Oil Refinery Merger in California Underscores Risks of Petro-Economy Nationwide

In a region known for being among the worst nationally for its air quality, plans are marching briskly forward on a proposed integration project that will combine operations at two sprawling oil refineries near Southern California’s Long Beach area, expanding it into the single largest oil refinery by far on the nation’s West Coast.

The merger threatens to introduce additional toxins, such as benzene and sulfur gases, into a community that is already suffering from unnaturally high rates of asthma, cancer and other ailments, warn experts. And, as is the case throughout the nation, communities of color living adjacent to the refineries are disproportionately shouldering these toxic effects of the United States’ continued reliance on oil.

Alongside an array of major modifications, the project will see interconnecting pipelines join Tesoro’s two adjacent refineries in Wilmington and Carson. Officials say the amount of crude processed at the combined refinery will increase by about 6,000 barrels a day, but independent experts argue the figure could be closer to some 17,000 barrels. Crude oil storage capacity is slated to increase by 3.4 million barrels.

According to a Draft Environmental Impact Report (DEIR), the proposed plant merger will comply with federal, state and local pollution reduction standards, and is said to “substantially reduce” emissions of greenhouse gas, sulfur oxides, nitrogen oxides and carbon monoxide.

But is the integration project really as benign as the draft report indicates?

“We wish Tesoro would tell the truth to pollution-burdened LA neighbors about their plans,” said Julia May, senior scientist for Communities for a Better Environment, who, alongside other experts, submitted detailed comments and questions on the draft report.

Rather than reduce emissions, the project would increase them and intensify the likelihood of a potentially dangerous accident occurring, said May. A tank rupture on August 26 that released a cloud of sulfur over the Carson facility, forcing local residents to shelter indoors, has only compounded these fears.

Should the proposed Tesoro Savage terminal in Vancouver — a crude-by-rail terminal located to ship crude oil from North Dakota, Montana and Canada to refineries in Washington and California, including Long Beach — get the go-ahead, critics fear the environmental toll from a marked increase of shipped crude along the West Coast.

And while a nine-month investigation by the Federal Trade Commission and the California Attorney General’s office resolved potential antitrust concerns, industry watchdogs fear Tesoro’s growing leverage on oil production on the West Coast because of the company’s apparent involvement in a scheme to artificially manipulate gasoline prices in California.

“Theoretically, having greater refining capacity is good for gas prices, except when you have a refinery that [already] controls 28 percent of the gas supply,” said Jamie Court, president of Consumer Watchdog. “The market power in Tesoro’s hands is very dangerous.”

Holes in the Draft Report?

Tesoro’s oil refinery in Wilmington, California. A proposed integration project linking Tesoro’s Wilmington and Carson refineries could see crude throughput increase by as much as 17,000 barrels a day, say independent experts. (Photo: Daniel Ross)

Tesoro’s refineries loom large over a sprawling steel-and-concrete industry-scape of truck-laden freeways, railroad tracks, smoke stacks and inner-city oil fields. Wilmington and Carson have the highest concentration of oil refineries in the whole of California, while the adjacent port of Long Beach is a busy commercial hub known for the worst ozone levels in the country.

Nestled among this industrial spider web are pockets of largely low-income, minority communities — neat little housing tracts dotted with dusty citrus trees and parched brown lawns shriveled dry through the drought. The refineries at Carson and Wilmington are situated in the 99th and 94th percentile most pollution-burdened areas in California respectively, meaning that those living there are exposed to some of the highest concentrations of traffic and diesel fumes, ozone, and other toxic emissions in the state.

Only a few years ago, the two refineries in Wilmington and Carson were ranked one and two of all facilities in California that disproportionately pollute communities of color.

According to Tesoro, the $450 million integration project will bring in $86.4 million in tax revenues, create approximately 700 construction jobs at peak construction and reduce local greenhouse gas emissions to the equivalent of removing more than 13,500 cars from local roads each year. The closure of an aging Fluid Catalytic Cracking Unit will contribute greatly to these goals, officials say.

“We are confident the project’s proposed modifications will reduce local emissions, at minimum, by the quantities outlined in the DEIR,” wrote Brendan Smith, a Tesoro spokesperson, in an email.

