No Buyers on the Horizon as Premcor Closes Blue Island refinery


		AcuSafe Home Page -> February 2001 Newsletter
		No Buyers on the Horizon As Premcor Closes Blue Island Refinery

U.S. refiner Premcor USA Inc. announced on January 17, 2001, its intention to permanently shut down its Blue Island, Illinois, refinery at the end of the month. This action puts 297 employees out of work. As of January 31, the company said it had received no offers to purchase the refinery and had completed its planned shutdown.The company cited environmental regulations that require a dramatic drop in the sulphur content of gasoline and diesel by 2006 as the principal reason for the closure.

"Despite the investment by Premcor of about $70 million over the past five years at Blue Island, the refinery does not generate a return sufficient for us to justify the additional investment,'' said William C. Rusnack, president and chief executive of Premcor, in a release. The company said, however, it believes the "cost of upgrading the other three Premcor refineries (in Illinois, Ohio, and Texas) will provide the return on capital necessary for them to remain competitive.''

The shutdown of the 80,000 barrel per day (bpd) refinery adds Premcor to a list of other U.S. refiners considering options for their smaller plants due to the looming strict federal rules, since many may lack the economies of scale to make the needed costly upgrades.

Farmland Refining put its 95,000 bpd Coffeyville, Kansas, refinery up for sale in December due to the new rules. Meanwhile, Marathon Ashland Petroleum LLC, a joint venture of USX Corp.'s Marathon Oil Co. and Ashland Oil Inc., is looking at options for its Midwest refineries, industry sources say.

Premcor said it will offer outplacement services and separation packages to the employees being laid off at Blue Island. The company added it will take a pretax charge of about $150 million in the first quarter of 2001 due to the shutdown.

The Plant has been plagued by mechanical and environmental problems for several years. Premcor's Blue Island refinery has emitted clouds of aluminum silica dust over the surrounding community on a number of occasions, most recently in July 2000, and was the site of a fatal explosion in 1995 that killed two workers.

Premcor's principal shareholders are affiliates of Wall Street investment firm Blackstone Group with about 81 percent and Occidental Petroleum Corp. with about 18 percent.