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Shell May Postpone Closing of Refinery

August 13, 2004|Elizabeth Douglass | Times Staff Writer

In what would be a victory for California motorists, Shell Oil Co. is considering postponing the Oct. 1 shutdown of its Bakersfield refinery to allow more time for talks with potential buyers, according to a person familiar with the matter.

The move would come as part of an accord between Shell and state Atty. Gen. Bill Lockyer, who has been pressuring Shell to keep the plant open or find a buyer for it, this person said. It wasn't clear how long of a postponement Shell was considering.

A spokesman said the attorney general wouldn't comment. A Shell spokesman said the company wouldn't "speculate or comment on speculation."

Pushing the shutdown date back would be a reprieve of sorts for California motorists because it would extend the life of a facility that makes 2% of the state's gasoline and 6% of its diesel. Experts have said the loss of that output would worsen California's fragile balance between supply and demand -- a situation that helps make the state's gas prices among the highest in the U.S.

A turnaround by Shell would be especially important for farmers in the San Joaquin Valley, who rely on diesel from the Bakersfield refinery to power tractors and other equipment. Farm groups and others have said closing the facility in October would disrupt diesel supplies at the height of harvest season.

Jamie Court, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica, said Shell was clearly yielding to Lockyer and Sens. Barbara Boxer (D-Calif.) and Ron Wyden (D-Ore.), who have questioned its motives for closing the facility.

"Shell is being pressured from Washington, Sacramento and its own employees to keep this refinery open," he said.

Lawmakers and other critics have said they believe Shell wants to close the refinery to tighten fuel supplies and boost retail prices in California, increasing profit at its Wilmington and Martinez plants. The Federal Trade Commission is investigating Shell's closure plan.

Shell said last fall that it decided to close the Bakersfield refinery because of dwindling supplies of crude oil in the San Joaquin Valley. The company made little effort to find a buyer for the plant, arguing that the facility is old, uneconomic and lacks a sufficient oil supply.

However, an industry consultant hired by Lockyer, Malcolm Turner, studied the refinery's prospects and declared in a July interview with The Times that closing the plant "flies in the face of common sense."

According to a report in the Oil Price Information Service, an industry newsletter, the attorney general agreed to withhold Turner's report if Shell pushed back the refinery's closing date and redoubled its efforts to find a buyer.

On Thursday, a group representing gasoline wholesalers warned that closing the refinery would cause "significant fuel supply problems, along with related fuel price spikes," particularly in Bakersfield and Fresno.

Jay McKeeman, president of the California Independent Oil Marketers Assn., urged the state to consider emergency measures if shortages develop as feared.

Shell spokesman Stan Mays said the company was "committed to doing its part to ensure adequate supply of gasoline and diesel to the Central Valley."

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