Tesoro CEO optimistic about union negotiations

Tesoro Corp. CEO Greg Goff said Tuesday he’s “comfortable” believing his company can reach an agreement with the United Steelworkers on contract negotiations that affect five of Tesoro’s seven refineries.

“We continue in negotiations and each (plant) has its own agreement,” Goff said. “We feel comfortable that we can reach resolution with the union.”

San Antonio-based Tesoro has been in prolonged talks with the United Steelworkers, who’ve rejected the company’s offers on a contract that expired Jan. 31. Workers at Tesoro’s largest plant, in Martinez, Calif., voted March 5 to authorize a strike, but they haven’t taken further action.

Goff made his comments during a brief telephone interview Tuesday following the annual meeting of the American Fuel & Petrochemical Manufacturers in San Diego.

At the meeting, Goff and Valero Energy Corp. CEO Bill Klesse said the industry faces onerous environmental regulations that make it difficult to generate strong returns for shareholders.

Goff said that the industry has spent $9 billion slashing the sulfur content of gasoline by 90 percent to meet Environmental Protection Agency standards phased in from 2004 to 2007, according to its website. Now, the EPA wants refiners to cut sulfur again. That could double or triple what the industry initially spent, Goff said.

Klesse told those at the conference that San Antonio-based Valero plans to scale back capital investments in its California plants because of the state’s environmental regulations, Bloomberg News reported.

Valero has two refineries in California: the 170,000-barrel-a-day Benicia plant and a 135,000-barrel-a-day plant in Wilmington.

As for Tesoro, Goff said some of California’s regulations “are still being formulated, so it’s hard to say how it would affect our investment plans.”

Klesse also said at the meeting that rising domestic production of light sweet crude oil will displace much of the light sweet crude that refiners now import, Bloomberg News said. Some of the light sweet crude is coming from the Eagle Ford Shale formation of South Texas, Klesse has said.

The change means heavy sour crude oils, which historically have been less costly to purchase, won’t have the same price advantage. That means Valero’s plan to build a coker to process heavy crude at its Port Arthur refinery is on indefinite hold, Valero spokesman Bill Day said.

Day said the company has purchased some key parts to build the Port Arthur coker, but “no construction has taken place.” Valero had planned to spend about $500 million on the coker.

Valero continues to go forward with a hydrocracker at the Port Arthur plant that is expected to be finished by the third quarter and operating by year’s end, Day said. The hydrocracker will produce diesel and gasoline, company officials have said.

vvaughan@express-news.net