Yes that is accurate. I beleive the last refinery was built in 76 BUT our refining capacity has actually increased by improved technology and additions to existing facilities. Here's some interesting info for you:
Information I have received during my ongoing investigation raises serious concerns that the nation’s major oil suppliers have set out in a strategic effort to orchestrate a financial triple play, a coordinated effort that would reduce supply, raise prices at the pump and relax environmental regulations. Unfortunately, in each case, it is the consumer who takes the hit.While the documents target activity on the West Coast and refinery closings in 11 states,they point to practices with significant national ramifications. The companies involved are national companies that operate in multiple states. In addition, gas and oil is a fungible commodity and the amount of capacity that has been taken offline is significant enough to affect national markets.The following information reflects what I have found to date during the course of myinvestigation.
FINDING 1:Oil Companies Articulated their “Need” to Reduce Oil and Gas Supply to IncreasePrices and Grow Profit Margins Facing what they deemed inadequate profit margins in the mid-1990’s, oil companiesreadily recognized that the surest way to drive up profits was to drive down oil and gasoline supply. By restricting supply, they would be able to demand higher prices and reap higher margins for their product. Oil company documents raise questions as to whether this mindset was the underpinning of a strategic business approach in which theindustry willfully engaged to control gas supply.
Internal oil company documents reveal that in 1995 and 1996 competitor companies strategized about opportunities to tighten product supply as a means of increasing profit margins.A “Competitor Intelligence Report” from Chevron dated November 30, 1995states:“A senior energy analyst at the recent API (American Petroleum Institute)convention warned that if the U.S. petroleum industry doesn’t reduce its refining capacity, it will never see any substantial increase in refining margins…However, refining utilization has been rising, sustaining highlevels of operations, thereby keeping prices low.
”1This concern over too-ample supply driving down profits was echoed in a Texacodocument dated March 7, 1996:“As observed over the last few years and as projected well into the future,the most critical factor facing the refining industry on the West Coast is the surplus refining capacity, and the surplus gasoline production capacity.The same situation exists for the entire U.S. refining industry. Supply significantly exceeds demand year-round. This results in very poor refinery margins, and very poor refinery financial results. Significant events need to occur to assist in reducing supplies and/or increasing thedemand for gasoline.
”2Not only did the oil companies view excess refining capacity as a financial liability, theyopenly suggested that eliminating the excess capacity and tightening supply would helpimprove their bottom line.These documents show that oil companies had the intent and motive to hamstring supplyand reduce refining capacity. Subsequent events show that they acted.
FINDING 2:Oil Company Competitors Planned Opportunities to Subvert Oil and Gas SupplyOn June 11, 2001, the Wall Street Journal reported that Marathon Ashland Petroleumintentionally withheld reformulated gasoline supply in the Midwest in a contrived effortto keep prices, and profits, artificially high.3 Although Marathon was reported to have operated alone in this instance, documents suggest that over the past five years other leading oil companies have worked together to control the amount of gasoline available on the market.1 Chevron document – Competitor Intelligence Information, November 30, 19952 Texaco memo - Future Gasoline Specifications, March 7, 19963 Wall Street Journal Article, Marathon Ashland Withheld Gasoline, June 11, 2001
A thank you note dated April 25, 1994, from Tosco CEO Thomas O'Malley to ARCO Executive Vice President James Middleton raises serious questions about how the two companies worked together to control gasoline supply in a manner financially beneficial to both companies:“ARCO represents an important part of Tosco's business. We want to do everything we can to nurture this important business relationship and make sure it keeps up the tradition of being mutually beneficial.
”4By highlighting the mutually beneficial “tradition” in which these two competitors engaged, the note points to intentional cooperation to improve their respective bottom lines.During the mid-1990s California, facing severe air quality problems, transitioned to cleaner-burning, reformulated gasoline referred to as CARB (California Air ResourcesBoard) gas. Because this formulation of gasoline was only required in California, fewer suppliers produced the fuel; those who did could play a significant role in setting the price.Documents obtained by my office indicate that several West Coast refiners and suppliers sought cooperative arrangements through which they could keep the supply of CARB gas tight and demand higher prices as a result.The President of ARCO Products Company William Rusnack admitted in a deposition taken May 15, 1997, that he met with Tosco CEO Thomas O’Malley to discuss opportunities to work together to control supply of the cleaner burning gasoline, thus propping up the overall price.“… explore whether or not there was any mutual benefit, any mutualinterest, any profit for both ARCO and Tosco to find a way to have ARCO purchase or Tosco sell CARB [cleaner burning California AirResources Board] gasoline to ARCO, recognizing that the agreementthat was in place at that time did not provide for the supply of CARBgasoline.
