Los Angeles Times: Federal Trade Commission Will Review Shell Oil's Plan to Close Refinery
Some antitrust experts wonder whether the Bakersfield plant is in the agency's jurisdiction.
By Elizabeth Douglass, Times Staff Writer
8 April 04
The Federal Trade Commission said Wednesday that it was evaluating whether Shell Oil Co.'s plan to close its Bakersfield refinery raised antitrust or unfair competition concerns, but the agency stopped short of launching a formal investigation.
The commission said it would conduct the review in a letter to Sen. Ron Wyden (D-Ore.), who had asked the FTC to investigate the planned closure, arguing that it would limit competition and raise gasoline prices for West Coast consumers.
"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," FTC Chairman Timothy J. Muris said in a letter to Wyden on Tuesday that was made public Wednesday.
Wyden, whose state gets a third of its gasoline from California refineries, said he wasn't satisfied.
"When someone says they are 'seriously considering' something, that's Washington code for nothing's going to happen," he said. At the FTC, Wyden added, "They can find every possible rationale for not doing anything for the consumer."
Chuck Samel, an antitrust attorney with Howrey Simon Arnold & White in Los Angeles, said that "when the FTC says they'll look seriously at an issue, they do." But Samel and other experts questioned whether the agency had the authority to intervene in the Shell case.
"Under the existing antitrust laws, this unilateral decision to shut the plant down wouldn't rise to the level of an antitrust violation, even if there were legitimate concerns about the effects on the market," said antitrust attorney Charles Biggio, a former Justice Department official and a partner at Akin Gump Strauss Hauer & Feld in Washington.
Wyden disagreed, saying the FTC did indeed have jurisdiction because Shell had gained full ownership of the Bakersfield refinery through a divesture required by the commission when it approved the Chevron-Texaco merger in 2001.
An FTC representative didn't return a call for comment Wednesday. A Shell spokesman said the company wouldn't comment because executives hadn't reviewed the FTC letter.
Shell said late last year that it would shutter the refinery in Bakersfield on Oct. 1 because the facility's crude oil supply, which is pumped from nearby oil fields, was on the decline.
State officials and consumer groups say that with gasoline supplies so tight, loss of any refining capacity could push pump prices up. If the Bakersfield facility closes, California's gasoline production would fall by 2%, and its diesel output by 6%, small numbers that loom large in a market suffering from chronic fuel shortages. A variety of refinery outages this year marked the start of a prolonged climb in gasoline prices that has kept the statewide average above $2 a gallon for seven weeks.
"Given the current shortage, or apparent shortage in refinery capacity, it's critical that that refinery stay open," said Michael Shames, executive director of the Utility Consumers Action Network, based in San Diego. California Atty. Gen. Bill Lockyer is investigating Shell's plan; he could act under state antitrust and unfair competition laws. Jamie Court, president of Santa Monica-based Foundation for Taxpayer and Consumer Rights, recently urged the attorney general to redouble his efforts on the case, citing Shell documents that show the Bakersfield refinery is profitable and running with higher profit margins than any of the company's other U.S. refineries.
Court and others accuse the company of wanting to eliminate the Bakersfield facility to strain California's fuel supplies to boost profit at Shell refineries in Los Angeles and in the Bay Area city of Martinez.
Shell spokesman Cameron Smyth has called such allegations "absolutely false."