Refinery workers, such as this one at a refinery in the U.S. South, may go on strike after Jan. 31 if industry management and the Oil, Chemical & Atomic Workers Union fail to agree on terms for new contracts.
Strikes by U.S. refinery workers appear likely after Jan. 31 unless an 11th hour accord is reached soon between refinery management and the Oil, Chemical & Atomic Workers Union (OCAW).
The prospect of widespread strikes is likely to force some refiners to cut throughput as nonunion personnel step in to keep plants running. That in turn is likely to bolster refined products and crude oil futures prices, especially with U.S. refining throughput running recently at more than 90% of capacity to meet demand.
Reports in recent weeks of the imminent closure of a 190,000 b/d refinery in Pennsylvania helped keep a prop under crude and products futures prices on the New York Mercantile Exchange.
Status of negotiations
As of presstime last week, negotiations remained in a quagmire, with the issues to be settled barely hammered out.
The industry, led by Amoco Oil Co., made what was essentially an initial pattern offer Jan. 9 in response to OCAW's original program of contract goals. The union rejected the offer.
"The very best thing you can say about this offer is that it doesn't propose wage cuts, although it comes close to that," said OCAW Chairman Robert E. Wages. "It isn't worthy of any further comment."
OCAW rejected a second offer from Amoco Jan. 19.
"We see it as no improvement whatever over the first one, and there's no way I could dignify it by commenting," Wages said. "We've yet to see a serious offer on our program."
Another OCAW official said, "The most disturbing thing is that this offer makes the initial division wider than you would expect at this stage of the game. Negotiations will continue as long as there is no (further) breakdown. It's a process that normally works itself out, but we've got a longer way to go than normal. Some strikes are probable."
OCAW represents about 40,000 oil industry workers. About 300 contracts with OCAW locals are due to expire this week.
Industry offers
As with the first industry proposal, the second did not cover most of OCAW's contract goals (see table).
OCAW said both offers dealt with only three of the issues included in the union's 10 point program, which was disclosed last fall and presented officially to the industry in December (OGJ, Sept. 25, 1995, p. 35).
Instead of OCAW's proposed 3 year agreement, companies proposed a 2 year contract.
Rejecting OCAW's wage hike plan, industry has offered a one time, $500/employee "nonbenefit bearing" lump sum payment to be paid Feb. 1, with no general wage increase in 1996 and a 1.5% general wage increase in 1997-up from an earlier offer of 1%, OCAW said.
The companies' newest proposal on their contributions toward hospital-medical insurance premiums was unchanged from the earlier offer and effectively maintains the status quo, OCAW said.
Further details of the industry's pattern contract were not readily available. All companies contacted by Oil & Gas Journal declined to comment.
Wages stressed that companies continue to ignore OCAW's No. 1 priority for this round of contract bargaining: job security language preserving em- ployment and protecting its members in the event of sales and transfers of refineries and other facilities during the term of the agreements.
Marcus Hook closure
That issue came dramatically to the fore in recent weeks as U.S. refinery operations began to feel the effect of the breakdown in negotiations shortly after the start of the year.
On Jan. 3, BP Oil Co. disclosed plans to sell its 190,000 b/d Marcus Hook, Pa., refinery this month to Tosco Corp. It is part of BP's worldwide effort to trim refining capacity (OGJ, Jan. 15, p. 32).
BP agreed to turn over the refinery to Tosco in a shutdown mode because of a lack of agreement between management and the OCAW local at the refinery (OGJ, Jan. 8, p. 26). Tosco had said it could operate the refinery profitably only if it cut about 130 of the plant's 535 jobs. Contract talks with the union later collapsed.
OCAW then filed a grievance with BP, claiming the refiner violated its contract by failing to give a 6 month notice before closing the plant. The union disclosed plans to file an injunction to halt the suspension while the grievance goes to arbitration.
BP countered that its suspension of operations as part of its pending sale to Tosco does not amount to a closure requiring the 6 month notice.
Press reports indicate BP started suspension of operations at Marcus Hook Jan. 15 and expected to complete that process by Jan. 25. Reuters news service quoted OCAW local officials Jan. 22 as saying the plant had stopped turning out refined products.
Tosco last week reportedly was interviewing BP managers at the plant to stay on as caretakers during the suspension.
Reuters also reported the union last week disclosed plans to file a grievance with the National Labor Relations Board in an effort to force Tosco to resume bargaining, claiming the refiner in earlier talks did not bargain in good faith.
Job security concerns
In the wake of refinery layoffs across the U.S. in recent years, OCAW's contract proposal placed job security as the top priority.
