Phillips 66 is closing its Wilmington-area refinery complex

For more than 100 years, oil refineries in Wilmington and Carson have pumped out millions of barrels of gasoline, filling the thirsty cars of motorists on Southern California’s highways.

Now, in a surprise move that reflects tectonic shifts caused by climate change, the transition to electric vehicles and demand for clean air, Phillips 66 announced Wednesday that late next year it will close its dual refinery complex that produces about 8% of its oil production. State gasoline.

The Houston company, which has operated refineries since its spin-off from ConocoPhillips in 2012, said it would replace its production with sources “both inside and outside its refining network” and with renewable diesel and sustainable aviation fuel from its San Francisco Bay Area refinery.

“Philips 66 remains committed to serving California and will continue to take steps to meet our business and customer requirements,” said Mark Lasher, Chairman and CEO of Phillips 66. “We recognize that this decision has an impact on our employees, contractors, and the broader community. We will work to assist and support them through “This is a transitional period.”

About 600 employees and 300 contractors are currently working to operate the refinery, which also produces diesel and jet fuel.

The refinery complex consists of two pipeline-linked facilities located five miles apart in Wilmington and Carson, about 15 miles southeast of Los Angeles. The Carson facility was built in 1923, and the Wilmington facility was built in 1919, according to the company’s website.

“There is no doubt that we will lose refineries over time, because demand will decline as we switch to electric cars, but I did not expect to see any of them coming out of this so quickly,” said Severin Bornstein, the college’s director. Energy Institute at UC Berkeley’s Haas School of Business.

He said that “in the medium term” California will now have to rely more on imports. “I think part of the response that the country will need to consider is how to make sure that we are able to import enough gasoline to meet our needs.”

The closure will leave the state with eight major refineries — three in the Bay Area and five in Southern California, operated by Chevron, Valero and other refiners — as well as several smaller refineries.

The decision immediately became a political football, with Republicans and gas station operators blaming California Gov. Gavin Newsom’s policies. Last weekend, at a campaign stop in California, former President Trump criticized the state for the highest gas prices in the country.

The announcement comes the same week the governor signed a new state law allowing the state to require oil refineries to maintain a minimum fuel inventory to avoid supply shortages that lead to higher gasoline prices. It also authorizes the California Energy Commission to require refiners to plan for resupply during refinery maintenance outages.

“Thanks to Gavin Newsom’s showmanship and incompetence, hundreds of workers will lose their jobs while California drivers will face massive price hikes,” Assembly Republican Leader James Gallagher of Yuba City said in a statement. “Great job, Gavin.”

The California Fuel and Convenience Alliance, an industry trade group representing fuel marketers, gas station owners and others, placed the blame squarely on the legislation.

“Unfortunately, today’s announcement was not a huge surprise, as we have continually warned the Legislature and the administration about how ABX2-1 could negatively impact supply,” said Alessandra Magnasco, director of government affairs and regulatory director for the coalition. “This is exactly what happens when our leaders are more interested in political theater than in solving real problems.”

The association said the rise in gas prices is the result of “high overhead costs of operating our plants and costly environmental regulations.”

Phillips 66 said in a statement that the decision was “not related” to signing the bill, but rather “based on multiple factors, including future options for the site as part of Phillips 66’s ongoing review of its asset portfolio.”

It also said it would not withdraw from the California market. Among its other operations is its network of 76 branded gas stations. The company said it has engaged Catellus Development Corp. and Deca Cos. to study future uses of the 650-acre site.

The governor’s office referred questions to the California Energy Commission.

“The company has committed to minimizing impacts to Californians as they continue to meet fuel demands, maintain reliable supplies, and ensure they take the necessary steps to meet commercial and customer needs,” California Energy Commission Vice Chair Siva Gonda said in a statement. .

David Hackett, president of Stillwater Associates, an oil consulting firm in Irvine, said Phillips contacted him just before the announcement and told him the closure was a business decision.

Although the timing was somewhat surprising, the closure was not, he said, given the age of the refineries, their relatively small size and the inefficient layout connecting them to a pipeline.

“This plant has been up for sale for years. They couldn’t find any buyers and I think this was an economic decision on their part. They looked at the profitability of the place and compared it to other businesses they owned, and they didn’t come up with the discount,” he said.

He said factors that played into the decision included a “onerous” regulatory environment that drives up costs, declining demand for gas and a dwindling supply of crude oil in California, forcing the refinery to rely more heavily on expensive imports from Alaska and foreign countries.

He noted that Phillips 66 has only broken even at its West Coast operations, which include the Washington state refinery, for about the past eight years, according to regulatory filings. “CEOs are getting fired because of it,” he said.

California’s energy policy has been driven by the state’s climate goals, first outlined in a landmark 2006 law and updated two years ago, which call for the state to become carbon neutral by 2045.

They include a 94% reduction in gas consumption, an 85% reduction in greenhouse gas emissions, and a 71% reduction in air pollution — an ambition for the world’s seventh-largest economy, which ranks behind only Texas and Louisiana in refining capacity.

One key strategy to achieve those goals is to enact a law requiring all new passenger cars, trucks and SUVs sold in California to be zero emissions by 2035, a goal that some have questioned as electric vehicle sales slow.

At the same time, Newsom has pressured drilling companies, directing the state to stop issuing hydraulic fracturing permits this year and calling for phasing out oil extraction by 2045. He also supported laws restricting drilling. Last month, he signed a bill that allows cities, counties and local voters to block the construction of new domestic oil and gas wells.

The California Air Resources Board is considering further tightening carbon fuel standards, which already penalizes refineries that produce high-carbon fuels, such as diesel and gasoline, and benefits makers of low-carbon fuels such as renewable diesel.

Phillips 66 has converted its larger, 1,100-acre plant in Rodeo to produce renewable diesel fuel from raw materials such as soybeans and used cooking oils, Hackett noted. But he said that the conversion reduced production capacity to about 40,000 barrels per day.

The closure of the South Bay refinery complex comes after long battles with neighbors, who complained about emissions from the twin plants – despite tightening air quality refinery rules issued by the South Coast Air Quality Management District.

Any new use of industrial property will certainly be less intensive.

“Historically, the industrial real estate market in the South Bay has been very tight, and this will allow for a significant amount of new inventory and capacity that will help the market by providing more warehouse and distribution space” around the Port of Los Angeles, real estate broker Mike said. Condon Jr. of Cushman & Wakefield, who helped manage the development partner selection process for Phillips 66.

Phillips Stadium 66 has also been the subject of controversy over its role in climate change, leading to calls for the iconic “76” sign at Dodger Stadium to be removed.

Times staff writer Roger Vincent contributed to this report.