Flying J California refinery remains closed after 10-day shutdown

| Monday, January 12, 2009

The Flying J hasn’t reopened its Bakersfield, CA, refinery after a planned 10-day shutdown, more bad news for the truck stop giant already plagued with expensive debts to creditors and business partners.

The Ogden, Utah-based diesel retailer filed Chapter 11 bankruptcy in late December. In early January, company officials announced that the Flying J-owned Big West refinery in Bakersfield, CA, wouldn’t operate for 10 days for maintenance.

At that time, many industry insiders speculated the refinery might not reopen, which could lead to higher gas and diesel prices in California in particular.

A company spokesman confirmed to Land Line Monday that Flying J officials hadn’t opened its Bakersfield refinery by Friday, January 9.

“The tight credit markets combined with our Dec. 22 Chapter 11 filing created some unexpected supply disruptions to our Big West refinery in Bakersfield, CA,” said Peter Hill, a Flying J spokesman. “They’re working through those supply issues, but those disruptions are ongoing.”

Many recent media reports have highlighted Big West as one of many smaller to mid-size refineries that may suffer from the recent drop in fuel and diesel prices. Big West provides a reported 6 percent of California’s diesel. One report said the refinery’s shutdown could jump retail prices between 5 cents and 20 cents per gallon.

Several media reports blamed Shell Oil Co. for its decision to close pipelines of crude oil to Big West facilities until receiving “tens of millions of dollars” owed to Shell. Some critics have said Shell wants to increase its oil profits by helping cause the Big West refinery shutdown.

Asked whether Shell’s decision led to the Bakersfield shutdown, Hill declined comment.

“I wouldn’t characterize it that way. Generally, I can’t comment on specific supplier relationships,” Hill said.

According to court documents, Big West refineries in Bakersfield and North Salt Lake City, UT, operate to create about 100,000 barrels of crude oil per day. Another subsidiary, Longhorn Pipeline, can move 80,000 barrels of diesel and gasoline each day from Houston to El Paso, where the company reportedly owns a terminal capable of storing more than a million barrels.

According to a statement filed by Flying J CEO J Phillip Adams, Flying J had 2007 sales exceeding $16.2 billion. The Flying J Group operates more than 200 travel plazas in 41 states and six Canadian provinces and employs about 16,000 workers.

Through other subsidiaries, Flying J also invests in more than 200 oil wells and develops land.

“The debtors believe that their businesses are fundamentally sound and profitable and that these Chapter 11 cases will allow them to resolve their liquidity constraints and emerge as stronger, healthier companies,” the Dec. 22 filing read.

Among Flying J’s biggest debts are more than $85.8 million to Zion Bank’s retail loan center, more than $69.4 million to Conoco Philips, and nearly $12 million to Shell.

Adams told The Salt Lake Tribune that Big West defaulted on a $200 million loan to Bank of America and others on Dec. 19, before Longhorn Pipeline defaulted on a $120 million loan the next day.

Hill declined to say whether there was a timeline on reopening its California refinery other than to say the “disruptions are ongoing.”

– By Charlie Morasch, staff writer
charlie_morasch@landlinemag.com

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