Change, But Not Resolution, Since Big West Refinery’s Shutdown

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Johnston struggles daily with uncertainty since he was laid off in
February from his job as an outside operator at Big West refinery on
Rosedale Highway.

He gets up and scans job listings in
newspapers and the Internet, but so far has found nothing that calls
for his qualifications.

"I think that a big a majority of us
(laid-off Big West workers) are waiting and praying that a buy for the
refinery will happen soon," Johnston wrote in an e-mail last week.

anybody’s guess how much longer he and up to 178 others recently laid
off at Big West must wait. It might never reopen as a refinery, though
that’s also unclear because little has been resolved in the three
months since refining operations halted at Big West.

The plant’s
parent company is going through a complex Delaware bankruptcy case. And
until there is significant progress, local oil producers likely will
not be paid for deliveries made shortly before the Utah company, Flying
J Inc., filed Chapter 11 in late December.

Meanwhile, the state
attorney general’s office continues its investigation into whether a
major oil company illegally contributed to the plant’s closure.

Some things have changed in the aftermath of Big West’s shutdown. But they do not necessarily point to resolution.

Fuel supply and demand

California refineries have taken up the slack by producing more
gasoline and diesel, helping to minimize the impact of prices paid by
local motorists. There remains a question, however, as to whether the
state’s refineries can keep pace once the economy picks up again.

some potential buyers have expressed interest in possibly buying the
refinery, even as there are suggestions that the property could
ultimately serve as a fuel terminal instead of a refinery.

its part, Flying J regrets the situation. Company spokeswoman Virginia
Parker said in an e-mail last week that the company "regret(s) any
adverse impact the wind-down has had on the workers affected and on the
greater Bakersfield community."

"We are considering all options
that could put people back to work at the refinery, including a sale of
the facility," her e-mail said. "We are actively pursuing such a sale
and have retained professional firms to help us do so as quickly and
efficiently as possible."

Sale on the way?

company looking at possibly making a bid is Connecticut’s NTR Partners
LLC. President Mario Rodriguez said Big West is among several
refineries it has eyed, but that Flying J’s bankruptcy means things are
moving more slowly than NTR would like.

"(A)t this point it is
unclear what the plans of management and the court (are)," he said.
"And as long as we stay close to the situation, we’ll figure out
whether this is something that makes sense or not."

Tom Kloza,
chief oil analyst for the New Jersey-based Oil Price Information
Service, suspects such a purchase does not, in fact, make sense in
light of lower demand for fuel.

"There’s a lot of extra (refining) capacity that’s not being used at the moment," he said.

When it was running at full capacity, Big West supplied 2 percent of the state’s gasoline and 6 percent of its diesel.

that it’s idle except for basic maintenance and safety operations,
other refineries have been able to bridge the gap, said Susanne
Garfield, spokeswoman for the state Energy Commission.

But Judy Dugan, research director of Santa Monica’s Consumer Watchdog, said that could change.

"When the economy recovers… demand is going to go up, especially for diesel," she said.

A terminal instead?

the meantime, former plant owner Shell Oil Co. is making tentative
plans to turn the plant into a fuel terminal, a use Dugan fears would
employ fewer workers and pay them a lower wage than would a refinery.
Kloza, on the other hand, called the terminal option more practical and
potentially helpful, as it would aid distribution of fuel piped in from
the Fresno area.

When Shell sold the refinery in 2005, it
retained ownership of a terminal and storage tanks on the property. It
offered to lease them to Flying J, but the property was never
subdivided, and so no lease was put into effect.

spokeswoman Alison Chassin confirmed that the company wants to use the
terminal to supply the Bakersfield area with fuel. But she added that
the company would be open to leasing the property to any buyer that
wants to operate the plant as a refinery.

Continuing investigation

unsettled issue is the state attorney general’s investigation into
allegations that Shell contributed to Big West’s closure by "illegally
refusing to sell crude oil… or shutting off pipeline access" to the

Shell has denied the charges, saying it tried to work out a deal in which Flying J would pay for shipments going forward.

West’s inability to secure a steady supply of crude oil from Shell and
other companies was the main reason for the refinery’s closure.

Simas, a spokeswoman for the attorney general, said last week that the
office is now monitoring the refinery sale process as part of the

Uncertainty weighs heavily on the local oil producers and others who used to sell to Big West.

of them are owed seven figures, said attorney John W. Kim, who
represents a number of creditors in Flying J’s bankruptcy case.

they will be paid — and how much money they will ultimately recover —
is hard to say, said Kim, who works for the Los Angeles law firm of
Nossaman LLP.

"It really is unclear," he said. "There are just too many moving parts to say."

Consumer Watchdog
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