Industry Committee on July 20th, 2010

[Richard Oblath]

Yes.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Did you receive an offer for the refinery, with a time extension, of $200 million?

[Richard Oblath]

No.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

After that, Mr. Oblath, once the discussions had ended, you set a deadline of June 30. In your press releases, you stated that there were no longer any discussions going on; however, Delek wanted to continue talking, did it not?

[Richard Oblath]

Mr. Chair, Delek withdrew from the discussions. I believe they're appearing later in this hearing and you can ask them.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

In your June 4, 2010 press release, you say: “[...] we are therefore implementing our plan to convert the refinery to a terminal.” That was three days after the June 1 deadline.

You say that Shell had announced as early as January that it intended to convert the refinery to a terminal. As early as January, then, was it not already Shell's intention to convert the refinery to a terminal? Had the decision not already been made?

[Richard Oblath]

Mr. Chair, the decision had been taken because we could find no one who would make us an offer. We had no alternative.

Before we announced in July 2009 that we would seek offers for the refinery, we looked at various alternatives: to completely idle the refinery and not even turn it into a terminal; to sell the refinery; to convert the refinery into a terminal; or to continue as we were. We could not—

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Oblath, the Fortier committee was in place and had the support of the Government of Quebec. You yourself said in your opening statement that incentives for buyers, as well as a whole range of assistance measures, had been put in place for the purchase of the refinery. So, the sale of the refinery should have been your real priority, as opposed to converting it to a terminal.

By stating in your press release, only three days after, that you were moving forward with your initial plan to convert the refinery, you essentially set aside all the work and all the discussions that were ongoing with the Fortier committee, as Mr. Rocheleau so aptly pointed out earlier. Were you not the ones who demanded that the Fortier committee not be involved in talks with Delek US Holdings?

[Richard Oblath]

The committee was party to the discussions up until the committee ended.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

So, you never said that you no longer wanted the Fortier committee to take part in the discussions?

[Richard Oblath]

The purpose of the committee, as it was set up and as we agreed, was that should they find a credible buyer—and Delek US was a credible buyer—they would let the seller, Shell, and the buyer partake in negotiations to see if they could reach an agreement. The initial expression of interest from Delek on the evening of June 1 was completely inadequate; it was very, very low. The value actually offered for the refinery was probably of the order of a few million dollars.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Delek US Holdings offered you $200 million. Did it make that offer after June 1?

[Richard Oblath]

Not for the refinery.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Then was exactly was the offer for? Could you provide us with details?

[Richard Oblath]

I would like to point out that they never formally tabled an offer. These were expressions of interest. The final expression of interest that was discussed at the meeting on June 21, which I attended at their headquarters in Tennessee, included a value for the refinery that was probably around $110 million. There were other offers on the table for our wholesale business and potentially our retail business, although they never made a formal expression of offer to value our retail business.

In the offer for the refinery and for the wholesale business--and I'd like to state, Mr. Chair, that on two occasions we asked Delek, would you buy the refinery alone, and on both occasions they said they would not. So the offer they had discussed with us initially was for the refinery and for our wholesale business. If I look at the financing for that, the discussions, by the time they had increased their offer—all of the increases in their offer, by the way, were increases, apparently, in moneys coming from government entities or pseudo-government entities—these increases still did not reach $150 million to $200 million for the refinery alone.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Oblath.

Thank you, Mr. Laframboise.

Mr. Petit, please.

[Daniel Petit, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you very much, Mr. Chairman.

Good morning, Mr. Oblath, Mr. Houle and Mr. Rocheleau.

First of all, I think it's important to point out that the employees of your refinery are the ones who will be most prejudicially affected by this situation. Of course, I'm referring to the 400 or 500 employees who will lose their jobs or may be displaced. It appears to be difficult to secure an official sale. We support your committee, but we don't know exactly what direction it is taking. Furthermore, there seems to be a second phase, and that worries me a little.

Mr. Oblath, I would like some additional details. Supposing that you convert the refinery to a terminal—I say “supposing” because that has not officially occurred yet. What exactly will you do with the employees? They want to know exactly what to expect. I would like to know what social and business plans you have in place for these employees. They will be the ones in difficulty, not you. You are going to keep your job, but they will lose theirs.

So, I would like a lot more clarification in that regard. This is an important question.

[Richard Oblath]

I think it's better answered by Monsieur Houle.

