Gas price fuels anger in rivals

Minnesota mandates a minimum price for gasoline, and one Anoka station might be dipping below it

St. Paul Pioneer Press/April 8, 2005
By Jason Hoppin

With gasoline prices spiraling upward, the new Exxon station in Anoka seems like a beacon of hope.

Gas sells for as little as $2 a gallon, about the cheapest you can find in the Twin Cities. The bargain is reflected in long lines at the pumps.

So what's wrong with cheap gas?

Nothing, unless you're one of many competitors up and down U.S. 10 who say the Exxon station is engaged in predatory pricing that is driving them toward extinction. They say the station, whose owners are affiliated with a Wisconsin-based religious group, is selling at a loss, possibly in violation of state law.

Nobody seems to know how a station, one with a sparsely stocked mini-mart and a car wash that doesn't seem to do a lot of business, can make money selling gas so cheap. Or why the station does it.

"We would have to shut down (if the low prices continue). What else can we do?" asked Frank Yamoutpour, owner of a Shell about a mile up U.S. 10. "Everybody knows about them. The effect is moving fast."

The owners of the station didn't return calls about the matter.

According to Anoka County property records, the station was purchased recently by a company affiliated with a Wisconsin religious group — the Dr. R.C. Samanta Roy Institute of Science and Technology, or SIST. The group keeps a low profile but has been described in news reports as a religion that embraces parts of Christianity and Judaism.

The group also has been accused of undercutting gas station competitors in Shawano County, Wis., near Green Bay.

In December, station owners there successfully filed a civil lawsuit against SIST, getting a Shawano County judge to award about $29,000 in fines and legal fees. The case is being appealed.

As in Wisconsin, Minnesota law mandates a minimum gas price, based on wholesale cost, freight, taxes and a certain percent for operating costs.

The problem with below-market gas, Anoka County station owners say, is that many motorists will go out of their way to save a nickel or dime per gallon.

Owners said stations as far north as Elk River are feeling the pinch from the Anoka Exxon, and those along U.S. 10 near the station contend their business has plummeted. Yamoutpour said his gas sales are down 50 percent. Another owner estimated a decline of 30 percent.

Until recently, the station advertised gas at $2.01 a gallon, which competitors say is below what it costs to sell the gas. After a recent TV news report that the station could be selling gas below levels mandated by the state, the advertised price climbed to $2.10. However, customers can still get a discount of 10 cents a gallon by asking for a coupon inside the store.

Sid Haugtvedt, owner of a Phillips 66 store across the highway, sells gas for as little as $2.13. "That's just legal. That's just barely legal," Haugtvedt said.

Haugtvedt said he makes almost no profit at that price, arguing he'd be better off if he took out his pumps and stuck to auto towing and repair. Haugtvedt estimated that the Exxon station goes through four tankers of gasoline a day.

"If I'm doing good, I'm doing three a week," he said.

An Exxon-Mobil distributor who sells gasoline to the station said competitors are bitter about getting beat.

"What you got is a bunch of crybabies there," said Bill Egan, owner of Anoka's Egan Oil. "It's just a good spot. It's a brand-new place."

Egan said he provides gas to several stations owned by the group, including one in St. Paul on Grand Avenue. He called them "pretty good people."

But even Egan conceded that at $2 a gallon, the station is only breaking even.

Midwest Oil of Minnesota, a limited liability company registered in Wisconsin, owns the gas station. Naomi Isaacson, who listed a Minneapolis address, signed a mortgage agreement filed with Anoka County.

Yamoutpour said Isaacson is behind the station, and he produced a business card given to him by Isaacson listing her as a board member of SIST. Yamoutpour said the group wanted to buy his station, but that he backed out when it was not able to provide necessary financial records.

The card also notes that Isaacson has a law degree, which was confirmed by officials with the state Supreme Court. She works as a clerk for Hennepin County Judge Janet Poston.

Isaacson did not return numerous calls for comment, either to her home, to her voice mail in Poston's chambers or to SIST, where she was said to be in a meeting.

SIST is located in Shawano, Wis. Shawano County District Attorney Gary Robert Bruno is familiar with the group.

"There have been allegations for years that things are going on," Bruno said. He said he prosecuted one member for assault charges and has an outstanding warrant on another.

Bruno said he also is familiar with charges that stations owned by the group charge too little for gas.

Bruno said he has forwarded allegations to Wisconsin's Department of Agriculture, but they were never referred back for a possible criminal prosecution.

Bruce Gordon, communications director for the Minnesota Department of Commerce, would not confirm whether the state is investigating the Exxon station. But Gordon said the department is investigating "a station or stations" in Anoka.

Gordon said 13 investigations are ongoing throughout the state, including the Twin Cities area, Albert Lea and Mankato. Midwest Oil has never been fined by the state.

The station's competitors hope it will be.

"It's been absolutely horrible," said Gary Dehr of Anoka-based Local Oil, which operates several Super America franchises.

After SIST lost the gaspricing suit in Shawano County, Isaacson was quoted in the local Shawano Leader newspaper as saying SIST was looking to serve the community and wasn't harming anyone.

But Anoka County station owners say the group is hurting them. Furthermore, they don't understand how the station can sell gas at what appears to be below-cost prices.

"That's our question," Dehr said. "What are they doing with the money? It just doesn't make business sense."