The pricing of gasoline in Hawaii has received a significant
amount of attention in recent years.  The Hawaii Attorney General
has been investigating gasoline prices in the State since 1989,
shortly after the Exxon Valdez oil spill, culminating in three
reports on the subject to date.125  In addition, the Hawaii
Department of Commerce and Consumer Affairs has recently concluded
a study of gasoline marketing in Hawaii,126 while a recent
University of Hawaii study has documented divorcement legislation
and its impact on gasoline retailing in the United States and
Hawaii.127  Earlier reports following the 1973 oil embargo
reviewed gasoline prices in the State,128 measures to manage a
gasoline shortage in Hawaii,129 and replacement and alternative
fuels, including ethanol and methanol, to serve as substitutes or
additives to gasoline.130
	
	Despite the numerous studies on gasoline and related issues,
however, there is little consensus among the large oil companies,
wholesalers, dealers, and state agencies on what appropriate
legislative responses, if any, are necessary to ensure a stable
supply of low-cost gasoline to Hawaii's consumers.  Before
reviewing these often divergent views (in chapters 4 to 15), it is
necessary to review some of the factors that influence the price
of gasoline in Hawaii.  In particular, this chapter discusses the
State's dependence on oil and vulnerability to disruptions, the
gasoline industry in Hawaii and reasons for the decline in the
number of lessee and open dealer service stations, the pricing of
gasoline in Hawaii, and relevant Hawaii legislation.
	
	
	Hawaii's Dependence on Oil
	
	Hawaii is heavily dependent on imported oil.  This is in part
due to the State's lack of indigenous fossil fuels, relatively
high fuel oil consumption for electric power generation and lack
of economically competitive alternative energy sources, and an
economy dominated by tourism, agro- processing, and the military,
making transportation the State's largest energy consuming
sector.131  These and other factors, including Hawaii's geographic
isolation and lack of overland access to energy sources, render
Hawaii unique among the fifty states with respect to its reliance
on imported oil and vulnerability to supply disruptions.132  The
State Energy Resources Coordinator has identified the following
factors as contributing to the State's energy vulnerability:133
	
     (1)  Market disruption.  Hawaii is dependent on imported oil
          for over ninety-two percent of its energy needs.  "This
          makes Hawaii the most vulnerable state in the nation to
          the disruption of its economy and way of life in the
          event of a disruption of the world oil market or rapid
          oil price increases."134 

     (2)  Declining reserves.  Forty percent of the State's oil
          comes from Alaska and the remainder from the Asia-
          Pacific region.  The export capabilities of these
          sources of supply are expected to decline by
          approximately fifty percent by the year 2000.  These
          factors will probably increase the Hawaii's dependence
          on the oil reserves of the politically unstable Middle
          East.135 

     (3)  Geographic location.  The long distance from the United
          States Petroleum Reserve in Louisiana and Texas,
          together with the declining number of U. S. flag
          tankers that are capable of transiting the Panama
          Canal, make timely emergency deliveries problematic,
          thereby further rendering the State vulnerable to
          supply disruptions in a crisis.

     (4)  Environmental fragility.  Energy production from fossil
          fuels is the major source of global and local air
          pollutants; petroleum shipping and handling present
          risks to the State's fragile marine habitats and
          coastal resort areas.

	Hawaii also has a relatively high demand for oil, reflecting
the growing energy demands of the Asia-Pacific region
generally.136  Although Hawaii's demand for petroleum products is
comparatively small at "130-140 thousand barrels per day--as
opposed to 1.6 million barrels per day in California.... Hawaii's
population is much smaller than California's", and, as mentioned
earlier, Hawaii's per capita demand is second only to Alaska and
far exceeds the per capita demand in the United States as a
whole.137  Moreover, during periods of supply curtailment, the
need to ensure basic public emergency services to safeguard the
public safety, health, and welfare, including police and fire
protection, hospital and ambulance services, utility emergency
services, water supply, and other areas, may compete with the need
to maintain Hawaii's economy and employment levels, including the
continued operations of industry, commerce, transportation,
construction, government, the military, and agriculture.138
	
