House OKs bill making gas-price gouging a crime

WASHINGTON -- With gasoline prices at record highs, the U.S. House passed a bill Wednesday that would make gas-price gouging a federal crime.

Washington Sen. Maria Cantwell has pushed such legislation for two years in the Senate, and the Majority Leader Harry Reid said he would bring up her bill in June.

Wednesday's action came as Congress prepares to face voters during its weeklong Memorial Day recess. Gasoline prices hit a record national average of $3.22 for a gallon of regular Wednesday.

In the Seattle area, prices reached $3.46 a gallon, according to the American Automobile Association.

"We have four refineries in Washington state, so why are our prices so high?" asked Cantwell, a Democrat.

The House vote provoked an immediate veto threat from the White House, which called the bill a form of price controls that could lead to fuel shortages and "bring back long gas lines reminiscent of the 1970s."

Cantwell said the vote -- and her companion bill -- sets up a political battle pitting the American people against the oil industry's "lobbyists and friends in the White House."

Even if approved, the impact of the legislation is uncertain. The biggest question is how price gouging would be defined. Cantwell acknowledged that problem but said the first step was to get criminal penalties on the books.

The House bill passed 284-141. Its weakness is that it can only be triggered if the president declares a federal emergency. However, it is groundbreaking because it is the first bill to make gas-price gouging a federal crime.

Introduced by Rep. Bart Stupak, D-Mich., the legislation is based on a bill that Cantwell and Stupak tried to get through Congress in late 2005.

The Federal Price Gouging Protection Act calls for stiff penalties against oil companies, traders or retail operators if they take "unfair advantage" or charge "unconscionably excessive" prices for gasoline or heating fuel.

The bill directs the Federal Trade Commission (FTC) and the Justice Department to pursue complaints of profiteering and any activity that "indicates that the seller is taking unfair advantage" of unusual market conditions, whether real or perceived.

Violations would carry penalties of up to 10 years in prison and a fine up to $2 million for an individual and up to a $150 million for a corporation.

The energy industry said the bill is vaguely worded and could result in unfair prosecution of dealers and suppliers.

Penalties would not be enforced unless the president declares an emergency, a provision that oil-state Democrats demanded in return for their support.

"The legislation is a cousin of the disastrous 1970s price and allocation controls, which created product shortages and put consumers in gasoline lines," said the American Petroleum Institute, which lobbies for the oil industry.

Cantwell fired back: "The oil industry is deliberately presenting this as a price cap, and it isn't."

Reid, the Senate majority leader, said he will include Cantwell's gas-price gouging bill in an energy package the Senate will take up after the Memorial Day recess.

Cantwell's legislation passed the Senate Commerce Committee on May 8.

But with Democrats holding only a one-vote majority, the energy package is in doubt.

Washington state's congressional delegation has been among the strongest supporters in Congress for anti-gas-gouging legislation, often citing the spike in state prices in 2005 after Hurricane Katrina damaged oil refineries on the Gulf coast.

The new bill's 120 House co-sponsors include Jay Inslee, D-Bainbridge Island, and Brian Baird, D-Vancouver.

Democrats needed a two-thirds vote to expedite the bill under House rules. They got 56 Republicans to break ranks with their party, giving them 284 votes, one more than needed.

Rep. Dave Reichert, R-Auburn, voted for it; he supported another gas-price gouging bill in 2006. The bill passed the House but died in the Senate.

"We've heard a lot from constituents about high gas prices," said Mike Shields, Reichert's chief of staff. "Prices are going up despite lower costs per barrel."

During House debate, Rep. Joe Barton, R-Texas, said there was no need for a federal law, arguing that if "pandemic price gouging" were going on, states with anti-gouging laws would be flooding the courts with complaints.

Instead, he said, the prices reflect that demand for oil is up. The markets were doing what markets do, he said, noting: "If you don't have more of it, prices are going to go up."

Cantwell told CNN on Tuesday she thought gouging had occurred in Washington, citing an unusual spike in gas prices in Spokane last summer.

Cantwell asked the FTC to review the Spokane prices.

"The FTC's preliminary investigation showed that there were anomalies," she said. But the final FTC report, won't be finished until 2008.

The Los Angeles Times contributed to this story.

Alicia Mundy: 202-662-7457 or amundy@seattletimes.com