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Break Out the Champagne at Chevron!

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.

That 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 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 mantenance 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.