[Christian Houle]

Montreal East Refinery has 490 employees, 127 of whom are eligible for retirement. To date, 35 employees have quit because they found jobs in another industry. Two people have retired, and about 20 have been transferred to other Shell establishments. We have also held a number of meetings of a committee involving the government and the union whose goal is to help people find other employment. Among other things, the meetings instruct people on drafting résumés and going through interviews. We have organized “career days,“ brought in people from Hydro Québec, Japan Tobacco Inc. and Suncor, as well as City of Montreal representatives and people responsible for water treatment. In September, other companies will come, such as Come By Chance and Albian Sands. I am in touch with other Shell locations, mainly in Canada, but also in Qatar. We are looking into job opportunities for people who are mobile. I recognize that not everybody can be mobile.

We are putting in a lot of effort. We provide information sessions on benefits and pensions. Human resources are working hard on educating our employees. As the refinery's chief executive officer, I certainly want all my employees to find a solution by November 30. They could find this solution within Shell, in the future terminal, which will have about 20 or 30 employees. The goal is to continue working with the union and with governments in order to take care of our employees and their families. Without a doubt, this is one of my main priorities.

[Daniel Petit, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Mr. Houle, since Mr. Oblath has allowed you to speak about the employees on Shell's behalf, I would like to know when you began with the efforts you are talking about. When did you meet with the union? Did you meet with it on this issue?

[Christian Houle]

We began working on this when the official announcement was made on January 7, 2010. This followed a rather extensive process to find a buyer for Shell. Once we realized that no formal offer had come our way, we began right away putting together this kind of process in cooperation with our human resources and head office people.

Given that the decision was not made two years previously, it is true that not everything was in place in January. So, at that time, we had to begin inviting people and bringing organizations together to implement plans for helping them. So there is no plot, and nothing had been predetermined. To some, we might have looked disorganized at first, but that is because the final decision had only just been made in January.

After that, we put together the committee. Clearly, without a formal offer, we cannot put our conversion plans aside and work on the committee. We have to work on things in parallel. Since then, we have been working on conversion plans and projects.

Some items take time to order. So we started doing it right away in order to be able to get it done in time and not run into supply problems, since some operation units must legally be taken out of service in September. We have no choice. For safety reasons, the units must be shut down in September. We have reached the point of no return, and the units must be shut down.

[Daniel Petit, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Mr. Rocheleau, you heard Mr. Houle. Is it true that, since January of this year, you have held meetings precisely in order to discuss the future of the employees if the refinery is not sold and becomes a terminal?

Have you personally—or people in your union—met with Mr. Houle or Shell people, representing Mr. Houle? Have there been any meetings?

[Jean-Claude Rocheleau]

Yes. It should be noted that the adjustment committee we are talking about is legally required in Quebec. So it does not necessarily exist because Shell created it. The company was legally obligated to put together an adjustment committee. We take part in it according to the rules established in law.

I dislike, contrary to what we were told... They talk about the efforts they are making for the workers. However, I can tell you that Shell is not making any particular effort for the workers. They say that they have transferred people to other Shell locations. Shell is not making transfers.

I lived through the closing of an Esso station, and we were guaranteed jobs within Esso. We did not even have to apply. We did not have to do anything.

At the moment, Shell is telling its workers who have lost their jobs to apply for open positions, just like anyone else. If they get the job, good for them; if not, too bad. Nothing special is being done.

In addition, it was said that 127 employees are eligible for retirement. I would like to believe people are eligible for retirement, but that involves a 25% penalty, so there is no incentive for those workers to do it. In addition, while the provisions in our collective agreement allow us to keep people who are better than subcontractors, let us just say that Shell is now trying to do away with those provisions that allow us to keep our own people rather than dealing with subcontractors.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Petit.

Thank you, Mr. Rocheleau.

Mr. Godin.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Thank you, Mr. Chair.

I would also like to welcome you to the Standing Committee on Industry, Science and Technology.

These are the important questions we are studying today. Does Shell want to sell? Is there a buyer?

You say that you are ready to sell. Do you have a potential buyer?

Mr. Oblath, you often said that offers on the table were not really formal but rather verbal. Let's imagine that a miracle happens today and Delek decides to make a formal offer on paper for $150 or $200 million for the refinery and $225 million for gas stations in Quebec and the Atlantic. Would this be an acceptable offer?