State could run refinery Shell intends to close

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Sacramento Bee

The state needs about 55 million gallons of fuel each year for its fleet of cars, trucks and other equipment, while Shell Oil Co. wants to get rid of a Bakersfield refinery producing about 643 million gallons of gas and diesel fuel annually.

Consumer activist Jamie Court sees a way to kill two birds with one stone: The state should buy the refinery and process its own fuel, saving jobs and money and possibly turning a profit by selling excess production to local governments.

Court, president of the Foundation for Taxpayer & Consumer Rights, says the marriage is a solution to high oil prices and budgetary woes, but others say it’s a harebrained idea.

“It would not be politically palatable for the state to buy, own and operate a refinery,” said Department of Energy spokeswoman Claudia Chandler. “To buy a refinery, maintain it and keep it up to specifications is beyond the purview ofwhat state government does.”

Joe Sparano, president of the Western States Petroleum Association, said the state would be welcome in the market, but he doubts it has the needed expertise or inclination.

Running a refinery is no picnic, he said. Even if the state contracted with experienced management, it still would be on the hook for environmental liabilities and the possibility that the investment could lose taxpayer money, Sparano warned.

“I don’t believe our state is set up to do that,” Sparano said. “It’s not the nature of their business.”

Tim Hamilton, a petroleum consultant based in Washington state, disagrees.

“This is not unprecedented,” Hamilton said, citing Hawaii and Canada as government entities that once ran their own refineries. The state could buy the refinery for little or nothing, he said, and supply crude oil to the plant using “in-kind” royalties it receives from drilling that takes place on public land.

The refinery’s foibles, as described by Shell spokesman David Harrington, could scare off buyers.

Patched together from three older facilities, the refinery is spread out, making it more expensive to run. Its inland location limits it to a single source of crude from the San Joaquin Valley.

State Attorney General Bill Lockyer, also interested in keeping the refinery open, has hired a consultant to look for buyers.
The Bee’s Melanie Payne can be reached at (916) 321-1962 or [email protected]

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