You are browsing the archive for Chevron.

Lessons (Not) Learned From the Chevron Fire

2:55 pm in Uncategorized by Consumer Watchdog

Chevron Refinery Fire

On Friday, federal accident investigators told California legislators that the state’s patchwork of oil industry regulations needs a serious overhaul. The Chevron fire that produced a toxic cloud and sent 15,000 people to the hospital could have been prevented, but the system was reactive and not designed to foresee and forestall problems, said the U.S. Chemical Safety Board. Duh. The board didn’t need 18 months to come to that conclusion. But Don Holstrom, lead investigator for the board, did put his finger on one problem: the need to bump up the number, skills, and authority of refinery inspectors.

Something smells when an agency purposefully cripples its own enforcement abilities. One good example is the Department of Toxic Substances Control (DTSC). The DTSC exists to protect communities like Richmond from toxic harm. And for years, it’s done a very poor job of it.

The DTSC has broad statutory authority to sanction these giant chemical plants for toxic releases like the one that Chevron caused in its fire, but it consistently refuses. Better yet, the DTSC should play a pro-active role in preventing harm as the department is supposed to do. So, you’d think the DTSC would view having refinery inspectors on staff as a high priority—inspectors that could be given broad latitude to inspect the guts of a refinery where hazardous substances slosh around and not just its excrement. Evidently, the DTSC thinks the fewer refinery inspectors the better.

The DTSC has only two refinery inspectors for the entire state and one of them is green and in training. The DTSC used to have more. But when other inspectors from its refinery unit retired or left, the DTSC didn’t bother to replace them. Nine vacancies in the unit handing refinery inspections were the result. Two scientist positions were approved for the refinery inspection unit and then inexplicably redirected to other positions and regions.

Refinery inspections are the most complex kind and the scientists that do them sometimes take a week to complete them. These scientists know the ins and outs of dealing with refineries. The DTSC maintains that any scientist can conduct a refinery inspection, but that just isn’t true. “Anyone who says that all DTSC scientists can conduct them and are trained to do them is either lying or out of their mind,” says one DTSC career investigator.

Under the direction of Chief Deputy Director Odette Madriago positions can be cut or simply re-directed, the investigator said. On top of that, “Odette has put in place the strictest travel requirements of all CAL EPA.” The inspectors and investigators that have to travel have to fill out a lengthy document and have to get approval from their supervisor before they can go do an inspection or investigation. “These travel restrictions have allowed polluters to go unchecked and unregulated,” the investigator said.

One explanation is budgets are tight. Another is that it isn’t in the interest of someone like Ms. Madriago to regulate an industry in which she invests. She’s invested up to $100,000 in Chevron and in BP Amoco. Why regulate these refineries and sanction them millions of dollars that could affect their stock price?

Read the rest of this entry →

Was State Senator Rubio (CA) Auditioning For Job at Chevron?

2:53 pm in Uncategorized by Consumer Watchdog

Chevwrong

The power of the petroleum industry in California may be unparalleled in the states. Its lobbying machine is stupendously successful. For instance, California remains the only significant oil producer that does not tax oil extracted in the state. It has very weak–perhaps the weakest–regulation of oil and gas extraction, particularly hydraulic fracturing of deep deposits, known as “fracking.” State environmental laws are under constant attack.

State Sen. Michael Rubio, a Central Valley Democrat elected to his seat in 2010, was in an ideal spot to show whose side he was on in these fights.

Rubio, who resigned from the Senate Feb. 22 to work for Chevron as its chief California lobbyist, was chair of the Senate Environmental Quality Committee, which oversees oil industry environmental issues. In 2011-12, he was a key Democrat on the Senate’s energy committee.

His most recent official action was an inaction: He was scheduled to co-chair his committee’s hearing on fracking with Sen. Fran Pavley. The hearing took place, airing widespread frustration with the weakness and loopholes of current and proposed state regulation of fracking. Rubio, however, was a no-show.

It’s obvious now that on Feb. 12 he was getting ready to jump ship to Chevron, and likely in no mood to hear citizen fears about water pollution, spoiled land and even fracking-induced earthquakes. But Rubio did, in his short tenure, leave a record that Chevron was surely tracking with admiration.

In hindisght, his biggest moment in the spotlight would have been his months-long campaigning on behalf of a corporate effort to weaken the California Environmental Quality Act. The changes would have particularly benefited the oil, energy and property development industries. The proposals didn’t become law, but they’re not dead yet. Rubio will just be working them from the other side of the fence.

