PMAA PAC Outing
Car Care Central Convention
SIGMA Spring Meeting
Want to see the photos that didn't make the issue? Check out the Cutting Room Floor.
Shell Expands Jet Fuel Supply at SFO
FTC Halts Western Refining, Giant Merger
Kinder Morgan To Acquire Vancouver Wharves
U.S. Ethanol To Build Plant in California
API Offers Safety Certification for Service Station Contractors
ZCL Composites Acquires Xerxes
SAN FRANCISCO, CA. — Shell Aviation has reported that it signed a long-term storage contract with SFO Fuel Company LLC, a consortium of 42 major airlines serving San Francisco International Airport.
As part of the agreement, Shell Aviation converted its former gasoline storage facility into a useable fuel terminal, adding an additional 230,000 barrels of storage capacity half a mile from the airport.
The 230,000 barrels is approximately five days of jet fuel demand for the San Francisco Airport.
Prior to the conversion of the Shell Aviation fuel terminal, SFO had 260,000 barrels of storage capacity at the airport and one supply pipeline, a situation which airport authorities believed made the facility vulnerable to supply disruptions.
"Shell Aviation has a long history as a reliable and valued fuel supplier at San Francisco International Airport. Their innovative solution to our fuel needs builds on their prior experience with similar Shell Aviation projects at other major US airports," said Bob Sturtz of United Airlines and chairman of SFO Fuel. "We look forward to their continued business growth with focus on supply security and infrastructure projects that support our industry."
SCOTTSDALE, AZ. — The planned merger between Western Refining Inc., of El Paso, TX., and Giant Industries, Inc. has been halted by the Federal Trade Commission but the two oil companies say they will contest the FTC's actions and look to complete their merger.
Under the terms of the deal, first announced at the end of last August, Western Refining was to acquire Giant Industries for $83 per share, approximately $1.5 billion, including $275 million of Giant's outstanding debt. The price tag was lowered in November to $77 per share due to fires at Giant's refineries which lowered its financial performance.
Included in the merger deal were Giant's assets including its Ciniza refinery in Gallup, NM., its Bloomfield refinery in Farmington, NM., and its Yorktown refinery in Virginia. Also included were Giant's terminals in Flagstaff, AZ., and Albuquerque, NM., the company's service stations and convenience stores in Colorado, Arizona, and New Mexico, and the company's transportation fleet.
Also included in the merger are the two jobberships owned by Giant, Phoenix Fuel Co., based in Phoenix, AZ., and Dial Oil Co., based in Farmington, NM.
In mid-April, the FTC asked the courts to place a temporary restraining order and preliminary injunction to halt the merger. The FTC claimed that "Western's proposed acquisition of Giant would lead to reduced competition for the bulk supply of light petroleum products to northern New Mexico, an area of the country where the two companies are direct and significant competitors."
The U.S. District Court for the District of New Mexico granted the FTC's request in April and issued the temporary retraining order to halt the merger.
"Western and Giant compete in the bulk supply of light petroleum products to northern New Mexico, including gasoline and diesel," said Jeffrey Schmidt, director of the FTC's Bureau of Competition. "Western's acquisition of Giant would eliminate this competition, leading to higher prices for consumers of these important energy products."
The FTC's complaint charges that Western's acquisition of Giant, as proposed, would violate Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended. It contends that if Giant is not acquired by Western, Giant will soon increase the supply of gasoline to northern New Mexico, and that the transaction as proposed would prevent this.
Giant had plans to bring production at its two New Mexico refineries up to full utilization, increasing supply of light petroleum products to the Albuquerque/Santa Fe area of northern New Mexico.
The FTC contends that the proposed acquisition would combine two of the five significant bulk suppliers — those able to increase supply in response to an output decrease — of light petroleum products to northern New Mexico; would eliminate the existing substantial competition between Western and Giant in this market; would substantially reduce competition in the market for bulk supply of light petroleum products to northern New Mexico; would combine two of the six significant bulk suppliers of gasoline to northern New Mexico, substantially increasing the concentration in an already highly concentrated market; would eliminate existing substantial competition between Western and Giant, and would substantially reduce competition in the bulk supply of gasoline to northern New Mexico.
The FTC also contends that Western "has both the incentive and the means to limit any increase in the supply of gasoline to northern New Mexico after its acquisition of Giant by, among other means, diverting some of Giant's planned additional gasoline supply for Albuquerque and Santa Fe to other markets. Western also could reduce the supply to northern New Mexico by shifting some of its current bulk supply between gasoline and diesel on the pipeline. This would allow Western to reduce the amount of gasoline or diesel fuel reaching Albuquerque."
