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    Regulators Try to Halt Giant Industries Takeover

    Claim that gas prices at the pump will be "significantly higher;" company reports first-quarter results.

    SCOTTSDALE, Ariz. -- A Federal Trade Commission (FTC) lawyer warned a U.S. District Judge in a hearing that by permitting the $1.3 billion acquisition of Giant Industries by Western Refining will ultimately lead to higher gas prices in New Mexico, The Associated Press reported.

    In the hearing -- which began on Monday and is expected to last all week -- FTC lawyer Tom Lang asked for a temporary restraining order and preliminary injunction to halt the sale from Judge James Browning.

    The FTC added that the acquisition will reduce competition and cause higher prices for bulk gasoline supply in 11 northern New Mexico counties, including the Albuquerque and Santa Fe areas, the AP reported.

    "Gasoline prices will be significantly higher on a per-gallon basis than they would have been before the proposed merger," Lang said in his opening statement.

    During separate presentations, El Paso, Texas-based Western Refining and Giant Industries told Browning that the government's claims have no merit, the report stated. The companies have stated that the purchase will cut gasoline costs by merging assets.

    "Giant needs to purchase its product from Western just to meet its demand in New Mexico," Western Refining attorney Marc Schildkraut told the AP. "These partners never considered themselves to be competitors."

    Lang admitted that it is uncertain how the proposed deal will affect third-party suppliers, or how much the cost at the pump could rise. The FTC will call experts, including an economist and a market analyst, to explain why the merger will boost gas prices, according to the AP. Land did state the merger would result in 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," Lang said at the hearing, adding that lower-income families face the threat of reduced food or housing money.

    Meanwhile, Giant Industries reported improved first-quarter results, as net earnings for the company were $7.2 million, compared to a net loss of $12.4 million in the year-ago period.

    "Our first-quarter 2007 earnings were negatively impacted by reduced operations at our Yorktown and Ciniza refineries in the months of January and February, as we made repairs necessitated by the fires that occurred at these facilities in the fourth quarter of 2006. The month of March was, however, exceptional for our refining operations as our refineries were operating at high utilization rates and refining margins were strong throughout our markets," Fred Holliger, Giant's CEO, said in a written statement.

    For the company's retail operations, same-store fuel volumes increased by approximately 2 percent, while merchandise sales increased approximately 3 percent in the first quarter compared to a year-ago period.

    "Our retail operations are continuing to experience growth in both merchandise and fuel sales on a comparable store basis," he added. "Recently, fuel margins within our retail operations have been lower primarily due to increases in the cost of fuel, while merchandise margins have remained stable."

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