Here's what'll end up happening: either (a) it ends up being run as a real business, in which case its fuel prices will converge with the market prices of private operators, or (b) the town's taxpayers end up subsidizing the fuel costs of their neighbors who don't pay taxes to the town but who will patronize the station to take advantage of the below-market prices. The first case wouldn't be that objectionable - free market competition is competition - but the second would be harmful to both town taxpayers and local private operators.
One wonders how long it'll take the town's taxpayers to catch on to the fact that they're being taken for a ride by this falsely "cheap" gas.