Work on the project could begin as early as this fall, after formal responses to public comments on the draft report have been made. The South Coast Air Quality Management District will only certify the DEIR if it “accurately analyzes the proposed modifications, including emission levels,” a spokesperson for the district wrote in an email.

Critics of the project and of the air quality management district’s ability to regulate emissions point to what they see as a number of important questions left unanswered in the report — questions pertaining to issues like the broader impacts on overall toxic emissions, especially in light of California’s plan to cut greenhouse gases by 40 percent by 2030. How would a refinery that has undergone significant modifications and expansions withstand a major earthquake?

More pointedly, some are concerned about Tesoro’s plan to maintain the credits it currently possesses under the Regional Clean Air Incentives Market (RECLAIM) air emissions cap-and-trade program.

“The thing that’s so absurd about their contention is that they’re not going to retire those credits,” said Adrian Martinez, staff attorney with Earthjustice. “They’re just going to keep them so they can sell them or use them to emit more pollution elsewhere. Refineries have long been the LeBron James or Michael Jordan of using the pollution trading system on the south coast to their benefit.”

The extra 3.4 million barrels in storage capacity is another sticking point. Officials say this vast uptick is necessary to expedite the offloading of crude at Long Beach port, thereby reducing emissions as oil tankers come and go more quickly. But that explanation alone doesn’t justify the sheer volume of crude storage increase, critics argue, and they wonder what Tesoro plans to do with the extra crude, if the throughput of processed oil only increases by 6,000 barrels a day.

“The public has been lied to, the public has been misled, and there hasn’t been full disclosure of information that’s important for us to know,” said Jesse Marquez, executive director of Coalition for a Safe Environment and a noted activist in the area for many years.

While the integration project proposes a number of modifications designed to modernize equipment and reduce emissions, these modifications don’t go far enough if pollutants are to be reduced to the promised levels, said Marquez. “What technologies are they not incorporating that would guarantee we have reductions in the future? That’s what concerns me.”

Gasoline Price Fixing in California?

Tesoro’s oil refinery in Carson, California. Carson and the adjacent City of Wilmington are two of the most pollution burdened regions in the state. (Photo: Daniel Ross)

Relative to national gasoline prices, which have dipped as global crude costs have slumped, the price of gasoline in California has remained the highest in the US — a phenomenon widely attributed to a February 2015 explosion at the Exxon oil refinery in nearby Torrance, which supplies 20 percent of Southern California’s gasoline. The explosion slashed oil production at the facility by more than four fifths while repairs ran on for months.

In a bid to capitalize from the accident, a cabal of oil producers, including Tesoro conspired to artificially manipulate the price of gasoline in the state, Consumer Watchdog has reported. The organization points to a disparity between the low market costs of gasoline and the high prices at the pump, as well as conflicting explanations from industry figures as to why gasoline prices are so high.

“I wouldn’t say we were turning our customers away,” admitted a representative for energy infrastructure company Kinder Morgan, at an August Petroleum Market Advisory Committee meeting, in response to reports that the increased volume of oil imports brought about by the Torrance refinery explosion was too great to manage at California’s terminals.

A Consumer Watchdog analysis states that drivers in the state have overpaid by $10 billion, due to the higher gas prices.

Court told Truthout that an increase in crude oil storage capacity could help shore up the gasoline market in California. But first, he said, systemic changes need to be made to the state’s oil industry. This includes greater transparency and accountability of maintenance schedules, reporting refinery outages and accidents in real time, and asking companies to publicly disclose weekly supply figures.

“Putting too much power into a refinery that already has 28 percent of the market — and increasing that to 30 or 33 percent of the market — would give undue market power to a company likely to abuse it,” Court said.

Tesoro declined to comment specifically on Consumer Watchdog’s allegations, wrote Brendan Smith, adding that there are “many factors” that determine the price of gasoline. “These include the cost of crude oil, distribution and marketing costs, refining costs and federal and state taxes. The market place and market conditions, such as supply and demand, determine the price that consumers pay at the pump,” Smith wrote.

National Impacts of the Project

Tesoro’s oil refinery in Wilmington, California. Wilmington and the adjacent City of Carson have some of the worst asthma rates in the state. (Photo: Daniel Ross)

If the Tesoro Savage Vancouver Energy Project gets the green light, the door will be opened for Bakken crude oil from North Dakota and Montana, as well as crude from the Canadian tar sands, to make its way south to Long Beach. The proposed Vancouver terminal is estimated to be the nation’s largest oil-by-rail marine terminal, moving some 360,000 barrels a day, 60,000 of which are earmarked by Tesoro.