	Interisland shipments of oil are also vulnerable. Following
the grounding of the Exxon Valdez in Alaska's Prince William Sound
in March 1989, together with several smaller oil spills from
tankers near United States shores, increasing attention was
focused on tanker safety, oil spill prevention, and protection of
coastal areas.  The Oil Pollution Liability and Compensation Act
of 1990 significantly increased liability for large and small
vessels that the federal government could impose in the event of
an oil spill.  In addition, that Act allowed unlimited liability
against tanker owners where gross negligence or willful misconduct
was involved, and reserved to the states the right to impose their
own unlimited liability requirements.139  Hawaii retained this
unlimited liability provision.  As a result, the major oil
companies that marketed heavy fuel oil to the neighbor
islands--PRI (BHP), Chevron, and Unocal--decided to discontinue or
limit their shipments of this oil in order to minimize their
liability risks.140  In response, the Hawaii Legislature limited
liability under the State's environmental response law for a
release of heavy fuel oil from a tank barge carrying this oil
interisland, citing the "approaching threat to essential public
services and the State's economy, including without limitation,
the production of sugarcane and the supply or cost of electricity
to the neighbor islands".141
	
	Several factors, however, may mitigate Hawaii's dependence on
imported oil and vulnerability to losses.  For example, the United
States Department of Energy, in discussing factors in opposition
to the establishment of a Regional Petroleum Reserve in Hawaii,
observed that Hawaii's refineries have been upgraded to process
greater volumes of Alaska North Slope crude oil, making the State
less dependent on foreign imports.  Moreover, since the 1970s, new
supplies of oil have been developed in Asia and the West Coasts of
North and South America.  Strategic petroleum reserve (SPR) crude
oil could also reach Hawaii indirectly through exchange sales, for
example, if Gulf Coast oil were exchanged for Alaska oil which was
destined for the Gulf Coast; "[t]he SPR oil would replace Alaska
oil on the Gulf Coast, and the released Alaska oil would become
available for use on the West Coast and in Hawaii."142
	
	
	Hawaii's Gasoline Industry
	
	Hawaii's gasoline retail market is served by five major oil
companies (BHP, Chevron, Shell, Texaco, and Unocal), one large
jobber selling gasoline under its own brand (Aloha Petroleum), and
several smaller jobbers mostly selling gasoline under major
brands.  Nearly all of Hawaii's gasoline is produced in-state and
supplied to these marketers by two refineries, one owned and
operated by BHP and the other by Chevron in the foreign trade zone
at Barber's Point (Kalaeloa) on Oahu.143
	
	Hawaii's refineries are of the highest level of complexity,
variously referred to as "upgrading" or "cracking" refineries, and
produce primarily gasoline, jet fuel, distillates, and heavy fuel
oil from crude oil.  The presence of advanced (and expensive)
cracking technologies in Hawaii's refineries is explained by their
use in maximizing jet fuel production.  In general, the refineries
have been constructed to match the relatively high needs in the
State for jet fuel (commercial and military) and gasoline, while
producing less diesel and fuel oil than would be expected.144
	
	Moreover, Hawaii's two refineries, although comparatively
small at 53,000 barrels per day (b/d) and 95,000 b/d, are able to
compete in the local market against the large 250,000 b/d
refineries in California despite the fact that California
refineries are closer to the sources of crude oil in both
California and Alaska.  However, the cost of shipping products
from California to Hawaii allows the Hawaiian refiners to import
and refine crude more competitively in the local market:  "Thus,
scale and complexity interact in complex ways with the locational
factors of transport costs and local demand patterns; Hawaiian
refiners have occupied a somewhat unique geographical niche that
is matched in few other locations."145
	
