Consumer Group Calls on Sen. Boxer, California Officials To Investigate at Facility Shell Previously Tried to Shut Down; Warns Gas Prices Could Spike

(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 http://www.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 http://www.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 http://www.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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