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Chapter 14
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503. Contrary to the implications of this question, the Petroleum
Industry Information Reporting Act of 1991 (the "PIIRA") and
Act 291, Session Laws of Hawaii 1991, refer to the same
statute, a copy of which is contained in Appendix I.
504. Telephone interview with Clay Nagao, Chief Counsel of the
Public Utilities Commission, on June 15, 1995.
505. Letter to researcher from Ted Gamble Clause, Deputy Attorney
General, August 31, 1995, at 1-2.
506. Letter from John Tantlinger, Ed.D., Energy Planner,
Department of Business, Economic Development, and Tourism,
to Wendell K. Kimura, Director, Legislative Reference
Bureau, September 1, 1995, at 1 (emphasis in original).
507. Letter to researcher from Richard C. Botti, Hawaii
Automotive and Retail Gasoline Dealers Association, Sept. 1,
1995, at 1.
508. Letter to researcher from Alec McBarnet, Jr., Vice
President, Hawaii Petroleum Marketers Association, Sept. 7,
1995, at 1. The HPMA's response to this question also
included a discussion of Act 238, Session Laws of Hawaii
1995 (amending section 486H-10(a), Hawaii Revised Statutes),
which has been included instead under the HPMA's response to
question (15) of the Resolution. See text accompanying note
8 in chapter 15.
509. Letter to researcher from Jennifer A. Aquino, Administrative
Manager, Aloha Petroleum, Ltd., dated September 21, 1995, at
9.
510. Letter to researcher from R. A. Broderick, Western Region
Business Manger, Shell Oil Products Co., dated August 31,
1995, at 1-2.
511. Letter from Susan A. Kusunoki, BHP Hawaii, to Wendell K.
Kimura, Director, Legislative Reference Bureau, dated
September 8, 1995, at 1.
512. Letter from J. W. McElroy, Regional Manager, Chevron U.S.A.
Products Co., to Wendell K. Kimura, Director, Legislative
Reference Bureau, dated August 7, 1995, at 9.
513. The requirement that manufacturers, terminal operators, and
jobbers file a tariff with the State listing all of the
prices at which goods and services are offered for sale or
lease, as proposed in question (9) of the Resolution, may
similarly be viewed as an example of disclosure. However,
it may be argued that this proposal exceeds the scope of
disclosure and is more regulatory in nature. As noted by
the response of the Department of Business, Economic
Development, and Tourism, it is unclear whether the purpose
of the tariff is to monitor or regulate prices. Whether the
intent is to ultimately assist consumers in making more
informed choices or to provide additional price information
to policy makers and investigators of the petroleum
industry, filing tariffs may nevertheless require the
involvement of the proposed petroleum regulatory commission
(question (7) of the Resolution), the Public Utilities
Commission, or some other state agency in a some regulatory
capacity.
514. Stephen G. Breyer, "Analyzing Regulatory Failure:
Mismatches, Less Restrictive Alternatives, and Reform," 92
Harv. L. Rev. 549, 556 (Jan. 1979); Stephen G. Breyer,
Regulation and its Reform (Cambridge, MA: Harvard
University Press, 1982) at 26.
515. Breyer (1982) at 26.
516. In particular, Breyer cited the following as typical
rationales for regulation in this area:
(1) Incentives to produce and disseminate information
may be skewed. Some information requiring
detailed research, for example, may be expensive
to produce initially but subsequently inexpensive
to make available. Because the information may
be easily reproduced at low cost, those in the
best position to produce the information may not
do so, even though the information may benefit
others, since the recipients may never pay the
original producer. While much of this
information may be protected by copyright and
patent laws, the problem may nevertheless lead to
a demand for regulation.
(2) A party to a transaction may deliberately seek to
mislead another party by misrepresentation or
omission of material facts. While
misrepresentation may be grounds for rescission
of a contract and damages, the high costs of
court actions may not serve as an adequate
deterrent. "The rationale for government action
to prevent false or misleading information rests
upon the assumption that court remedies and
competitive pressures are not adequate to provide
the consumer with the true information he would
willingly pay for. Thus, the Securities and
Exchange Commission (SEC) regulates the issuance
of securities, while the buyer of used cars is
typically left to his basic judicial remedies."
Id. at 27.
(3) Buyers may be unable to evaluate the
characteristics of certain products or services.
For example, laypersons may not be readily able
to evaluate the potential effectiveness or
dangers of a drug without additional information.
Regulation may be desired both to specify what
information must be provided and to assist
consumers in evaluating the information that is
supplied.
