July 15, 1999

Undisclosed weekend explosion cuts Richmond production by 70%
A previously undisclosed explosion at Chevron's Richmond refinery last weekend has significantly reduced gasoline production, raising speculation that already rising prices at the state's fuel pumps will soar even higher.

Chevron officials said Wednesday that Saturday's accident has reduced gas production at the West Coast's largest refinery by 70 percent.

If the price-hike pattern following two recent East Bay refinery accidents holds true, the decreased supply will drive gas prices up.

The incident, which was not made public until late Wednesday, also has raised the hackles of environmentalists who say they want to know why the public wasn't notified when the accident happened.

A leak developed in the main gasoline producing unit Friday. The explosion occurred Saturday, leaving the unit - known as a fluid catalytic cracker - inoperable, said Chevron spokesman Mike Libbey. There were no injuries and the plant was not evacuated, he said.

"This is a significant reduction" in production, Libbey said. "We are still analyzing the problem and we don't know when things will get back on track."

On Tuesday, hoping to avert the predicted state gasoline shortage and higher prices, the oil company asked California regulators for permission to sell out-of-state gasoline that doesn't comply with California's stricter environmental laws. No hearing date on the request has been set.

As the supply of gasoline shrinks, oil companies and traders who buy up stocks of gas are likely to jack up their prices. Gas station owners who have to pay more for each gallon, in turn, pass the price hikes on to drivers, said Paul Moreno, spokesman for the California State Automobile Association.

"This refinery problem comes when we're in the thick of the summer driving season and oil prices have already been going higher, so it's not good news for consumers," Moreno said.

Moreno said it was unclear how much gas prices will rise. But Gordon Schremp, an analyst with the state Energy Commission, told the Sacramento Bee Wednesday that if the state doesn't allow Chevron to sell out-of-state gas "you could easily see price increases of 20 to 30 cents a gallon."

Saturday's accident comes on the heels of two major East Bay refinery accidents that have seriously depleted gas reserves in the state and were blamed in large part for the recent surge in gas prices throughout California.

Bay Area gas prices skyrocketed as much as 50 percent in March, following a fatal explosion at Tosco's Martinez refinery and an explosion at Chevron's Richmond plant. By April 12, San Francisco had the nation's most expensive gallon of gas - $1.71 - and prices kept going up.

Calls for gasoline boycotts
Outraged motorists called for gas boycotts. Sen. Barbara Boxer, D-Calif., demanded that the Federal Trade Commission investigate whether gas companies were engaging in anti-competitive pricing, and FTC announced last month it will subpoena documents from Chevron and other major oil companies in the state. California Attorney General Bill Lockyer launched his own investigation.

Since then prices have begun to creep back down. The California State Automobile Association's most recent survey, taken June 22, found the average price for self-serve unleaded to be $1.51 per gallon in the Bay Area, with the average price in San Francisco higher, at $1.60 per gallon. The state average was $1.38 per gallon.

Chevron is asking regulators at the state Air Resources Board for permission to buy 3.5 million barrels of gasoline from outside the state for the maximum allowed 45 days.

If production at the refinery is not back on track by then, Chevron will arrange for the purchase of cleaner burning gasoline from other sources, Libbey said.

$22 million for consumers to pay
But approval of those gas purchases comes with a price tag: Chevron will have to pay a penalty to the state of 15 cents for every gallon of the non-CARB gas, which does not meet California's clean air requirements. For 3.5 million barrels, that would be a whopping $22 million - a charge that Chevron can pass along to consumers.

"These penalties always hit the consumer's pocket book, especially when you're talking about the West Coast's major refinery," said Donald Brown, a refinery safety consultant and former refinery operator. "It's going to have an effect on prices statewide."

If the Air Resources Board agrees to Chevron's request, it would mark the first time that the state allowed non-CARB gas since a cleaner-burning alternative, CARB gas, was introduced in 1996. CARB gas lowers hydrocarbon emissions by about 17 percent, while non-CARB gas trims emissions by only about 8 percent.

Staff members for the air board are recommending that the agency grant a temporary waiver to allow Chevron to sell non-CARB gas because of the state's current shortage. The board may decide as soon as this week.

Saturday's accident was the third at Chevron's Richmond refinery since March. Both sent gas production down and raised health and safety concerns among nearby residents.

On March 23, a fire shot an 18,000-pound plume of sulfur dioxide into the air and sent more than 350 area residents to hospitals with ailments including eye and throat irritation, breathing trouble, dizziness and nausea.

Damage to the refinery cut gas production by 15 percent, which the plant had not recovered from when Saturday's accident occurred.

On June 2, a chemical release that gave some nearby residents headaches and made them nauseous led to a temporary shutdown of the plant. The county issued a Level 2 warning, meaning people with asthma or other respiratory problems should stay indoors.

That incident angered many residents because the company delayed notifying authorities for several hours. Ultimately, the county Department of Health Services determined no hazardous materials were released.

Environmentalists, who didn't learn of Saturday's incident until contacted by the media Wednesday evening, expressed surprise and anger that the company had not released any information to the public.

"That's outrageous. That's really dangerous. Boy, they sure kept this quiet," said Denny Larson, Northern California director for Communities for a Better Environment. "This is another example of Chevron being more concerned about spin control than about threats to the neighborhood."

Chevron described the impact on the surrounding community as imperceptible.

"It was a very, very minor explosion," Libbey said. "It happened quite some distance from the gates (to the refinery). If there was some kind of air emission, you could see it or smell it, and we didn't see or smell anything outside the gates."

Report required by law
Chevron was required by law to report the incident to the Bay Area Air Quality Management District.

District spokesman Terry Lee said there were no toxic emissions from the explosion outside the plant and there had been no complaints from residents. Lee could not confirm late Wednesday whether an independent environmental appraisal had been conducted after the incident.

Environmentalists countered that more sophisticated tests must be conducted to determine whether the incident had an environmental impact.

"It is possible to release something you can't see or smell," Larson said.