”5Cecil Blackwell, a senior Chevron official, described during a deposition a conversation he had with Jay Kowal, a senior ARCO official, in which they discussed possible agreements affecting supply.“And he, as I recall, confirmed their interest …and if we can reach a commercial agreement with them, that he felt, you know, thiscould change some of their investment decisions or change investment decisions of others on supplying CARB gasoline.”64Thank you note to ARCO Exec. VP James A. Middleton from Tosco CEO Thomas O’Malley, April 25,19945Summary of Deposition of William C. Rusnack, President of ARCO Products Co., taken May 15, 19976Summary of Deposition of Cecil Blackwell, Senior Chevron Official, taken February 19, 1997
Based on information obtained during this and other depositions related to a court case currently before the California Supreme Court, the plaintiff’s attorney compiled an index that documents face to face meetings between top competitors in the West Coast oilindustry. These meetings between ARCO and Tosco, ARCO and Exxon, ARCO and Chevron, Chevron and Tosco, etc., expose efforts among the companies to reach agreements to control the supply of oil and gas in the West. Documents obtained as part of the legal proceeding also verify that major oil and gas companies supplying CARB gas to the California market entered into 44 supply-sharing agreements. These agreements were generated to control the quantity of CARB gas on the market, reduce efforts to expand CARB refining capacity, limit imports of CARB gasand discourage excess CARB gas from being sold on the spot market to independent purchasers. Exxon, ARCO, Chevron, Shell, Texaco, Tosco and Unocal all entered into such supply-sharing agreements with at least one of their competitors.Because such agreements benefited the major suppliers and excluded independent operations from the process, significant questions are raised about whether these agreements had the effect of forcing independent refiners to close down – further decreasing overall gasoline supply.In February 1993, Mobil, Texaco and Chevron (with the financial support of Exxon) fileda lawsuit to overturn the small refiners’ exemption to the CARB gas program, reducingthe ability of small refiners to compete in the CARB gas market.An internal Mobil document highlighted the connection between an independent refinerproducing CARB gas, the depressed price that would result, and the need to prevent theindependent refiner from producing.“If Powerine re-starts and gets the small refiner exemption, I believe theCARB market premium will be impacted. Could be as much as 2-3 cpg(cents per gallon)…The re-start of Powerine, which results in 20-25 TBD(thousand barrels per day) of gasoline supply…could…effectively set theCARB premium a couple of cpg lower…Needless to say, we would all like to see Powerine stay down. Full court press is warranted in this case.”7The Powerine Oil Company refinery closed in 1995. Despite documented attempts to work in conjunction with major oil companies to restart the Santa Fe Springs, Calif.refinery8, the major oil companies stood in the way and the refinery remains closed.7 Internal Mobil Corp. E-mail regarding Powerine refinery, February 6, 19968 Powerine Oil Co. Letter to Mr. M.R. Diaz, General Manager of Supply & Distribution for TexacoRefining & Marketing Inc.
