I tend to agree with you.  And I am sure it will by some miracle reopen when gas goes back up again. 

just another excuse for the oil companies to continue to financially rape us

not inconceivable at all Adam...I hope they catch shell with holding to promo their northern plant...those kind of games need to be nipped in the bud before they become even more common place than they already are. Its been years since i worked there as a contract electrician but that was a great bunch of people even back then..

I grew-up in Rosedale watching them stack gas back when you could see it from calloway and meacham by lookin across the miles of alfalfa fields....to drive by and watch it sit idle like the PG&E plant wasn't something I ever expected in my lifetime...not as long as everyone drove gas powered vehicles anyway.

I know someone who works for Big West.  He's a real nice guy.  For him, I'm bummed.

I am personally glad they will no longer be polluting our air. I was fed up with their constant hiding of plant accidents. (Hydrofluoric acid leaks.)

Yup. lets shut down all the refneries.  Then maybe Detroit will figure out a way to run cars off of all the hot air produced by blogs..

Nice to meet you too MissAshie, welcome to the blogs.

missashie, you need to calm down on the name calling hun. and get YOUR facts straight. only HALF the people that blog on this site are ignorant, uninformed idiots. lol :)

oh and for anyone who says they are "happy" about the closing...  you won't be when it takes you even longer to get a job and unemployment rates skyrocket another 10% because like 500 people lost their jobs. no one should ever be happy about people losing their financial lives. that is just wrong.

Dear MissAshie83, I think everyone here thus far knows that Flying J and its susidiary Big West are refiners and not the major oil companies. At least I hope everyone understands the difference. Big West cannot do business if the oil providers refuse to ship them oil to refine.

I have heard a bunch of crazy talk regarding the new refining process, and the local governments disappointment and anger over failed notification of leaks and emissions of toxins as being a possible reason for going into bankruptcy. I believe this to be bunk for the move into bankruptcy. The closure is alarming coming after years worth of expansion discussions and hopes for a better partnership between the refinery and the city.

I still believe that the major oil companies, and specifically Shell as the driver, want a reduction in refinery capacity to drive up the price of gasoline. For years the argument over the lack of refineries has centered on the refusal of those wacky environmentalists to compromise, and to allow companies the ability to refine and process without threat of litigation over pollution levels. If the oil industry had its way there would no worker safety protections and no pollution standards to worry about, which is why these companies abandoned America and sought to drill overseas. What I believe has happened is that the oil companies, just like our formerly great steel industry, want less to make more. It is the inherent problem with unregulated capitalism where ultimate profit is the only real driver in the equation.

For a real fun story about the oil business There Will Be Blood has no peer. Sorry you find us all uninformed idiots. Here's hoping you reconsider.

The labor contract for most USW represented work forces in the oil industry ends Saturday night and, from everything I've heard, the negotiations have been tough.  Management says the economy is bad so there isn't any money for good wage and benefit increases.  The Union says the companies have been flush with cash from the boom of the last couple of years while holding the membership to the terms of their contracts, and now it's time for their slice of that pie.  I don't know if this is the case with the Big West workers, but it doesn't help in dispelling the suspicion's of the conspiracy theorists.

Oh wow, man.  I didn't know that CARB was involved in the conspiracy. 

Out of genuine curiosity and some ignorance, can someone tell me if it's true that Big West hasn't been able to pay for it's oil recently. I heard they've been running idle and no one will ship to them because they can't pay. Can anyone here in the industry explain what's going on?

As for the person glad that's it's closing down, don't expect the air quality to get much better as a result. But you can bet gas is going to go up and yet another hit to the local unemployment numbers are going to ripple it's way to you.

 MissAshie Get your facts straight before you post on here, supposedly THINKING you know what you're talking about!

I don't know guys..hmm early twenty's hasn't learned much about life yet?? Maybe she doesn't understand that by not supplying product the refinery can't make money there by creating debt to force closure. Thus the oil company (in this case Shell) no longer has the competition from Big West..

Course you need to forgive me cause I'm just speakin from an ignorant point of view..and the investigation phhttt such a waste of time..I think the government owes MissAshie83 an apology for being so stupid to even think it warrants their attention.

When Flying J filed for bankruptcy in December, they owed oil producers millions of dollars for the oil that had been previously purchased.  They normally buy oil month to month, with the payment for the crude due on the 20th or so of each month.  So, if they bought 50000 bpd for the month of July, on Aug 20, they would have to write a check for that oil.  Which means they are paying anywhere from 20 to 50 days after reciept of  the oil.  Those were the terms, agreeable by both parties.  When Flying J did not have the money to pay their bills, (not only the Big West bills, but other obligations as well because of the credit crunch), and they did not have time to sell assets (truck stops, equipment, whatever)  to pay for the bills, they filed bankruptcy.  This meant that they did not have to pay for any outstanding bills prior to the bankruptcy filing.  The bankruptcy court would determine who would be paid for their debts and how much, and when, considering the plan the company comes up with for restructuring.

