ST PAUL, Minn. — State lawmakers are taking aim at a 1999 law that prohibits gas stations in Minnesota from selling their fuel at below cost, by requiring a minimum profit margin of 8 cents per gallon.
Rep. Dan Wolgamott, a St. Cloud Democrat, has teamed up with Sen. Jordan Rasmusson, a Fergus Falls Republican, on a bill that would repeal the markup in an effort to lower gas prices. They say the markup has outlived its usefulness.
"It's a hidden tax on middle income and low-income families, and it's time we repeal it and do something to lower gas prices for middle income Minnesotans," Wolgamott told reporters Thursday.
Legislators passed the minimum markup law in 1999 in an effort to protect smaller gas station owners from being undercut by national chains and big box stores that could afford to eliminate competition by operating at a loss.
Then-Attorney General Mike Hatch endorsed the effort as a way to protect small stations from predatory pricing tactics, and shield consumers from the lack of competition in the market. Rep. Rasmussen asserts fueling store operators don't rely as heavily on gasoline sales anymore.
"More and more the profits from petroleum marketers are coming from convenience store sales, and less from gas. And they use a competitive gas price to attract customers into buying things for higher margins like snacks or soft drinks."
When Rasmussen presented the bill to his colleagues on the Senate Commerce Committee Thursday, he pointed out that club stores such as Costco or Sam's Club already get around the minimum markup rules by offering deep discounts to members.
"This is also an issue of economic justice for working class Minnesotans. The minimum markup law does not apply to club stores like Costco or Sam's."
Those gas station owners who testified against the bill said they still need protection from those larger players who can afford to temporarily sell at a loss. They asserted it's actually better for competition to even the playing field.
Lance Klatt of the Minnesota Service Station and Convenience Store Association showed lawmakers a set of pricing data comparing states with minimum markups with those who lack those laws.
"The study proves the six states with minimum markup laws on gasoline average cheaper gas prices. That’s hard to argue. Today MInnesota consumers are benefiting from the minimum markup law of 8 cents with lower prices today than yesterday."
Alan Merschman runs the gas station in Bemidji opened by his father in 1954, a business that has survived the oil embargoes and many other crises.
"Of these, the worst was dealing with a major corporation, BP-Amoco, that had morphed into a profit-driven entity that sacrificed many of its dealers on the altar of volume and profit."
Merschman also said it's overly simplistic to think removing the markup will necessarily reduce prices by 8 cents a gallon. He said prices at the pump also depend on how much gas station operators pay for their gasoline from the fuel terminals and how much they pay trucking companies to haul their fuel.
"The big boxes or the chain stores have more volume, and they get a better price, and they have their own trucks."
He asserted the markup repeal is being driven by large companies determined to run smaller and medium-sized operators out of business.
Wolgamott's bill has already reached the House general register, so it could be taken up for a floor vote whenever leadership decides to schedule it.
Rasmusson's bill will have slower ride to the Senate floor. The Commerce Committee Thursday voted to lay the bill over. That gives them the option of taking it up as a stand-alone bill or incorporating it into a larger omnibus bill at the end of the session.
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