Shell delays closure of Bakersfield oil refinery

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Associated Press

LOS ANGELES — Shell Oil Co. has agreed to delay the planned closure of a Southern California oil refinery that produces 2 percent of the state’s gasoline to allow more time to find a buyer and negotiate a sale, state officials said Friday.

“I’m extremely pleased with Shell‘s decision,” state Attorney General Bill Lockyer said in a statement. “It’s a welcome show of cooperation with our effort to keep open this refinery, which is crucial to helping protect California drivers from even higher gas prices than they already pay.”

Lockyer’s announcement came after a state-hired consultant questioned Shell‘s decision to close the Bakersfield refinery. The report, which was prepared for the attorney general’s office by a Dallas-based consulting firm, concluded the facility can be run profitably, and that a sale can be structured that is economically viable for both seller and buyer.

Shell President Lynn Laverty Elsenhans agreed to keep the refinery running through March 31 – six months later than the Oct. 1 planned shutdown date. Elsenhans said the company would continue making a good-faith attempt to sell the facility, Lockyer’s statement said.

“What this does is allows the sales process to mature and will provide additional time for Shell to explore a sale with any and all prospective buyers,” said Houston-based spokesman Stan Mays.

Shell officials last November announced their decision to shutter the 72-year-old refinery, citing a decline in oil production in the region and the inefficiency of the aging inland operation. The refinery produces 2 percent of the state’s gasoline supply and 6 percent of its diesel fuel.

Experts, however, have said that while oil production is declining at a rate of about 3 percent to 5 percent per year, there are still large amounts of crude oil in Kern County, where output surpasses every state except for Texas and Alaska.

The proposed closure generated outrage among politicians and consumers who argued the dismantling would further squeeze supplies and inflate pump prices for California motorists, who have long paid the highest gasoline prices in the nation.

Jamie Court, a consumer activist with the Foundation for Consumer and Taxpayer Rights, hailed Shell‘s decision as a “major victory for consumers.”

“I don’t know of another instance in which an oil refiner has yielded to pressure from legislators and consumers to keep their refinery open,” Court said.

U.S. Sen. Barbara Boxer, who had protested the closure, said she would continue to focus on the issue until a “satisfactory conclusion” was reached.

“After months of misleading statements by Shell Oil, I believe we now have proof that Shell had no credible economic reason to abandon this important facility,” Boxer said in a statement. “California consumers deserve relief from the economic squeeze they are feeling as a result of skyrocketing gasoline prices.”

Shell‘s ability to keep the refinery operating through March 31 may depend on whether it can obtain a modification of a consent decree over air pollution emissions at the facility.

The attorney general said an ongoing antitrust investigation into Shell‘s decision to close the refinery will continue, but he also stressed that his office preferred to work cooperatively with the oil company. The Federal Trade Commission also has been investigating the proposed shutdown.

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