Utah-based firm to buy Bakersfield, Calif., refinery for $130 million

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The Bakersfield Californian

Flying J Inc. has big plans for the Shell Bakersfield Refinery.

The Ogden, Utah-based company has signed an agreement with Shell Oil to purchase the refinery, reportedly for $ 130 million.

Flying J plans to “modernize” the circa-1932 plant so it can produce twice as much gasoline and slightly more diesel fuel, according to Flying J spokeswoman Virginia Parker.

The refinery, on both sides of Rosedale Highway, makes 2 percent of the state’s gasoline supply and 6 percent of the diesel. Oil experts have warned that shuttering the refinery would lead to even higher fuel prices.

William Keese, chairman of the California Energy Commission, said Monday that any additional fuel supply is a good thing, particularly for the valley.

“Clearly, when you have a shortage of supply, prices go up,” Keese said.

Any upgrades will need regulatory approval and according to Jeff Utley, senior vice president of refinery operations at Flying J, will take two years to complete. In the meantime, he said, refinery operations should continue as normal.

Just two months shy of the deadline Shell gave for closing the refinery, Shell announced Monday it had signed an agreement with Big West Oil LLC, a subsidiary of Flying J, to sell the Bakersfield refinery. Neither company would disclose terms of the deal, but according to Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, which has criticized Shell‘s handling of the refinery, Travel J is paying $130 million.

Shell expects to close the deal by the end of the quarter. The sale requires the approval of the U.S. Environmental Protection Agency and Justice Department, both of which are expected to sign off on the deal.

Aamir Farid, general manager of the Shell Bakersfield Refinery, said Shell could exit day-to-day operations at the plant by the end of March.

He said Shell will continue to supply gasoline and diesel to its branded customers in the area. He said the fuel will come from the Bakersfield refinery, as well as other sources.

This will be Flying J’s first foray into the California oil refining business. The company is best known here for its diesel fuel stations, which it calls travel plazas.

Big West Oil operates a small refinery in North Salt Lake, Utah.

“This increases our refining capacity,” Utley said.

The Bakersfield refinery can currently produce up to 70,000 barrels of oil per day.

Under the terms of the sale agreement, Shell will lease Flying J an adjacent terminal that’s a pick-up point for tanker trucks. Shell has been criticized for excluding the terminal from the sales process.

Shell said it will continue to own and operate pipelines that feed the refinery.

Utley said the oil the refinery will process will come from the local Kern River field, as well as Midway-Sunset and Elk Hills near Taft.

When Shell announced in November 2003 that it was shuttering the refinery in 11 months, the company cited dwindling supplies of San Joaquin Valley heavy crude oil, which the refinery processes.

Utley said Flying J believes there’s enough oil in the area to keep the refinery running for the long-term.

He said the company intends to keep the gasoline and diesel the refinery produces in the local market.

Court said the announcement the refinery will likely stay open is “very good news” for consumers, but the sales process should not have taken this long.

“This should really force every other oil company in the nation to think twice before closing their refineries in this market,” Court said.

In the past few months, Shell has said it was working with a short list of companies interested in buying the refinery. The most recent name that surfaced was a private investment firm in New York.

Following Shell‘s announcement that it planned to close the refinery, California Attorney General Bill Lockyer and the Federal Trade Commission launched investigations into the company’s plans for possible antitrust implications.

“While we have to study the details of the sale, the continued operation of Shell‘s Bakersfield refinery would be a victory for California drivers,” Lockyer said in a statement. “California drivers cannot afford the loss of this facility.”

Sen. Ron Wyden, D-Oregon, and Sen. Barbara Boxer, D-California, both of whom have raised concerns about the refinery’s planned closure, expressed cautious optimism that the sale announcement means the plant will remain open.

Ed Huhn, secretary-treasurer of the union that represents hourly employees at the refinery, said news that Shell had signed an agreement to sell the refinery “made my whole day.”

THE FUTURE FOR EMPLOYEES: The Bakersfield Californian Flying J Inc. intends to offer all employees who wish to stay on jobs at the refinery, according to Jeff Utley, vice president of refining operations at Flying J.

The refinery has about 200 employees and uses an additional 150 contractors.

Utley said Flying J will offer comparable salaries and benefits.

About half of the refinery’s employees have accepted transfers to other Shell locations, according to Aamir Farid, general manager of the Shell Bakersfield Refinery. He said Monday that Shell will honor those transfers, as well as any retirement/severance packages other employees intended to take the company up on.

“I see nothing but positives across the board,” he said.

Flying J is expected to assume the contract the employees’ union, PACE, currently has in place with Shell, according to Ed Huhn, secretary-treasurer at the PACE local.

Utley said he will be at the refinery this week to start talking with employees about their options.

Local refinery spokesman Alan Spencer has worked at the plant since 1981, when it operated under the auspices of Getty Oil. Spencer said Monday he expects to transfer to a Shell refinery in southeast Texas as planned.

His wife and 16-year-old daughter have already relocated there.

Since Shell announced in August that it was holding off on closing the refinery by several months, Spencer has been commuting every two weeks between here and the refinery in Texas.

“For the most part, it hasn’t been that bad,” he said. “As far as I’m concerned, I’m very happy with the way I’ve been treated.”

Farid met with employees at the refinery Monday to brief them on the plant’s impending sale to Flying J.

“This has been 15 months of not knowing” the refinery’s fate, Farid said. “I think this morning, there was more relief than anything else.”

Huhn said the refinery’s sale will allow employees to move on with their lives, whatever direction that might be.

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