Chevron threatens to cut gas supply in state

Bernadette Tansey, Chronicle Staff Writer

Tuesday, June 5, 2001, ©2001 San Francisco Chronicle

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/05/MN159275.DTL&type=news

Chevron Corp. will reduce gasoline production at its two California refineries unless they are exempted from rolling blackouts, the company's chief executive warned Gov. Gray Davis.

In a move that could raise California gas prices, Chevron's Richmond and El Segundo plants will scale back output and rely solely on the power provided by their own electrical generators, Chevron Chairman David O'Reilly said in a letter Friday obtained by The Chronicle.

Chevron would not say how much less gas it would supply from its refineries, which have a combined capacity of 485,000 barrels per day. But a spokesman for the California Energy Commission said motorists could feel it at the pump.

"Any reduction in production has an impact in the marketplace," said senior fuel specialist Gordon Schremp."Prices are going to go up." Chevron's gasoline sales account for more than 18 percent of the California market, company spokesman Fred Gorell said.

While other California refiners met yesterday's deadline to apply to state regulators for exemptions from temporary outages, O'Reilly said Chevron would not submit an application.

To qualify for one of the exemptions being considered by the state Public Utilities Commission, Chevron would have had to assert that its vulnerability to blackouts would present "imminent danger to public health or safety" -- something O'Reilly said Chevron could not do.

"Chevron will never operate its facilities in a manner that jeopardizes the health or safety of its employees or its neighbors," O'Reilly wrote. Unless the PUC or the Legislature shields Chevron from blackouts, it will rely on its cogeneration plants. Chevron set no time line for cutting production, but Gorell said the company is looking for state action "as soon as possible."

Industry groups, backed by the California Energy Commission, have been pressing state officials to overturn a PUC decision that stripped refineries of a former exemption from blackouts. Legislation that would create a blanket exemption for refineries is stalled in the state Senate.

Davis spokesman Steve Maviglio said the governor has not yet responded to Chevron's letter and has not taken a position on the refinery exemption law proposed by Assemblyman John Dutra, D-Fremont. Industry officials have warned that a refinery blacked out for just a few hours could take as much as a week to bring back online. State regulators could not be reached for comment on Chevron's letter.

Gorell said O'Reilly's letter should not be read as saying that conditions at Chevron could be dangerous if the refineries suddenly lost power. At the Valero refinery in Benicia, however, spokesman Scott Folwarkow said his company did not hesitate to warn in its exemption application that sudden shutdowns can pose a risk.

He said refineries were designed under the assumption that they would have a reliable supply of power. "If you start flipping the switch on and off, unpredictable things can happen," he said.

E-mail Bernadette Tansey at btansey@sfchronicle.com.

©2001 San Francisco Chronicle Page A - 4

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