The Wall Street Journal: FTC Opens Probe Of Shell Oil Co Refinery: “William Kovacic, the FTC's general counsel, said subpoenas already have been served”

DOW JONES NEWSWIRES

July 7, 2004 12:35 p.m.

Posted 8 July 04

WASHINGTON (AP)--The Federal Trade Commission has begun a formal investigation of the proposed shutdown of a Shell Oil Co. (RD) refinery in California to determine possible antitrust violations, a senior FTC official said Wednesday.

The refinery near Bakersfield, Calf., has been the subject of intense controversy as Shell (SC) officials plan to close the facility in November. The oil company said the refinery was being shut down because of a decline in oil production in the region.

But critics maintain the shutdown is part of a strategy to continue tight oil markets and increase gasoline prices, which already are the highest in the country in California.

William Kovacic, the FTC's general counsel, said subpoenas already have been served as part of the investigation and that the probe is being viewed as a top priority of the regulatory agency.

"We regard this as a matter of particular urgency and importance," he said.

Kovacic disclosed the investigation at a hearing into high gasoline prices before a House Government Reform subcommittee, where lawmakers questioned why the FTC wasn't taking a more aggressive role in examining the Bakersfield refinery issue.

Rep. John Tierney, D-Mass., noted that Shell obtained the California refinery when the FTC required as part of a merger that ChevronTexaco Corp. (CVX) divest some of its facilities.

Kovacic said the formal investigation is aimed at "examining possible antitrust implications" of the Shell refinery shutdown on California's gasoline market.

After the hearing, Kovacic said the investigation would be conducted expeditiously in light of Shell 's target date of closing the refinery by this fall.

He said that, depending on what is found, the full commission could have a broad range of actions it might take including challenging the shutdown or imposing various restrictions.

The Bakersfield refinery produces 75,000 barrels a day of gasoline.

Consumer groups have questioned the proposed shutdown.

A recent report released by Sen. Ron Wyden, D-Ore., questioned Shell's claims of declining oil availability. He said that ChevronTexaco, in fact, has plans to expand drilling in the Bakersfield area, a region that is the center of California's oil production.