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Safeway gas station proposal ignites controversy


Safeway stores in Sonoma County are beginning to offer more than milk, bread and other groceries. They are soon going to start selling you gas — but not without controversy.

A Union 76 station at Mendocino Avenue and Steele Lane/Lewis Road in Santa Rosa is being remodeled into a Safeway-brand station.

While that changeover hasn't prompted any opposition, a 16-pump station proposed in Petaluma is raising questions among independent station owners and city leaders.

Their concerns range from unfair competition for the city's independent gas stations, to additional traffic at the city's most congested intersection, to air quality degradation near a school and day care facilities.

A Safeway spokeswoman declined to comment on the Petaluma proposal or discuss in detail the company's gas station strategy.

In a series of lawsuits against Safeway in the past five years, a Petaluma lawyer has represented several East Bay independent gas station owners who argue that the grocery giant's discount programs and gas pricing are illegally designed to drive them out of business.

Last year, an Alameda County court granted Dixon-area gas station owners an injunction that prohibited Safeway in that area from selling gas below cost in connection with its Club Card discount. That particular program was discontinued in Northern California after the ruling.

Another suit recently was decided in Safeway's favor, allowing the continued use of the Fuel Rewards program, which earns grocery customers a 10-cent-per-gallon discount at some Chevron and Safeway stations with a certain amount in grocery purchases.

Petaluma lawyer Jim Dombroski said his clients are appealing the decision.

"They have a number of discount programs we believe result in them selling gas below cost," he said, which violates state laws governing fair competition.

"My clients ... have been harmed by the fact that Safeway is able to sell its gas below cost, while they have to sell above cost to make a profit," he said. "As a result, they are losing business and a lot of their competitors have gone out of business."

Although Dombroski isn't representing Petaluma gas station owners, they have expressed similar concerns about an application Safeway submitted to the city last month for a 16-pump gas station and mini-mart in the Washington Square Shopping Center on South McDowell Boulevard.

The company's plans are to tear down a building that houses Pepper's Restaurant and several smaller shops and replace it with a 1,000-square-foot convenience store and an almost 6,000-square-foot covered fueling station.

The station would be among the biggest, if not the biggest, in town, with 16 pumps in two rows of four double-sided dispensers.

A gas station is a permitted use in the area. But Safeway will have to submit a detailed traffic study before the application will be accepted, said Heather Hines, deputy planning manager. An undetermined level of environmental study also will be required.

The station would be less than a quarter-mile south of East Washington Street and McDowell, an intersection where traffic routinely backs up and drivers often must wait through more than one light cycle during rush hours.

Dan Lutz, whose family has owned the Chevron station on East Washington on the north end of the Safeway center since 1968, said he supports free enterprise.

"As long as they were going to be competitive, go ahead and do it," he said. "But they're not trying to sell gas; they're trying to sell groceries by giving away a lollipop to get people in the store. They're not trying to be competitive with anyone else in town, they're trying to undercut people."

In court cases, Safeway has argued that its low gas pricing is not intended to harm competitors, which is illegal, but is intended to keep up with its own competitors — other stores that sell groceries and gas, like Albertsons or Costco.

Petaluma Valero station owner Bert Lathrop, who has owned his Baywood Drive station for 13 years, said small owners like he and his wife can't issue "rewards discounts" like Safeway.

The volume of low-price gas Safeway could pump "will reduce three or four gas stations in town to blight," he said, and eliminate several local jobs.

Safeway spokeswoman Wendy Gutshall wouldn't discuss the company's gas station plans.

"We operate 400-plus fuel stations in the U.S. and where there's an opportunity and space to offer our customers a fuel center, we explore the option," she said in an emailed response to an interview request.

Petaluma City Manager John Brown said the company will have to provide traffic studies before the city considers any permits.

"Staff has been looking at this pretty hard," he said. "The traffic analysis would have to show a good result for this to move forward."

You can reach Staff Writer Lori A. Carter at 762-7297 or lori.carter@pressdemocrat.com.