In May 2012, Rubio also cast the deciding “no” vote against a bill (SB 1054) by Sen. Pavley that would have merely required oil companies to notify residents and businesses nearby in advance of fracking activities. The bill, vociferously opposed by the Western States Petroleum Assn. and other oil lobbyists, failed. Industry opponents of the bill recognized Rubio for his role in leading the opposition that killed a bill with wide public support.

Rubio also supported, and may have encouraged, the governor’s firing of two state energy regulators in 2011 after oil lobby complaints about their tightening of oversight.

(Oil and energy weren’t the only supporters he was courting. Rubio also championed the profits of Blue Cross over the pocketbooks of customers. He withheld his vote in 2011 from a measure that would have allowed the state insurance commissioner to reject health insurance rate increases that could not be justified. In the state Legislature, an abstention from voting is effectively a “no” vote, but with no accountability. It’s the coward’s way out. )

Judy Dugan

Chevron certainly knows what it’s getting with this new top lobbyist.

Rubio stated that he was leaving his elected post two years early to spend more time with his family, including a disabled child. No matter how much that weighed in his decision, the fact remains that his status as a state senator (however briefly) greatly inreased his value to Chevron. His pay will grow by multples. Because there is no law against such a quick trip through the revolving door–from overseeing an industry to lobbying for it–Rubio could be schmoozing his fellow legislators right now, and spreading money to their campaigns. His constituents, meanwhile, are stuck with no representation until a special election that’s perhaps months away.

Posted by Judy Dugan, former research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Break Out the Champagne at Chevron!

5:13 pm in Uncategorized by Consumer Watchdog

Chevron Refinery Fire

The news reports were on the gee-whiz side this week as state job safety regulators announced nearly $1 million in fines–the largest ever!– against Chevron for its refinery blaze last August. But “largest ever” only means that the levy hit the state’s $1 million cap on such fines. For Chevron, whose yearly profits are measured in the tens of billions (second only to Exxon), $1 million is pocket lint. As with so much of California’s regulation of mega-businesses, such fines are baked into the cost of doing business. They have zero deterrent effect.

The Cal-OSHA fines were for Chevron’s carelessness and lax oversight at its Richmond. CA refinery–leading to a a burst pipe, a huge fire and a toxic smoke cloud that sickened thousands of residents in and around the Richmond, CA, refinery last August. Chevron also dithered and delayed a shutdown for more than two hours after finding the leak, guaranteeing a conflagration.

The blaze starkly illustrated how the energy industry and other polluters evade regulation and play off one regulator against another. The regulators sit in their little silos of fractured authority, disclaiming responsibility for this disaster or that disaster.

Chevron, as the fine was issued, also listed how it would make the aged Richmond refinery safer in the future. The list is a joke–it promises not one cent in capital spending to upgrade and make safer the parts of the plant that didn’t burn down. All of the promises amount to “we’ll keep a closer eye on things.” Keep in mind as you read that Chevron’s inspections and safety training, before the August fire, were considered state of the art in the industry.

Chevron said it was:

  • Enhancing inspections of piping components potentially susceptible to sulfidation corrosion since carbon steel components with low-silicon content can corrode at an accelerated rate. This inspection program is being applied throughout our refinery system worldwide.
  • Strengthening reliability programs for piping and equipment, and enhancing competency requirements for leaders, inspectors and engineers.
  • Strengthening leak response protocols and reinforcing the authority that everyone has to shut down equipment.
  • Creating more management oversight and accountability for process safety and re-emphasizing focus on process safety.

Judy DuganThat all sounds like more of the same, vulnerable to the same human error, reluctance to shut down and cost-cutting that led to the August disaster.The badly corroded pipe that burst, for instance, was skipped in a Nov. 2011 inspection of the unit destroyed by the fire. The deliberate omission was in violation of Chevron’s own safety policies.

Chevron will obviously have to replace the pipes (and everything else) in the processing unit that failed. But even that is in question–the new pipes that Chevron insists it will usewill use are the same as the piping that corroded at a BP refinery in Washington State, leading to a similar huge blaze that shut down the refinery. Richmond’s City Council, which has final say over how Chevron does its repairs, is largely staying out of the dispute between Chevron and the U.S. Chemical Safety Board over the pipe replacements.

Could it be because Chevron spent $1.2 millon on the city’s municipal municipal election last November, putting two of the three candidates it backed onto the council and fighting off progressive candidates? The company is also pouring millions into pet projects for city leaders.