FINDING 3:Closing Refineries: Oil Companies Act to Inhibit SupplyWhile oil companies were making agreements to control oil and gas supply, refineries were closing. Since 1995, 24 refineries have closed, including refineries in California,Illinois, Arizona, Oklahoma, Indiana, Kansas, Louisiana, Texas, Mississippi, Michigan and Washington (the Tosco refinery has subsequently reopened), taking nearly 830,000 barrels a day of refining capacity offline. While capacity at some existing refineries expanded during this time, the fact is that more capacity would exist if these refineries were still operating.According to Energy Information Administration, the following refineries were shutdown between 1995 and 2001:YearRefineryLocation1995 9Indian RefiningLawrenceville, ILCyril Petrochemical Corp.Cyril, OKPowerine Oil Co.Sante Fe Springs, CASunland Refining Corp.Bakersfield, CACaribbean Petroleum Corp.San Juan, Puerto Rico1996 10ToscoMarcus Hook, PABarrett Refg. Corp.Custer, OKLaketon Refg.Laketon, INTotal Petroleum, Inc.Arkansas City, KSArcadia Refg. & Mktg.Lisbon, LABarrett Refg. Corp.Vicksburg, MSIntermountain Refg. Co.Fredonia, AZ1997 11Gold Line Refg. LTDLake Charles, LACanal Refg. Co.Curch Point, LAPacific Refg. Co.Hercules, CA1998 12Gold Line Refining Ltd.Jennings, LAPetrolite Corp.Kilgore, TXShell Oil Co.Odessa, TXPride Refg. Inc.Abilene, TXSound Refg. Inc.Tacoma, WA9Energy Information Administration/Petroleum Supply Annual 1995, volume 1, p. 8010Energy Information Administration/Petroleum Supply Annual 1996, volume 1, p. 11911 Energy Information Administration/Petroleum Supply Annual 1997, volume 1, p. 8012 Energy Information Administration/Petroleum Supply Annual 1998, volume 1, p. 119
YearRefinery Location199913TPI Petro. Inc.Alma, MI200014PennzoilRouseville, PABerry PetroleumStephens, Ark.ChevronRichmond Beach, WA200115PremcorBlue Island, ILThese refinery closures took more than 830,000 barrels per day of refinery capacity outof production.Refinery Capacity Lost Due to Refinery Closures Between 1995 - 2001< Numbers in Barrels per Calendar Day >1995191,750 bbl/cd 161996268,750 bbl/cd 17199787,100 bbl/cd 181998123,650 bbl/cd 19199951,000 bbl/cd 20200025,700 bbl/cd 212001*80,515 bbl/cd 22Total Capacity Lost:828,465 bbl/cdThe major oil companies had a financial interest in seeing the closure of independentrefineries. By reducing the overall supply of oil and gas and reducing the number ofcompanies involved in producing it, the major oil companies can have tighter reins on thesupply and the price.13Energy Information Administration/Petroleum Supply Annual 1999, volume 1, p. 11614 Phone Conversation with Mark Connor, Energy Information Administration Analyst, May 9, 200115 Ibid.16Energy Information Administration/Petroleum Supply Annual 1995, volume 1, p. 8017Energy Information Administration/Petroleum Supply Annual 1996, volume 1, p. 11918 Energy Information Administration/Petroleum Supply Annual 1997, volume 1, p. 8019Energy Information Administration/Petroleum Supply Annual 1998, volume 1, p. 11920Energy Information Administration/Petroleum Supply Annual 1999, volume 1, p. 11621Phone Conversation with Mark Connor, Energy Information Administration Analyst, June 12, 200122Ibid.
Oil Companies Reap Benefit of Higher Prices at Pump Despite complaints indicting the cost of environmental compliance and manufacturing“boutique” fuels, in the 2000 the oil and gas industry enjoyed record profits that reflect record gas prices.According to Texaco’s 2000 Annual Report, the company’s production steadily decreased from 1998 to 2000, yet its net income more than quadrupled during the sameperiod – with Texaco posting well above $2.4 billion in net income in 2000.The following charts show this dramatic relationship and point to the tremendousi ncrease in profits for Texaco.Texaco Production Steadily Dropped from 1998 – 2000 Texaco’s Net Income Quadrupled from 1998-2000 Commenting on Texaco’s strong first quarter 2001 showing, Chairman and CEO GlennTilton said in a news release, “Our outstanding first quarter results follow our record fourthquarter and mark the third consecutive quarter that earnings surpassed $800 million.”2523 Texaco 2000 Financial & Corporate Highlights (www.texaco.com/investor/2000ar/index.html)24 Ibid.25 Texaco Press Release: Texaco Reports First Quarter Earning Data – April 26, 2001
Chevron’s net income increased from $2.07 billion in 1999 to $5.185 billion in 2000,26a250 percent increase. During the same period, ExxonMobil Corporation’s net income jumped from $7.9 billion to $17.7 billion.27The trend continued with BP Amoco p.l.c.whose 2000 profits were $11.87 billion, up from $5.008 billion in 1999.28Among these four companies alone, profits for the year 2000 increased by over $22billion dollars in one year. In light of these substantial profits, oil industry claims thatthey cannot afford to comply with environmental regulations or expand their refining capacity lack credibility.
