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Tesoro Blast Shows Pattern of Refinery Safety Problems, Investigator Says

A blast and fire which killed four at Tesoro Corp.'s Anacortes, Washington, refinery today is likely the most fatal accident to strike a U.S. refinery since a 2005 explosion killed 15 people at BP Plc's plant in Texas City, Texas.

"It appears to have the most fatalities of any accident since BP Texas City," Daniel Horowitz, a spokesman for the U.S. Chemical Safety and Hazard Investigation Board, said in a telephone interview. "The Board is extremely concerned about the pattern of safety problems in the refining sector."

Lynn Westfall, a spokesman for Tesoro, didn't immediately return a voice mail and e-mail seeking comment.

Four employees died as a result of the blast and fire at the refinery, Tesoro said in a statement. Three other refinery workers -- a 36-year-old woman and two men, ages 34 and 41 -- remain in critical condition, according to Susan Gregg-Hanson, a spokeswoman for Harborview Medical Center in Seattle. They all have burns over the majority of their bodies.

The fire occurred at a naphtha unit while maintenance work was under way, the company said in a statement. The affected units have been shut down though "major" parts of the refinery remain in operation at reduced rates, according to Tesoro.

'Serious' Violations

The CSB, an independent U.S. federal agency that investigates industrial chemical accidents, has sent a four- person team to investigate the Anacortes refinery accident, according to a statement from the agency.

Tesoro's 58,000 barrel-a-day Salt Lake City, Utah refinery is also under investigation by the CSB after an Oct. 21 fire occurred when flammable liquid overfilled a flare stack and ignited, Horowitz said. The agency said last year it was investigating the incident due to similarities with BP's Texas City accident.

The BP explosion occurred March 23, 2005, when an octane- boosting unit overflowed as it was being restarted. Gasoline vapors spilled into an inadequate vent system and ignited a blast that shattered windows five miles away. Fifteen people were killed and 180 injured, according to the CSB.

The Anacortes refinery received 17 "serious" violations last year from the Washington State Department of Labor & Industries. Fourteen of those violations have been deleted and a $85,700 initial penalty was reduced to $12,250.

Grief Counselors

Tesoro has grief counselors on site, said Joe Solomon, president of the United Steelworkers Union Local 12-591, which represents about 200 workers at the Anacortes refinery. The units that were affected by the fire were shut down and the rest of the plant is stable and operating, he said.

The $2.02 billion company's stock rose 49 cents to $14.39 on the New York Stock Exchange yesterday. The shares have risen 6.2 percent this year.

Tesoro is based in San Antonio and operates seven refineries in the western U.S. Its 120,000 barrel-a-day Anacortes plant, about 60 miles north of Seattle, is the company's second largest and accounts for about 18 percent of its systemwide 664,360 barrel-a-day capacity.

Unplanned and planned outages can increase prices for petroleum products as refiners turn to spot markets to help them meet supply contracts. Operational disruptions can also depress prices for crude oil because less feedstock is needed.

Fuel Production

"For the units involved in the fire, that could be several weeks" before they return, said Andy Lipow, president of Lipow Oil Associates LLC, a Houston-based consulting company. "In the Pacific Northwest, prices are liable to rise."

The plant manufactures gasoline, jet fuel and diesel for markets in Washington and Oregon. It receives oil by pipeline from Edmonton, Alberta, and by tanker from Alaska and foreign sources, according to the company's Web site. The plant also processes intermediate feedstocks such as heavy vacuum gas oil that are produced by other Tesoro refineries or purchased in the spot market.

The discount to futures for conventional, 87-octane gasoline widened 0.5 cent to 6 cents yesterday in Portland, according to data compiled by Bloomberg. The prompt delivery price gained 0.87 cent a gallon to $2.2637.

Regular gasoline at the pump in Seattle, Bellevue and Everett, Washington, rose 0.3 cent to an average $3.003 a gallon, AAA, the nation's biggest motoring organization, said today on its Web site.

To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net Jessica Resnick-Ault in New York at jresnickault@bloomberg.net.

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