July 6 (Bloomberg) -- Chevron Corp.’s oil refinery near the San Francisco Bay will keep using equipment that dates as far back as the 1930s to process crude into gasoline and other fuels after a judge halted replacement of the oldest units.

Fuel production will continue at the Richmond, California, plant with existing equipment, some of which is seven decades old, while Chevron and municipal officials decide how to respond to the court order, Brent Tippen, a spokesman for second-largest U.S. oil company, said today in an interview.

San Ramon, California-based Chevron has dismissed 100 construction workers and other contractors since July 2 and plans to send another 900 home by the end of August after Contra Costa County Superior Judge Barbara Zuniga last month ruled the environmental permit covering the project was inadequate.

Chevron wants to replace steam boilers built in the 1930s and a hydrogen plant installed in the 1960s to allow the Richmond refinery to handle a wider variety of crudes, decrease breakdowns and use less energy. Construction began in September after three years of public hearings and permit deliberations, Tippen said.

“We believe the project was properly analyzed and permitted,” Tippen said in a telephone interview from the Richmond plant, Chevron’s third-largest refinery. “It’s going to take about a 60-day time frame to dismantle the project.”

Communities for a Better Environment, one of the groups that sued to halt the project, said allowing Chevron to proceed would result in more pollution than keeping the old units in service. Greg Karras, the organization’s senior scientist, said Chevron plans to import thick, high-sulfur crude from Alberta, Siberia and Venezuela.

‘Old Equipment’

“The community wants the old equipment replaced, but it doesn’t want and can’t afford to have it get even dirtier,” said Karras, a biologist whose group says it has 20,000 members. “The grades of oil Chevron wants to start refining there are inherently more polluting.”

Tippen said the upgrade would allow the Richmond plant to process oil with as much as 3 percent sulfur, compared with 1.7 percent now. The plant won’t be able to handle any heavier crudes than it already does, he said.

“Physical limitations in the crude unit do not allow processing heavy crudes,” Tippen said.

First-Quarter Profit

The Richmond refinery can process 243,000 barrels of crude a day, ranking the facility behind Chevron’s Pascagoula, Mississippi, and El Segundo, California, plants, according to a public filing.

Chevron, which triggered the Saudi energy boom with the 1938 discovery of oil in the kingdom, in the first quarter posted its lowest profit in five years as energy prices tumbled and U.S. motorists cut fuel use by enough to fill more than 50 supertankers.

The company is scheduled to release preliminary second- quarter data on July 9. Irving, Texas-based Exxon Mobil Corp. is the largest U.S. oil company.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net.

Last Updated: July 6, 2009 16:43 EDT