Marathon refinery closure could signal big transition for area refineries

MARTINEZ — The recent announcement that Marathon Petroleum will close its Martinez plant has cast a spotlight on the handful of refineries that have defined the region for decades but today are besieged by the double-whammy of a coronavirus pandemic and a growing chorus for a “just transition” to renewable resources.

At stake is cleaner air as well as the jobs of thousands of people and the contributions they and their employers make to the local economy.

For years now, experts say, it hasn’t been a question of whether a transition was going to happen but when, and the steep decline in auto use resulting from stay-at-home orders has accelerated the timetable for that discussion.

Congressman Mark DeSaulnier, who represents the district in which some of the refineries including Marathon are located, says he started conversations with labor groups, industry leaders and environmentalists before the pandemic struck because the reckoning for the oil industry has been a long time coming.

“The question was, how do we prepare for life without these facilities?” he said in an interview last week. “Because we’ve got to prepare for it.”

Marathon Petroleum, which bought the Martinez refinery in 2018, announced at the end of July it will indefinitely idle the facility and begin laying off its 740 employees in October, canceling contracts that provide temporary employment to between 250 and 2,500 people at any given time.

“This decision to indefinitely idle the Martinez Refinery is based on the company’s ongoing assessment of our operating costs and the competitive position of our assets, as well as our continued evaluation of the broader economic and financial impacts of COVID-19,” Patty Deutsche, the company’s director of government and public affairs, told this news organization in an emailed statement.

The refinery, which started pausing operations in April after coronavirus-spawned lockdowns sent demand for oil plummeting, has mostly produced gasoline and diesel, as well as some propane, petroleum coke and other products. For now it’ll be used as a fuel storage facility, Deutsche said.

Meanwhile, Marathon is exploring a plan to turn the site into a 48,000 barrel-per-day renewable diesel operation. It intends to apply for permits to make that switch, company leaders have told Contra Costa County.

If permits are granted, Marathon could start producing diesel in a couple of years and hit “full production” by 2024, Deutsche said.

Marathon isn’t alone in making changes.

Chevron has said it made changes to its refineries in response to the lower demand for oil, although it has not publicly disclosed how that has affected its Richmond plant. Other energy companies with refineries in the area — Phillips 66, Valero, and PBF Energy — have also adjusted production levels since the start of the pandemic.

The price of crude oil and gasoline plummeted when much of the nation went on lockdown because refineries couldn’t stop production fast enough, said Severin Borenstein, an energy economist at UC Berkeley who has studied the oil and gasoline industries.

As a result, the “long, slow decline” of the oil industry that has been forecast because of the push for renewable, cleaner energy suddenly picked up steam, Borenstein said. “The pandemic came along and really whacked them,” he added.

“It’s an unfortunate situation. There are literally hundreds of thousands of workforce hours that come out of that facility,” Bill Whitney, head of the Contra Costa Building Trades Council, said of the Marathon refinery closure. “It impacts fitters, welders, boilermakers, ironworkers, painters, electricians, laborers. So across the board, it will have an impact.”

Tracy Scott, of United Steelworkers 5, called the impact “devastating,” acknowledging the outlook for traditional oil refinery work is “not looking good in the moment.”

He said the union is trying to help the hundreds of workers it represents get new jobs.

Some environmentalists say that had the “just transition” from oil to renewable energy started long ago, such sudden job losses could have been avoided. They say the companies should start start scaling down oil refining for export now to ensure workers can be trained to gradually shift into new energy technology jobs.

Shutting down a refinery abruptly like Marathon did doesn’t accomplish that because it’s unplanned, said Greg Karras, a longtime environmentalist with Community Energy reSource who recently completed a report about breaking away from oil refineries in California. It’s incumbent upon policymakers to figure out long-term solutions now, he added.

Marathon’s renewable diesel facility plan is not the ultimate solution, he said, noting that, for one, renewable diesel still involves burning. There’s also a limited capacity for developing the agricultural products required for renewable diesel.

“Should we really be using our limited capacity just so companies like Marathon can squeeze out a few more bucks?” he asked.

And although storing oil at the facility in the interim will at least reduce the refinery’s emissions, the operation will require only  about 60 jobs.

“The longterm question is, ‘what’s the best and highest use of that land?'” Karras said of the Martinez facility. “Probably most people who live around it would say it’s not just storing oil there.”

Contra Costa Supervisor John Gioia told this news organization he has talked to fellow government officials and others about planning for the future.

Gioia, who sits on the air district board, said he’s heartened by the possibility of Marathon investing in renewable diesel but believes there needs to be discussions about the long term for all the refineries.

“How do we think in the future,” he said. “About going forward with transitioning these well paid workers and well-paying jobs into future well-paying jobs.”