Group Asks California Attorney General to Force Shell to Keep Refinery Open

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The Bakersfield Californian

The spotlight on the Shell Bakersfield Refinery grew brighter this week.

The Federal Trade Commission told a U.S. senator on Tuesday that it is evaluating Shell‘s decision to close the Rosedale Highway refinery.

The same day, a consumer rights group announced it had obtained internal company documents which it said showed the refinery was a money-maker. The Foundation for Taxpayer and Consumer Rights called on Attorney General Bill Lockyer to force Shell to keep the refinery open or sell the plant.

“The attorney general is going to do everything in his power to try and protect the drivers of this state and the Bakersfield area from the financial hardships they could very well suffer if this refinery closes,” Tom Dresslar, a spokesman for the attorney general, said Wednesday.

The attorney general’s office confirmed in February that is was looking into Shell‘s plans to close the refinery. Dresslar said the office will continue to “aggressively” investigate the situation.

The Shell refinery produces 2 percent of the state’s gasoline and 7 percent of its diesel. Experts have said a loss in production will most likely lead to higher fuel prices on the West Coast. The refinery also employs 250 individuals and uses 150 contractors. Shell has said transfer opportunities, severance packages and retirement planning will be made available to employees.

Meanwhile, Shell released a statement on Tuesday that it “welcomes discussions with potential buyers of the Bakersfield Refinery.”

“Since so many people have questioned if the refinery is for sale, I want to make it clear that it is, and to state unequivocally that we are willing to sit down with any credible buyers to discuss such a deal,” Lynn Elsenhans, chief executive officer of Shell Oil Products U.S., said in the statement. “We still believe, however, that once potential buyers take a close look at the facility and its available crude supply, that they will reach the same conclusion that we have. That this refinery is not economically viable going forward for a number of reasons, including the cost and availability of the crude needed to run the facility.”

When Shell executive Aamir Farid announced in November the company was closing and dismantling the refinery, reporters asked if the company would consider selling the plant.

Farid, manager of the Bay Valley Complex, which includes the Bakersfield refinery and its sister plant in Martinez, said any new owner would face the same problem as Shell — declining supplies.

Shell officials have said their decision to close the 72-year-old refinery was based on continuing declines in San Joaquin Valley heavy crude.

“Any assertion that Shell is closing the refinery to either drive up prices or restrict supply is absolutely false,” Shell spokesman Cameron Smyth said Wednesday.

State oil officials have said their predictions show the valley has at least 20 to 25 years of remaining heavy crude supplies.

Oregon Senator Ron Wyden has twice asked the commission to re-examine mergers in the gasoline industry in order to investigate Shell‘s plans for the refinery.

Timothy Muris, chairman of the FTC, wrote Wyden on Tuesday: “The issues that you have raised are very important to this agency and will be seriously considered as the agency evaluates the situation with respect to the Bakersfield refinery and determines what course of action, if any, may be warranted.”

Muris did not say whether the commission has launched an official investigation into the matter. A spokesman for the commission declined further comment on Wednesday.

“The senator considers the letter to be lackluster,” said Carol Guthrie, a spokeswoman for Wyden, a Democrat.

Saying you’re concerned about a situation and actually taking action are two different things, Guthrie said.

Also this week, the Santa Monica-based Foundation for Taxpayer and Consumer Rights publicly called on State Attorney General Bill Lockyer to file suit under the state’s Unfair Business Competition Law to force Shell to sell the refinery or keep it operational.

The group said Tuesday it had obtained internal company documents that showed the refinery had strong profit margins in 2003.

The documents the organization posts on its Web site include a Christmas letter the refinery’s manager sent employees, a weekly refining update dated April 5 and a report on the Bakersfield refinery for the month of February.

The weekly refining update includes a note on the Bakersfield refinery: “Operations are running well. Some planned maintenance work has been deferred in order to take advantage of very high margins.”

Refiners in general have been enjoying strong profits thanks to unusually high crude oil prices.

In the statement from Shell, Elsenhans said, “We are disappointed that these documents were publicly released but … they do show that the Bakersfield Refinery lost money in 2001 and 2002, and that the profit that we project for the refinery in 2004 does not justify maintaining our investment in the facility. Furthermore, the declining utilization rates illustrate that it will not be economically viable to operate the facility going forward.”

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