	Generally, gasoline is marketed to Hawaii's consumers by a
fairly simple distribution system.  Chevron and BHP store the
gasoline that they manufacture in terminals, and sell some in bulk
quantities to Shell, Texaco, and Unocal, which in turn store the
gasoline in their own terminals.  Each terminal consists of
several storage tanks, pipelines to a pier or refinery, and
dispensing facilities ("racks") where tank trucks fill up with
gasoline to deliver to retail service stations. While the main
terminal storage facilities are on Oahu, there are also terminal
storage facilities on each of the other major neighbor islands. 
Gasoline is distributed to neighbor island terminals by
inter-island barge.  Gasoline is distributed on the same island
from terminals to retail stations by tank truck.146
	
	In 1992, the six major marketers in Hawaii (BHP, Chevron,
Shell, Texaco, Unocal, and Aloha) supplied 365 outlets.  Out of
this number, 63 were supplied through jobbers or commission
agents, while 302 outlets were supplied directly.  Of these 302
outlets:
	
     .    177, or 48.5 percent, were operated by lessee dealers;
     .    31, or 8.5 percent, were operated by open dealers;
     .    65, or 17.8 percent, were operated by companies (salary
          operated); and
     .    29, or 7.9 percent, were commission operated.

	In addition, two of the major marketers (Unocal and Shell) did
not have any company-operated stations.147
	
	
	Changing Market Conditions
	
	Despite conflicting data, the number of retail service
stations in Hawaii appears to be steadily decreasing.148 Miklius
and LaCroix (1993) regard as unlikely in Hawaii's retail markets
allegations that the rapid decrease in the number of lessee and
open dealer stations resulted from predatory pricing by refiners
against their lessee dealers,149 and instead cite the following
alternative explanations for the observed decrease in the number
of lessee and open dealers and increased importance of company-
operated stations:
	
     (1)  Changes in gasoline consumption trends.

	The retail gasoline marketing network was built originally in
anticipation of a continuation of strong historical growth in
gasoline consumption.  However, actual gasoline consumption
decreased on the United States mainland after the second oil shock
of 1979 until 1982, and resumed at a slower growth thereafter.  In
Hawaii, gasoline consumption declined after 1979 for two years,
jumped between 1981 and 1982, and has been growing at a somewhat
higher rate than on the mainland since that time.150  Lower
consumption trends in Hawaii have been attributed in part to an
increase in the real price of gasoline and the erosion of personal
real income.151  Another reason for declining rates of gasoline
consumption was the replacement of older vehicles with more
fuel-efficient ones.  Changes in automotive technology to improve
fuel efficiency included redesign of chassis and body to reduce
drag and weight, redesign of the engine and drivetrain, and
advances in lubrication to reduce friction on surfaces within
engines.152  Miklius and LaCroix contend that these changes in
consumption may be sufficient to account for a contraction in the
number of retail outlets.
	
	(2)  Changing service station configurations.
	
	In addition, the trend toward large-volume, self-service
outlets and the decline in demand for repair and maintenance
services, have affected dealer-operated conventional service
stations unfavorably.  The change in station configuration from
conventional bay stations to large-volume, self-service outlets
was motivated by such factors as technological innovations making
self-service possible, increasing construction and payroll costs,
consumer preferences, and the decreased demand for automobile
repair and maintenance services.  The decline in demand for
automobile repair and maintenance services was due in part to
improvements in automotive technology that reduced the frequency
of required routine maintenance service.  This in turn reduced
conventional stations' sales of tires, batteries, and accessories
(TBA).  Improvements in technology also allowed manufacturers to
offer extended warranties and increased the complexity of
automobiles, requiring specialized expertise and equipment for
repairs and maintenance.  These trends favored repair and
maintenance services by automobile dealers and other specialists,
since conventional stations tended to have more general repair
expertise, and affected a greater share of lessee dealer-operated
stations since they tended to provide more repair services than
company-operated stations.  Although Hawaii's acceptance of self-
service outlets has lagged behind the U.S. mainland, the
distribution of station configurations in Hawaii (self-service,
convenience store, and conventional stations) is similar to that
on the mainland.153
	
