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Shell to Delay Closing Refinery, Granting Californians Reprieve

THE WALL STREET JOURNAL: Shell to Delay Closing Refinery, Granting Californians Reprieve

“Shell’s intent to close the plant had triggered an antitrust investigation by California officials as well as one by the U.S. Federal Trade Commission.”

By THADDEUS HERRICK

Staff Reporter of THE WALL STREET JOURNAL

August 16, 2004; Page B2

Shell Oil, a unit of Royal Dutch/Shell Group, agreed to postpone the Oct. 1 shutdown of a California refinery for six months to allow more time to find a potential buyer, providing at least a temporary reprieve to consumers in one of the nation’s tightest gasoline markets.

The agreement between Shell and California State Attorney General Bill Lockyer comes as growing world demand for products made from crude oil, coupled with the nation’s limited refining capacity, has resulted in unusually high fuel prices. As of last week the average retail price for a gallon of regular grade gasoline was $1.87, up nearly 31 cents from a year ago, according to the Department of Energy.

Shell’s plan to close the 70,000 barrel-a-day Bakersfield refinery because of what it says is declining crude-oil production in the area threatens 2% of California’s gasoline and 6% of its diesel, a significant amount in a state where supply and demand are seldom in balance. Gasoline prices in California are up about 35 cents a gallon from last year.

Mr. Lockyer, among other state and federal officials, questioned the motives of Shell’s sale, which would likely benefit the company’s profits and hurt consumers. He was particularly swayed by a report by a consulting firm that said that refinery could be run profitably or viably sold, said Tom Dresslar, a spokesman for Mr. Lockyer.

Both Shell executives and Mr. Dresslar said Shell Oil President Lynn Laverty Elsenhans made his decision to keep the refinery open during a telephone conversation last week with Mr. Lockyer.

Shell’s intent to close the plant had triggered an antitrust investigation by California officials as well as one by the U.S. Federal Trade Commission. The commission has served subpoenas to several companies as part of its investigation.

Still, the company’s ability to keep its refinery operating through March may depend on whether Shell can meet requirements to reduce air-pollution emissions by the end of this year — or get officials to modify a consent decree over pollution at the plant.

California consumers have long paid the highest prices in the continental U.S., in part because the West Coast doesn’t enjoy the same access to Gulf Coast refiners that help keep prices steadier in other parts of the nation. Nor do those refiners produce California’s required low-emission blend of fuel.

Write to Thaddeus Herrick at [email protected]

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