Southland's small indie gasoline refiners vanishing.

Small independent gasoline refiners' market share in California has plunged to 4 percent from 15 percent in 1980, and soon only one small indie will be operating in Southern California.

"The exit of the independent marketer will create near-monopoly conditions in the Southern California fuel marketplace," read an article in a Jan. 3 newsletter published by the Southern California Service Station Association.

As small independent gasoline refiners halt operations in the Southland, nine competitors will be left operating here. Six of these are majors, such as downtown Los Angeles-based Atlantic Richfield Co., one is a large independent refiner, namely Ultramar Inc. in Wilmington, and two are small independent refiners -- one of which is in bankruptcy and is not a factor in the independent gasoline market.

In contrast, more than 20 gasoline refiners were present during the 1970s. Several independents have pulled out of the market since then, as well as majors like Gulf Oil Co. and Phillips, said Judy Roberson, legislative coordinator for the Southern California Service Station Association.

The recession and strict environmental regulations are to blame, say industry experts.

Weakened economic activity has reduced gasoline demand, leading to lower pump prices and hence smaller profit margins for refiners. In the meantime, the California Air Resources Board has been toughening environmental standards for the oil industry. Stringent fuel-composition requirements and refinery emission standards are requiring refiners to spend millions of dollars upgrading their equipment, which drives up the cost of making gasoline.

Southern California boasted 11 independent gasoline refiners just 10 years ago, but as of Feb. 1 the only one not in bankruptcy that will be left in operation and selling gasoline to independent dealers is Powerine Oil Co.

The American Independent Refiners Association defines a small independent refiner as one that refines 75,000 barrels of oil per day or less.

Several of the Southland's small independent refiners shut down during the 1980s when the oil industry was deregulated and they no longer received government subsidies that enabled them to compete in the free marketplace. And others closed last year under pressure from the economy and environmental regulations.

There were only four small independent gasoline refiners left operating in Southern California by fall 1991. These were Carson-based Fletcher Oil & Refining Co.; Santa Fe Springs-based Golden West Refining Co.; and Santa Fe Springs-based Powerine. Each company operated one refinery in the community in which it is located, but one has suspended operations and another is about to follow suit.

Fletcher halted production at its refinery in November 1991. Both the recession and toughening environmental standards contributed to the refinery's closure, said Walter Neil, a spokesman for Fletcher.

He said he was hopeful, though. The company plans to re-open the refinery as soon as "economic conditions warrant," he said.

Golden West will soon follow in Fletcher's footsteps. The refinery will cease operations Feb. 1, according to a statement issued by the company. Golden West is a subsidiary of Downey-based Thrifty Oil Co.

"The decision to close the refinery is attributable to inadequate refining margins on gasoline and fuel oil and pending expenditures for environmental compliance," states the release.

Pending better profit margins, the refinery may re-open as early as April 1992, the release goes on to state.

With both Fletcher and Golden West ceasing operations, Powerine effectively would become the only small independent gasoline refiner in Southern California. Powerine's Santa Fe Springs refinery processes and average 40,000 barrels of oil per day.

Technically, there still will be another small independent here, Paramount Petroleum Corp., but Roberson said it is not contributing to independent marketing competition because it sells all its gasoline to downtown Los Angeles-based Unocal Corp. Furthermore, Paramount has been in Chapter 11 since January 1990, and one industry source said its future is uncertain.

Doug Henderson, executive director of the Western States Petroleum Association, blamed the demise of the independent refiners on the state's tough environmental measures regarding emission standards for refineries and composition of the fuel itself.

Industry members "told people in government that their trend of turning the ratchet tighter and tighter on our companies was going to have economic consequences," Henderson said.

The Air Resources Board passed a first phase of tougher fuel standards in September 1990, and handed down requirements for a second phase in November 1991. For each phase of requirements, refiners need to upgrade their refineries with new equipment to produce cleaner fuels.

Oil industry officials say compliance with the second phase of requirements will cost the entire industry between $6 billion and $9.7 billion statewide.

It is harder for the independents to upgrade their refineries than it is for the major refiners, noted William Sanderson, a principal with Purvin & Gertz, a Dallas-based energy consultant.

Many majors have the bucks to upgrade, but the cash-poor independents have to rely on lenders to finance their improvements. And under today's economic conditions, banks are wary of lending to independents with uncertain prospects, Sanderson said.

Overall, the independent refiners' disappearance leaves a lack of competition that is unhealthy for the industry, Henderson said. Some industry experts say gasoline prices may rise as a result, which would be bad for consumers but would benefit surviving refiners.

The second phase of statewide fuel regulations that go into effect for the major refiners in 1996 and for the independent refiners in 1998 will also contribute to a decrease in the Southland's gasoline supply, Henderson added.

Until then, local gasoline marketers will be able to import fuel that is refined in other countries and in other parts of the nation, he said.

After the second phase of fuel regulations is implemented, fuel refined elsewhere will most likely not meet the state's requirements for cleaner fuels. These requirements include a reduction in the overall amount of toxic compounds in gasoline and the addition of oxygenated additives to fuels during the winter months.