FINDING 5:National Energy Policy Incentivizes Oil Companies to Expand Refinery Capacity The Bush administration’s National Energy Policy, released in May, points to lagging profit margins and costly environmental regulations during the past decade as the reason for lost refinery capacity. The report also states that, “excess capacity may have deterred some new capacity investments in the past,” and that “more recently, other factors, such as regulations, have deterred investments.
” 29Oil companies cited excess capacity in the mid-1990s as a cause of inadequate profit margins. It was this excess capacity that the companies sought to eliminate in order toimprove their margins. Subsequently, refineries were closed. The industry documents cited earlier indicate that oil companies may have closed those refineries specifically totighten supply and drive up costs.This strategy is paying off in multiple ways. In addition to forcing higher gas prices andrealizing exploding profits, the industry now stands to benefit from a national energypolicy that could reward anti-consumer actions by weakening environmental standards.The National Energy Policy verifies that America currently faces tight supply and highprices, as well as the fact that oil and gas companies enjoyed higher profit margins in 2000.“During the last ten years, overall refining capacity grew by about 1 to 2 percent a year as a result of expansion in the capacity of existing, larger refineries. Although there was a significant, sustained improvement in margins during 2000, those gains arose out of a very tight supply situation
26 Chevron Press Release: Chevron Reports Net Income of $1.5 Billion in Fourth Quarter And $5.2 Billionfor 2000, January 24, 200127 ExxonMobil 2000 Annual Stockholder Report, released January 24, 2001, p. 2928 BP Amoco p.l.c. 2000 Annual Stockholder report, released May 8, 2001, p. 3429Report of the National Energy Policy Development Group, released May 17, 2001, p.7-13
Industry consolidation has been a key response to this poor profitability”30This is precisely the situation the 1995 and 1996 oil and gas company documents encouraged as a method of improving profit margins.The National Energy Policy calls for efforts to “streamline” environmental regulationsand permitting to provide financial incentives for oil and gas exploration anddevelopment and to institute cost benefit analysis when implementing environmentalregulations.Some of the specific recommendations from the Bush administration’s National EnergyPolicy include:“Recommendations:• The NEPD Group recommends that the President directthe Administrator of the Environmental ProtectionAgency and the Secretary of Energy to take steps toensure America has adequate refining capacity to meetthe needs of consumers.•Provide more regulatory certainty to refineryowners and streamline the permitting process wherepossible to ensure that regulatory overlap is limited.•Adopt comprehensive regulations (covering morethan one pollutant and requirement) and considerthe rules’ cumulative impacts and benefit.• The NEPD Group recommends that the President direct theAdministrator of the Environmental Protection Agency, inconsultation with the Secretary of Energy and otherrelevant agencies, to review New Source Reviewregulations, including administrative interpretation andimplementation, and report to the President within 90 dayson the impact of the regulations on investment in newutility and refinery generation capacity, energy efficiency,and environmental protection.”• The NEPD Group recommends that the President directthe Attorney General to review existing enforcementactions regarding New Source Review to ensure that theenforcement actions are consistent with the Clean AirAct and its regulations.”3130Report of the National Energy Policy Development Group, released May 17, 2001 p. 7-1331 Ibid. p. 7-14
While these recommendations stop just short of calling for weaker environmentalstandards, the report identifies regulations as one of the causes of the shortage of refinerycapacity. The implication is that regulations could be relaxed as an incentive forincreasing capacity.If this approach becomes reality, the U.S. government will reward the same oilcompanies who perpetuated the gasoline supply crunch, those companies who may havedeliberately worked to close refineries and reduce supply. These companies, alreadyenjoying record profits because of their actions, would reap even higher profits byrecognizing the cost savings of relaxed environmental standards. As a result, oil and gasprofits would continue to rise, the public would be saddled with the costs of dirtier air,and consumers would remain unprotected from high gas prices.
So as you can see by reading through this article. The oil companies are screwing us high, wide and handsome and now the GOP is attempting to ram through revisions to existing legislation that does NOTHING to help consumer and everything to help big oil. Much of this revision bill is crap they couldn't pass with the initial legislation so now after Katrian and Rita they are siezing on an opportunity to do what they couldn't get done before.