(4) The market, on the supply side, may not be
sufficiently competitive to provide all of the
information that consumers would willingly pay
for. For example, accurate information regarding
the nicotine content of cigarettes or the fuel
economy of cars was unavailable to most buyers
until the government required disclosure. There
may also be tacit understandings in an industry
not to supply certain information. "[O]ne does
not find individual airlines advertising safety
records. Since the airline industry is highly
competitive in many respects, this fact suggests
that tacit understandings not to supply certain
varieties of information may be easier to reach
(the industry need not be highly concentrated)
than are tacit agreements not to compete in price
or in service quality. Id. at 28.
On the other hand, opponents of the rationale for regulating
the provision of information often focus on whether the
rationale is applicable to particular cases. For example,
it may be argued that the market is functioning
competitively, there is little deliberate deception, or
consumers are sufficiently capable of evaluating the
qualities of a product; "[t]hey may argue that a particular
agency's efforts to provide information are too expensive,
that the information is unnecessary, that disclosure itself
may mislead consumers, or that it may interfere with the
competitive workings of the marketplace." Id.
517. Id. at 193. Other forms of regulation may also be necessary
in response to a lack of necessary information, such as
screening, standard setting, and bargaining. See id. at
192, table 3.
518. Id. at 161.
519. Breyer (1979) at 579 (footnote omitted).
520. United States, President's Commission for a National Agenda
for the Eighties, Panel on Government and the Regulation of
Corporate and Individual Decisions, Government and the
Regulation of Corporate and Individual Decisions in the
Eighties (Washington, DC: 1980) at 23:
[D]isclosure is not entirely free of
administrative problems. Regulators must decide how
and to whom information is to be disclosed. In some
cases, however, the act of collecting and
disseminating the information in the required form can
be quite burdensome, as are some campaign disclosure
laws and the registration requirements for small
businesses selling securities. Moreover, disclosure
cannot be expected to overcome powerful incentives
acting upon both buyers and sellers to ignore
important social values that cannot adequately be
expressed in unregulated markets. For example,
disclosure will normally prove ineffective in dealing
with environmental problems, for consumers cannot be
expected voluntarily to purchase a substantially more
expensive brand of a product that was produced in a
more costly but less environmentally destructive way.
521. Breyer (1982) at 162-163:
Despite the similarity of problems faced by the
regulator implementing disclosure and these other
forms of classical regulation, there remains one
important difference. Ordinary standards governing
primary conduct ofttimes forbid or dictate the type of
product that must be sold or the process that must be
used. As such, they interfere with consumer choice
and impede producer flexibility. To the extent that
those standards deviate from the policy planner's
ideal (as they inevitably do), the restrictions on
choice and conduct are clearly undesirable. Standards
governing disclosure, however, do not restrict conduct
beyond requiring that certain information be provided.
The freedom of action that disclosure allows vastly
reduces the cost of deviations from the policy
planner's ideal. At worst, too much information or
the wrong information has been called for. It does
not stop buyers from obtaining products or producers
from making them. ...
For these reasons, disclosure regulation does not
require regulators to fine-tune standards as
precisely. The regulators need less information from
industry, there are fewer enforcement problems, there
is less risk of anticompetitive harm, and there is
greater probability of surviving judicial review. ...
522. Haw. Rev. Stat. §486I-5(a).
523. Haw. Rev. Stat. §486I-4(a).
524. Haw. Rev. Stat. §486I-9. That section also requires the PUC
to make information available to the Director of Business,
Economic Development, and Tourism and the Consumer Advocate,
and requires the safeguarding of confidential material.
525. The Legislature made the following findings and declaration
accompanying that Act:
SECTION 1. Legislative finding and declaration.
The legislature finds and declares that the petroleum
industry is an essential element of Hawaii's economy
and is therefore of vital importance to the health and
welfare of all people in the State of Hawaii.
The legislature further finds and declares that a
complete and thorough understanding of the operations
of the petroleum industry is required by the state
government at all times to enable it to respond to
possible shortages, oversupplies, and other market
disruptions or impairment of competition.
The legislature further finds and declares that
information and data concerning all aspects of the
petroleum industry, including, but not limited to,
crude oil production, supplies, refining, product
output, prices, distribution, and demand are essential
for the State to develop and administer energy
policies which are in the interest of the State's
economy and the public's well-being.
The legislature further finds that because Hawaii
is a physically small and geographically remote
economy, certain of its markets tend to be
concentrated. Market concentration is a function of
the number of firms in the market and their respective
market shares. In a highly concentrated market,
market prices tend to rise above competitive levels.
Market prices persistently above competitive levels
are harmful to consumers and the public. Barriers to
competition tend to cause supracompetitive prices to
persist.
The legislature further finds that the markets
for oil and oil products in Hawaii are highly
concentrated markets. 1991 Haw. Sess. Laws Act 291,
§1.
526. See California Public Resources Code, §§25350 et seq.
("Petroleum Industry Information Reporting Act of 1980").
