ALBUQUERQUE, N.M. -- Federal regulators reiterated during a hearing that allowing Western Refining's proposed $1.3 billion acquisition of Giant Industries to move ahead will lead to higher gasoline prices in New Mexico, said the Associated Press.
During a hearing Monday in Albuquerque that is expected to last all week, a Federal Trade Commission (FTC) lawyer asked U.S. District Judge James Browning for a temporary restraining order and preliminary injunction to halt the sale.
The FTC said the proposed buyout will reduce competition [image-nocss] and create higher prices for the bulk supply of gasoline in 11 northern New Mexico counties, including the Albuquerque and Santa Fe areas.
"Gasoline prices will be significantly higher on a per-gallon basis than they would have been before the proposed merger," FTC attorney Tom Lang said in his opening statement.
However, attorneys for Western Refining of El Paso and Giant Industries of Scottsdale, Ariz., told Browning during separate presentations that the government's claims have no merit. Both companies maintain the sale will drive down gasoline costs by merging assets, arguing that the companies have cooperated for years.
"Giant needs to purchase its product from Western just to meet its demand in New Mexico," Western Refining attorney Marc Schildkraut said. "These partners never considered themselves to be competitors."
Browning asked Lang whether he agreed the key issue is supply. Giant officials say they can lower costs by increasing gasoline supplies to customers but they need Western's assets, including a pipeline from El Paso to Albuquerque.
Lang agreed with the judge, said the report, but said it is uncertain how the proposed deal will affect third-party suppliers. The FTC will call experts, including an economist and a market analyst, to explain why the merger will boost gasoline prices.
Lang did not estimate how much the cost at the pump could rise, but said broadly it would mean an increase of $5 million annually for New Mexico consumers and businesses. "Higher gas prices can mean taking on second jobs, pulling kids from traveling sports teams and eliminating summer driving," he said, adding that lower-income families face the threat of reduced food or housing money.
Schildkraut disputed the government's claim, arguing that the companies can better control costs by consolidating efforts. He also said the FTC based its economic forecasts on errors. For example, he said, the FTC grossly underestimated the importance of trucking in Giant's distribution system, leading to flawed economic impact conclusions.
Hugh Whiting, an attorney for Giant, said the FTC in its conclusions has misrepresented company documents related to a July 2005 presentation to the board. At the time, Giant was considering a pipeline acquisition. He said Holliger had asked company officials to present a "worst-case" analysis, and those findings went into the FTC's research on the proposed merger even though Giant "tossed out" the information and never presented it to board members.
"I respectfully submit that the FTC's theory is just that," Whiting said.
Meanwhile, Scottsdale, Ariz.-based Giant reported net earnings for the first quarter ended March 31, 2007 of $7.2 million or 49 cents per diluted share. This compares to a net loss for the first quarter ended March 31, 2006 of $12.4 million or 85 cents per diluted share.
And El Paso, Texas-based Western reported net income of $62.6 million, or 93 cents per diluted share, for the quarter ended March 31, 2007. For the same period in 2006, it had a net loss of $19.7 million, or 32 cents per diluted share.
Western Refining is an independent crude oil refiner and marketer of refined products. It operates primarily in the Southwest. Giant owns two New Mexico crude oil refineries; a crude oil pipeline system; finished products distribution terminals in Albuquerque and Flagstaff; a trucking fleet; and retail gas station and convenience stores in New Mexico, Colorado and Arizona.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.