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Banned
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Is Forcing Privately Held Oil Corps into a USPS Model in the Public Interest?
Aceventura3 provided info in his thread on US Government subsidies for big oil companies. When Walmart decides to build a larger store near an existing one, it is not uncommon for that company to vacate their existing store, move into the new, larger location, and leave the old store empty for many years. Walmart makes leases for their empty stores so restrictive that the buildings remain empty, unleased.
It is in the public interest for petroleum products to be readily available and sold at competitive prices. The major, integrated oil companies in the US, explore for, extract, refine and distribute petroleum products. The following is evidence of their intentional betrayal of the public trust, resulting in intentionally limiting supply of refined products for the purpose of elevating prices paid by the public.
The ongoing Federal Reserve bailout of private leading investment banks demonstrate that there are "no rules"...no true separation of public and private business risk or operations. If you read the following articles, sequenced in a progressive timeline from 2001 to 2005, can't a case be made to take these oil companies' operating assets related to production, distribution, and retail sales of petroleum products, via government powers of eminent domain, and operate them via a quasi public agency, like the US Post Office, selling the products at cost plus current tax revenue that they generate?
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http://www.cbsnews.com/stories/2001/...le296584.shtml
Boosting Big Oil Profits
WASHINGTON, June 14, 2001(CBS) While the Bush administration cites a lack of refineries for energy shortages, internal oil industry documents show that five years ago companies were looking for ways to cut refinery output to boost profits.
It takes about four years to build a large refinery so any substantial additional new capacity from new plants would have had to begin by the mid-1990s, energy experts acknowledge.
Internal documents from some of America's biggest oil companies suggest higher prices at the pump may, in part, be a result of a deliberate strategy to limit domestic gasoline production, reports CBS News Correspondent Bob Orr. Sen. Ron Wyden, D-Ore., who has been investigating oil prices for two years obtained the documents.
"These documents say point blank, look if you really want to boost your profits, you have to reduce refinery capacity," said Sen. Wyden. "This industry went to great lengths to limit refinery capacity, control markets, restrict supply to boost their profits, increase costs to consumers, and then argue we should relax environmental laws."
"Too much capacity also "may have deterred some new capacity investments in the past," the Bush energy plan acknowledges.
Wyden said the documents he obtained - including the internal Texaco and Chevron memos - suggest that oil companies in the '90s "sought to eliminate excess capacity to improve profits.
He said some of the refineries that were closed may have been shuttered "specifically to tighten supply and drive up costs" to consumers, although he provided no specific documentation of this.
But Wyden obtained a confidential 1996 e-mail from Mobil Corp., which has since merged with Exxon, that suggests major oil companies were not reluctant during the 1990s to try to force smaller independents out of business.
A California refinery owned by Powerine Oil Co., had ceased operation in 1995, but was trying to start up again a year later hoping to compete in production of a special, cleaner gasoline required by the state.
This gas was selling at a premium and Powerine's re-entry intthe market could cause the price to drop as much as 3 cents a gallon, a Mobil executive warned in the internal e-mail.
"Needless to say, we would all like to see Powerine stay down," the memo continued. "Full court press is warranted in this case." The refinery remained closed.
Attempts to reach Exxon Mobil spokesmen were unsuccessful."
Read The Documents:
# <a href="http://cbsnews.com/htdocs/pdf/chevron.pdf">Click here</a> to read the Chevron document.
# <a href="http://cbsnews.com/htdocs/pdf/texaco.pdf">Click here</a> to read the Texaco memo.
# <a href="http://cbsnews.com/htdocs/pdf/mobil.pdf">Click here</a> to read the Mobil e-mail.
# <a href="http://cbsnews.com/htdocs/pdf/wyden.pdf">Click here</a> to read the Senator Wyden's report.
One Chevron memo warns the oil industry would never see higher profits, if it didn't reduce the amount of gasoline being refined.
"If the U.S. petroleum industry doesn't reduce its refining capacity, it will never see any substantial increase in refinery margins (profits)," said an internal Chevron document in November 1995.
The memo cited warnings given about refinery profits by a senior analyst from the American Petroleum Institute, the industry trade group, at an industry conference that year.
API spokesman Jim Craig said Thursday, "We don't know about these alleged internal company memos, but the idea that the API would warn member companies on profits is ludicrous."
A year later, an official at Texaco, in a memo marked "highly confidential," called concerns about too much refinery capacty "the most critical factor" facing the refinery industry - resulting in "very poor refining financial results."
The Texaco memo, written in March, 1996, concluded that "significant events" were required to deal with the excess refinery capacity problem and suggested one solution might be to get the government to lift clean air requirements for an oxygenate in gasoline. Removal of the additive would require more gasoline to be used in each gallon of fuel, tightening supplies.
While refinery capacity now has become tight, the oil industry is still pressing for an end to the federal requirement for an oxygenate in gasoline, arguing new blends of gasoline can meet the same clean air requirements.
API says refiners overall are turning out more gasoline than when the memos were written.
"If you look at the Department of Energy's own data, you'll find from 1995 to the current day, industry refinery capacity has increased over a million barrels a day," said Red Cavaney, President of the American Petroleum Institute.
