Price gouging suit filed

PAINTSVILLE HERALD EDITOR

Attorney General Greg Stumbo announced an $89 million, history-making lawsuit filed in Franklin Circuit Court yesterday against Kentucky's biggest wholesale gas supplier and two of its subsidiaries for allegedly price gouging after Hurricanes Katrina and Rita.

Marathon Oil Corporation owns Marathon Petroleum Company LLC, which supplies gas to 10 Pike County stations - five in Pikeville, two in Phelps, and one each in Belfry, Ashcamp, and Jenkins - and Speedway SuperAmerica LLC, which has one store at Pikeville and one in Belfry.

All three businesses were named in the first suit in the nation filed against a major oil refiner for price gouging. The lawsuit claims Marathon and its subsidiaries violated Kentucky's Consumer Protection Act and KRS 367.374 - known as the price gouging law - ordered at the request of Stumbo by Gov. Ernie Fletcher on Aug. 31, 2005, a day after he declared a state of emergency for the state per Hurricane Katrina. The law prohibits companies from selling gasoline at a price in excess of the price prior to the declared state of emergency.

The Attorney General's Office claims Marathon Petroleum Company, which has 12 wholesale terminals in the state, overcharged Kentuckians by $86 million in wholesale transactions, while Speedway SuperAmerica, which has 137 retail gasoline stations in the state, overcharged an additional $3 million.

“Following an 18-month investigation, my Consumer Protection and Rate Intervention divisions have uncovered evidence of massive overcharging for gasoline, affecting nearly every family and business in the state,” Stumbo said in a press release. “The worst thing ... is it took place during a grave national emergency.”

The lawsuit claims Marathon Petroleum increased its refining margin by over 100 percent for September and October 2005, compared to August 2005, which was after hurricanes Katrina and Rita hit.

The AG's office began reviewing the petroleum industry's pricing and established a hotline for gas price gouging complaints after the hurricane landfalls, and investigated and/or reviewed nearly 700, the office reported.

In February 2006, the AG's office issued subpoenas to 30 retail gasoline stations regarding pricing during the state of emergency and issued subpoenas to 13 petroleum refiners and suppliers in April 2006, requiring the same data. On Aug. 1, the AG's office issued subpoenas to Speedway for data on all stations and announced settlements in the price-gouging investigation totaling more than $50,000.

Besides the 10 stations in Pike County, Marathon Petroleum supplies gas to six stations in Johnson; 13 in Floyd, four of which are in Prestonsburg; four in Martin; three in Lawrence; and two in Magoffin.

Besides the two in Pikeville, Speedway has two stores in Floyd, and one each in Johnson, Martin, Lawrence, and Magoffin counties. The number of stores affected in the six Eastern Kentucky counties totals 46.