Royal Dutch Shell Group .com Federal Trade Commission to evaluate decision to close Shell refinery

By ERIN WALDNER, Californian staff writer

Posted: Wednesday April 7th, 2004, 2:03 PM
Last Updated: Wednesday April 7th, 2004, 2:17 PM

The Federal Trade Commission has confirmed it is evaluating Shell’s decision to close its Bakersfield refinery.

U.S. Sen. Ron Wyden of Oregon has twice asked the commission to re-examine mergers in the gasoline industry in order to investigate Shell’s plans for the plant.

Timothy Muris, chairman of the FTC, wrote a letter to Wyden on Tuesday: "The issues that you have raised are very important to this agency and will be seriously considered as the agency evaluates the situation with respect to the Bakersfield refinery and determines what course of action, if any, may be warranted."

Muris did not say whether the commission has launched an official investigation into the matter. A spokesman for the commission, when contacted today, declined further comment.

As for Wyden’s office, "The senator considers the letter to be lackluster," said Carol Guthrie, a spokeswoman for the senator. Saying you’re concerned about a situation and actually taking action are two different things, Guthrie said.

Meanwhile, Shell released a statement on Tuesday that it "welcomes discussions with potential buyers of the Bakersfield Refinery."

"Since so many people have questioned if the refinery is for sale, I want to make it clear that it is, and to state unequivocally that we are willing to sit down with any credible buyers to discuss such a deal," Lynn Elsenhans, chief executive officer of Shell Oil Products U.S., said in the statement. "We still believe, however, that once potential buyers take a close look at the facility and its available crude supply, that they will reach the same conclusion that we have. That this refinery is not economically viable going forward for a number of reasons, including the cost and availability of the crude needed to run the facility."

When Shell announced in November that it was closing and dismantling the Rosedale Highway refinery, reporters asked if the company would consider selling the plant instead. Shell executive Aamir Farid said any new owner would face the same problem as Shell - declining local crude supplies.

State oil officials say their projections show the valley has at least 20 to 25 years of remaining heavy crude supplies.

Also this week, the Santa Monica-based Foundation for Taxpayer and Consumer Rights publicly called on State Attorney General Bill Lockyer to file suit under the state’s Unfair Business Competition Law to force Shell to sell the refinery or keep it operational. The group said Tuesday it had obtained internal company documents that proved the refinery was in the black in 2003.

In the statement from Shell, Elsenhans said, "We are disappointed that these documents were publicly released but ... they do show that the Bakersfield Refinery lost money in 2001 and 2002, and that the profit that we project for the refinery in 2004 does not justify maintaining our investment in the facility."

The attorney general’s office confirmed in February that is was looking into Shell’s plans to close the refinery.

"The Attorney General is going to do everything in his power to try and protect the drivers of this state and the Bakersfield area from the financial hardships they could well suffer if this refinery closes," Tom Dresslar, a spokesman for the attorney general, said today.

The refinery produces 2 percent of the state’s gasoline and 7 percent of the diesel. Industry experts have said prices will most likely increase after the refinery closes.

The 72-year-old facility also employs 250 individuals and uses 150 contractors. It has an annual payroll of about $30 million.

Visit later today or read Thursday's Bakersfield Californian for details on this developing story.


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