But Wyden charges oil companies could still be producing more. 24 small refineries, some under pressure from Big Oil, have been shut down since 1995.
"The documents suggest that major oil companies pursued efforts to curtail refinery capacity as a strategy for improving profit margins," said Wyden, who released the papers at a news conference Thursday.
Wyden also says the documents show some cooperation between companies that are supposed to be competitors. While he stops short of charging collusion, he is now calling for a full-scale congressional investigation.
Attempts to get a comment from either Texaco or Chevron officials were unsuccessful.
Texaco and Chevron are awaiting government approval to merge, creating the nation's fourth largest oil company.
The need for more refinery capacity has been the focus of President Bush's energy plan. Vice President Dick Cheney frequently has blamed gasoline prices increases on tight supplies caused to a large part, he says, by the fact that no new refinery has been built in 25 years.
In fact, 24 refineries - many of them small independents - have shut down since 1995, according to the Energy Department, accounting for the loss of 831,000 barrels a day of refining capacity. Individual refinery expansions at the same time have added 1 to 2 percent of capacity annually.
At a House hearing on gasoline supplies Thursday, the National Petroleum and Refiners Association said both financial and regulatory constraints make it difficult to build new refineries in the United States...
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http://cwd.grassroots.com/energy/fs/...l+Bill+Lockyer
Letter To California Attorney General Bill Lockyer
Shell Documents Give You Ability To Keep Bakersfield Refinery Open
April 6, 2004
Honorable Bill Lockyer
California Attorney General
1300 I Street #1730
Sacramento, CA 94244-2550
Dear Attorney General Lockyer:
Californians are paying the highest prices for gasoline in the nation, up to 50 cents per gallon more than most other regions. All honest witnesses will acknowledge that the gasoline spikes are not a result of OPEC crude prices or environmental standards, as the oil industry claims, but low inventories and restricted refining capacity maintained by the five oil refiners that control 90% of California's special CARB fuel.
Given this restriction of supply, it's shocking that Shell would announce the closure of yet another refiner responsible for 2% of the state's gasoline supply. That would bring the number of refineries in California making CARB fuel to 12, from 37 in 1983, despite a burgeoning population. Everyone seems to be aware that local refineries can barely meet our needs for CARB gasoline and the lack of refining capacity is recognized as a major factor in the higher pump prices. Closing yet another refinery would undoubtedly cause prices to rise even further.
This market obviously functions like no other. If there were a computer shortage, would any computer maker close computer factories? At last, we believe there is an opportunity for you to act under the state's Unfair Business Competition Law to stop Shell's plan to demolish its refinery and to prevent gasoline prices from spiking once again.
When Shell Oil announced its intentions to close its refinery in Bakersfield by October of 2004 [2003], the company blamed poor profitability and a declining crude supply in the San Juaquin Valley. Shell stated in its press release that the refinery's continued operation is "no longer economically viable" because "there is simply no longer an adequate supply of crude oil to justify the continued operation of this facility." The Seattle Times also reported on March 6th: "Shell will close the plant because it was unprofitable and didn't receive enough oil from the area to keep operating, said James Frazier, a company spokesman.".
New evidence obtained by the Foundation for Taxpayer and Consumer Rights (FTCR) shows Shell has deceived the public with these statements and that it intends to demolish the refinery to keep gasoline off the market, and the price of gasoline high, rather than sell the refinery....
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The Bakersfield Channel - KERO TV (California)
May 12, 2004
by Reporter: Heidi Carter
Shell Has No Plans To Cover Refinery's Loss
KERO Interviews Refinery Manager
BAKERSFIELD, Calif. -- As the closing date approaches, the controversy surrounding the closure of the Shell Refinery on Rosedale Highway continues to heat up, KERO reported.
Consumer Reporter Heidi Carter sat down with the refinery manager, who said the Bakersfield refinery isn't efficient enough to keep open, even though it's making a profit.
Amir Farid said the Rosedale refinery isn't as efficient as Shell's two other California refineries, which is why Shell will close it down at the end of September.
"This refinery is two separate refineries that have been stitched together over time," Farid said. "You also have simply the economy of scale. This is a 70,000-barrel-a-day refinery. Martinez is currently 145,000 and can produce up to 160,000 (barrels a day.)"
Farid said the refinery closing has nothing to do with the current price spikes for gasoline. But the current market is making the refinery profitable.
"Clearly, in the environment today, we are profitable at the moment, but this is a cyclical business," Farid told KERO.
Farid admitted Shell has no current plans to make up for the total loss of supply that will occur when the plant closes.
"There is going to be a gasoline shortfall that we are still working on and potentially can offset some of that from our refinery up in the northwest," Farid said.
Shell only has the capacity to make up about half of the diesel production that will be lost.
Jamie Court, the president of the Foundation for Taxpayer and Consumer Rights, said that closing the refinery is about shorting the market and ultimately keeping gas prices above $2.
Farid said in spite of the current profits, the refinery has a history of losing money.
Court said Shell should put the refinery up for sale, rather than short California consumers by closing it down.
