A jury found Phillips 66 (PSX) engaged in “trade secrets misappropriation” under California law on Oct. 16, according to an Oct. 17 press release by Propel Fuels. Phillips 66 awarded biofuel manufacturer Propel $604.9 million in damages.

A state court in Oakland, California, heard the case. Propel alleged that Phillips stole company’s secrets during discussions for a potential acquisition. The jury found that Phillips used the information it learned from Propel to start a rival business, in violation of California’s Uniform Trade Secrets Act, according to the press release.

Phillips 66 has denied the allegations and is considering its next move.

“Before its discussions with Phillips 66, Propel had worked for more than 13 years to create the market for these fuels, which are important alternatives that improve air quality and help fight climate change,” said Propel Founder and CEO Rob Elam in a statement following the verdict. 

Propel specializes in low-emissions gasoline and diesel fuels.

In a statement to Hart Energy, a Phillips 66 spokesperson said that "while we are disappointed with the outcome, we respect the legal process and the time expended by the court and the jury over the past five weeks. We maintain confidence in the strength of our case and will carefully evaluate all of our legal options moving forward.”

According to the suit, Phillips 66 and Propel began discussing an acquisition in 2017. According to Propel, Phillips broke off discussions in 2018 and began selling its own E85 fuel in California, a state that incentivizes the sale of alternative fuels. E85 (or flex-fuel) is type of high-ethanol fuel blend.

Propel filed the suit in February 2022.

During the five-week trial, Phillips argued that it developed its low-emissions fuel through its own program and that Propel did not provide any evidence that proprietary information had been stolen.

California refinery to close

On the same day the court ruled against Phillips, the company announced it would close operations at a Los Angeles-area refinery by the end of 2025.

The announcement came two days after California Gov. Gavin Newsom signed a law giving him new authority to regulate refineries. According to the governor, the new rules would help the state combat high gasoline prices by requiring refineries to prevent price spikes.

The legislation, ABX2-1, requires refineries to keep a minimum supply of fuel on hand to prevent supply shortages during maintenance. Newsome said oil companies were purposefully causing the shortages to rake in higher profits.

Phillips 66 did not mention the new regulations in its announcement that it would close the refinery. The company also did not mention the court case in its statement. Both the verdict and the refinery closing announcement happened on the same day.

“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, Phillips 66 chairman and CEO. “Phillips 66 remains committed to serving California and will continue to take the necessary steps to meet our commercial and customer demands.”

The company said about 600 employees and 300 contractors work at the refinery.

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