	Self-service technology has also contributed to the growth of
convenience store ("C-store") stations.  The practice of
installing self-service pumps at small C-stores, which was first
popularized in the 1960s, increased as C-store owners and
independent marketers realized the profit potential of a joint C-
store/self-service operation.  Although there were only 1,500 C-
stores in the United States in the early 1960s, by 1990 the number
of C-stores had increased to 71,200, of which 66 percent sold
gasoline.154  Another recent trend in station configurations is
the addition of restaurants to C-store stations.  For example,
McDonald's and Chevron Corporations recently announced the
development of co-branded outlets in Hawaii and throughout the
West, featuring McDonald's restaurants, Chevron service stations,
and convenience stores at selected locations in which both
companies operate.  Insurers have also recently introduced
"automobile managed care" in response to high vehicle repair
costs.155
	
     (3)  Effects of governmental regulation.

     A.   Price and allocation regulations.

	The federal Emergency Petroleum Allocation Act of 1973 was
enacted to help maintain the historic market share of independent
marketers.  Pursuant to this legislation, the Department of Energy
adopted price and allocation regulations, in effect until 1981,156
which adversely affected lessee and open dealers on the U.S.
mainland by delaying the conversion of dealer-operated,
conventional bay stations to self-service stations.  From 1971
until 1981, consumers were shifting from full- to self-service,
and the costs of operating a conventional station were increasing.
 However, a combination of federal price and margin controls and
the inability to purchase additional gasoline prevented
dealer-operated stations from changing their operations to
self-service, although the same supply constraints were not
imposed on jobbers.157
	
	The decontrol of the U.S. gasoline market in January, 1981,
allowed gasoline dealers to profit by cutting prices and margins
for self-service gasoline, while increasing prices and margins for
full-service.  Removing regulations also resulted in lower jobber
margins and profitability, causing a large number of jobbers to
leave the market.  Generally, decontrol allowed changes consistent
with emerging technology and consumer demands, but which had been
constrained by a decade of federal regulations.158  In addition,
decontrol furthered greater economic efficiency in gasoline
marketing, contributing to lower gasoline prices during a time of
rising gasoline taxes and increasing inflation:  "In retrospect,
the DOE gasoline regulations appear to have benefitted wholesalers
but hurt small retailers....  DOE allocation controls, which
accompanied price controls, appear to have impeded the
introduction of more efficient marketing operations, which have
lowered prices to consumers since decontrol."159
	
	Miklius and LaCroix note, however, that the decline in the
number of dealer-operated stations on the mainland was not
observed in Hawaii during this period.  They suggest that Hawaii's
small retail markets generated less competition than larger U.S.
mainland markets, producing larger retail margins which were
locked in by price regulations; the large margins in turn allowed
increased costs to be absorbed by dealers.  Because of the
relatively minor role played by independent dealers in Hawaii,
there was little pressure to adopt self-service.160
	
	B.   Environmental regulations.
	
	Miklius and LaCroix cite the cost of complying with new
environmental regulations to have been and continue to be the
single most important factor affecting gasoline retail
marketing.161  These Environmental Protection Agency regulations-
-including underground storage tank, financial responsibility,
environmental cleanup, and other environmental regulations--are
reviewed in chapter 14.
	
	(4)  Changes in lease rents and increasing land values.
	
	Finally, a substantial increase in lease rents and rising land
values have contributed to the increased importance of
company-operated stations.  Citing the high rent increases in a
sample of recently renegotiated leases, Miklius and LaCroix
maintain that "[a] large number of businesses could not afford to
pay land rentals of these magnitudes and gas stations are no
exceptions.  One should expect the total population of firms doing
business in Hawaii as well as the number of gas stations to
decrease."162  These issues are also further reviewed in chapter
14.
	
