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RE: Update-Big West may sell Bakersfield Refinery due Crude supply/Flying J Chap 11

Home Forums Refining Community Refinery News Update-Big West may sell Bakersfield Refinery due Crude supply/Flying J Chap 11 RE: Update-Big West may sell Bakersfield Refinery due Crude supply/Flying J Chap 11

#6290

Charles Randall
Participant

Big West Refinery Shutting Down Indefinitely
January 29, 2009  /The Bakersfield Californian / By John Cox

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Jan. 29–Big West announced Wednesday that its Rosedale Highway refinery will soon shut down indefinitely, a move that would likely mean mass layoffs and could foretell higher local gas prices and perhaps the plant’s sale.

The planned closure results from the company’s inability to secure an adequate supply of crude oil following last month’s Chapter 11 bankruptcy reorganization filing by the refinery’s Utah owner, Flying J Inc.

“For now, we will be winding down refining operations at the facility as we continue to explore opportunities,” Big West Executive Vice President Fred Greener said in a news release.  “We hope that this suspension will be short-lived, and we are working very hard to find a solution that will allow resumption of operations,” the statement continued. “However, at this time, we cannot predict when that might occur.”  The release did not say when the wind-down would begin, and company spokesman Peter Hill declined to say when the plant would close.

The announcement stoked fears that the refinery might not soon recover from its troubles.  “That’s scary,” Henry Medina, president of Fleet Card Fuels, a Bakersfield fuel supplier, said of Wednesday’s announcement. His company normally buys gasoline from Big West, but in recent weeks has been able to purchase only a relatively small amount of diesel from the refinery. The rest of its fuels now come from the Los Angeles and Fresno areas, he said.

Big West said it has contacted the union that repr esents many refinery employees regarding the plant’s future. A company spokesman said the discussions with United Steelworkers Local 219 will focus on layoffs.  The refinery employs some 150 hourly workers, as many as 100 salaried employees and about 40 contracted laborers, union official Ed Huhn said.  According to a union labor contract, Huhn said, many of the plant’s union-represented workers must be granted six months’ notice — or the equivalent severance pay — upon announcement of the refinery’s closure.

The news release was the company’s first major communication regarding the refinery’s future since Flying J’s Dec. 22 bankruptcy filing.  In the meantime, however, some in the industry have speculated that the plant would soon close, and that this would mean a jump in gas prices by much as 20 cents a gallon because of added transportation costs.  “It’s going to push prices up,” Medina at Fleet Card said.  A spokeswoman for the state Energy Commission said prices would probably increase only slightly as other refiners adjust.

“I can tell you that Bakersfield will continue to receive gasoline and diesel products,” spokeswoman Susanne Garfield said. “They’ll be available from outside the area. (Fuel companies) will bring them in.”
Bob van der Valk, a fuel analyst with 4 Refuel Inc. in Lynnwood, Wash., said the announcement clearly points to the refinery’s sale.

Big West “is an albatross around (Flying J’s) neck,” he said, adding that the company made a mistake when it bought the refinery in 2005 because it does not produce oil for the plant, as did the plant’s previous owner, Shell Oil Co.

The shutdown is sure to impact local oil producers who used to — or in some cases still do — supply crude to the refinery. Many are owed large sums for shipments made prior to the bankruptcy filing, and they were hoping the refinery would negotiate a steady supply to get the refinery back to normal.  Former Big West supplier Chad Hathaway, an independen t Bakersfield oil producer, said he was glad he found new buyers for his crude shortly after the bankruptcy filing.  Still, he was saddened to hear Wednesday’s announcement.

Big West recently came back online after a maintenance period of more than a week. Many said the maintenance was done earlier than planned because of the supply problems.

The state attorney general’s antitrust unit this month opened an investigation into accusations that Shell has intentionally contributed to the refinery’s troubles.  Chief Deputy Attorney General James M. Humes wrote in a letter last week to Sen. Barbara Boxer, D-Calif., saying that his staff will look into whether Shell has withheld oil shipments and closed a key pipeline into the refinery in order to bring about Big West’s closure.     (Don’t forget Attorney General is moonbeam Jerry Brown!)

Shell owns a refinery in the Bay Area that could benefit financially from an excess of oil on the market.
The company has denied the accusations, saying it hopes to work out a supply deal soon with Big West.

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