In filing Chapter 11, it allows the company to keep operating, however, this doesn't mean the suppliers have to agree to the pre-bankruptcy terms and conditions of sale.  IF you are an oil company, why in your right mind would you sell oil to Flying J under the same terms??  Instead of them paying you up to 50 days after reciept, wouldn't you want your money up front?? I sure would, especially if I might not get paid for oil I have already delivered.  And this is what is happening.  Oil companies are saying if you want crude, here are the terms.  I don't know what the terms are, but it is basically pay in advance for the oil.  That is just the way the game is played.  There is nothing anti competitive about this.  If you can't pay your bills, don't expect to get crude in the door and not have to pay for it till next month.  They simply don't have the cash flow, or credit to pay for crude up front.  50000 bbl/day for a month is $45 million dollars just for crude.  Not to mention other expenses that vendors want paid for up front.   

As much as I hate to say it, I don't think Shell is the villain here.  Shell doesn't have to sell them a drop of oil.   Shell doesn't have to let them use their pipeline if they won't live by the terms of sale.  If a pipeline is that critical to the operation, then Big West needs to build one.  You can't force companies to do business with other companies that do not pay their bills.

 What I believe has happened is that the oil companies, just like our formerly great steel industry, want less to make more. It is the inherent problem with unregulated capitalism where ultimate profit is the only real driver in the equation.  Adam Payne

You are so full of [edit.] it is coming out your ears.  Unregulated capitalism my [edit.].  It took Big West over 3 years to jump thru the regulatory hoops to get their permits.  Don't tell me about unregulated capitalism.  

The regulatory agencies don't even know what is required regarding notifications.  They make up guidance as they go.  1 cup of ammonia spilled in the refinery results in state investigations, yet 500 lbs spills in Buttonwillow and nothing is made of it.

Air regulations involving process heaters passed just last year probably would have been the death nail of that refinery even if they had not gone into bankruptcy.

It would take about 3 months to run a pipeline from Kern River to the Refinery, IF there WAS unregulated capitalism.  However, the reality is it would take probably 3 years to get the permits to run a simple 8 mile long pipeline.  Not telling how long once all the inevitable lawsuits would be resolved.

Lots of other refineries of this size have shutdown over the last decade, and it has not been because of unregulated capitalism.

Try again, Adam

As a side note, one might ask why Bank Of America will not extend Big West credit to purchase oil.  Didn't B of A get federal money to keep the credit markets open????  Maybe Big West should call up Obama and the House Democrats and tell them they would like 45 million to buy some condoms....

Well, even though its for sale, I bet Shell won't buy it either.  Then they'd REALLY look guilty, now wouldn't they? 

Do you all think it'll close completely?  Will someone step in to stop it?  I do hope Shell receives some backlash from all this politcal hooey.

My husband works there, and I'm scared spitless.  I was hoping he'd be a lifer there.  He's worked out there for YEARS, first as a contractor then he got hired on when Big West took it over. If he loses this job, next,  it'll be our house,  I'm so very scared and worried. 

I am not sure what Shell has done to make them guilty.  I don't think they supplied them with crude anyway.  They did ship other companies crude thru their line, but that wasn't done for free. Now they are just asking for their money up front.

Big West deserves some blame.  They don't know how to run a refinery.  How do you justify hundreds of millions of dollars in equipment sitting in the dirt?  Why was that equipment purchased before they had approval to expand??  Plus, the parent company apparently spent money like drunken sailors and bought an albatross of a pipeline in Texas that has sucked them dry of money.

Again, what has Shell done??  BIg West screwed the pooch on this one...

 I am wounded, but I am not slain.  I shall lay me down and rest a while, and then I will rise and fight again.  -Anonymous.

Everything will be all right. Ron Mexico.

I just hope during this shutdown and sale that all the hazardous chemicals have been properly stored and are being actively monitored for leaks (or theft, I could see someone trying that).

Woof~ I be thinking positively for you and all those others directly effected.

Money is usually at the root of things. And There Will Be Blood is an excellent look into the early days of oil production and the very dark heart of one human being. "I am done".

The first few posts got this blog totally off of kilt.  Talk of collusion, unregulated capitalism, evil oil companies...

Ron, appreciate you setting this straight.  Your explanation is most logical and devoid of paranoid.

Adam, you are totally off on this.  If you truly believe that the oil companies are squeezing out Big West to drive up the cost, you should call the feds - or buy stock and get rich quick.  I know that the oil companies are an easy target for your ignorant (ignorant of petroleum industry) dribble, but this is blog is an absolute farce. 

With all the regulations, enviormentalist frenzy and general public ignorance, we will have another structure on the Rosedale highway that will serve as an eye sore for years to come.  Bakersfield, you've done it again.

Thanks Sage.....and,  There Will Be Blood was such a good movie, I watched it a couple of times. 