While Shell has not put the refinery up for sale, they have received 14 inquires from companies interested in buying it, but so far no offers have been made.
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Sacramento Bee
May 19, 2004
by Dale Kasler, Bee Staff Writer
Shell denies greed spurs the closure
BAKERSFIELD - In the furious debate over California's gasoline prices, the Shell Oil refinery in Bakersfield - a forlorn mess of pipes and boilers on a state road choking on truck fumes - usually got overlooked. Until Shell decided to close it.
Set for an Oct. 1 shutdown, the refinery produces just a sliver of the state's motor fuel but has been embraced as a cherished resource by economists, elected officials and consumer advocates. They say losing the refinery could be devastating in a market where the balance between supply and demand is extraordinarily delicate.
With the statewide average price of gas at a record $2.31 a gallon Tuesday, one energy economist said prices could jump another 10 percent or more if the refinery closes.
Some consumer advocates say that's no accident. The Foundation for Taxpayer & Consumer Rights, which has unearthed internal company memos showing the refinery has been profitable recently, says Shell is trying to manipulate the market.
"They don't have a good reason for shutting it (except) to drive up the price of gasoline," said Jamie Court, president of the Santa Monica-based foundation. "Shell knows that ... the price will go through the roof."
Shell officials deny that the company is out to do harm. They say the 72-year-old refinery is inefficient and needs $1 billion in new equipment. Discarding it is "best for the consumer," said David Harrington, a spokesman for Shell Oil Products US.
But Shell won't rule out the possibility that prices could go higher as a result. While the company expects to compensate partially by increasing production at other West Coast refineries, Harrington acknowledged Shell's total output of fuel for California will fall. "I don't know what the market's going to look like," he said when asked about the price impact. "Maybe others will bring in cargoes from somewhere" or increase production...
..Shell's decision raises unsettling questions about Kern County's oil-based economy and California's long-term energy future.
The refinery is surrounded by some of the nation's most fertile oil fields. Kern produces more crude oil than Oklahoma and Wyoming combined, and trails only Louisiana, Texas and Alaska. It's responsible for about one-fourth of all the oil used in California.
But it's slowly running dry.
Kern's oil production is falling roughly 1 to 3 percent a year and has dropped more than 20 percent since 1988 - mirroring what's happening in the rest of California's oil fields.
Twenty years ago, California produced 60 percent of its oil; now it's 48 percent and falling.
Shell officials say declines in Kern's oil make it increasingly difficult - and expensive - to feed the Bakersfield refinery. Although Shell is a partner with ExxonMobil Corp. in a major oil-producing venture in Kern County, that business is run separately and the refinery has to scrounge for supplies like anyone else, Harringon said.
"The crude here is declining. That doesn't mean it's going away tomorrow, but it's a finite resource," he said. "There's a point where the cost to acquire (oil) does not make it efficient to run ...an old, cobbled-together, inefficient refinery."
But at a time of record gas prices, the refinery has become a battleground issue for suspicious consumer advocates and elected officials.
U.S. Sen. Barbara Boxer, D-Calif., who has criticized Shell repeatedly, accused the company Tuesday of speeding up the shutdown by two months. Shell denied it, saying it will begin scaling back production after the peak summer driving season ends on Labor Day. Production would come to a complete halt Oct. 1, as scheduled.
According to documents uncovered by Court's group, the refinery earned $4.7 million last year and has made money in four of the past six years. A separate memo from early last month said the Bakersfield site was enjoying the highest profit margin of any Shell refinery in the nation.
Harrington said the memos only provide a "snapshot" of what's going on. The larger story is that the refinery is increasingly uneconomic, and closing it will improve the efficiency of Shell's West Coast operations, he said.
That's because the Bakersfield site has acted as a kind of drain on a much larger, more efficient Shell refinery in Martinez, which runs partly on Kern oil. With Bakersfield out of the picture, more oil will flow to Martinez, Harrington said. "We can squeeze more ... out of Martinez than Bakersfield," he said.
The company also expects to bring more supplies in from its refinery in Anacortes, Wash. But it won't be enough to make up completely for the loss of Bakersfield.
"Will we be making less gasoline? The answer's yes," Harrington said.
Many experts say California needs every drop it can refine.
While high global crude-oil prices are contributing to the latest increases at the pump, California also is suffering from a long-term, fundamental shortage of production capacity at its refineries. That problem is compounded by the state's unique clean-air fuel specifications: Only a handful of refineries outside California can meet those recipes, and that's a key reason why prices spike when in-state production falters.
As a result, even a small refinery like Shell's in Bakersfield - producer of only 2 percent of the state's gasoline and 6 percent of its diesel fuel - can matter. Even though Shell said it will make up part of the shortfall, the effect on prices still could be significant.
"If you're at a peak time (in demand) and you don't have any other place to get supply, it could mean a 10 to 15 percent increase in the price," said Severin Borenstein, director of the University of California Energy Institute.
The Kern facility opened in 1932 as the Mohawk Refinery. It's gone through a succession of owners, including a joint venture between Shell and Chevron. When Chevron merged with Texaco in 2001 and was forced by antitrust regulators to sell its share, Shell became sole owner.
