Deadline Passes in U.S. Refinery Workers Contract Talks
Sunday, February 1, 2015
BY ERWIN SEBA
Union leaders and oil companies were unable to agree on a new labor accord on Saturday for workers at 63 U.S. refineries as a deadline passed that could lead to a strike. The United Steelworkers union (USW) said in a text message sent to members that the latest offer from companies was "insulting and fails to address issues that matter to members."
Royal Dutch Shell Plc, the lead negotiator for U.S. refinery owners, has said it does not comment on details of labor negotiations. The USW talks have been occurring against a backdrop of falling oil prices. "We remain committed to resolving our differences with the USW at the negotiating table," said Shell spokesman Ray Fisher. The expiring national contract covers about 30,000 hourly workers at plants that together have two-thirds of U.S. refining capacity.
Failure to reach an accord could lead to walkouts, though some refineries have contracts in place with local union chapters that would keep operations running. In the event of strikes, companies have said they would call on trained managers to use as replacement workers. The proposal rejected on Saturday was the fourth offer turned down by the USW since negotiations for a new three-year agreement began on Jan. 21. The contract began expiring at 12:01 a.m. Eastern Time (0401 GMT) on Sunday.
The Steelworkers issued strike notices on Friday night to several U.S. refineries where contracts expire on Sunday. While the current national agreement expires on Sunday, each refinery has an individual contract based on the national agreement. A strike notice is legal notification of a possible strike by a labor union at that location. It does not mean that a strike will take place. "All of the locals that have contracts expiring on Feb. 1 were instructed to issue strike notices to the companies," one of several sources said.
The sources did not know which refineries received the notices, but only those plants where the local contract expires at 12:01 a.m. local time on Sunday in the time zone where each refinery is located. Exxon Mobil Corp said its refinery in Beaumont, Texas, received a strike notice. USW International Vice President Gary Beevers, who is negotiating on behalf of the union, will decide at which refineries strikes will take place after the contract expires.
The USW is seeking annual pay raises double those of the last agreement. It also wants work that has been given in the past to nonunion contractors to start going to USW members, a tighter policy to prevent workplace fatigue, and reductions in members' out-of-pocket payments for healthcare.
DROPPING CRUDE PRICES
The drop in oil prices since last summer may have cut the union's ability to win its objectives, said an oil industry analyst. "I think the union would have had a lot more leverage six months ago when the price (of oil) was $100 a barrel," said Andrew Lipow, president of Lipow Oil Associates in Houston. "But now, when the industry is facing hard times and layoffs have been announced, their bargaining power is limited."
Independent refiners, such as Valero Energy Corp, have reaped big profit in recent quarters by tapping cheap inland crudes from the U.S. shale oil revolution, while integrated companies like Exxon Mobil have seen their U.S. refining units provide a cushion against falling prices that have hurt their upstream businesses. "The drop in oil prices has benefited the refining side of the oil majors’ operations and also the independent refiners as well," said USW spokeswoman Lynne Hancock. "Even though the refiners’ margins may not be as high as they were before the oil price decrease, the refiners are still making money."
West Texas Intermediate crude delivered at the Cushing, Oklahoma, oil hub finished on Friday at $47.76 a barrel. Oil prices rose more than 8 percent on Friday due to an attack by Islamic State militants toward the Iraqi oil production center of Kirkuk. Analyst Lipow does not expect oil or gasoline prices will go up in the event of a strike. "Attacks on Kirkuk will drive up prices, but a strike by the USW will not," he said.