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Refiners May Stay Online

California regulators, responding to pressure from oil companies and the threat of higher gasoline prices, have proposed a plan that would exempt refiners from rolling blackouts ordered during severe power shortages.

California Public Utilities Commissioner Carl Wood said a statement the draft decision would be reviewed at the commission's June 28 meeting. "The draft decision I issued ... will allow our agency to respond to the governor's request to minimize any potential disruption of fossil fuel production this summer," he said.

The draft was accompanied by a ruling asking energy producers, the California Energy Commission, and the electric utilities to provide further information on the "fossil fuel production system" that the commission will review to determine whether the proposed exemptions should be expanded, according to Reuters.

On June 5, Valero Energy Corp. and Chevron Corp. warned they would be forced to reduce production at their refineries because the threat of blackouts would require them to rely on less-powerful back-up generators.

Chevron chief executive David O'Reilly wrote California Gov. Gray Davis that his company might have to operate its two big California refineries at reduced capacity unless it is spared from blackouts. Two days later, Davis asked the state's Public Utilities Commission (CPUC) to consider the exemptions.

Chevron provides most of its own power at the refineries, one near Los Angeles and the other near San Francisco, but rely on utilities for the rest. "We're encouraged by anything that moves in the direction of providing that refineries and key associated infrastructure, such as pipeline delivery systems, are not interrupted by blackouts," Chevron spokesman Fred Gorell told Reuters.

Chevron and Valero both praised the move as good public policy that would benefit Californians at the gas pump. "It's really important for the consumers to avoid any interruptions, because even a slight interruption causes prices spikes," said Valero spokeswoman Mary Rose Brown.

Other refining companies that have filed for exemptions from blackouts include Equilon Enterprises LLC and ExxonMobil Corp.

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