The plant is actually three separate facilities, pulled together by acquisitions over the years. One of the sites is actually three miles away, connected to the main plant by pipelines.
The combined facility processes under 70,000 barrels of oil a day - a minuscule amount in a state that runs through roughly 2 million barrels daily. It's the second smallest of the 13 California refineries that make gasoline (another 11 refineries make other products).
Bakersfield also needs expensive upgrades, like a machine known as a fluid catalytic cracking unit.
"But it was a $1 billion investment and it never got built," said Gregory Cervantes, the refinery's operations manager.
Cervantes, who's worked at the refinery for 25 years, said he's heard rumors of a shutdown for more than 10 years.
"We gave it a hell of a run," he said. "Nobody expected us to be here this long.
"We tried to work out as many of the inefficiencies as we could. You can't do 'em all."
Some experts agree.
"It's a pretty old, inferior piece of equipment," said Phil Verleger Jr., an independent energy consultant from Newport Beach.
By spotlighting the gradual decline in Kern's oil production, Shell created something of an unpleasant buzz in Bakersfield.
No one denies that oil gradually is running out in Kern. Still, most people say the barrel is half full, not half empty.
Kern has at least 20 to 30 years of oil left, said Randall Adams of the state Department of Conservation's oil and gas division. New oil-extraction methods could extend that even further, he said.
Questions about disappearing oil bring a chuckle from folks like Fred Holmes, a genial oilman who runs drilling rigs in the sandy hills of western Kern.
"Why don't we seem more nervous? We've heard this all our lives," the 60-year-old said in a soft twang. "It's not going to decline overnight."
Locals take heart from ChevronTexaco Corp.'s decision to increase capital spending by $100 million in the area this year. "There's still a lot of value in these fields," said spokesman Greg Hardy.
Oil was first discovered in Kern County in 1899 and has been part of the landscape ever since. Oil rigs methodically bob up and down next to subdivisions, golf courses and everywhere else. The sports teams at Bakersfield High School are the Drillers. The city's elite dine at the downtown Petroleum Club.
The oil business here isn't easy street, though, even when crude prices are sky high. Most of Kern's oil, known as "San Joaquin Valley heavy," is thick and sludgy and expensive to extract, while its high sulfur content makes it less desirable to refiners.
So when west Texas crude, the benchmark for U.S. oil, topped $41 on Tuesday, Kern crude was selling for about $35.
The difficult economics seem to have made Kern oil people that much tougher.
"There's still a lot of wildcatters out there, looking, exploring," said Les Clark, who runs an association of independent oil producers in Kern.
"Most folks know oil won't be there forever. But to shut the door today and walk away? That's not the position we're in."
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Sacramento Bee
May 27, 2004
by Dale Kasler - Bee Staff Writer
Lockyer hires consultant to check Shell claim
Attorney General Bill Lockyer hired a petroleum industry consultant Wednesday to assess Shell Oil Co.'s claim it has not been able to sell it's refinery in Bakersfield.
Shell plans to close the aged refinery in October if it isn't sold.
With gasoline at a record $2.37 a gallon in California (and a record $2.29 in Sacramento), economists have said the refinery's closure would force prices even higher. The refinery makes only 2 percent of California's gas and 6 percent of its diesel, but the market is so tight that any loss of supply could have substantial impact on prices, economists say.
On Wednesday, Lockyer hired Dallas-based Turner Mason & Co., a consulting firm that works on mergers and acquisitions and other issues for the petroleum industry. Turner Mason's job will be "to determine if what Shell is saying is true, that (the refinery) is not viable," said Lockyer's spokesman, Tom Dresslar.
If it's determined the plant can be sold, Turner Mason will try to find a buyer, Dresslar said.
The firm is being paid $35,000 through July 31. Under pressure from elected officials, Shell has put the plant up for sale. It said it has received 14 inquiries, but no offers.
Shell spokesman David Harrington said it would cooperate with Turner Mason.
The consultant can look through the refinery's financial information if it signs a confidentiality agreement, Harrington said...
Malcolm Turner, the consulting firm president, couldn't be reached for comment.
Documents unearthed by a consumer advocate group, the Foundation for Taxpayer & Consumer Rights, show the plant made money four of the past six years. But Shell says the long-term outlook is bleak, in part because of the declining availability of crude oil around Bakersfield ..
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Los Angeles Times
June 21, 2004
by Elizabeth Douglass, Times Staff Writer
Shell to Cut Summer Output at Bakersfield Refinery, Papers Say
Shell Oil Co. plans to put the brakes on production at its Bakersfield refinery in July and August, potentially shorting California's fuel supplies during the summertime driving season, according to internal Shell documents.
The planned cutback is the latest development in the controversy over the refinery, which can process up to 70,000 barrels a day of crude oil and makes about 2% of California's gasoline supply and 6% of its diesel. Shell has said it will close the facility Oct. 1 in a move that experts predict will boost pump prices by worsening the chronic imbalance between supply and demand in the state.