“I think this integration project is part of Tesoro’s plan to figure out how they’re going to wrap up refining on the West Coast,” said Kristen Boyles, a staff attorney with Earthjustice who has monitored progress on the Vancouver terminal as a final decision inches closer.

Boyles and other leading environmentalists are concerned about an increased movement of crude oil on the West Coast, given the dangers inherent with shipping crude oil by rail, boat or pipeline over long distances.

The recent derailment of a crude tanker at Mosier, Oregon, has only heightened these fears. In June, a Pacific Union train slid off the tracks near the small Columbia River Gorge town, spilling as much as 42,000 gallons of Bakken crude into the local environment, and prompting the evacuation of roughly 300 people from a mobile home park. Some of the oil caught fire, while a nearby wastewater treatment plant was also contaminated.

Three years ago, nearly 20,600 barrels of crude spilled from a Tesoro pipeline in Tioga, North Dakota, an incident described as one of the biggest onshore oil spills in recent US history.

“The well-to-wheel impact of greenhouse emissions is already huge,” said Boyles. “But the spill risk every time oil is transferred and shipped is immense. An oil spill in any of these areas these trains go through will be devastating.”

A potential switch in the types of crude oil processed at Tesoro’s integrated refinery also comes with increased dangers, said Julia May. Bakken crude would accelerate corrosion of the refinery’s equipment, increasing the likelihood of an explosion occurring, she said, and would introduce an “additional content of toxics,” including benzene and sulfur gases like hydrogen sulfide.

“The draft EIR ignores these significant impacts, and thus violates [the California Environmental Quality Act],” May said.

Tesoro’s spokesperson Brendan Smith wrote that the refinery integration project is “completely separate and independent” from the Vancouver Energy project, before admitting that the Vancouver terminal has the potential to “displace 30 percent of the crude oil currently imported from foreign countries for use on the West Coast.”

Local Residents Suffer Health Effects

Tesoro’s oil refinery in Wilmington, California, near Long Beach, which is a busy commercial hub known for the worst ozone levels in the country. (Daniel Ross)

As the clock ticks on the final Environmental Impact Report, many local residents living in the shadow of the plants are unaware of the changes likely to occur on their doorsteps. Of those familiar with the project, however, many fear that damage has already been done, even if emissions are reduced as promised.

Six years ago, Venes Derama moved with her mother and four children to a rented house in West Long Beach on the northeast corner of Tesoro’s Carson plant, where a 15-foot wall separates them from the guts of the refinery and a railway line on which train carts rumble by morning and night.

Before they moved to West Long Beach, theirs was a healthy family, Derama, 53, said. Now, she wakes up in the middle of the night struggling for breath, and was prescribed an inhaler to cope with her breathing problems. “I have headaches all the time. I take pills but they don’t work.”

Her son Mike, a 27-year-old student, was born with asthma, which disappeared as he got older. After the family moved to their new home, his asthma returned.

Derama’s mother was 85 when she passed away in 2013 after her health, and her breathing in particular, deteriorated fast, Derama said. “In the end, she just couldn’t breathe.”

“My children, they’re always bugging me, ‘mum, we need to get out of here,'” she said. “Sometimes I smell gas. I check everything, and can’t find anything wrong. But the smell of gas is strong.”

Wilmington and Carson have some of the worst asthma rates in the state. And Alicia Rivera, an organizer with Communities for a Better Environment, describes how, through her work, she meets many adult residents suffering from an “array of respiratory, cardiac, and cancer ailments.” Those residents include Merilee Hartzell, 59, who has lived beside the Carson refinery “on and off” all her life.

Hartzell says that the air quality in Carson has markedly improved in recent decades. “Oh God, our air was really screwed up back [in the ’60s and ’70s],” she said. “We had actual smog alerts where they would keep you in through the day. You could look out and never see the city of Los Angeles.” Still, she remains skeptical about the integration project.

“Honestly, I think they should break the whole damn place up,” she said. “At this point in time, we should be shutting [refineries] down and building solar panels and windmills. I don’t understand why we’re still having discussions over it. We’ve been discussing getting off gasoline since the ’60s.”