January 31, 2009 at 3:04 pm #3206
Big West May Sell California Refinery, Seek Partner (Update1)
By Robert Tuttle
Jan. 29, 2009 (Bloomberg) — Big West of California LLC, a
subsidiary of bankrupt Flying J Inc., plans to sell its
Bakersfield, California, refinery or find a partner to share in
running the plant, a union representative said.
They are looking for partnership or to sell the plant,
Kevin Cable, the union committee chairman of the United
Steelworkers local at the plant, said in a telephone interview.
The refinery, which stopped processing crude oil a month
ago, shut diesel-making units yesterday and is likely to stop
remaining operations by next week, when the plant runs out of
petroleum feedstock, Cable said. Big West said in a release
yesterday it is winding down operations at the plant because
of an inability to purchase crude supplies.
Flying J bought the Bakersfield plant from Royal Dutch Shell
Plc in 2005 for an undisclosed sum with plans to upgrade. The
price paid to Shell was $130 million, the Los Angeles Times
reported in May 2006. Shell originally was going to close the
plant, saying it was losing money.
Its got a lot of disadvantages, David Hackett,
president of Stillwater Associates LLC, a consulting company in
Irvine, California, said in a telephone interview. There are a
lot of problems with the place. Shell didnt want to walk away
from the refinery for no reason.
Flying J declined to comment on the possible sale or
Flying J and Big West are unable to comment beyond what
was in the release yesterday, Peter Hill, a spokesman for Big
West, said in a telephone interview today.
Shell Ended Shipments
The refinery, which can process about 68,000 barrels of
crude a day, supplies 6 percent of Californias diesel fuel and 2
percent of the states gasoline, according to Consumer Watchdog,
a consumer advocacy group.
Shell, which had been supplying 10,000 barrels of oil a day
to the refinery, stopped sending crude oil to Big West on Dec.
23, the day after the Flying J bankruptcy, Alison Chassin, a
Shell spokeswoman, said Jan. 8.
Shell said yesterday it is in talks with the California
attorney generals office over crude supplies to Big West.
The Bakersfield Californian reported Jan. 27 that the
states antitrust office is investigating whether Shell is
illegally withholding oil supplies to Big Wests refinery.
The newspaper cited a letter from James Humes, the chief deputy
attorney general, to Senator Barbara Boxer.
Closely held Flying J filed for bankruptcy on Dec. 22,
blaming a cash crisis brought on by a decline in oil prices.
Crude has fallen 72 percent from the record $147.27 in July.
January 31, 2009 at 4:06 pm #6290
Big West Refinery Shutting Down Indefinitely
January 29, 2009 /The Bakersfield Californian / By John Cox
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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