The internal documents obtained by The Times, including a refinery output forecast, indicate that Bakersfield will soon be producing far less than its capacity. After relatively high output rates in May and early June, Shell plans to cut crude oil processing about 6% in July and another 6% in August, according to the forecast.
Those two months are when California's fuel demand reaches annual peak levels.
Aamir Farid, general manager of Shell's refineries in Bakersfield and Martinez, said he couldn't confirm that there was a production slowdown in the works.
"If that's the case, there is a good reason for it," he said.
There could be maintenance planned or projections for a shortfall of crude, he added, but "off the top of my head, I don't know what that good reason is.
"We're not playing any games. We're not shutting down early," Farid continued. "We're going to run as we normally run everything. We're not doing anything different through Labor Day, for sure, because we don't want to impact anything during driving season."
Refining industry experts said production at a facility slated for a shutdown wouldn't need to be curtailed until shortly before the closing date, when the owner would begin emptying and cleaning the equipment...
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The Orange County Register (California)
June 22, 2004
by CHRIS KNAP and DIANA McCABE
Group says Shell plots 'peak' repairs;
Documents suggest company already planned summer refinery slowdown
Shell Oil Co. documents released by a Santa Monica consumer group on Monday show that California's second-largest oil refiner plans to throttle back production at its Martinez and Bakersfield refineries in July -- a time of peak demand.
Experts said the cutbacks could amount to 200,000 gallons per day - enough of a shortfall to boost gasoline prices under some circumstances.
A spokesman for Shell Oil said the documents appear to be authentic but stressed that they were revised in early June. "Those are not necessarily the current plans," spokesman Stan Mays said.
Mays didn't disagree that the documents portray a production slowdown in July and August at both refineries in order to rehabilitate refinery units at Martinez - and he said some maintenance is still scheduled.
"There is routine summertime maintenance that is going on. Whatever would be normal for the refinery would be undertaken," Mays said.
Jamie Court, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights, contends that the documents are very recent because they contain numbers marked "5/25/04 Actual."
"Why are they cutting back in a peak period?" he asked. "Cutting back operations in July and August is a recipe for higher prices."
The documents describe refinery units that would be taken down for cleaning and repairs, cutting production from 96 percent of capacity in June to 87 percent in July. August production would recover somewhat, to 91 percent.
Experts say maintenance on refineries is normally done in the winter, when demand is slack. Unanticipated reductions in the summer might leave an oil company struggling to supply its own stations.
David J. Hackett, president of Stillwater Associates and a former oil company executive, reviewed the Santa Monica group's documents for the Register and said they appear to be a 90-day plan drafted sometime in May.
"They were planning to do some maintenance in July and August," Hackett said. "Refiners don't like to do maintenance in the summer. But it's not unusual."
Hackett said the documents show Shell planning on a slippage in spot gasoline prices --from $1.36 per gallon in June to $1.21 in August.
"They might have thought that they would pump up the price," Hackett said. "Or they might already have plenty of gas in the tank, and they've got it covered. .. 150,000 barrels over a three-week period is not a lot of gas."
Economists consider California's gasoline market a tight oligopoly. Four companies - Chevron/Texaco, Shell, BP/Arco and Valero control 71 percent of the market.
In an interview last week about the economics of oil refining, Severin Borenstein, director of the University of California Energy Institute at Berkeley, said California's largest refiners have "market power" -- meaning a single company's business decisions can have a dramatic effect on gasoline prices.
"If you take product off the market that no one else can replace, it can have a big effect," Borenstein said. "In general, there is a 5 percent increase in price for every 1 percent decrease in quantity."
The controversy over Shell's maintenance plans comes on top of a months-long dispute over Shell's plans to cease operations at the Bakersfield refinery in October.
Shell has said the 1932 refinery, which processes San Joaquin Valley heavy crude, is only marginally profitable in good years and is projected to lose $5.7 million this year.
However, the documents obtained by the consumer group show the refinery earning a projected profit of $11.4 million in May alone. Shell's projected margin at Bakersfield was $11.76 per barrel in May, compared with $16.09 at Martinez.
Court sent the documents to the Federal Trade Commission and the California attorney general, saying a regulatory response is needed to keep gasoline from hitting $3 a gallon before August.
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The Los Angeles Times
July 24, 2004
by Elizabeth Douglass, Times Staff Writer
Refinery Expert Is at Odds With Shell
A state-hired consultant finds that a Bakersfield site the company plans to shut down still is 'economically feasible.'
Shell Oil Co.'s Bakersfield refinery is financially sound and an attractive asset for potential buyers, and the company's decision to close it "flies in the face of common sense," a consultant hired by the state said Friday.
Industry expert Malcolm Turner, retained by Atty. Gen. Bill Lockyer to provide an objective opinion on the refinery's outlook, said his consulting firm disagreed with Shell's reasons for planning to shut down the facility Oct. 1.
The proposed closure of the refinery has generated outrage among politicians and consumers, who have endured gasoline prices that have hovered above $2 a gallon for more than four months.
