Pact a Reprieve for Shell Refinery

Shell Oil Co. and federal officials have agreed to modify pollution limits so the company can keep running its Bakersfield refinery through March 31 and have more time to negotiate with a “short list” of potential buyers, Shell said Monday.

The amended environmental agreement represents another reprieve for a facility Shell had planned to close Oct. 1.

The company granted its first stay of execution in August in the midst of antitrust investigations, fuel supply worries and political pressure.

Shell said it would keep the Bakersfield facility open through the end of this year. And it pledged to continue operations in Bakersfield for an additional three months -- through March 31 -- if it won a waiver of certain emissions limits contained in a 2001 consent agreement between the oil company, the Environmental Protection Agency and the Justice Department.

On Monday, Shell said it got the necessary dispensation on nitrogen oxide emissions.

The accord with the federal officials, which must be approved by a federal judge in Texas, would ease layoff worries for many of the 250 employees at the relatively small refinery, which produces 2% of California’s gasoline supply and 6% of its diesel. It also would keep alive the possibility that a buyer could step in to save the facility and stop car-dependent California from losing badly needed fuel-production capacity.

Shell said discussions with potential buyers were continuing but wouldn’t identify the bidders or give a deadline for a sale agreement. However, the company made clear that it intended to close the refinery March 31 if it couldn’t strike a deal to sell it.

“We are pleased to be in a position to extend operations at the Bakersfield facility,” Lynn Laverty Elsenhans, president of Shell Oil Products US, said in a statement. “Extending operations at the Bakersfield plant would help with transition issues, should a new owner emerge from the sales process.”

State officials and others have been pressuring the company to sell the refinery instead of closing it. They say shuttering the Bakersfield plant would worsen the state’s chronic fuel supply troubles and lift prices at the pump.

Tom Dresslar, spokesman for Atty. Gen. Bill Lockyer, praised the emissions agreement and the extra time it would provide for fuel production and negotiations with potential buyers. But he added that “the real prize is a sales transaction that will keep it open for the long term.”

Lockyer, who secured the postponement from Shell in August, continues to push for a sale. “We’re hopeful that Shell can reach an agreement with a qualified buyer that will keep the refinery open and spare California drivers even higher pump prices than they pay now,” Dresslar said.

Under the modified environmental agreement announced Monday, Shell can exceed emissions limits for the first three months of 2005. In exchange, Shell said it agreed to meet other emission reduction deadlines more than three years earlier than required under the 2001 settlement.

The original agreement called for Shell to reduce total nitrogen oxide emissions from a list of refineries by Dec. 31, 2004, and make further reductions by Dec. 31, 2008. The agreement was one of several pacts between federal regulators and refiners accused of illegally polluting the air.

The Bakersfield refinery had already reached its required emissions reductions, Shell said. The firm had been relying on the closure of the Bakersfield plant to meet required overall emissions reductions at all of its refineries by the end of 2004.

A spokesman for the Environmental Protection Agency referred questions on the matter to the Justice Department. Justice Department officials didn’t return a call seeking comment.