Politics & Government

Judge will not issue injunction against Marathon in price-gouging case

FRANKFORT — A Franklin Circuit Court judge will not issue an injunction against Marathon Petroleum for allegedly raising gas prices during a state of emergency.

Judge Thomas Wingate ruled Wednesday that Attorney General Jack Conway did not prove that Marathon Oil grossly raised its prices over its costs to try to gouge customers after Gov. Steve Beshear signed an emergency order April 26.

Conway's office had asked that Wingate issue a temporary injunction against Marathon Oil to keep the price of gasoline at levels before the April 26 order.

Beshear signed the executive order after widespread flooding hit Western Kentucky. The order also triggered the state's price-gouging statutes, which say companies cannot raise prices over their costs. Conway's office alleged that in some Kentucky markets, gas prices jumped more than 30 cents overnight.

Conway's office was flooded with complaints from consumers who were livid about high gas prices. Gas in some markets topped $4 a gallon.

Marathon Oil's attorneys said last week in court documents and during oral arguments that price increases were tied to the spot commodity market for gasoline. In his order, Wingate noted that Ramsey Shehadeh, Marathon's petroleum expert, presented evidence that Marathon is both a buyer and seller of gasoline and that the cost of petroleum increased during the time of emergency.

Conway's office had asked that Wingate restore gasoline's price to what it was before the April 26 emergency.

In his order, Wingate said doing so actually might harm the public. "Not only has the price of wholesale gasoline in Kentucky fallen before the pre-declaration price, but Marathon presented evidence that a fixed gasoline price in Kentucky could result in significant disruption in the market."

Marathon, in a statement, said it was pleased with Wingate's decision.

"Our wholesale gasoline prices in Kentucky both before and after the governor's declaration were consistent with those in neighboring states and with broader market conditions," the statement said. "We believe our prices complied fully with Kentucky's emergency pricing law."

The order is part of an ongoing case against Marathon Petroleum, Marathon Oil and Speedway for allegedly raising gas prices during hurricanes Katrina and Rita in 2005. Wingate said in his order that Wednesday's denial of Conway's motion is "not a ruling on the plaintiff's ultimate ability to succeed on the merits of this case."

Conway said he was disappointed with the ruling.

"I brought this case in good faith to protect the consumers of Kentucky," he said. "I do think that Marathon has engaged in price gouging."

Marathon has a monopoly on the wholesale gas market in some parts of Kentucky, he said. "In the long term, we must address this problem, and I am turning over evidence we have developed to the U.S. Department of Justice's recently formed gas task force that is charged with investigating illegal activity in the oil and gas markets."

Meanwhile, Beshear on Wednesday extended the state of emergency an additional 30 days. The first emergency order was set to expire Thursday. By extending the order, Conway will have more time to investigate any other price-gouging allegations, Beshear said in a release. Beshear said many victims of last month's heavy flooding are still trying to repair and rebuild property. Seventy-one of the state's 120 counties declared states of emergency in the wake of last month's storms.

"This extension will protect potential victims from price-gouging by contractors and suppliers of building services as citizens begin rebuilding their homes and businesses," Beshear said.

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