	
	Gasoline Prices in Hawaii
	
	Gasoline prices in Hawaii are among the highest in the United
States.  If the price of gasoline is considered to include the
average pump price plus state and federal taxes, the three states
with the highest prices are Connecticut, Hawaii, and Alaska, in
that order.  Alternatively, if one considers the average pump
price excluding taxes, the three states with the highest prices
are Alaska, Hawaii, and Connecticut, respectively.163
	
	The Attorney General's 1990 report on gasoline prices in
Hawaii discussed the following four components that make up the
price of gasoline at the pump:164
	
     (1)  The cost of crude oil.  The cost of crude oil, as
          discussed in chapter 2, fluctuates depending on a
          number of variables, including the influence of OPEC
          members' decisions, the scarcity of crude oil, the lack
          of substitutes, and seasonal demand.

     (2)  The refiner margin.  The refiner margin is the
          difference between the cost of crude oil and the dealer
          tankwagon price.

     (3)  The retailer margin.  The retailer margin is the retail
          dealer's price, before taxes, for self-service gasoline
          paid for in cash; the dealer includes its land costs,
          labor, overhead, and profit to the DTW price.
          Additional fees may be added for payment by credit card
          or full service.165 

     (4)  Fuel and excise taxes.  In Hawaii, the federal, state,
          and county taxes comprise a large portion of the price
          of gasoline at the pump.  For each gallon of gasoline,
          fuel taxes include a $0.002 superfund (leaking
          underground storage tank) tax, a $0.091 federal fuel
          tax, a $0.11 state fuel tax, and county fuel taxes of
          $0.165 for the City and County of Honolulu and $0.088
          for the other counties.  State excise taxes amount to
          0.5 percent on the sale between the oil company and the
          retail dealer, and 4.0 percent on the sale between the
          retail dealer and the public.

	The Attorney General further noted the following factors that
may have the effect of decreasing price competition and lessening
competition generally in Hawaii's petroleum industry:166
	
	(1)  Oligopolies.  Oahu and each of the Neighbor Islands
constitute separate, highly concentrated oligopolistic gasoline
markets; the pricing of gasoline in these markets is influenced by
the limited number of competitors and their interdependence.167
	
	(2)  Entry barriers.  New competition in Hawaii's highly
concentrated gasoline markets is hindered by a number of costs and
risks, including the high cost of building new terminals to store
gasoline that is transported in bulk to the islands, and the risk
that the additional gasoline supply would require too great a
reduction in price to gain a sufficient market share in Hawaii's
retail gasoline market so as to allow a new competitor to remain
in business.168  As noted earlier, Hawaii's high land prices also
deter new competition by substantially increasing the cost of
doing business for both refineries and services stations.169  In
addition to economies of scale and high land costs, other entry
barriers include unrecoverable capital costs, environmental
restrictions, and the relatively small size of Hawaii's gasoline
market.170  Hawaii's relatively small gasoline market, however, is
compounded by the State's high costs of doing business and the
comparative cost-effectiveness of establishing operations in a
mainland city.171  A related factor that tends to decrease price
competition in Honolulu as compared to mainland cities is the
geographic layout of Oahu.172
	
	(3)  Inelastic demand.  Another factor discouraging price
competition in Hawaii is that the demand for gasoline in the State
is relatively inelastic.  Generally, elasticity measures the
responsiveness of sellers and buyers to price changes; when the
percentage change in quantity of a product is less than the
percentage change in price, demand is said to be inelastic, buyers
are not very responsive to price changes, and purchases will not
be drastically affected.173  Demand for a commodity is inelastic
when a large price increase may be imposed without a significant
loss in sales.174  Because gasoline is an essential commodity for
which there are currently no economically viable substitutes, it
is estimated that gasoline consumption will decrease by only 1.3
percent if the price increases by ten percent.175  Inelastic
demand acts as an entry barrier to new competitors in Hawaii's
gasoline industry because "total demand will not increase much
unless the market price is reduced significantly....  [P]eople who
are not driving now because the price of gasoline is too high,
probably won't start driving unless the price of gasoline goes
down significantly."176
	