California's fuel supply and demand are so delicately balanced that any reduction in refining capacity could cause prices to rise further. Shell's plan is being scrutinized by, among others, the Federal Trade Commission, which is investigating whether shuttering the refinery would violate antitrust laws.
Turner, in an interview, said other companies were interested in buying the facility and "would be successful operating it as an independent refinery." Turner, who has worked for Shell in the past, is also helping to identify buyers for the refinery but declined to identify potential purchasers.
"We do conclude, unlike Shell, that the Bakersfield refinery is commercially and economically feasible," Turner said.
Turner stressed that his conclusions were preliminary. But he said they were unlikely to change before his firm, Houston-based Turner, Mason & Co., submitted its report to the state at the end of July.
Shell spokesman Stan Mays said the company hadn't heard about Turner's findings. But he said, "We continue to stand by our conclusion that the small, inefficient, landlocked Bakersfield refinery can no longer compete and is economically unviable going forward."
The company has said it will consider any credible offers for the refinery.
The consultant's opinion is not binding on Shell. Still, it is encouraging news for a bevy of government officials and consumer advocates who have been openly skeptical of Shell's assertions that the facility can't be run profitably and lacks an adequate supply of crude oil.
Lockyer spokesman Tom Dresslar said the attorney general would comment on Turner's report when it was completed. He said Lockyer "remains hopeful that a way can be found to keep open this crucial source of gasoline ¿ so that consumers are spared the inevitable higher prices that a closure will bring."
Market experts consistently cite California refineries' inability to keep up with demand as a key factor in the state's chronically lofty fuel prices, which on Monday averaged $2.186 for a gallon of self-serve regular gasoline, according to the latest Energy Department survey.
Shell's Bakersfield facility is relatively small, producing 2% of the state's gasoline supply and about 6% of its diesel fuel. But there is little doubt that its dismantling would further squeeze supplies and inflate pump prices for motorists.
Critics believe that Shell wants to close its Bakersfield plant to boost profits at its two other California refineries, based in Wilmington and Martinez in the Bay Area.
Shell announced its decision to close the refinery in November and, in the intervening months, has put forth a variety of explanations.
Initially, Shell said there was not enough San Joaquin Valley heavy crude to keep the Bakersfield refinery running. After state officials countered that nearby oil fields remain productive, the company said that Shell's existing oil contracts could no longer feed both the Bakersfield and Martinez refineries, and that Shell would rather use the remaining crude at its Martinez site.
Shell's rationale has been questioned by experts who point out that the oil company could easily import crude oil for its Martinez plant, which is close to the coastline and already uses some imported blends.
The company's stance was also undermined by a surge in California fuel prices, which made the nation's most lucrative fuel market even more so this year.
Internal documents show that Shell's Bakersfield refinery earned almost $25 million in the first five months of 2004, compared with a profit of about $5 million for all of 2003. Profit at Martinez exceeded $91 million from January to May, more than double company projections.
Said Turner, "We've heard their point of view, and they've given us the information they based their decision on ¿ and the information, the arguments and the reasons they used are not persuasive."
Turner's opinion could be hard for Shell to dismiss, given that his firm has decades of experience appraising refineries on behalf of oil companies, including the U.S. division of Royal Dutch/Shell Group. For its part, Shell continues to provide information to several interested bidders, spokesman Mays said.
"We're open to the possibility of a sale, and, barring that, we continue to plan for a safe and orderly closure," he said.
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Sacramento Bee
August 13, 2004
by Dale Kasler, Bee Staff Writer
Report: Shell gives in to state
Company agrees to postpone closing its Bakersfield refinery so buyers can be found.
In a concession to California officials, Shell Oil Co. reportedly has agreed to postpone the shutdown of its Bakersfield refinery. The plant was scheduled to close Oct. 1.
The refinery will stay open indefinitely, giving prospective buyers more time to prepare their bids, according to a report Thursday by New Jersey-based Oil Price Information Service.
State officials and consumer advocates have been badgering Shell for months to keep the plant open or make a stronger effort to sell it, arguing that losing the plant's production would lead to higher fuel prices. The Federal Trade Commission launched an investigation as well.
Shell spokesman David Harrington had no comment. Nor did Tom Dresslar, a spokesman for Attorney General Bill Lockyer. Lockyer had hired a consultant from Texas to study Shell's claims the plant was becoming less economically viable. The consultant reportedly had concluded the plant was viable.
Though it's one of the smallest refineries in California, the facility produces 2 percent of the state's gasoline and 6 percent of its diesel.
Experts say California's gas supply is so flighty that even a tiny drop in production can produce big jumps in prices. Severin Borenstein of the University of California Energy Institute said the plant shutdown could boost prices 10 percent to 15 percent - a prospect that had state officials howling at a time when regular unleaded gas was running at $2-plus a gallon.
Now it appears the refinery is getting at least a temporary reprieve...
"If it's true, it's a big victory for consumers and for regulators," said consumer advocate Jamie Court of the Foundation for Taxpayer and Consumer Rights in Santa Monica. "It looks like Shell's finally conceding it's a very profitable refinery and prospects for sale are good."
