
     is necessary, and collection by DBEDT would be
     inconsistent with the DBEDT Director's role as the
     State's Energy Resources Coordinator (ERC).  The ERC is
     to serve as an energy advisor, coordinator, and
     facilitator for the Governor, industry, and all levels
     and branches of government.  However, the ERC is not a
     regulator.537 

	In summary, it may be argued, the PIIRA is duplicative of existing
law, requests information that may readily be obtained from other
sources, and (in part) exceeds the scope of disclosure legislation by
requesting information that may be considered regulatory or
quasi-regulatory in nature. 	

		Endnotes	Chapter 14 Table of Contents