Marathon Petroleum Seeks Dismissal of Kentucky AG's Suit

LOUISVILLE, Ky. — Marathon Petroleum Corp. is asking U.S. District Court Judge David Hale to toss a legal challenge brought against the company by Kentucky's attorney general.

Findlay, Ohio-based Marathon said Kentucky Attorney General Jack Conway offers no facts backing up his lawsuit alleging anti-competitive behavior by the company resulting in higher gas prices in Louisville and northern Kentucky, according to WDRB.com.

"For all its rhetoric, the attorney general's [lawsuit] fails to allege any unlawful conduct by defendant Marathon," the company said in a court document filed Aug. 19.

It's the company's first formal response to Conway's complaint, which was first filed May 12 and refiled last month.

As CSNews Online previously reported, Conway alleges that Marathon has illegally restricted competition in the market for reformulated gas (RFG). Cleaner-burning reformulated gas is required in Louisville and Covington during the summer months to reduce air emissions. Marathon owns the only oil refinery in Kentucky and another in nearby Illinois, and supplies about 95 percent of the RFG in Louisville and northern Kentucky.

Marathon's unlawful conduct has resulted in gas prices that are roughly 40 cents higher per gallon in Louisville than in St. Louis — a similar market where reformulated gas is also required, according to Conway's lawsuit.

According to the news outlet, Conway points to "exchange agreements" by which Marathon supplies RFG to competitors BP, Shell and ExxonMobil for sale in Louisville and northern Kentucky. (The identities of BP, Shell and ExxonMobil are blacked out in Conway's lawsuit, but not in Marathon's response).

Marathon, however, responded that agreements allowing refiners to swap gas supplies in their respective geographic areas actually promotes competition.

"By supplying [reformulated gas] for use by these competitors in Louisville and northern Kentucky, the exchange agreements enable ExxonMobil, Shell and BP to compete more effectively than they might be able to in their absence," according to the company's court filing.

Conway also presented a handful of examples in which Marathon has sold former gas station properties with deed restrictions forbidding future owners from using the real estate as a gas station, the news report added.

Marathon contends that Conway offers no evidence that "any significant portion" of the real estate in Louisville and northern Kentucky is subject to those restrictions. "Common sense indicates that there are numerous properties in the Louisville metropolitan and northern Kentucky regions that are suitable for gas stations," according to its filing.

Conway also said Marathon has contracts with retailers (Kroger and Swifty, according to Marathon's response) requiring the retailers to buy a certain amount of gas from Marathon or face penalties, thus "limit(ing) the retailers' ability to obtain gasoline from Marathon's competitors."

Marathon said the supply contracts Conway cites are from 2008 and therefore too old to challenge, according to WDRB.com.
  
Asked for a response to Marathon's filing, Attorney General's office spokeswoman Allison Martin told the news outlet: "The facts speak for themselves and are clearly outlined in our complaint."