Did Chevron’s Refinery Fire Deserve Just a Finger Shake From Regulators?

Federal safety investigators from the U.S. Chemical Safety and Hazard Investigation Board issued a severe critique Wednesday of Chevron’s (NYSE:CVX) response to its huge refinery fire last August. The agency compiled a technical report in conjunction with the California Division of Occupational Safety and Health (Cal/OSHA) that evaluated the condition of Chevron’s piping from samples taken from the Richmond, California, refinery.

On the day of the accident, August 6, 2012, a pipe leading from a unit that processed oil into hydrocarbon products began leaking, causing a dense, white cloud to stretch approximately 1,000 feet into the air above the plant before it ignited and triggered a massive blaze.

Analysis revealed that damaged 8-inch pipe, which was installed in 1976, had ruptured due to “severe sulfidation corrosion,” and furthermore, the tested samples showed a very low level of corrosion-inhibiting silicon.

From this diagnosis, Cal/OSHA Chief Ellen Widess concluded that the fire was not accidental, but the result of negligence. “This report confirms what Chevron already knew – that the pipe was severely corroded and should have been replaced – but failed to act on before the August fire,” she said in a statement. “This failure to act was included among the multiple Serious and Willful Serious citations issued to Chevron.”
Not only did the company not follow proper precautions in advance, but officials did not follow good safety practices during the blaze. CSB Chairman Rafael Moure-Eraso explained in a statement released along with the report that Chevron continued to troubleshoot the problem when it was not safe to do so, sending firefighters out to search for leaks while flammable hydrocarbons were still leaking from the pipe.

Chevron has not yet completed its own investigation into the incident, but the company has already begun making changes in response. As Reuters reported, the company has taken corrective actions to strengthen management oversight, process safety, mechanical integrity, and leak response. But the fact remains that Chevron, the second-largest U.S. oil company, did not comply with public safety standards and put both workers and the public at risk, which brought a record fine of nearly $1 million from the California Division of Occupational Safety and Health.

The million-dollar fine is just one of the company’s worries. It has also suffered from lower production capabilities because of the incident; the crude unit at the 245,000 barrel-per-day refinery will only restart refining at the end of March.

Investing Insights: A Quick Look at the Nexen Situation.