The troubled ExxonMobil refinery in Torrance is set to get new ownership under a $537.5 million deal announced today by petroleum refiner PBF.
The 750-acre refinery has been under scrutiny by local and state regulators since a massive explosion at the facility in February touched off shaking the equivalent of an 1.7 earthquake.
The refinery has been operating at 20 percent capacity since the explosion sent flames and ash into the sky and four workers to the hospital, which has helped keep retail gasoline prices high for motorists.
The deal between ExxonMobil and PBF is expected to be finalized by next spring. In the meantime, ExxonMobil is expected to fix any safety and environmental problems at the refinery.
“We’re going to spend the next six months, between now and closing, learning as much about the plant as we can," said Jeffrey Dill, the president of PBF’s western division, "making sure that when we take the keys, we can operate safely and reliably going forward.”
California typically relies on the refinery for about 10 percent the special fuel blend the state requires to cut exhaust pollution.
Dill said under terms of the deal, ExxonMobil remains on the hook for repairing any equipment damaged in the February explosion.
In a statement, ExxonMobil officials acknowledge the deal hinges on the company making those repairs and getting regulatory approval for the fixes. The statement also said the change in control of the facility is expected to take place by the middle of next year.
Local consumer and environmental activists vowed to make sure Exxon complies with its obligations repair the facility, even after the change of ownership.
“They can’t walk away from the liability,” said Liza Tucker with Consumer Watchdog. “They will be held accountable.”
Tucker said that a major oil company selling to an independent refiner could be good for California consumers. “Any new blood we can get into the market is a good thing, because it’s not boosting consolidation even further," she said.
A deal in the making before the blast
The Torrance plant is the second ExxonMobil refinery purchased by PBF in the last four months. Rumors of a sale have circulated since last year when Reuters reported that ExxonMobil was trying to sell four U.S. refineries not associated with neighboring chemical plants.
“It has been a process that has gone on for a while, but we’re happy to have it completed,” Dill said.
The transaction may have been delayed by February’s blast.
On that day, a loud sonic boom brought 50 firefighters to the refinery, where too much pressure in the refinery’s catalytic cracker unit forced hydrocarbons into an electrostatic precipitator, creating a fire that contaminated 8 workers and sent four others to the hospital.
Exxon and the refinery have faced mounting criticism in the subsequent months, as the company ignored or refused to cooperate with several subpoenas from the U.S. Chemical Safety Board.
Federal, state, and regional regulators continue to investigate environmental and health concerns related to the incident.
Ongoing safety concerns at the plant
In August, regulators from Cal/OSHA fined ExxonMobil $566,600 and issued more than a dozen workplace violations for the incident, including some deemed especially grave because the agency “found that Exxon did not take action to eliminate known hazardous conditions at the refinery and intentionally failed to comply with state safety standards.”
Earlier this month, the refinery leaked modified hydrofluoric acid for at least 15 hours. While some local authorities downplayed the seriousness of the incident, the leak is under investigation by Cal/OSHA, and it has underscored ongoing safety concerns in surrounding neighborhoods.
PBF says it intends to continue using the chemical in its process. “We’re pretty comfortable with the features of the [unit where the hydrofluoric acid is used] now,” said Dill. He pointed out that PBF has had no reportable releases of hydrofluoric acid at its New Jersey refinery in the past five years.
ExxonMobil recently announced it would scrap efforts to use outdated filtration equipment to get the Torrance refinery up and running. The equipment would have increased emissions from the unit, but ExxonMobil vowed to reduce pollution from other parts of the facility to compensate.
Under normal operating circumstances, the Torrance facility refines about 20 percent of Southern California’s oil, but in recent months, the plant's output has dwindle to a fifth of its permitted capacity.
California gasoline is refined under a different process than in the rest of the country, with additives to make it cleaner burning. Those additives boost the price of gas about 40 cents a gallon in California.
Production slowdowns, like the one underway in Torrance, can have a dramatic impact on gas prices. Californians have been paying about 70 cents a gallon more than the rest of the country; in Los Angeles on Wednesday, gas is about 82 cents above the national average, according to the AAA Fuel Gauge Report.
The reduction in output has also put a dent in Torrance city finances. Utility-users taxes amounting to $500,ooo to $700,000 a month have been a key part of the city’s budget. The refinery also pays property taxes, which amounted to $25 million a year in 2011.
ExxonMobil and its predecessors have operated the refinery in Torrance since 1955.
The company’s M-70 pipeline carries heavy crude from the San Joaquin Valley. Unlike ExxonMobil, PBF is what the industry calls a "downstream" company only: it refines oil, but does not produce it. PBF has also acquired ExxonMobil’s logistical facilities in Vernon and the Atwood area of Orange County as well as pipelines that connect the refinery to the harbor complex and LAX.
PBF's Dill said the company intends to offer jobs to the 700 of employees working for ExxonMobil in Torrance now, including members of United Steelworkers 675 and the International Brotherhood of Electrical Workers.