REFINERY NEWS: Phillips 66 said it will cease operations at Los Angeles refinery in Q4 2025

Phillips 66 will cease operations at its 139,000 b/d refinery in Wilmington, California, in the fourth quarter of 2025, and will work with the state of California to supply fuel markets and meet consumer demand, the company said in an Oct. 16 statement.

The decision comes on the heels of the Oct. 14 signing by California governor Gavin Newsom into law AB 1 X2 which gives the green light to the California Energy Commission to begin the rulemaking process to increase the state's transportation fuel supply in order to prevent gasoline price spikes at the pump by giving the CEC oversight over refinery operations.

“With the long-term sustainability of our Los Angeles Refinery uncertain and affected by market dynamics, we are working with leading land development firms to evaluate the future use of our unique and strategically located properties near the Port of Los Angeles,” said Phillips 66 CEO Mark Lashier in the statement.

“Phillips 66 remains committed to serving California and will continue to take the necessary steps to meet our commercial and customer demands,” he said.

The company will supply gasoline from sources inside and outside its refining network as well as renewable diesel and sustainable aviation fuels from its Rodeo Renewable Energy Complex in the San Francisco Bay area.

"Phillips 66 supports these efforts and will work with California to maintain current levels and potentially increase supplies to meet consumer needs," the statement said.

The ABX 2-1 law will give the unelected CEC the authority to determine how much fuel each refiner should have in storage, where it should be stored, and will give the CEC oversight on deciding when refinery maintenance can be performed.

Proponents of the bill have said that California’s gasoline price spikes often caused by refinery maintenance – both planned and unplanned – which cuts supply of California’s more complex, cleaner burning CARBOB gasoline grade. Some participants of the Sept. 26 California Assembly session on the bill said they expected it to reduce gasoline by 7-10 cents/gal.

During a Sept. 26 legislative hearing on the bill, expectations of how much it would impact price spikes was discussed, with one legislator putting it at a 7 -10 cents/gal savings for consumers.

California drivers pay the highest gasoline prices in the country due to the state's specially blended clean burning CARBOB gasoline, which is more expensive to make, as well as the highest state gasoline taxes in the country, at 69.8 cents/gal.

Drivers also pay for environmental taxes associated with the state's Low Carbon Fuel Standard (LCFS) and Cap and Trade Costs, which adds another 54 cents/gal. As of Oct. 14, the average retail price of CARBOB was $4.43/gal compared with the national average of $3.20/gal, according to the Energy Information Administration.

California's refining capacity has been tightening for decades. California currently has 14 refineries with a combined 1.7 million b/d of capacity, down from 42 refineries with 2.5 million b/d of capacity in 1984, according to the US Energy Information Administration.

More closures expected

Refiners who operate in California are nearly unanimous in their feelings about the challenges they face in the state and some expect more closures going forward.

“The West Coast [is] clearly the highest cost region we operate in,” Valero Energy CEO Lane Riggs said on the company’s second-quarter results call July 25.

Riggs said the high cost of operating in California made the economics “marginal” and, as demand softens, would expect California “to be one of the places that you will ultimately see refinery closures.”

Chevron Corp., originally Standard Oil of California, has decided to leave the state for Houston. The decision came after the company reached a $550 million settlement to be paid over 10 years to Richmond, California, associated with operations of its 245,271 b/d refinery over the past 100 years.

The Phillips 66 decision also comes ahead of the November 8, 2024, public hearing by the California Air Resources Board (CARB) to consider amendments to the LCFS, which could add about 45 cents/gal to the price of gasoline

Going forward, Phillips 66 has engaged Catellus Development Corporation and Deca Companies, two leading real estate development firms, to evaluate the future use of the 650-acre sites in Wilmington, California, and Carson, California.

“We understand this decision has an impact on our employees, contractors and the broader community,” said Lashier. “We will work to help and support them through this transition."

About 600 employees and 300 contractors currently operate the Los Angeles-area refinery.