NEWS RELEASE:
Memo at Bakersfield Refinery: Shell Oil
Is "Trying to Shut Down Our Plant"
Consumer Group Calls on Sen. Boxer, California Officials
To Investigate at Facility Shell Previously Tried to Shut Down; Warns Gas Prices
Could Spike
January 9, 2009
CONTACT: Judy Dugan, 310-392-0522, x305
Santa Monica,
CA — Consumer Watchdog called for an investigation of a possible attempt by Shell
Oil to shut down a Bakersfield refinery that is crucial to California’s supply
of diesel and gasoline, in a letter to Senator Barbara Boxer, California
Attorney General Jerry Brown and Treasurer Bill Lockyer. Shell appears to be
"unilaterally shutting down pipelines to the refinery," the group writes, which
would lead to higher pump prices, particularly in the West. (See the letter
at https://consumerwatchdog.org/resources/BigWestLetter.pdf )
Leaders of the United Steel Workers
local at the Big West refinery, owned by truckstop operator Flying J, charged
Shell with "trying to shut down our plant" by shutting off pipelines and
demanding payment 30 days in advance. The union memo to members said Shell had
refused an offer of eight days’ advance payment. (Read a pdf of the memo
at https://consumerwatchdog.org/resources/BigWestUpdate.pdf ). The refinery’s parent company, Flying J,
filed for bankruptcy in December, but continues to operate its
business.
"This appears to be blatant attempt by Shell to shut down the
refinery, which it tried and failed to do in 2005 when it owned the plant," said
Jamie Court, president of the nonprofit Consumer Watchdog, which helped prevent
the closure. "Shell aimed then to raise pump prices by restricting refinery
output in California, and closing the Bakersfield refinery would have the same
result now."
In its letter to California officials, Consumer Watchdog
wrote:
"We write to warn you of the alarming possibility that the Big
West refinery in Bakersfield, which supplies 6% of diesel fuel and 2% of
gasoline in California, may shut down for good. We urge you to launch an
immediate investigation into whether Shell and possibly others are trying to
artificially short the gasoline market and raise prices by refusing to make
crude available to Big West, unilaterally shutting down pipelines to the
refinery.
"As you know, the refinery’s owner, Flying J, is in Chapter 11
bankruptcy. The company is still operating its truck stops and a refinery in
Utah. Big West, in Bakersfield, is largely not operating and shows no sign of
emerging from a ’10-day maintenance shutdown’ that the company announced Dec.
30.
"You will recall that your offices and ours prevented Shell Oil from
shuttering this medium-sized refinery (68,000 barrels a day capacity) in 2005.
You helped prove that, unlike Shell’s assertions, the plant was profitable and
that a ready supply of crude petroleum was available to it. Internal Shell Oil
documents showed the company publicly misrepresented the conditions at the
refinery in what appeared to be an effort to reduce California’s already anemic
refining capacity and spike fuel prices."
Efforts by Boxer and Lockyer
in 2005 ultimately pressured Shell into selling the refinery to Flying J, whose
plans to upgrade and expand the refinery were approved shortly before the
company’s declaration of Chapter 11 bankruptcy Dec. 22. The company has
continued to operate its truck stop network and another refinery in Utah, its
corporate headquarters, without interruption since the company filed for
bankruptcy protection.
The United Steelworkers memo, sent yesterday to
union members, attributed its claims to the plant’s managers and included the
following:
"1. The Refinery is out of Crude oil
"2. Shell Oil
owns the Crude oil pipelines into the plant and the Gas Oil
pipeline out of
the plant.
"3. Shell oil has shutdown our Crude oil pipelines coming
into the plant and
the Gas Oil pipeline out of the plant.
"4. Big
West Oil has offered Shell, 8 day’s pre payment for crude oil, but
Shell has
refused
"5. Shell Oil and Exxon/Mobil want 30 days pre payment for our
Crude oil
supply. This comes to about 40 million dollars."
The entire
memo can be downloaded at https://consumerwatchdog.org/resources/BigWestUpdate.pdf
The memo goes on to say that other,
independent producers including Berry Petroleum are willing to sell crude oil to
the plant, but can’t do so without access to the Shell-owned crude pipeline. The
"gas oil pipeline" carries a heavy fuel product that is essentially a byproduct
of the refinery out of the plant to other refineries that can process it into
usable fuels. The plant cannot operate unless pipelines both in an out are
running.
The nonprofit, nonpartisan Consumer Watchdog has called for
stricter oversight and regulation of oil companies and refiners, to prevent any
manipulations of supply in an industry that is concentrated and
uncompetitive.
"What’s going on in Bakersfield is the free market at its
most savage, without regard to the consequences for the people of California and
the country," said Judy Dugan, research director of Consumer Watchdog. "In 2000,
Enron and friends all but cut off California’s electricity supply because of a
lack of regulation. This refinery battle is more evidence that state and federal
governments must take a stronger hand in how these critical industries are
run."
The Consumer Watchdog letter to Boxer, Brown and Lockyer
concludes: "We ask your aid in determining what is going on at the plant and
acting to avert a permanent shutdown."
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