Phillips 66 is shutting down its LA refineries. What’s next?

Phillips 66 announced last week it will shut down its oil refineries in Wilmington and Carson by the end of next year, marking the end of an era.

Starting more than 100 years ago, the refineries have turned crude oil into billions of gallons of gasoline, diesel and jet fuel from their location next to the nation’s largest ports. Together, the refineries supply about 8% of all of California’s gasoline demand. They also contribute to California’s single largest source of planet-heating pollution from the industrial sector.

The decision comes as demand for gasoline continues to decline and an aging facility faces costly maintenance and updates to meet pollution regulations.

About 600 employees and 300 contractors will be affected by the closure, according to the company.

What does the closure mean for nearby communities?

Pollution from refineries has been linked to higher rates of asthma and cancer in neighboring communities. Homes in Wilmington, for example, are a stone’s throw from the Phillips 66 facility, just across a cinder block wall. The Wilmington and Carson area has the largest concentration of oil refineries in California.

“These facilities are linked to so much suffering and death that they will never pay for,” said Alicia Rivera, an organizer with Communities for a Better Environment who has advocated for better protections from refinery pollution in Wilmington for more than 20 years.

She said she’s glad the refinery is closing, but worries the site will just be turned into another health-harming facility, such as hydrogen, biofuel production, or carbon capture. Those types of operations may reduce planet-heating carbon pollution compared to traditional oil and gas production, but they can also increase or not significantly reduce local health-harming air pollution, as well as have other impacts.

“I hope that Phillips 66 doesn’t plan another polluting operation…continuing the trend of fossil fuels that are fueling the catastrophe of illnesses in the neighborhood and in the climate,” Rivera said. “The neighbors are vigilant about what the plans are.”

An aerial view shows Marathon Petroleum Corp's Los Angeles Refinery in Carson, Calif. It's the state's largest producer of gasoline. It's among the many refineries in Wilmington-Carson area, including Phillips 66's Los Angeles Refinery, which will shut down next year.

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David McNew

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Getty Images

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Phillips 66 converted its other California refinery in San Francisco to produce “renewable diesel” and “sustainable aviation fuel,” made mostly from vegetable oils, animal fats, and animal feed. However, that facility may not reduce carbon pollution as much as claimed, and could increase local air pollution.

Rivera said the community has not yet been involved in discussions about what may be next for the site.

Redevelopment would be subject to a full public process under the California Environmental Quality Act.

What’s next for the refineries?

“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 Mark Lashier, chairman and CEO of Phillips 66, in a news release. “These sites offer an opportunity to create a transformational project that can support the environment, generate economic development, create jobs, and improve the region’s critical infrastructure."

A Phillips 66 spokesperson declined to provide more details on their future plans for the 650-acre site.

Phillips 66 has been trying to sell the aging refineries for years, said David Hackett, chairman of Stillwater Associates, a transportation energy consulting firm in Irvine.

Phillips 66 is not one of their clients, but Hackett said they called him about the closure before the public announcement.

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Courtesy Nick Souza Photography via The Port of Los Angeles

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Hackett told LAist their representative told him that part of the 650-acre site will be converted to an oil terminal, which will store and distribute imported petroleum products.

The rest of the site he expects they’ll clean up and repurpose for other industrial uses, such as warehousing. The land is zoned industrial.

“Land that's zoned industrial is very dear in Southern California,” Hackett said. “So they could essentially recycle the land, scrape the buildings that are there, clean up the dirt, and then sell it to somebody for other industrial uses. There are plenty of examples of this in the industry. You see this fairly frequently.”

Why now?

Demand for gasoline has been steadily declining since the early 2000s due to slowed population growth, more efficient gas and diesel vehicles, and now the increasing adoption of electric vehicles. The Phillips 66 L.A. refineries also face higher costs to maintain and upgrade aging facilities and meet pollution reduction requirements.

Hackett said he wasn’t surprised Phillips 66 decided to shut down the aging refinery, but he was surprised by the timing.

“What we forecast is that the demand is going to come off to the point sometime before the end of the decade where the economics of running a refinery are poor,” Hackett said. “At that point, somebody would give up and quit. We didn't think somebody would be quitting next year. We figured it would be around 2027.”

A spokesperson for Phillips 66 said in a statement that the decision was primarily related to high-cost operations and a long-term decline in demand for crude oil products.

Will gas prices be affected?

Phillips 66 said in its news release that despite the closure at the end of next year, it will continue to “work with the state of California to supply fuel markets and meet ongoing consumer demand.”

The company declined to provide more details to LAist on how exactly they'll meet that demand.

Hackett said the closure could lead to higher gas prices, because the company will likely need to import more gasoline to meet demand.

“While demand is decreasing, it's not going to decrease 8% between now and the end of next year,” Hackett said. “That gasoline supply…is going to come in by tanker from someplace else.”

And imported gasoline on average costs more, Hackett said.

"Instead of being produced locally, it'll be produced someplace else: India or Korea or the United Kingdom — those are the places that make the most California-like gasoline, so it's got to come from halfway around the world," Hackett said. “It's going to be expensive.”

The refineries will shut down late next year, so the exact impact won’t be quite clear until closer to the date.