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Refiners, Union Workers Extend Contract Talks as Strike Looms

Bloomberg

 

 

By Barbara Powell, Aaron Clark and Jordan Burke

Feb. 1 (Bloomberg) — Royal Dutch Shell Plc and the union representing refinery workers extended talks on a new contract for at least 24 hours, delaying a possible strike that may affect almost two-thirds of U.S. capacity.

The groups made “sufficient progress” during talks yesterday, Lynne Baker, a United Steelworkers spokeswoman, said in a telephone interview. The rolling 24-hour extension began at 12:01 a.m. U.S. Central Time today and renews each 24 hours until the two sides reach an agreement or the union terminates the contract and gives 24 hour notice that it will strike.

“When you go to rolling 24-hour extensions, it appears they want to reach a settlement, which will keep the union working without disrupting refinery operations,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

The negotiations cover workers at 86 plants representing about 64 percent of U.S. refining capacity, including operations owned by Exxon Mobil Corp., Valero Energy Corp., BP Plc and Chevron Corp. as well as Shell. Gasoline futures prices soared almost 10 percent last week on concern over a walkout.

“The USW has agreed to extend the existing contract given that negotiations continue to be productive and progress is being made,” Stan Mays, a Shell spokesman, said in an e-mail. “Shell is committed to resolving the remaining issues at the negotiating table. We are optimistic that a mutually satisfactory agreement can be reached with the USW.”

Rejected Offer

The union rejected on Jan. 30 Shell’s third offer, which included giving workers a three-year contract with a $500 signing bonus and 2.5 percent wage increases in the second and third years, according to a Jan. 28 memo distributed by the union. Employees would receive a 75 cent-an-hour increase in the first year.

No fourth offer was made, Baker said. Members authorized a strike in October. The contract expired at 12:01 a.m. today.

Local unions negotiating plant-specific contracts that expired at 12:01 a.m. were also asked to institute 24-hour rolling extensions, Baker said. Lyondell Chemical Co. agreed to such an extension with its local bargaining committee, David Harpole, a spokesman for Lyondell, said in an e-mail.

The last national refinery strike happened in 1980 with the walkout lasting for about three months. Union workers received a 23 percent raise in pay and benefits over two years, while failing to get company agreement to fund future medical insurance premium increases, Business Week reported at the time.

Baker earlier declined to say the areas in which progress was made and what issues are still to be resolved. She said the talks focused on safety and health-care issues. Talks are taking place in Austin, Texas.

“While our focus is on reaching an agreement, we do have plans to safely operate in the event of work stoppages,” Mays said in an earlier e-mail.

Valero’s Plans

Valero, the largest U.S. refiner, has a contingency workforce on site at its refinery in Port Arthur, Texas, Bill Day, a company spokesman, said in an interview. It’s made up of non- union workers and managers, he said.

“Valero is still negotiating with unions at the local level, and we’re hopeful that a work stoppage can be avoided,” Day said after the union announced the extension.

Valero plans to keep Port Arthur open if there is a strike and shut its refineries in Delaware City, Delaware, and Memphis.

“We have agreements with the unions at Memphis and Delaware City that if they call for a work stoppage, employees will stay on the job for 72 hours to help complete a safe and orderly shutdown of the plants,” Day said.

The Memphis refinery can process about 182,000 barrels of oil a day, according to Energy Department data. The Delaware City plant can process 190,200 barrels a day, while the Port Arthur plant can process about 294,000 barrels a day.

BP Plant Closures

BP, Europe’s second-largest oil company, has estimated that a walkout could affect four of its U.S. refineries processing about 1.3 million barrels of crude a day, said Scott Dean, a spokesman. The company plans to shut plants where there is a strike.

The union at BP’s Texas City, Texas, refinery reached an agreement on local issues with the London-based company, said W.E. Sonny Sanders, the sub-district director for the state of Louisiana.

Lyondell Chemical “continues to bargain in good faith and will continue as long as we make progress,” David Harpole, a company spokesman, said yesterday. About 500 of the 950 workers at its Houston refinery are union members.

Lyondell has been training salaried personnel for the past year to be replacement workers “who can safely operate the refinery” in the event of a strike, Harpole said. “They are able to take over if necessary. There would be no impact to operations.”

Shell, Exxon Mobil

Shell and Exxon Mobil are preparing to keep their U.S. plants running in a walkout, using managers and other non-union employees to keep sites operating.Prem Nair, a spokeswoman for Exxon Mobil, the world’s largest fuel maker, declined to comment yesterday on the status of the negotiations.

Chevron, the second-biggest U.S. oil company, may keep operating its refineries in the event of a strike.

A strike could affect 58 percent of the workers responsible for the nation’s fuel supply, union spokeswoman Baker said. The current contract was reached in 2002 and was extended in 2005.

The union’s national bargaining policy calls for higher wages, including a cost-of-living adjustment, as well as full medical, dental and vision-care benefits for workers and retirees. Local unions also may call strikes if they don’t reach agreement on issues such as work schedules and overtime.

To contact the reporters on this story: Aaron Clark in New York at[email protected]Barbara Powell in Dallas at[email protected]Jordan Burke in New York at[email protected]

Last Updated: February 1, 2009 00:01 EST

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