Concurring Statement of Commissioner Mozelle W. Thompson

Valero Energy Corporation's Petition to Approve a Divestiture

Docket No. C-4031

The Commission today approved Valero Energy Corporation's petition to divest the former Ultramar Diamond Shamrock Golden Eagle refinery in Contra Costa County, California, seventy California gasoline stations, and related assets to Tesoro Petroleum Corporation for $1.1 billion to restore the competition that Valero's acquisition of Ultramar Diamond Shamrock eliminated in California. I concur that Tesoro has the financial strength and the expertise to continue the operations of the refinery and the retail gasoline network. One fact, however, gave me pause: Tesoro is an incumbent California gasoline marketer, which means that a divestiture to Tesoro will necessarily increase the market concentration beyond what existed prior to Valero's acquisition of Ultramar Diamond Shamrock.

I generally believe that divestitures resulting in an increase in market concentration are not appropriate. Thus, I generally frown on divestitures that fail to achieve a "zero delta." In this case, however, the evidence demonstrates that Tesoro is relatively insignificant in the California markets because it ships a limited supply into California and is unlikely to enhance its competitive significance through only internal expansion. Accordingly, while I had initial reservations about Tesoro's acquiring these assets, I believe that this divestiture will not decrease competition in the relevant markets. And possibly, Tesoro will successfully integrate the divested assets into its overall operations and increase California gasoline output to the benefit of California consumers.