Attorneys for Western Refining and Giant Industries said they FTC's decision "is without basis in fact or law and that the companies intend to vigorously challenge the FTC in court."
Western's President and Chief Executive Officer Paul Foster said in an official statement, "This merger will result in more product being provided to the combined companies' customers and is, therefore, pro-competitive. The FTC's decision demonstrates a fundamental and troubling lack of understanding about the areas in which Western Refining and Giant operate, the competitors in those areas and the competitive nature of those areas. The FTC's position is entirely without basis, and we look forward to proving our case before an objective and knowledgeable court."
Giant's Chairman and Chief Executive Officer, Fred Holliger, added, "We are disappointed that the FTC has chosen to oppose the merger of two small companies that together would operate less than 1.5% of the U.S. refining capacity. Over the past several years, mergers and acquisitions of refineries have created refining companies that dwarf our size and they have been allowed by the FTC. The employees of both companies have spent countless hours preparing documents in response to the FTC's information requests and we and our advisors haven't seen anything that we believe would serve as a basis for the FTC to oppose this merger. We continue to believe that the merger is in the best interest of our shareholders, our employees and our customers."
Western and Giant also noted that the FTC has never suggested the need for any potential divestiture or other potential remedies.
VANCOUVER, BC, CANADA — Kinder Morgan Energy Partners has announced that it plans to purchase and operate Vancouver Wharves, a bulk marine terminal here, from British Columbia Railway Company. The price of the deal was not disclosed.
The Vancouver Wharves facility, located at the Port of Vancouver, consists of five vessel berths as well as a fuel terminal with dry bulk and liquid storage, equipment, and rail lines.
Kinder Morgan officials say the assets acquired in the deal will help increase supply and movement of fuels in the U.S. Pacific Northwest as well as Western and Central Canada.
The deal is expected to be completed by the end of June.
WASCO, CA. — U.S. Ethanol Holdings LLC has announced plans to build a 100 million gallon-per-year ethanol plant here.
The Wasco plant will be US Ethanol's second California facility. They have four other plants under development in Indiana and Illinois.
The plant will be a $200 million investment, and will create 60 to 65 jobs in Kern County in addition to 400 to 500 local construction jobs while the plant is being built.
"We worked on finding a site that was the right fit for them," said Ron Mittag, economic development director of Wasco. "We also worked with them to streamline the whole approval process, so they'll be able to start construction sooner."
Construction is scheduled to begin during the fourth quarter of 2007.
WASHINGTON, D.C. — The American Petroleum Institute has launched a new voluntary safety qualification program for contractors performing construction and maintenance work at retail service stations.
Called API WorkSafe, the program offers third-party training based on standard safety practices "that are common throughout the industry." The training includes areas as excavation, hoisting, lifting, and working at heights or in confined spaces. The program is available in English and Spanish.
"The vast majority of contractors in the retail petroleum industry work for more than one customer," explained the API, "but each customer may have different safety requirements. It means service providers can often find it cumbersome and expensive to track such variations and then follow the correct procedures on site."
Applicants who pass the exam will receive a "Safety Key" with a personal identification code. Station operators can verify the code online or by telephone.
The program's website is https://worksafe.api.org.
EDMONTON, AL, CANADA — Canadian fiberglass tank manufacturer ZCL Composites has acquired Xerxes Corporation, the Minneapolis-based fiberglass tank design, manufacturing and marketing company. The purchase price is $40.8 million.
The acquisition will be funded by approximately $35 million in private stock as well as loans which will be used to purchase all the issued and outstanding stock of XAHC Inc., the parent company of Xerxes.
Xerxes had approximately 260 employees at the time of its acquisition. The ZCL says it will continue to manufacture tanks from the company's facilities in Minneapolis, Anaheim, CA; Sequin, TX; Hagerstown, MD; and Tipton, IA. but made no further announcements about the company's staff.
ZCL's President and Chief Executive Officer, Ven Cote, said, "We are excited about the opportunity to join forces with a well managed industry leader to provide a broader range of products to our Canadian customer base and to increase our market presence in the United States."
Originally published in the June 2007 issue of O&A Marketing News.
Copyright 2007 by KAL Publications Inc.
Serving the 13 Western States, the World's Largest Gasoline, Oil, Fuel, TBA and Automotive Service Market