527. Testimony of Dr. Nancy Yamaguchi and Dr. David Isaak, East-
West Center Energy Program, on Senate Bill No. 1329 (1991)
before the Senate Committee on Consumer Protection and
Business Regulation, March 1, 1991, at 1-2. Drs. Yamaguchi
and Issak noted that their role in Hawaii state energy
issues was "informal and voluntary". Id. at 1.
528. Id. at 2.
529. Nancy D. Yamaguchi and David T. Isaak, Hawaii and the World
Oil Market: An Overview for Citizens and Policymakers
(Honolulu: East-West Center Energy Program, Aug. 1990) at
82-83:
Whether or not there are any anticompetitive
practices in the Hawaii oil industry, (and, as we have
noted earlier, none have been proven), the importance
to government in monitoring the situation has been
undervalued. Per capita, Hawaii is one of the most
oil-dependent areas in the world. The values of
alternative resources are always evaluated against the
cost of oil, but often with little understanding of
where the costs are headed. This is not the last
disruption that will be seen in the oil market.
International oil lurched into a volatile environment
beginning in 1973, and it is now in a permanent state
of fluctuation. The drop of prices beginning in 1986
was not "a return to normal," but rather a violent
downward fluctuation that was just as dangerous in its
own way as the price hikes of 1973, 1979, and 1990.
The government needs to develop the skills to monitor
and analyze the market, not merely to deal with short-
term crises, but also to serve the ongoing needs of a
number of branches of the government.
530. Hawaii House of Representatives, Special Committee on
Energy, Investigation of the Hawaii Gasoline Market
(Honolulu: March 1974) at 70-71:
[T]he State of Hawaii should compile and maintain
accurate data on the supply and demand for petroleum
products in the State. One of the major problems
encountered during the severe gasoline shortage of
early 1974 was the lack of such data. This lack
hampered the State's efforts to assess the extent of
Hawaii's shortfall to make policy decisions based on
solid information and to justify the State's appeals
to the FEO for additional supplies of gasoline. In
the event of another severe shortfall, the State
should be prepared with accurate data at hand.
531. In testimony regarding Senate Bill No. 1329, the Attorney
General noted that its investigation "involved delays in
obtaining oil industry data in a timely manner" and that
"inconsistency in the way the data was presented and the
multitude of technical information supplied by each of the
oil companies impaired prompt assessment." See Testimony of
the Attorney General on Senate Bill No. 1329 (1991) before
the Senate Committee on Consumer Protection and Business
Regulation, March 1, 1991, at 2. The Attorney General
further noted that "[t]hese delays might have been avoided
had the oil companies been required by law to make regular,
periodic, and uniform reports of specified data to a unit of
state government...". Id. The Attorney General stated in
its 1994 interim report on the investigation of gasoline
prices that the information requested by Act 291 "is
essential to providing an adequate fact basis for
appropriate legislative oversight, regulatory action, and
antitrust enforcement." Hawaii, Department of the Attorney
General, The Attorney General's 1994 Interim Report on the
Investigation of Gasoline Prices (Honolulu: 1994) at 20.
532. Testimony of Craig Peterhansen on behalf of Chevron U.S.A.,
Inc., and testimony of George Aoki on behalf of Pacific
Resources, Inc., on Senate Bill No. 1329 (1991) before the
Senate Committee on Consumer Protection and Business
Regulation, March 1, 1991 (both at page 2).
533. Yamaguchi and Isaak (1990) at 80-81.
534. Telephone interview with Milton Higa, Administrative
Director, Public Utilities Commission, on October 23, 1995.
535. These estimates were requested of the Department for two
reasons. First, the Director of Business, Economic
Development, and Tourism was originally specified as the
entity responsible for collecting the information requested
in the PIIRA in the original version of that Act, rather
than the PUC; the PUC was substituted for the Director in a
subsequent version. See House of Representatives Standing
Committee Report No. 1222, dated April 5, 1991, by the
Committees on Consumer Protection and Commerce and
Judiciary, regarding Senate Bill No. 1329, S.D. 1, H.D. 2.
Second, as noted in the Department's testimony, the
petroleum industry already provides supply and demand data
to DBEDT as required by chapter 486E; chapters 486E and 486I
(the PIIRA) therefore overlap in terms of the information
requested. The Department is also required to "undertake
energy development and management" pursuant to section 26-
18(a), HRS, and the Director of Business, Economic
Development, and Tourism serves as the Energy Resources
Coordinator pursuant to section 196-3, HRS.
536. Letter to Wendell K. Kimura, Director of the Legislative
Reference Bureau, from Seiji F. Naya, Director of Business,
Economic Development, and Tourism, dated October 18, 1995,
at 2. (Appendix J).
537. Id.
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Chapter 14
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