AFX Europe (Focus): US FTC clears Shell decision to shut California refinery (ShellNews.net) 26 May 05

SAN FRANCISCO (AFX) - A Federal Trade Commission investigation of Shell Oil Company's decision to shut a California refinery found the company did nothing wrong, the government agency said.

Shell's announcement that it would shut its Bakersfield refinery by Oct 1, 2004, triggered a storm of accusations by consumer groups and lawmakers that the company was trying to drive up gasoline prices by cutting refining capacity.

"The commission found no evidence to substantiate this," the FTC said in a statement late Wednesday.

California is especially vulnerable to refinery closures. Its strict fuel emissions standards -- the toughest in the United States -- make it hard to import gasoline from other states. And, like the rest of the nation, California has not built a new refinery in nearly three decades.

These two factors result in Californians paying about 40 cents a gallon above the national average for unleaded gasoline.

After coming under intense public scrutiny over its decision to shut the refinery, Shell ended up selling it to a unit of Flying J Inc, a privately-held Utah company that plans to continue running the facility.

In its ruling, the FTC went on to say that its findings would have been the same even if the refinery had not been sold.

Shell said it based its original decision to shut the Bakersfield refinery, built in the early 1930s, on the costly upgrades needed to keep it competitive and on the dwindling supply of crude from nearby oil fields in the state's southern San Joaquin Valley. The plant can process about 70,000 barrels a day of oil when running flat out.

Shell Oil is the US subsidiary of Royal Dutch/Shell Group.

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