Court said he's been told that about a dozen buyers are interested but the Oct. 1 shutdown didn't give them enough time to study the plant's economics. The oil-price service said 30 potential bidders requested information from Shell, and 10 were interested enough to sign confidentiality agreements.
Shell's shutdown plans have been criticized for months. Internal company documents unearthed by Court's organization showed the plant made money four of the past six years, including $4.7 million last year.
But Shell officials said those documents didn't tell the whole story. In fact, they said, the declining availability of crude oil in the fields around Bakersfield, where production has fallen 20 percent since 1988, was turning the refinery into a loser. They also said the plant was aging, inefficient and needed $1 billion in equipment upgrades.
Shell planned to increase production at its East Bay refinery, and import more product from its Anacortes, Wash., refinery. But the company acknowledged it wouldn't be enough to make up for the loss of production at Bakersfield.
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The Los Angeles Times
September 15, 2004
by Elizabeth Douglass, Times Staff Writer
New Obstacle to Refinery Deal;
Shell is refusing to include key parts in the sale of its Bakersfield facility, sources say.
Several buyers are interested in Shell Oil Co.'s Bakersfield refinery, but an acquisition could be thwarted by the company's refusal to sell on-site storage tanks, pipelines and other key parts of the facility, according to people familiar with the situation.
Shell's reported stance is the latest obstacle to efforts by state officials to save the small refinery, which makes 2% of California's gasoline and 6% of its diesel. If the refinery is shut instead of sold, the lost production could spark increases in California's chronically high fuel prices, state officials said.
A spokesman for the oil company, Stan Mays, declined to be interviewed Tuesday, though he provided written answers to e-mailed questions.
Asked about the sale restrictions, Mays said: "I'm not aware that anyone at Shell has said this."
Shell first decided to shutter the refinery without trying to sell it and then, under pressure from state Atty. Gen. Bill Lockyer and others, earlier this year agreed to entertain offers. The company warned at the time that it intended to keep the refinery's crude oil contracts, reducing the pool of possible buyers to those that could secure a new source of oil for the landlocked facility.
Now, according to the people close to the negotiations with potential purchasers, Shell has put up the additional roadblocks. It has offered to lease the storage tanks and pipelines to a buyer but "at extraordinarily high rates," one source said.
This source called the situation "pretty much unprecedented in a refinery transaction."
What's more, potential buyers have only until the end of today to submit an offer for the refinery under deadlines set by Shell, according to several sources.
Shell declined to confirm the deadline.
Mays, the company spokesman, called the bidding process "robust" and said there were several prospective buyers. Because of confidentiality agreements, he said, "we cannot discuss any terms or conditions that may or may not be imposed."..
...."It seems to me that Shell is again complicating a sale. It's like trying to sell a car without the gas tank," Court said. "Everything that's been done to keep this refinery open in the last six months is moot if Shell's not willing to make a sale real."..
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The Los Angeles Times
September 23, 2004
by Elizabeth Douglass, Times Staff Writer
Shell Studying Offers for Its Bakersfield Site
Shell Oil Co. said Wednesday that it was evaluating proposals from several companies that want to buy its Bakersfield refinery, a profitable facility the oil company had targeted for closure.
Shell also acknowledged that the company intended to sell the facility without valuable components such as certain pipelines and on-site storage tanks -- conditions the company said "reflect market realities."
Last week, The Times reported the sale restrictions, which people familiar with the situation said were unusually restrictive and would limit interest in the refinery. At the time, Shell said confidentiality agreements prohibited the company from discussing its sale conditions.
State officials and politicians, alarmed by Shell's plan to shutter the refinery, have been pressuring the oil company to sell it. The Bakersfield plant makes 2% of California's gasoline and 6% of its diesel, and officials worry that its closure would worsen the state's chronic supply troubles and lift prices at the pump.
Shell initially made no effort to sell the facility, and repeatedly told lawmakers and others that no one would want it, especially because the company intended to keep the refinery's crude oil contracts. On Wednesday, Shell said more than 70 parties had expressed interest in the Bakersfield refinery, and that 20 signed confidentiality agreements so they could dig deeper into the plant's books.
Several companies submitted bids "stating the price they would pay for the refinery and any additional terms and conditions they would propose," according to a statement released by Shell, the U.S. unit of Anglo-Dutch company Royal Dutch/Shell Group.
The company set no deadline for a sale deal, but pledged to continue negotiations as long as they are "warranted by the progress of our discussions," spokesman Stan Mays said. Mays declined to be interviewed for this story, but provided written answers to questions.
Mays said the sale would include some large storage tanks, but not all of them. Shell said it would negotiate a long-term lease with the buyer for use of the fuel terminal, tanks and pipelines not included in the sale.
If no deal is reached, Shell said it would close down the refinery March 31, or by the end of the year if it couldn't get the necessary waiver from the Environmental Protection Agency to stay open into 2005. Shell originally planned to shut the plant Oct. 1, but postponed the closure to allow more time for negotiations with possible buyers.
"This is a far cry from Shell's statement that no one would want this facility," said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica. With so much interest, "I don't think Shell can announce that they couldn't finalize a deal without regulators asking why."