	(4)  Intercompany dealings.  The Attorney General noted that
even though the major oil companies in Hawaii are supposed to be
competitors, they nevertheless deal with each other in many areas:
 "They exchange gasoline.  They share pipelines.  They buy and
sell additives to and from one another.  They provide storage and
terminalling services to one another.  These dealings, and the
interdependence they generate, appear to discourage meaningful
price competition."177  One form of intercompany dealing reviewed
by the Attorney General is that of exchange agreements, which
generally involve competing companies that agree to structure
certain features of supply arrangements, often to deliver products
on each other's behalf in order to lower transportation costs. 
For example, a hypothetical exchange agreement would allow Shell,
which does not refine gasoline in Hawaii, to obtain gasoline from
BHP, which does refine gasoline locally, in exchange for providing
BHP the gasoline it needs in areas in which BHP does not refine
gasoline, but Shell does. Arguments in favor and against exchange
agreements are discussed in chapter 5.178
	
	(5)  Vertical networks.  The ownership and control of retail
marketing facilities in Hawaii by vertically integrated oil
companies, although efficient for the companies involved, may
further lessen competition in the State.  In particular, vertical
arrangements in the State's branded distribution system, when
considered along with other factors such as high entry barriers
and inelastic demand, contribute to the lack of aggressive price
competition in Hawaii.179
	
	(6)  Closed terminals.  The Attorney General has noted
evidence in which a terminal operator in the State refused to deal
with an outsider seeking unused terminal space to store gasoline
that would be imported to the U. S. mainland, and concluded that
this practice lessens competition by helping local oil companies
maintain the status quo of high market concentration and
interdependence.180
	
	
	Hawaii Legislation
	
	Divorcement.  Hawaii's retail divorcement statute, codified as
section 486H-10, Hawaii Revised Statutes, establishes a moratorium
on the operation of company-operated retail service stations
selling petroleum products under certain conditions until August
1, 1997.  In particular, that section allows manufacturers and
jobbers to open one company-operated station for each
dealer-operated station owned by that manufacturer or jobber that
was opened on or after July 31, 1995, up to two company-owned
stations.  That section also allows manufacturers and jobbers to
acquire or construct replacement stations to replace any
company-operated stations in existence on July 30, 1993, which
have subsequently closed due to the expiration or termination of
the station's ground lease, so long as the manufacturer or jobber
negotiated in good faith to renew the ground lease of the stations
and the stations are located within a one-mile radius of the
stations that they replace.181
	
	Other petroleum laws.  Chapter 486E, Hawaii Revised Statutes
(HRS) (fuel distribution), requires distributors, including fuel
refiners and manufacturers who sell fuel at wholesale or retail,
to register with the Department of Business, Economic Development,
and Tourism and to file statements with the director regarding
fuel refined, manufactured, or compounded and sold or used by the
distributor; fuel imported or exported; and other categories
during certain reporting periods.  Civil penalties may be imposed
for failure, neglect, or refusal to register or to file the
required statements.  Effective July 1, 1996, section 486E-5, HRS,
requires that the department adopt rules to require that gasoline
sold in the State for use in motor vehicles contain ten percent
ethanol by volume.182
	
	Chapter 486H, HRS (gasoline dealers), contains Hawaii's retail
divorcement law, as discussed earlier, as well as provisions
relating to dealer franchises.  In particular, that chapter
prohibits the wrongful or illegal termination or unreasonable
nonrenewal of a franchise agreement by a petroleum distributor,
and allows for damages and equitable relief.  The chapter also
requires written notice of termination, cancellation, or
nonrenewal by certified mail at least ninety days in advance of
the effective date of that action.  Petroleum distributors are
prohibited from dictating, forcing, or attempting to set the
retail price of any product sold by a gasoline dealer.
	
