Statement of Western States Petroleum Association
Before City Council of Los Angeles
June 17, 2003

RE:	Agenda Item #36 - “Communication from Board of Referred Powers relative to execution of 5th amendment to Permit 688 between City of Los Angeles and Los Angeles Export Terminal, Inc. (LAXT)

POSITION: SUPPORT APPROVAL OF 5th Amendment

Good Morning Members of the City Council. My name is Jeff Wilson, and I am speaking on behalf of the Western States Petroleum Association (WSPA). WSPA represents nearly 30 companies that explore, produce, refine, market and transport petroleum and petroleum products in the Western United States. Our refiner members in the Southern California region manufacture and sell petroleum coke, and use the LAXT facility as an export terminal.

Today I want to express WSPA’s support for the Council’s proposed action to ADOPT an order allowing the execution of the 5th amendment to Permit 688, allowing the transfer of land from LAXT to Oxbow Energy. While WSPA supports the proposed action, our outlook reflects a much broader perspective than the specifics of the Oxbow Energy contract.

WSPA supports the proposed action for a number of reasons. As you will hear, there is a lot at stake for every driver in southern California. This is because the unintended consequences of removing the LAXT facility from coke export service could ultimately result in reduced gasoline production and possibly create very negative consequences for California consumers.

Let me explain. LAXT is one of only two southern California export terminals that can handle petroleum coke – a significant energy product supplied to other parts of the U.S. and the World. Elimination of either operation would reduce competition and flexibility in petroleum refining and product distribution, and limit the regional handling capacity of product by reducing the spare handling capacity that currently exists.

If there were only one coke export terminal left in southern California, and a significant disruption in coke handling capacity occurs, with no outlet for export coke, refinery operations would be out of balance and reductions in the throughputs of area refineries would be possible. Disruptions to key refinery process units could also occur, leading to potentially significant reductions in the production of gasoline and gasoline blend stocks.

In order to meet the region’s increasing demand for petroleum products, it is critically important that refineries maintain steady and ratable (e.g., consistent) production. To accomplish this, it is equally important that the region retain flexibility in the handling of petroleum coke – flexibility that is maintained by adoption of the Amendment.

The Association believes that the LAXT facility is a modern, environmentally sound operation. It supports the export of millions of tons of valuable energy-producing petroleum coke to customers throughout the world. The export volume allows LAXT to pay about $2.5 MM each year to the Port of LA. As long as these petroleum coke-handling facilities operate according to their permit limits, the environment should not be adversely affected and continued revenues to the Port and City of Los Angeles can be realized.

Approval of the amended lease, allowing continuing operation of the LAXT facility, ensures that the City will be paid some or all of the debt incurred previously by LAXT. It also clears the way for a return of 81 acres of usable land to the Port – land that could be used to generate even more fees for the Port.

As a final comment, I hope that the views of the California Energy Commission have been solicited by the Council. The Energy Commission, being the State’s energy agency, surely recognizes the strategic role that the LAXT facility plays in Southern California refinery operations and regional product supply balance.

As I indicated earlier, any disruption in the handling of petroleum coke can, and most probably will, affect other refinery processes and product supplies. If disruptions continue, serious impacts to gasoline markets can result -- and affect citizens in the City, county, and potentially throughout Southern California. Wise decision-making by the City Council, to adopt the lease revisions, can reduce the risk of future product supply upsets, and serve as an example of good government and wise action on energy policy.

WSPA appreciates the chance to testify today. Thank You.