Emails show Marathon jacked up gas prices

Attorney General Andy Beshear is reviving an 11-year-old lawsuit against Marathon Petroleum over gas prices during
Hurricane Katrina. But a low-profile bill passed by the GOP-controlled legislature may help Marathon's case.

On August 29, 2005, as Hurricane Katrina roared ashore on the Gulf Coast, a senior vice president at Marathon Ashland
Petroleum asked a colleague at the company’s Ohio headquarters for a list of states with laws prohibiting businesses from
jacking up prices on necessities, like gasoline, during emergencies.
company’s then-president and now CEO of Marathon Petroleum, wanted to “take the full move.”
Marathon, the biggest supplier of wholesale gas to Kentucky, would proceed over the next three days to raise the price of
regular gas at its terminals in the state by nearly 35 percent, from $1.94 to $2.59 per gallon, according to the Kentucky
Attorney General’s Office.

On Aug. 31, as the remnants of the dissipating storm reached Kentucky, the Marathon vice president, Mary Ellen Peters,
made a suggestion to her boss, Heminger: “How about going public quickly that we are not trying to profit from the
problems (and) will donate 10 or 20 or whatever to the relief efforts.”

The 2005 emails are among confidential records obtained by WDRB News in Kentucky’s decade-old lawsuit against the
company, now known as Marathon Petroleum Corp., which is the “dominant” supplier of wholesale gasoline to Kentucky
service stations.

The emails were also the subject of a contentious fight in the court case, with lawyers for the state arguing they show the
company flaunted Kentucky’s anti-gouging law and spiked prices. Marathon has disputed that interpretation while seeking
to keep the emails from public view.

The case centers on Kentucky’s allegation that Marathon, which also owns the Speedway gas station chain, illegally
increased gas prices in the wake of Hurricanes Katrina and Rita in 2005, and again in 2011, when the state had a major
flood.

Kentucky’s anti-gouging law prohibits businesses from charging prices “grossly in excess” of their previous prices or their
costs during a state of emergency declared by the governor. The law is meant to ensure consumers aren’t taken advantage
of for necessities like gas, building materials and groceries.

Attorney General Andy Beshear – who inherited the lawsuit filed in 2007 by his predecessor’s predecessor, Greg Stumbo –
said he is determined to finally resolve the languishing case, which has taken “far too long” already.

“We believe what we are going to be able to show here is that they were making significant and gross profits off of this time
period, where people were suffering,” Beshear said in an interview last week.

Marathon, which has denied the state’s allegations in court, declined to comment for this story. A trial is scheduled for
January, though either a settlement or yet another delay is possible.

But even if Beshear, a Democrat who has launched a bid for governor next year, successfully resolves the 11-year-old
case, the Republican-controlled state legislature may have knee-capped Beshear’s ability to win penalties from Marathon.

With the support of many Democrats, the General Assembly passed a bill in March that puts a $25,000-per-day cap on
penalties for violating the law, among other changes to the statute.  

Marathon lobbied for the changes and even sent a company lawyer to testify to the bill’s benefits before a legislative
committee in March.

Beshear’s attorneys have suggested in court that Marathon may have misled legislators about how the bill could strengthen
the company’s position in the current case, as opposed to the changes applying only to future price-gouging claims.

In court, Beshear has demanded Marathon turn over any communications its lobbyists may have had with lawmakers and
with Gov. Matt Bevin or his office about the bill. A spokeswoman for Bevin called the request “just another political stunt
from Candidate Beshear.”  

Marathon calls lawsuit a “vehicle for self-promotion”

Marathon, based in Findlay, Ohio, is a $35 billion petroleum giant that operates oil refineries – including in Cattletsburg, Ky.
– and owns the Speedway chain, including 147 stations in the state.

Kentucky is no stranger to litigation with the company, which is believed to provide a significant portion of the gasoline sold
in the commonwealth, regardless of whether the selling station is a Shell, BP or other brand. (Stations with the “Marathon”
brand are actually owned by independent business people).

In 2015, five months before his unsuccessful bid for governor, then-Attorney General Jack Conway sued the company for
anti-trust violations, alleging Marathon exploits a monopoly on the cleaner-burning reformulated gas, or RFG, required to be
sold in Louisville and northern Kentucky.

Conway said consumers in Louisville and northern Kentucky suffer by paying consistently higher prices at the pump than
other markets, like St. Louis, where reformulated gas is required.

Beshear said he wants to get the antitrust case, which is unfolding in federal court in Louisville, to trial as soon as next year.

Marathon, for its part, has said it’s been made a punching bag for politically motivated attorneys general. In a 2016 court
filing in the price-gouging case, the company said the state has “repeatedly demonstrated its willingness to use this lawsuit
as a vehicle for self-promotion.”

Stumbo filed the litigation on the eve of a primary election (in which Stumbo was on a gubernatorial ticket) in 2007, and
Conway added the 2011 flooding claims as he was seeking re-election that year, Marathon noted. But after grabbing
headlines, Stumbo and Conway did little to advance the cases, the company said.