March 23, 2004

Wyden Presses FTC Chair to Review Agencys Orders on Bakersfield Refinery

Senator calls on Muris to provide answers, determine whether FTC orders from Chevron-Texaco merger make facility less viable

Wyden Presses FTC Chair to Review Agencys Orders on Bakersfield RefinerySenator calls on Muris to provide answers, determine whetherFTC orders from Chevron-Texaco merger make facility less viableMarch 23, 2004Washington, DC Continuing his strong criticism of the Federal governments inaction on rising gas prices across the country, U.S. Senator Ron Wyden today called on Federal Trade Commission (FTC) Chairman Timothy Muris to review previous oil company mergers and FTC orders that may be contributing to the planned shutdown of Shell Oils Bakersfield, Calif. refinery. Shell Oil officials have contended to Wydens office that an FTC order reducing Shells access to a certain type of crude oil is forcing the planned shutdown. Wyden, who first asked Muris last month to look into the Bakersfield refinery shutdown, has to date received no answer. In a second letter to Muris today, Wyden urged the FTC to review not only the merger that resulted in Shells purchase of the 70,000 barrel-per-day Bakersfield refinery, but also to review FTC orders made at that time. The full text of Wydens letter is below.The Honorable Timothy J. MurisChairmanFederal Trade Commission600 Pennsylvania Avenue NWWashington, DC 20580Dear Chairman Muris:On February 18, I wrote you to request that the Federal Trade Commission (FTC) use its continuing authority to re-examine recent mergers in the gasoline industry in order to investigate Shell Oil's plans to close its 70,000 barrel-per-day Bakersfield, California refinery later this year. As of today, I have still not received a reply.Today, I am writing to request again that the FTC use its continuing authority to prevent further gasoline price spikes and anti-competitive problems in West Coast gasoline markets that could result from closure of Shells Bakersfield refinery. Specifically, I am requesting that the FTC consider either modifying its prior orders affecting the Bakersfield refinery or take other appropriate action to ensure that the refinery is not shut down.According to Shell officials, one of the reasons that Shell is closing its Bakersfield refinery is an order by the FTC that reduced Shells access to heavy crude oil in the San Joaquin Valley. Shell contends that under an FTC order, the company takes the brunt of declining production of San Joaquin Valley heavy crude oil and is left with insufficient heavy crude oil to operate the Bakersfield refinery efficiently. Shell claims this FTC order was issued when Shell acquired full ownership of the Bakersfield refinery from Equilon Enterprises LLC, a joint venture between Shell and Texaco. As you know, Shell acquired the Bakersfield refinery when the FTC required Texaco to sell its Equilon holdings as a condition of the Chevron-Texaco merger in 2001.While recent news articles have reported that both Chevron Texaco and State of California officials estimate that the San Joaquin Valley where the Bakersfield refinery is located has a 20-25 year supply of crude oil remaining, Shell claims that much of that crude oil supply is not available to Shell. At the same time, The Bakersfield Californian reported on January 8, 2004, that Chevron Texaco plans on drilling more than 800 new wells in the San Joaquin Valley this year which is "300 more new wells than last year." With Shell's former joint venture partner increasing its drilling in the area, there may be additional crude oil supply available to continue operation of Shells Bakersfield refinery. The FTC should have continuing authority over that crude supply because of your prior review of the Chevron-Texaco merger.Because of the critical importance of the Bakersfield refinery for maintaining gasoline supplies in the extremely tight West Coast gasoline market, I am requesting that you review the FTCs prior orders involving the Bakersfield refinery to determine if they are in fact preventing the refinery from obtaining an adequate supply of heavy crude oil for the refinery to operate efficiently. If so, the FTC should modify its prior orders or take other action to forestall closure of the refinery.With gasoline prices already at record high levels in West Coast gasoline markets, I urge the FTC to use every power available to prevent closure of the Bakersfield refinery and the impacts that closure would have on consumers. At a minimum, the FTC, as the agency responsible for protecting consumers from anti-competitive practices, should ensure that its own orders are not causing the Bakersfield refinery to shut down, because they prevent the refinery from acquiring sufficient crude oil supply to operate efficiently.Thank you for your attention and I look forward to your response.Sincerely,RON WYDENUnited States Senator