Refinery Murder Mystery
The chair of Sunoco’s board of directors is a refinery assassin. Lynn Laverty Elsenhans, who will remain Sunoco chair until May, tried to kill off a Shell refinery in Bakersfield, Calif., when she was CEO at Shell Oil Products. At Sunoco, where she was CEO until March 1, she succeeded in snuffing out its Marcus Hook refinery in Eastern Pennsylvania in December. And Elsenhans orchestrated the demise of Sunoco's massive Philadelphia refinery, scheduling its lethal ejection for June. Joining her in refinery extermination is ConocoPhillips and Hovensa. ConocoPhillipa silenced its Trainer refinery near Philadelphia late last year. And in February, Hovensa offed a large St. Croix refinery that provided fuel to the Northeast. As fuel prices rise, these companies are closing the very facilities essential for producing fuels. It raises the question: why would corporations do that? It’s a mystery that U.S. Sen. Robert Casey, D-Pa., announced on Friday he will try to solve with a Congressional hearing scheduled for April. Maybe then the Northeast will know if the community suffering, the worker layoffs and the projected East Coast shortages and skyrocketing rates are really unavoidable. The cost of the refinery closings to the region is appalling. The Pennsylvania Center for Workforce Information & Analysis has estimated job losses could reach 36,000, and cities, school districts and the state could lose $560 million in tax revenues. The U.S. Department of Energy has warned that if Sunoco closes its Philadelphia refinery as planned in June, the Northeast could be subjected to gasoline and fuel oil shortfalls and price spikes. ConocoPhillips said it had to close the Trainer refinery not because it was losing money but because of the “level of investment required to remain competitive.” Sunoco claimed it lost money at the Marcus Hook and Philadelphia refineries over the past three years. Maybe it did. Maybe it didn’t. That’s what Shell said in 2004 about the Bakersfield, Calif., refinery when it announced it would close that facility supposedly because it “couldn’t reach financial targets.” Elsenhans, then chief executive of Shell Oil Products, contended there was no point in trying to sell the Bakersfield refinery because any potential buyer would reach the same conclusion she had – that it wasn’t viable. She refused to hire a broker to try to sell the asset. California officials didn’t swallow that corporate line of bull. Jobs and fuel price hikes were at stake. U.S. Sen. Barbara Boxer, then-state Attorney General Bill Lockyer and consumer groups challenged Elsenhans’ assertions. Already burned by extraordinarily high gasoline prices and the Enron energy price manipulation scheme, they weren’t going to take it anymore. Lockyer suggested Shell planned to close the refinery in the nation’s most lucrative fuel market so that it could jack up prices even further. He and other critics said closing Bakersfield would cause shortages that would increase prices, which in turn would boost profit for Shell refineries in Wilmington and Martinez. Boxer attacked Shell’s excuses for the closing, pointing out in a letter:
“An internal Shell memo from April 5, 2004, shows that Bakersfield had the biggest margins of any Shell refinery in the nation as of that date.”And, she refuted the company’s contention that limited access to crude was a problem for the refinery that was surrounded by prolific oil fields, writing:
“Shell internal documents from February 2004 indicate the slowdown in crude was not due to a physical lack of it, but instead to mechanical problems with a hydro-conversion unit compressor.”She demanded an investigation by the Federal Trade Commission (FTC), which conducts inquiries into attempts to fix prices. And she got one. In the end, Elsenhans was proved wrong. Lockyer hired a firm to market the refinery. Flying J, a large diesel retailer, bought it. The recession and other problems bankrupted Flying J, but then another company, Alon USA Energy Inc. bought the Bakersfield refinery in 2010 for $40 million and invested in retrofitting it to process vacuum gas oil. Alon operated it until December and plans to resume operations in the second quarter of this year. Maybe Elsenhans is wrong about the Philadelphia area refineries too. In Bakersfield, the plant produced 2 percent of the state’s gasoline supply and 6 percent of its diesel when Shell tried to close it. On the East Coast, the numbers are much bigger. The Philadelphia, Marcus Hook and Trainer refineries, in recent years supplied the Northeast with 40 percent of its gasoline, 60 percent of its diesel and 45 percent of its home heating oil, according to a report by the U.S. Energy Information Administration. The report says if Sunoco closes the largest -- the Philadelphia refinery -- as announced, there could be serious problems. For the Northeast, it could mean a year or more of fuel shortages, including home heating oil, on which a large percentage of homeowners there rely. It could also mean much higher prices. Which, of course, could mean huge profits. Who knows what’s really going on? Maybe U.S. Rep. Patrick Meehan, R-Pa., will get some answers on March 19 at his hearing titled, “The Implications of Refinery Closures for U.S. Homeland Security and Critical Infrastructure Safety.” Maybe Sen. Casey will get them April 26 at his hearing titled, “Gas Prices in the Northeast: Potential Impact on the American Consumer Due to Loss of Refining Capacity.” Maybe they’ll solve the mystery before another refinery is killed, more jobs are lost, crucial tax revenues disappear and unnecessary shortages and price spikes exasperate consumers.
Sign thepetition to stop the refinery closings.