The Federal Trade Commission says it has reached a settlement with Tesoro, which is buying a fuel pipeline that supplies the Treasure Valley. The agency says a series of proposed orders will prevent Tesoro Corp. and a subsidiary, Tesoro Logistics, from acquiring too big a share of the wholesale fuel-supply market in Boise.
Tesoro is buying the 760-mile Northwest Products Pipeline from Chevron Corp. The pipeline carries gasoline, diesel, jet fuel and other fuels from refineries in the Salt Lake City area to southern Idaho and north to Spokane. Tesoro is paying $355 million for Chevron’s pipeline and related assets, including a light-petroleum products terminal in Boise.
The Federal Trade Commission says the deal would have given Tesoro ownership of two of the three full-service light-petroleum terminals in Boise and thereby reduced competition for local terminal services. The result could have been higher terminal costs that would have been passed on to customers, according to the FTC.
Tesoro’s acquisition would have eliminated the competition between Tesoro and Chevron, “increasing the likelihood that respondent Tesoro will exercise market power unilaterally,” according to an administrative complaint the FTC issued.
Tesoro agreed to sell its Boise terminal to an FTC-approved buyer within six months of the day the federal orders become final.
“The sale of Tesoro’s terminal will preserve the competitive conditions that exist today for terminal customers in Boise,” said Richard Feinstein, director of the commission’s Bureau of Competition. The three Boise terminals are near one another along North Phillippi Street and North Curtis Road between Emerald and Franklin streets on the Boise Bench.
The third terminal, owned by Franklin United Oil, is much smaller than the Chevron and Tesoro terminals, said Charley Jones, president and owner of Stinker Stores, a Boise company that operates about 35 Treasure Valley gas stations that rely on fuels from the pipeline.
Jones supports the divestment order. “I rarely agree with the government, but on the face of it, it’s too much market power,” Jones said.
The Idaho Attorney General’s Office backs the order too, Deputy Attorney General Brett DeLange said.
DeLange said his office assisted the FTC in its review. “Tesoro would potentially have had monopoly power,” DeLange said. “Generally, when you have ability to exercise monopoly power, you can exact monopoly prices or provide poorer service. There could be a variety of things that, absent the agreement, would be potentially be a detriment of consumers.”
The Attorney General’s Office investigated gas pricing in the state in 2008 at the Legislature’s request and found that the state’s high gas prices then were due to infrastructure limitations, not to criminal wrongdoing by gas companies, DeLange said.
The pipeline is the primary petroleum source in southern Idaho and a major source to eastern Washington. An average of about 87,000 barrels flowed through the system daily in 2012, according to Tesoro.
“We are pleased to have received the FTC’s clearance of the Northwest Products System acquisition,” Tesoro Logistics Chairman and CEO Greg Goff said in a news release from the company’s headquarters in San Antonio.
Zach Kyle: 377-6464