	Chapter 486I, HRS (petroleum industry information reporting),
requires that each refiner, major marketer, oil producer, oil
transporter, and oil storer submit to the Public Utilities
Commission certain information relating to petroleum and petroleum
products relating to their areas of specialty within specified
time periods.  The Commission, with its own staff and other
support staff with expertise and experience in the petroleum
industry, is required to gather, analyze, and interpret the
information submitted to it, and may conduct random or periodic
audits and inspections of suppliers of petroleum products to
determine whether they are unnecessarily withholding supplies from
the market or are violating applicable laws or policies.  The
Commission is required to publish annually and report to the
Governor and the Legislature a summary, analysis, and
interpretation of the information submitted to the Commission.
	
	Copies of the full text of chapters 486E, 486H, and 486I, HRS,
are contained in Appendices G, H, and I, respectively.
	
	Environment.  Chapter 128D, HRS (environmental response law),
defines "oil" as including petroleum and includes oil as a
"hazardous substance" under section 128D-1.  Section 128D-4
provides for the removal and remedial action of hazardous
substances that are released into the environment; section 128D-6
establishes strict liability for costs of removal or remedial
action, damages for injury or loss of natural resources, and the
costs of health assessments.  In addition, section 128D-8
establishes civil penalties, including treble punitive damages for
failure to perform actions specified in an administrative order to
properly provide removal or remedial action, and section 128D-10
establishes criminal penalties or enhanced civil penalties for
knowing releases of hazardous substances.
	
	Chapter 342G, HRS (integrated solid waste management), defines
"special waste" in section 342G-1 as including petroleum-
contaminated soil, i.e., soil contaminated by a release of
petroleum to a degree exceeding levels determined acceptable by
the director of health.  Pursuant to section 342G-21, each county
is required to prepare an integrated solid waste management plan
which, under section 342G-25(b) and 342G-26(e), must include a
special waste component that describes the existing waste handling
and disposal practices for special wastes, including
petroleum-contaminated soil.
	
	Chapter 342H, HRS (solid waste pollution), in section 342H- 1,
defines "petroleum-contaminated soil" the same as defined under
section 342G-1, and, pursuant to section 342H-4.5, prohibits the
transportation of this soil without a permit issued by the
department of health.  Section 342H-4.5 provides an exemption from
the permit requirement for the transport of petroleum-contaminated
soil to a soil remediation site if the transporter provides
written notification in advance to the department and abides by
any transportation guidelines set by the department.
	
	Chapter 342L, HRS (underground storage tanks), defines an
underground storage tank in section 342L-1 as one or a combination
used to contain an accumulation of regulated substances, including
petroleum, the volume of which is ten percent or more beneath the
surface of the ground.  Permit procedures are established under
section 342L-4 to obtain permission from the director of health to
install or operate a tank or tank system.  Variances may be
obtained from the department with respect to provisions deemed
more stringent than federal rules established under the federal
Resource and Recovery Act pursuant to sections 342L-5 and 6. 
Enforcement of the chapter may be by emergency administrative
order to stop a release or other activity presenting an imminent
peril to human health and safety or the environment (section
342L-9), civil and administrative penalties (sections 342L-10 and
11), and injunctive relief (section 342L-12).183
	
	Part II of chapter 342L, HRS (sections 342L-30 to 37),
establishes underground storage tank regulations, standards, and
financial responsibility requirements.  The Department of Health
is required to adopt standards applying to underground storage
tanks and tank systems pursuant to section 342L-32.  The
Department is also required by section 342L-36 to adopt
requirements for maintaining evidence of financial responsibility
for taking response action and compensating third parties for
bodily injury and property damage caused by an accidental release,
and allows the department to establish the amount of required
coverage for particular classes or categories of underground
storage tanks or tank systems containing petroleum at not less
than $1,000,000 for each occurrence.184  Part III of chapter 342L
(sections 342L-50 to 53) establishes the department response
program for petroleum releases, including the leaking underground
storage tank fund, responses to suspected or confirmed releases,
and cost recovery measures.
	