Sen. Barbara Boxer (D-Calif.), was less enthusiastic about Shell's latest announcement.
"Whatever Shell says is one thing. What they do is another," she said Wednesday. "And everything they do leads me to believe that they want to avoid the sale of this refinery."...
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The Bakersfield Californian
December 7, 2004
by Erin Waldner
Refinery granted reprieve;
Shell refinery in Bakersfield, CA reaches pact with EPA to stay open
The Shell Bakersfield Refinery on Rosedale Highway has received a stay of execution.
The company announced Monday it reached an agreement with the U.S. Environmental Protection Agency and the U.S. Justice Department that will allow the refinery to stay open through March 31, 2005.
Had it not reached an agreement, Shell would have had to close the refinery by the end of this month.
Shell Oil Products U.S., part of Shell Oil Co., agreed to reduce an additional 62 tons in annual nitrogen oxide emissions, companywide, by March 31. The original deadline was Dec. 31, 2008.
In return, Shell received permission to come under its original nitrogen oxide emission reduction target for the year by seven tons. Nitrogen oxide is a pollutant.
The agreement between Shell and the EPA must now go through a period of public comment. Court approval is also required. The timeline wasn't known Monday.
Shell said it plans to close the refinery by March 31 if the facility does not sell by then. The company said it is continuing discussions with a short list of bidders.
Industry experts have said the refinery's closure will lead to higher fuel prices. The refinery produces 2 percent of the state's gasoline supply and 6 percent of diesel.
Shell originally planned to close the refinery on Oct. 1, 2004. Under pressure from California Attorney General Bill Lockyer and Sen. Barbara Boxer, D-California, the company agreed to delay the closure to give time for the refinery to sell.
"We're pleased the refinery is going to remain open at least through March of next year," Tom Dresslar, a spokesman for Lockyer, said Monday. "The real prize is a sale agreement that keeps it open over the long term. We continue to have our eye on that prize."..
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Los Angeles Times
December 16, 2004
by James F. Peltz, Staff Writer
Talks on Shell Refinery Sale Break Down
Shell Oil Co. said Wednesday that talks with the leading bidder for its Bakersfield refinery broke down, reviving the prospect that the plant could shut down next spring and pinch the state's tight gasoline market.
The two sides "could not reach an agreement that offered terms and conditions acceptable to both parties," Lynn Laverty Elsenhans, president of Shell Oil Products US in Houston, said in a statement. If another bidder doesn't offer "an acceptable package, she said, "we will proceed with plans to close the refinery" in March.
Shell last week said it was negotiating exclusively with one suitor, which sources identified as the private investment firm Kelso & Co. in New York.
Shell spokesman Stan Mays declined to say why the talks collapsed or whether Kelso remained interested. Kelso's general counsel, James Connors, declined to comment.
The Bakersfield refinery produces 2% of California's gasoline and 6% of itsdiesel fuel. Shell's plan to shutter it alarmed California Atty. Gen. Bill Lockyer, politicians and consumer advocates who feared that the closure would leave California short of gasoline supplies and raise pump prices.
Under pressure, Shell agreed earlier this year to attempt to arrange a sale that would keep the 500-acre, 72-year-old plant open. A few potential buyers other than Kelso expressed interest.
"We're going to go back to the other final bidders and gauge their interest... and see if it's possible to negotiate a sale," Mays said.
Critics contend that Shell is a reluctant seller because it has made clear its desire to keep ownership of certain storage tanks and other assets integral to running the refinery and leasing those assets back to the new owner.
That makes the property less attractive to bidders, said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica.
"Shell is acting like someone who's selling their house but refusing to sell the garage that goes with it," he said. "It's incumbent on the attorney general to demand that Shell live by reasonable terms."
Lockyer spokesman Tom Dresslar said Lockyer's office was "going to review the circumstances that led to this apparent failure of the negotiations."
Shell "committed to making a good-faith effort to complete a sale," Dresslar said, "and the attorney general intends to hold them to that promise."
Two other potential buyers were Flying J Inc., a privately held oil company based in Ogden, Utah, and Paramount Petroleum Corp., a Paramount firm that mainly refines oil into asphalt.
Executives with the two companies didn't respond to requests for comment Wednesday. Last week they said they remained interested, especially if the talks with Kelso faltered.
Shell, the U.S. unit of the Anglo-Dutch oil giant Royal Dutch/Shell Group, said it wanted to close the refinery because of dwindling supplies of crude oil in the San Joaquin Valley.
The company also cited the refinery's age and that it wasn't profitable enough. It employs 250 people and can process 70,000 barrels of crude oil a day.
Critics asserted that Shell's motive was to drive up pump prices and profit at Shell's two larger California refineries in Martinez and Wilmington.
In July, the Federal Trade Commission said it was investigating whether Shell's plan to close the Bakersfield refinery would violate antitrust laws by reducing competition.
If the plant closes in March, it could add to what is already a volatile period in California's gasoline market.
That's when refiners switch to summer blends of gas that are more difficult to produce. The result can be supply snags and higher prices.
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Part I ..to be continued.. |