Phillips 66 is closing Wilmington-area refineries after more than a century, marking the end of an era

For more than 100 years, the Wilmington and Carson oil refineries have pumped out millions of barrels of gasoline, fueling the thirsty cars of Southern California's freeway-driving motorists.

Now, in a sudden move that reflects tectonic shifts driven by climate change, the transition to electric vehicles and the demand for clean air, Philips 66 announced on Wednesday that by the end of next year it is closing the twin-refinery complex that produces about 8%. State Gasoline.

The Houston company, which has operated the refineries since its 2012 spin-off from ConocoPhillips, said it would replace its output “within and outside its refining network” and with renewable diesel and sustainable jet fuel from its San Francisco Bay Area refineries.

“Philips 66 is committed to serving California and will continue to take the necessary steps to meet our commercial and consumer needs,” said Mark Lashier, Chairman and CEO of Philips 66. “We understand the impact this decision will have on our employees, contractors. and the wider community. We will work to help and support them through this transition.”

About 600 employees and 300 contractors currently operate the refinery, which also produces diesel and jet fuel.

The refinery complex consists of two facilities connected by pipelines located about 15 miles southeast of Los Angeles in Wilmington and five miles in Carson. The Carson facility was built in 1923 and the Wilmington facility was built in 1919, according to the company's website.

“There's no question that we'll lose refineries over time, as demand continues to decline as we transition to electric vehicles, but I don't expect any of them to exit this quickly,” said Severin Borenstein, faculty director. Energy Institute at UC Berkeley's Haas School of Business.

California will now have to rely more on imports “in the medium term,” he said. “I think part of the response that the state needs to consider is how to make sure that we can import enough gasoline to meet our needs.”

The closures will leave the state with eight large refineries — three in the Bay Area and five in Southern California, operated by Chevron, Valero and other refiners — as well as several smaller ones.

The decision turned into a political football, with Republicans and gas station operators blaming California Gov. Gavin Newsom's policies. Last weekend, former President Trump, while campaigning in California, blasted the state for having the highest gas prices in the country.

The announcement comes the same week the governor signed a new state law that allows state oil refiners to maintain minimum inventories of fuel to avoid supply shortages that cause spikes in gasoline prices. It authorizes the California Energy Commission to plan to resupply refiners during refinery maintenance outages.

“Thanks to Gavin Newsom's showboating and incompetence, hundreds of workers will lose their jobs while California drivers face massive price increases,” Assembly Republican Leader James Gallagher of Yuba City said in a statement. “Great job, Gavin.”

The California Fuels and Convenience Alliance, an industry trade group representing fuel marketers, gas station owners and others, directly criticized the law.

“Unfortunately, today's announcement does not come as much of a surprise, as we have continually warned the Legislature and administration about how ABX2-1 will negatively impact supply,” said Alessandra Magnasco, the Alliance's director of government affairs and regulatory affairs. “This is exactly what happens when our leaders are more concerned with political theater than solving real problems.”

The association said higher gas prices are the result of “overhead costs to operate our stations, costly environmental regulations.”

In a statement, Philips 66 said the decision was “not related” to the signing of the bill but “based on consideration of multiple factors, including future options for the site as part of an ongoing review of Philips 66's portfolio of assets.”

It also said it is not exiting the California market. Its other operations include its network of 76-brand gas stations. The company said it is working with Catellus Development Corp. to examine the future use of the 650-acre site. and Deca Cos. who appointed

The governor's office referred questions to the California Energy Commission.

“The company is committed to minimizing the impact on Californians as they meet energy demand, maintaining reliable supplies and ensuring they take the necessary steps to meet both commercial and consumer needs,” California Energy Commission Vice Chair Shiva Gunda said in a statement.

David Hackett, chairman of Stillwater Associates, an Irvine oil consultancy, said he was contacted by Phillips just before the announcement, and told the closing was a business decision.

He said the timing was somewhat surprising, not off-putting — the age of the refineries, their relatively small size and an inefficient layout that connected them by a pipeline.

“This plant has been sold for years. It didn't find a buyer and I think it was an economic decision on their part. They looked at the profitability of the place and compared it to their other businesses and it didn't cut it,” he said.

Factors contributing to the decision, he said, include a “tough” regulatory environment that raises costs, lower demand for gas and reduced supply of California crude oil, forcing refineries to rely more on expensive imports from Alaska and foreign countries.

He noted that Phillips 66 has also broken even at its West Coast operations, which include a Washington state refinery, for the past eight years, according to regulatory filings. “CEOs get fired for this,” he said.

California energy policy is driven by the state's climate goals, first outlined in a landmark 2006 law and updated two years ago, that call for the state to become carbon neutral by 2045.

This includes reducing gas consumption by 94%, reducing greenhouse gas emissions by 85% and reducing air pollution by 71% — ambitious for the world's seventh-largest economy, behind only Texas and Louisiana in refining capacity.

A key strategy to reach those goals is a law requiring all new passenger cars, trucks and SUVs sold in California to be zero-emissions by 2035, a goal that some have questioned as electric vehicle sales slow.

At the same time, Newsom has put pressure on drillers, ordering the state to stop issuing fracking permits this year and calling for a phase-out of oil extraction by 2045. He also supported laws to limit drilling. Last month, he signed a bill allowing cities, counties and local voters to block the construction of new local oil and gas wells.

The California Air Resources Board is considering tightening carbon fuel standards, which already penalize refineries that make high-carbon fuels like diesel and gasoline and favor those that make low-carbon fuels like renewable diesel.

Hackett noted that Phillips 66 has converted its larger, 1,100-acre refinery in Rodeo to produce renewable diesel from raw materials such as soybeans and used cooking oil. However, the conversion reduced capacity from about 120,000 barrels a day to about 40,000, he said.

The closure of the South Bay refinery complex comes after a long battle with neighbors, who complained about emissions from the twin plants — despite tightening air quality refinery rules issued by the South Coast Air Quality Management District.

Any new use for industrial property will almost certainly be less intensive.

“Historically, the South Bay industrial real estate market has been very tight and this will allow for a ton of new inventory and capacity that will help the market by providing more warehouse and distribution space around the Port of Los Angeles,” said real estate broker Mike Condon Jr. of Cushman & Wakefield. , who helped lead the process of selecting a development partner for Philips 66.

The Philips 66 has also been the subject of controversy over its role in climate change, leading to calls for the removal of its iconic “76” sign at Dodger Stadium.

Times staff writer Roger Vincent contributed to this report.