There are endless ways that a company the size of Chevron can spend relative pennies in order to keep all of its billions in profits. Fines make more economic sense than upgrades. Building parks and meddling in local elections is cheaper than protecting the overall health and safety of local citizens. Spending more millions on state officials and elections is also cheaper than suffering coordinated official scrutiny.

California’s governor and Legislature could easily improve both safety and consumer protection with some reasonable changes:

  • Put oversight and regulation of oil refineries under a single independent body, funded through a tax on oil extraction.
  • Give the regulator the power and funding to inspect refineries regularly and follow up frequently to ensure that violations are fixed.
  • Require refineries to stagger routine maintenance shutdowns in order to prevent spikes in gasoline prices, and oversee routine shutdowns to ensure that they are not dragged out for financial reasons.
  • Require that refiners keep about three weeks’ worth of gasoline in stock to ease price spikes after events like the Richmond fire. This could include stronger oversight of refiners’ exports outside the U.S.

Sounds pretty simple. But Chevron, Exxon and friends see such regulation as interfering in their freedom to profit. Gov. Jerry Brown could lead the reforms above and probably win with major public backing. It’s all a matter of whether anyone, even Brown, will stand up to the oil industry. Early on, he didn’t show much backbone. But with the economy recovering slowly and the state’s debt looking more manageable, the still-popular Brown could successfully lead the charge to make refiners operate safely and in the public interest.
________________________________________________________________
Posted by Judy Dugan, research director emeritus for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Senators Add Fire to Scandal Over Phony California Fuel Crisis

6:55 pm in Uncategorized by Consumer Watchdog

Photobucket

Today, senators from California, Washington and Oregon joined our call to investigate refineries, asking the Department of Justice to comb through California refineries one by one to see whether market manipulation or false reporting by oil refineries had something to do with record $5 a gallon prices at some California gas stations last month and near record prices earlier in the year.

Read our letter to California Attorney General Kamala Harris here.

“We are requesting a Department of Justice investigation of possible market manipulation and false reporting by oil refineries which may have created the perception of a supply shortage, when in fact refineries were still producing,” wrote six Senators, including California Senators Dianne Feinstein and Barbara Boxer.

The Senators cited the same report we did by McCullough Research concluding that price spikes in May and October happened while crude oil prices were declining, and inventories were increasing, possibly in conjunction with misleading market-making information.

The Senators called on Attorney General Eric Holder to use existing authority to prevent and prosecute fraud and collusion, and to draw upon the Federal Trade Commission to prohibit fraud or deceit in wholesale petroleum markets, and on the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Federal Energy Regulatory Commission to exercise their power to prevent the use of any “manipulative or deceptive device or contrivance.”

Read the Senators’ entire letter here.

Consumer Watchdog wrote California Attorney General Kamala Harris on November 15 calling for a criminal investigation of possible market manipulation or false reporting by refineries to drive up the price of gas to the highest in the nation, based on the McCullough report.

Between the Justice Department and its collaboration with other agencies in Washington and the California Attorney General on the West Coast, consumers should be getting some answers about why wild gyrations in the price of gas cost them $1 billion dollars extra in a short span of time in October, adding up to a 66-cent-per-gallon windfall for oil companies, or about $25 million a day, according to the McCullough report.

Refueling California

1:17 pm in Uncategorized by Consumer Watchdog

Photobucket

$5-a-gallon gas is a wake-up call. Let’s change the way oil companies operate here.

How can a power outage at a refinery spark $5-a-gallon gasoline at some L.A. stations? Why would the fact that California had to switch to the winter-blend fuel at the end of October — a fact known all year — raise gasoline prices to record levels?

This price surge is not a freak phenomenon or the result of a convergence of refinery problems, as the oil industry has argued. It’s happened before (only the $5 level is new) and will happen again and again because California oil companies can make more money by making less gasoline.

California’s under-regulated gasoline market resembles our briefly deregulated electricity grid during 2000-01, when energy pirates such as Enron manipulated prices. Why? The market is geared to shortages and scarcity. So when an inevitable problem occurs to shock the system, such as a refinery outage or pipeline problem, gasoline prices and company profits go through the roof in tandem.

The state’s gasoline, the lifeblood of our economy, is priced by an under-regulated commodities market largely controlled by a handful of companies. Over the last decade, Californians have consistently paid prices that are 10 to 20 cents a gallon higher than the rest of the nation, and we have lower inventories. The rest of the continental U.S. has about 24 days of gasoline on hand; California’s average is 10 to 13 days. Not surprisingly, over the last 10 years, refineries on the West Coast consistently have been among the most profitable in the continental U.S.