In addition to detailed wage and benefit provisions, OCAW is seeking specific contract language preserving employment and protecting its members in the event of sales and transfers of refineries and other facilities.
"Our members have suffered wave after wave of massive refinery and plant closures, layoffs, and job eliminations," Wages said. "While laying people off, the companies have mouthed unending euphemisms like restructuring, trimming the fat, becoming lean and mean-and more recently, downsizing, rightsizing, reengineering-to sugarcoat the terrorism they're engaged in.
"What their actions really mean in human terms is, 'They're mean, we're lean'."
While wages in current dollars have increased 11.1% for refinery workers, real wages have risen only 2.6% from January 1993 to January 1996, OCAW maintains. Refinery workers currently average about $18/hr.
Productivity has risen during the same period from about 175,000 b/d/worker to about 200,000 b/d/ worker, OCAW says.
However, industry points out that much of that productivity gain stems from increasingly sophisticated automation of refinery equipment, thus requiring fewer workers, and the closure of many small, inefficient refineries spawned by federal price and allocation controls in the late 1970s and early 1980s.
OCAW's acceptance of some version of the industry's "lump sum" payment proposal would not break new ground. In 1986, U.S. refiners gave workers a $900 lump sum settlement but combined this with a 30/hr wage hike during the contract's first year and a 3% wage increase during the second year.
Under current OCAW contracts, average refinery wages increased 46/hr from the 1993 average of $17.54/hr.
Refineries hit
Refineries have been hard hit in recent years, due in part to the general decline in industry profitability combined with costly new regulations, particularly on the environmental front.
In California, where pollution control regulations are stiffer than anywhere else, several sizable refineries have closed in recent years-two in the past year alone. (OGJ, Dec. 4, 1995, p. 21).
Across the U.S., OCAW says, 25,000 jobs have been lost in the refining sector in the last decade, with 10,000 of these jobs, or 9% of refining industry employment, disappearing during the current contract period.
Yet OCAW maintains that rebounding industry profits in 1995 afford the means for refiners to give workers higher wages and better job security.
Citing statistics in trade publications, OCAW noted profits of the top 20 oil companies soared by more than 100% during first half 1995 compared with the same period the year before.
Some realized huge profit gains in first half 1995, the union noted. Mobil Corp.'s profits jumped by 1,437% the first half of the year, while ARCO's climbed 1,529%. In most instances, however, these big profit swings indicate unusual items related to cost cutting from previous years and/or big swings in upstream and petrochemical profits.
In 1994, oil industry profits were down substantially. The 300 biggest U.S. public oil companies posted an 11.9% drop in profits from the previous year, the OGJ300 survey shows (OGJ, Sept. 4, 1995, p. 49).
Merrill Lynch in early December cited an average U.S. gross refining margin of only $2.89/bbl year to date, the lowest level in 5 years, suggesting refining profits in 1995 will be weak at best. And analysts note the recent surge in petrochemical profits has weakened in recent months.
Safety concerns
Notably absent from OCAW's list of contract goals is language calling for further safety improvements at refineries, where accidents were on the rise in the past year.
The most serious refinery accident in 1995 was an Oct. 16 explosion at the Pennzoil refinery in Venango County, Pa., that killed five workers and injured four. Main processing units of the refinery were down through late December, and start-up of new piping and tankage was being phased in as the year opened.
Refinery explosions and fires resulted in at least seven other fatalities last year.
Since the accidents, OCAW has issued a number of statements decrying the Clinton administration's refusal to fund the Chemical Safety and Accident Prevention Board, a panel that would study the causes of major refinery accidents, instead of merely assessing regulatory compliance (see related story, p. 34). However, OCAW says no new language is needed in new contracts because the union has a policy of accepting no less than was approved in prior years.
The lack of specific safety language comes as a stark contrast to the previous round of contract negotiations, where safety and environmental concerns were top bargaining points. Among other things, OCAW's previous contracts have highlighted improved worker training and monitoring. But the rash of recent, serious accidents has created a need for higher level oversight in Washington, OCAW believes.
Strike prospects
If current contract talks fail to make progress, any widespread strikes would be the first since major layoffs of workers occurred early this decade.
The last nationwide walkout in the U.S. took place in 1980 and prior to that in 1969.
During previous strikes, refineries tapped supervisory personnel and workers brought in from other sites, and plants were able to keep running at near prestrike levels.
In light of layoffs in recent years, sources say this practice would be less effective than in the past, raising the potential for operating cuts and with it increases in product prices.
OCAW is not yet predicting a general strike, but rather, localized strikes of workers at individual refinery sites.
"There is always potential for a general strike, but there is also potential for selective strikes and job actions," a union official said. "We're not moving toward a settlement."
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