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Wyden Presses FTC Chair to
Review Agency’s Orders on Bakersfield Refinery
Senator calls on Muris to provide answers,
determine whether
FTC orders from Chevron-Texaco merger make
facility less viable
March 23, 2004
Washington, DC – Continuing
his strong criticism of the Federal government’s 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 Oil’s
Bakersfield, Calif. refinery. Shell Oil officials have contended
to Wyden’s office that an FTC order reducing Shell’s
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 Shell’s purchase of
the 70,000 barrel-per-day Bakersfield refinery, but also to review
FTC orders made at that time. The full text of Wyden’s
letter is below.
The Honorable Timothy J. Muris
Chairman
Federal Trade Commission
600 Pennsylvania Avenue NW
Washington, DC 20580
Dear 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 Shell’s 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 Shell’s 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 Shell’s
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 FTC’s
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 WYDEN
United States Senator
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