Memos from West Coast oil refiners from the 1990s and released years ago by Sen. Ron Wyden (D-Ore.) suggest that this is a deliberate business strategy. An internal Chevron memo, for example, stated: “A senior energy analyst at the recent API [American Petroleum Institute] convention warned that if the U.S. petroleum industry doesn’t reduce its refining capacity, it will never see any substantial increase in refinery margins.” It then discussed how major refiners were closing down refineries. Oil company profit reports show each dramatic gasoline price spike over the last decade has been mirrored by a corresponding corporate profit spike.

This situation is well known to policymakers in California. About a decade ago, after some sharp, unexpected price hikes, then-Atty. Gen. Bill Lockyer formed a gas pricing task force that included industry experts and me. We viewed industry documents and cross-examined industry representatives. Among the conclusions: “Supply disruptions that contributed to major price spikes of 1999 are likely to continue … because (1) California refiners have little spare capacity to cover outages; (2) California refiners maintain relatively low inventory levels.” The report also noted: “Refiners have significant market control.”

The task force recommended a series of measures, including building a strategic gasoline reserve that could flood the market when supply is most scarce. But the Legislature didn’t listen. And now we are near 5 bucks a gallon.

There’s a simple policy fix to the gasoline woes in California: more regulation and less consolidation.

If the state doesn’t have the wherewithal to build a strategic gasoline reserve, a simple requirement that refiners keep at least three weeks of inventory on hand will do.

Rapid oil company consolidation has also been a driver of high gas prices. A handful of refiners control 14 state refineries. It had gotten so ludicrous that in 2005, my consumer group teamed up with Sen. Barbara Boxer (D-Calif.) and Lockyer and succeeded in getting Shell Oil to reverse its decision to bulldoze its Bakersfield refinery, and to instead sell it. Internal documents showed that the refinery was making among the highest profits of all Shell refineries. That indicated the company wanted to make supplies even tighter, driving prices artificially higher.

The greatest challenge for competition may be ahead. Tesoro is seeking to buy the low-cost Arco brand and its California assets from BP. More than 800 stations carry the Arco brand. If state Atty. Gen. Kamala Harris and federal regulators approve the merger, two refiners — Chevron and Tesoro — will control 51% of the refining capacity in the state. That would be like writing a blank check from California drivers to the oil industry.

Let’s hope that $5-a-gallon gasoline is a wake-up call that came in time to head off greater refinery consolidation and higher prices. Fourteen refineries now power the world’s ninth-largest economy. It’s time Sacramento stepped in to keep them running at full speed, producing enough inventory to fuel the state, and from falling into even fewer corporate hands.

Jamie Court is the president of Consumer Watchdog and author of “The Progressive’s Guide to Raising Hell: How to Win Grassroots Campaigns, Pass Ballot Box Laws and Get the Change We Voted For.”

First printed in the October 12, 2012 edition of the Los Angeles Times

Did ‘Don’t Shut It Down’ Mentality Cause Chevron Refinery Disaster?

4:04 pm in Uncategorized by Consumer Watchdog

More than two hours passed at Chevron’s Richmond, CA, refinery between the discovery of a leak and the ignition of a blaze that threatened the health of thousands of nearby residents and sent hundreds to hospital emergency rooms Monday night. At any point during those hours, shutting down the big crude-oil processing unit in which a pipe was leaking could have prevented or greatly limited the disaster.

A massive plume of smoke over Richmond, CA.

The Chevron Refinery Fire in Richmond, CA (Photo: Daniel Parks / Flickr)

The San Francisco Chronicle reported details of that excruciating delay Wednesday morning, along with very different accounts of why it happened. The plant’s emergency response managers vaguely said they saw the leak as too minor–just “20 drops a minute” at first, to trigger an emergency or notify anyone. Until, of course, it suddenly got bigger and exploded into a blaze. But workers on the ground saw it differently and told their story to their union’s safety experts:

 

“From the time they did see the leak, they debated what to do,” said Kim Nibarger, who has investigated refinery accidents nationwide. “It was not so much whether to fix the leak, it was about what could they do to keep the line running and get it fixed.”
Nibarger based his opinion on Monday’s incident after discussions with union representatives at the refinery. The choice, he said, should have been clear.

“When you have hydrocarbons outside the pipe, you are no longer running at a normal condition. It’s time to shut the thing off and fix it, not to try to figure out a way around it.”

The last big fire at the Chevron Richmond refinery, in 2007, started the same way: a leak in the same refining unit, No. 4. Two employees were injured and the refinery was shut for months.

What one local resident said in 2007 sounds like it was today:

Read the rest of this entry →