Thanks for the lesson in German, Ron. I see someone decided to make an edit to your colorful descriptor of my thinking process. I am not sure why responses to the question I posed, or to my written opinions here, needs to take on some personal attack. I appreciate your viewpoint regarding Big West's supposed inexperience with refinery operations, although as has been pointed out in a variety of stories their Utah operation seems to be doing fine. Maybe they did fail on their own by a series of bad decisions, and a credit squeeze they had no control over. I have worked in places where a sudden correction to contracted credit terms were pulled and  the fallout was severe.

The question here is that we have a $700 million expansion plan for a plant and operation that was viable just a few months ago, but now sees this same organization battered into closure here locally. Its collapse had nothing to do with any environmental pressure or pollutant oversight, casooner90. The major refineries have made good money in this state for a long time. I will refer you to a series of articles that appeared three years ago in the Los Angeles Times about the peculiarities of the gasoline business here in California. Part A. Part B. Part C.

You don't have to agree with, or believe a word in these articles, but they do give a detailed look at our gasoline situation here in California. There has been over the past two decades a tremendous amount of merger and acquisition activity in the oil industry with downstream partnerships forged to lessen costs and improve margins and efficiencies due to scale. All of this has occurred with the understanding that huge capital investments are part of the business and some latitude should be given to those making these investments and to allow for fair profit on their improvements. Latitude did not mean maximizing profit at the expense of the health and welfare of the citizens in this country or to make record sums of money while the population suffers and goes broke. Exxon-Mobil just announced yet another year of record profits with earnings for 2008 hitting $45.2 billion. Chevron also announced that its fourth quarter earnings were $4.9 billion, although revenue was down 26% from the previous year's quarter.

The supermajors still control more than 50% of all refining in America. That is down from the high point in the late 1980s when this group controlled more than 70% of refining in the US.

Supplies are on the rise today. Here is a report from RTE Business out of Dublin Ireland:

The US government's Energy Information Administration (EIA) said today that crude reserves jumped 6.2 million barrels in the week to January 23, which was more than double market expectations and indicated weaker demand.

It is speculation at this time as to the actual causes of the recent closure. The companies involved are always reticent to speak and details always seem to come out many years after the fact. I guess we'll find out over time.

 The question here is that we have a $700 million expansion plan for a plant and operation that was viable just a few months ago, but now sees this same organization battered into closure here locally.

What makes you think it was viable when it even began??  Just because you get permits to expand, doesn't mean it is a profitable venture.  The Salt Lake Refinery is an unsophisticated tea kettle.  They also have some of their own crude to feed it.  And, they don't have many major competitors.  Have you read the paper?? Even some analyst have said Flying J and nobody that knew how to run refineries. There is no conspiracy here.  THey shot themselves in the head.

 Exxon-Mobil just announced yet another year of record profits with earnings for 2008 hitting $45.2 billion.

Their profit margin is 10%.  They make 10 cents profit on every dollar of sales. You call that excessive??

In the quarter ending in September, Exxon made 14.8 billion in profit.  The government got a check for 11.3 billion for taxes.  Now you tell me who is doing the screwing...

Hi Adam,

I just posted my own blog on this story (didn't see yours).  I have read many of your posts in the past and know that you are a very informed individual.  However, this time, some of your theories are incorrect.  Ronmexico has made the most accurate statements.  He obviously works in the refinery.

If others would like to view my blog, I have posted the phone numbers of all of our representatives. That is a proactive thing to do for all of the posters to your blog .  It takes very little time. Having spoken to those at offices of McCarthy, Feinstein, Boxer, Ashburn, Fuller, and Supervisor Watson....I KNOW that they are encouraging calls.    At this point, it is difficult to say what government intervention could be done....but they were all surely interested.  They don't want us to lose that refinery and would love to see it bought or partnered with a major oil company.

The bottom line is that Big West got in way over its head buying large amounts of oil at high prices.  The price of gas plummeted and they are stuck holding the bag.  Bank of America called in its line of credit early...and Chapter 11 resulted.

If Big West produced its own oil in the valley, it would have been ok.  It does have some oil production in Utah.  That is one of the reasons why that refinery is OK.  Additionally, they were able to renew contracts in Utah two days after the Chapter 11 filing.

At this point, the Bakersfield Refinery is an albatross around Big West's (and ultimately Flying J's) neck.  I think they would love to find a buyer.  That buyer would need to have its own production, however.  That is the only way to offset this crazy fluctuating market.     And finding that buyer will be difficult......even though the refinery is a known money maker....and it has millions of dollars of equipment at hand to build an already approved improvement project.  If that project is completed,  it has the potential to make a bucketload of profit for the refinery.     Again, it is a wait and see situation.   While you're sitting....pick up that phone and make some calls!

Oh....and to comment on what Shell has to feel guilty about is their claim that the reason they needed to sell the refinery was because it was not profitable.  That is so untrue.  That masked their true reasons. But then, that is a whole other topic.

CALL