California’s Most Protective Oil Refinery Rules Will Cost Millions

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By Sam Pearson

California oil refinery operators including Chevron Corp., Andeavor Inc., and Valero, could spend about $58 million during the next year to comply with the state’s new refinery safety rules, the state says.

The new safety rules, which were published by the state’s Office of Administrative Law Aug. 4 and take effect Oct. 1, require refinery operators to make changes to better anticipate and prevent major accidents such as the 2012 Chevron refinery fire in Richmond, Calif., that prompted the overhaul. The fire injured six workers and caused an estimated 15,000 residents to seek medical care as a result of heavy smoke in the air.

Chevron, which operates two of the state’s three largest refineries by volume, also is required to make safety changes under the terms of a settlement with California’s Division of Occupational Safety and Health, announced July 24.

Catherine Reheis-Boyd, president of the Western States Petroleum Association (WSPA), said in a statement to Bloomberg BNA Aug. 7 the changes ignore the state’s refineries’ existing safety records, which she called “the safest and cleanest in the world.”

The standards, which Cal/OSHA approved in May, “were developed with little consideration of the impacts on our state’s economy or workforce,” Reheis-Boyd said.

Regulatory Impact Assessment

The state found in a regulatory impact assessment completed in 2016 that the regulation would create 158 jobs and cost companies $58 million during its first year. The regulations would pay for themselves if they reduced the risk of a “costly major incident” at a refinery by 7.3 percent, according to the assessment. The state defined a major incident as one causing at least $800 million in damage to California’s economy.

A dozen companies operate California’s oil refineries, according to the California Energy Commission. The companies are Chevron, Tesoro (now known as Andeavor), Shell, PBF Energy, Valero Energy, Phillips 66, Paramount Petroleum Corp., Delek US, Kern Oil & Refining Co., San Joaquin Refining Co. Inc., Greka Energy, and Lunday Thagard.

David Lanier, secretary of California’s Labor and Workforce Development Agency, said in a statement Aug. 4 the changes mean California “leads the nation in protecting the safety and health of refinery workers and people in nearby communities.”

The rules, which are stricter than federal requirements, require companies to review equipment and material degradation, and to evaluate staffing and training. Some refineries already perform these tasks, state officials have said, though others do not, posing safety risks for workers and disrupting the state’s economy if fuel prices spike during a refinery outage.

Kara Siepmann, a spokeswoman for WSPA, told Bloomberg BNA companies will seek to implement the changes but may be hesitant to advertise how they do it.

The companies “don’t want their competition to know how much they have to spend on something,” Siepmann said of updates to refineries to comply with the regulation.

Representatives for Andeavor and Chevron declined to comment to Bloomberg BNA.

To contact the reporter on this story: Sam Pearson in Washington at spearson@bna.com

To contact the editor responsible for this story: Rachael Daigle at rdaigle@bna.com

For More Information

The refinery standard is available at http://src.bna.com/rsc.

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