	Chapter 342N, HRS (used oil transport, recycling, and
disposal), defines "recycled oil" as oil that is reused or
prepared for reuse as a petroleum product, and "used oil" as a
petroleum-based oil that has become unsuitable for its original
purpose due through use, storage, or handling.  Section 342N-4
requires a permit from the Director of Health to discharge waste
or construct or modify a used oil management system.  Section
342N-30 prohibits new, used, or recycled oil from being discharged
or allowed to enter sewers, drainage systems, surface or ground
waters, or onto the ground, except for inadvertent, normal
discharges from vehicles or equipment, provided that appropriate
measures are taken to minimize releases.  Section 342N-8 and 9
impose civil and criminal penalties for violations of this
chapter.
	
	Tax laws.  Section 237-27(b), HRS (general excise tax;
exemption of certain petroleum refiners), excludes from the
general excise tax law "such part of the petroleum products
resultant from the refiner's business as is to be further refined
by another refiner, to the extent that the petroleum products
resultant from such further refining will be ... included in the
measure of the tax on such other refiner ...".  Section 237-27.1,
HRS (exemption of sale of alcohol fuels), excludes from the
general excise tax law all of the gross proceeds arising from the
sale of alcohol fuels for consumption or use by the purchaser and
not for resale.
	
	Section 243-2, HRS (fuel tax law), requires distributors,
including refiners, manufacturers, and importers of liquid fuel,
to register with the Department of Taxation and to be licensed by
the department.  Under section 243-3, retail dealers (those
purchasing liquid fuel from a licensed distributor and sell the
fuel at retail) must also hold permits from the department.
Section 243-3.5 imposes an environmental response tax on each
barrel, or fractional part of a barrel, of petroleum product sold
by a distributor to a retail dealer or end user other than a
refiner.185  Section 243-4 imposes license taxes on distributors
for each gallon of liquid fuel refined, manufactured, produced, or
compounded and sold or used by the distributor in the State or
imported by the distributor, or acquired from persons who are not
licensed distributors, and sold or used by the distributor in
Hawaii.  Section 234-4 also imposes a license tax with respect to
distributors of diesel oil.  Both of these license taxes include
amounts designated for the counties, in addition to the county
fuel taxes provided under section 234-5.186
	
	Energy planning.  Chapter 196, HRS (energy resources),
requires the director of business, economic development, and
tourism to serve as the energy resources coordinator to formulate
plans for the development of the State's energy resources.
	
	Section 201-12, HRS (state program for energy planning and
conservation), requires the department of business, economic
development, and tourism to develop a program for energy planning
and conservation, consisting of short- and long-range planning for
the development and promulgation of methods to encourage voluntary
conservation of gasoline and other fuels, and development of new
or alternative sources of fuels and energy.
	
	Antitrust.  Hawaii's antitrust law, chapter 480, HRS
(monopolies; restraint of trade),187 prohibits unfair methods of
competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce in section 480-2, and subjects
persons violating that section to a civil penalty not exceeding
$10,000 for each violation in section 480-3.1.  Section 480-4
further prohibits combinations in restraint of trade, price-
fixing, and limitations of production, and section 480-5 prohibits
tying agreements that have the effect of substantially lessening
competition or tend to create a monopoly in any line of commerce. 
Section 480-3 provides that chapter 480 is to be construed in
accordance with the judicial interpretations of similar federal
antitrust statutes.188
	
	Miscellaneous statutes.  Other laws affecting the petroleum
industry include county requirements for the leasing of commercial
space for the sale of gasoline and petroleum products,189
procedures for the control, distribution, and sale of petroleum
products during a shortage,190 requirements relating to motor
vehicle industry licensing and rentals,191 measurement
standards,192 and theft of petroleum products.193

		Endnotes	Chapter 4 Table of Contents