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FAIRBANKS, Alaska -- Alaska Gov. Frank Murkowski wants to move Fairbanks gasoline prices closer to the prices in Anchorage, and may get his way if Flint Hills Resources of Wichita, Kan., buys Williams Alaska Petroleum Co.'s refinery and fuel outlets in Alaska and accepts the terms for a contract to buy state-owned royalty oil from the North Slope, according to the Alaska Journal of Commerce.
"I have expressed my deep concern about the disparity in retail prices of motor fuels between Fairbanks, where the fuel is refined, and Anchorage, another area where it is marketed," said Murkowski. "There is no legitimate reason why Fairbanks should be paying as much as 23 cents a gallon more. We would like a guarantee of parity of wholesale prices to be included in the royalty contract."
The governor said that Williams does maintain parity in jet fuel prices between Anchorage and Fairbanks, and should do so with gasoline as well. He also said the market is not being rational because the fuel is made in Fairbanks and transported to Anchorage, but it is being sold for less than in Fairbanks, according to the Journal.
The state has initiated negotiations with Flint Hills on a new royalty oil contract sales agreement, and in an Aug. 4 press conference, the governor said a key part of the new royalty contract would be agreement by Flint Hills to maintain "parity" in wholesale gasoline prices between Anchorage and Fairbanks. Williams now owns retail gasoline outlets in both cities.
According to one state official, the only explanation for the fuel being sold for less is that Anchorage is a larger market with more competition than in the smaller Fairbanks market, and both Flint Hills and Williams oppose the parity of pricing, according to reports.
Furthermore, Murkowski assumes that Flint Hills will buy Williams' chain of gasoline retail outlets and convenience stores in the state since the company currently has no retail outlets for its products. The business is being offered as a package that includes the refinery, retail chain and Anchorage bulk storage facility, but no final agreement has been made.
In addition to the gas price agreement, Murkowski also said the state would require Flint Hills to make investments in equipment to remove sulfur in the North Pole refinery to allow low-sulfur fuels to be produced. The U.S. Environmental Protection Agency is requiring reductions of pollution-causing sulfur in fuels, and if refineries in Alaska don't make the fuels they will have to be imported.
If the state approves the contract with Flint Hills it would be a one-year contract because a longer term would require approval by the Legislature, according to Murkowski. The one-year contract would be followed by a multi-year contract proposal submitted to state lawmakers in the 2004 legislative session.