Tesoro to Take Over ARCO Offices in La Palma

By Rico Dizon
The City of La Palma may yet regain its huge loss in sales tax revenues brought about by the pull out of BP/Arco’s fuel sales group in the third quarter of last year that precariously put the City almost in the brink of fiscal emergency.

After the infamous oil rig debacle in the Gulf of Mexico four years ago, BP (British Petroleum) had to sell its refinery in the City of Carson and its Arco retail network in the Southwest.

The buyer is the Tesoro Companies, Inc. who most recently expressed willingness to bring back its Arco sales and marketing operations to the same location in La Palma –a seven-story building at Centerpointe Drive and Valley View Boulevard and very close to 91 Freeway.

The La Palma City Council meeting on Feb. 5 approved the recommendation by Community Development Director Douglas Dumhart to adopt a resolution approving an Operating Covenant with Tesoro.

In his report, Dumhart said Tesoro has negotiated a lease agreement with TA Realty Fund for 22,491 gross sq. at 6 Centerpointe Dr.

The space comprises the entire 5th floor of the seven-storey building that will house 103 offices and modular work stations and eight conference rooms for around 200 employees. Tesoro’s lease is contingent upon securing approval of an Operating Covenant with the City.

Among the terms and conditions of the agreement is that the City shall rebate Tesoro 50% of all net sales tax up to $3 million every quarter.

The city will also rebate 70% of all net sales tax in excess of $3 million received by the City from the sale of Tesoro petroleum products connected at this location.

The City of La Palma will also facilitate and assist the refinery firm in establishing its corporate identity in proximity to the 91 Freeway in order to promote sales.

With the Tesoro sales and marketing operations housed in La Palma, the City is expected to benefit from unanticipated sales tax revenue that will help fund essential services such as police and public safety, maintenance of public infrastructure, code enforcement and building safety.

Of utmost importance is being able to neutralize the close to a million-dollar deficit and regain more or less the approximately $2 million lost in sales tax revenues.

BP recently elected to sell its Carson Refinery and Arco Retail Network to Tesoro among its other international assets to repay costs stemming from the oil rig explosion in the Gulf of Mexico.

Tesoro agreed to pay $1.18 billion for the refinery and 800 Arco branded gas stations and $1.3 billion for the refinery’s existing inventory.

Tesoro’s latest purchase will bring its number of California refineries to three (Wilmington, Martinez and Carson) accounting for 60% of the company’s total refining capacity.

The 266,000 barrels-per-day Carson Refinery shares a fence line with the 97,000 bpd Wilmington refinery enabling Tesoro to combine the two refineries into one facility and realize about $250 million in saving costs. Production wise, this spells good fortune for La Palma as the Arco gas-brand sales network has a huge product supply to sell in the Southland.

The BP deal that is contingent to the review and approval of the Federal Trade Commission would double Tesoro’s refinery operations in California and make the San Antonio-based company the second largest refinery company in the state after Chevron Corp. Wall Street Journal reported that Tesoro expects to close the deal with BP/Arco by the middle of 2013.