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FTC Investigates Shell Refinery Shutdown

WASHINGTON -- A senior official said Wednesday that the Federal Trade Commission has launched a formal investigation of the proposed shutdown of a Shell Oil Co. refinery in Bakersfield, Calif. to determine possible antitrust violations, according to the Associated Press.

The refinery has been the subject of intense controversy due to Shell 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.

Critics maintain the shutdown is part of a strategy to maintain tight oil markets and increase California's gasoline prices, already the highest in the country.

William Kovacic, the FTC's general counsel, said subpoenas already have been served as part of the investigation and 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.

Shell spokesman Stan Mays said the company was cooperating with the investigation. "It's nothing new," he said. "They have been evaluating our decision and we have been cooperating in that regard for several months. We will continue to answer any questions that they have."

He said the decision to close the refinery was a matter of economics. "The refinery is a small, inland, inefficient refinery that can no longer compete with larger, sophisticated refineries ... typically located on the coastline," said Mays.

He said the refinery has lost $50 million during the last three years and faces $30 million to $50 million in upgrade costs.

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

In related news, the commission overruled an administrative-law judge and reinstated an antitrust complaint against Unocal Corp., an El Segundo, Calif.-based oil and gas production company, for pursuing patents for a special low-emissions gasoline at the same time that the company was helping California regulators mandate that gasoline as a state standard. The complaint originally was filed in March 2003, but was overruled by the judge in November.

The FTC alleges Unocal unlawfully created a monopoly in the market for a blend of low-emission gasoline.
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