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Supreme Court agrees to review Hawaii case over gasoline limits

Associated Press
October 13, 2004
Gina Holland

(Note to readers from CRC: the quote "The list could be virtually endless" was taken from the brief that CRC filed on behalf of the National Conference of State Legislatures and others. Read the brief here.)

WASHINGTON (AP) - The Supreme Court said Tuesday it would decide whether Hawaii went too far to keep gasoline affordable for residents when it imposed rent caps on dealer run stations. Lower courts said the 1997 law, intended to protect independent dealers and promote competition, was unconstitutional.

In Honolulu, Hawaii Attorney General Mark Bennett lauded the court's decision to examine the state's action aimed at taming high gasoline prices in the islands.

"This case raises questions of profound importance concerning the proper relationship between the courts and institutions of democratic governance," Bennett said. The federal court should not "freely second guess the wisdom of state economic legislation," he said.

The case is being watched across the country, because it could have a a big impact on states' abilities to regulate private businesses to help consumers.

The case to be argued early next year will set guidelines for other states. Nineteen states and many city and legislative leaders had urged the Supreme Court to hear Hawaii's appeal, arguing that their own regulations of various types could be affected.

"The list could be virtually endless," justices were told by lawyers for the National Conference of State Legislatures, National League of Cities and other groups.

Chevron USA filed a challenge to the law, which restricted lease prices that oil companies could charge their dealer owned stations and barred the companies from taking over those stations.

The company won, on grounds that the law was an unconstitutional taking of its property.

In the appeal, Hawaii argues that such economic regulations are not property takings and that judges should consider states' authority to determine policy.

Hawaii has been trying to control island motorists' gas prices. It also passed a law that imposed limits on gas prices, but the restrictions haven't started yet.

Last month, Honolulu had the highest gas prices in the nation at $2.26 for self-serve regular. The average national price was $1.91, according to the Lundberg Survey.

Chevron attorney Craig Stewart of San Francisco told justices in a filing that Hawaii imposed "fundamentally irrational restrictions" on lease arrangements between oil companies and gas station operators.

He said Chevron sells most of its gas in Hawaii through 64 stations which the company leases to independent operators. The contested law required Chevron to charge less rent than needed to recover its expenses, Stewart said.

The law was aimed at keeping Chevron from forcing independent operators out of business, so there would be more stations setting retail prices that would be more competitive.

Chevron, the largest of two oil refiners in the state, claimed the state regulations amounted to an unconstitutional state taking of its property.

The state said the courts should let the Legislature set economic policy, attracting supporting briefs from the 19 states, Puerto Rico, the Virgin Islands, Guam and major local government organizations.

Hawaii Gov. Linda Lingle supported that argument.

"The courts should never substitute their opinion for the legislative branch of government or for the executive branch of government," Lingle said Tuesday. "That's a very strong point to make to stand up for the separation of powers and for the right of the Legislature or the governor to pass a law and to sign a law and believe it's going to have a certain impact."

The states that urged the Supreme Court to take the appeal are: California, Colorado, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maine, Maryland, Minnesota, Mississippi, Missouri, Montana, New York, Oklahoma, Oregon, Utah, Vermont, and Washington.

The case is Lingle v. Chevron USA, 04-163.

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