Refinery Workers Said to Reject Fourth Offer From Producers

The union representing more than 30,000 U.S. refinery workers rejected a fourth contract offer from producers as the two sides work on a new agreement before the current one expires tonight, according to three union representatives familiar with negotiations.

The offer from Royal Dutch Shell Plc (RDSA) to the United Steelworkers, which was turned down yesterday, included an improved wage increase of 2 percent in the first year of the three-year contract and 2.5 percent in each of the next two, according to the representatives, who declined to be identified because they aren’t authorized to speak for the union. An earlier offer proposed 1.5 percent in the first year and 2 percent thereafter.

Shell also offered to tighten some language and definitions related to health and safety in the contract, without agreeing to the union’s demand for a safety specialist at each facility, the representatives said.

The current contract expires at midnight Central time. If no deal is reached, the union may strike or agree to extend negotiations in 24-hour increments. Talks have been held in Austin, Texas, since Jan. 17, with Shell negotiating on behalf of the refiners. The union represents workers at 69 plants.

Industry Plans

“Shell remains optimistic that a mutually satisfactory agreement can be negotiated with the USW,” Emily Oberton, a Houston-based spokeswoman for the company, said. She declined to release any details of the talks.

Oberton said yesterday that Shell has contingency plans for its refineries in the event no agreement is reached.

Gary Beevers, the lead union negotiator, declined to comment through Lynne Hancock, a Nashville, Tennessee-based union spokeswoman. Negotiations continue, Hancock said.

Valero Energy Corp. (VLO) Chief Executive Bill Klesse said the company’s Port Arthur, Texas, refinery received a notice of intent to strike by the union if there’s no national agreement by the deadline.

The company plans to keep the plant operating the Texas plant, while it would shut the Memphis refinery, he said. Five of Valero’s 13 U.S. refineries are represented by the union. He remained optimistic that there will be a settlement.

“We expect there will be an agreement,” Klesse said during Valero’s fourth-quarter earnings call today.

Conoco Plans

ConocoPhillips (COP) has not received strike notices at any of its five U.S. refineries that have USW contracts expiring at midnight, Rich Johnson, a spokesman for the company in Houston, said in an e-mail. He said Conoco is prepared to keep those refineries running in the event of a strike.

BP Plc (BP/) said in a statement that it would cut output at its Whiting, Indiana, plant to “a level that maintains safe winter operations.” The company said it wouldn’t hire replacement workers because “that would disrupt the progress BP has made with the USW in continuing to improve safety and operational performance.”

The union hasn’t struck since 1980, when a stoppage lasted three months. A strike would affect almost two-thirds of U.S. refining capacity, according to the union.

The majority of local contracts expire Jan. 31 and most of the rest later in the winter and spring.

The current pact, approved in 2009 three days, gave 3 percent yearly raises and a $2,500 bonus, while not addressing the union’s demands on health and safety language and procedures. That contract was approved after 12 days of negotiations and three 24-hour extensions.

Union Committee

Beevers and the five-member oil bargaining policy committee must approve an offer, which would then be placed before the union local representing Motiva Enterprises LLC’s Port Arthur, Texas, refinery. Houston-based Motiva is a joint venture of Shell and Saudi Arabian Oil Co.

If approved, the agreement becomes the pattern that companies will use in negotiating local contracts. The national agreement addresses wages, benefits and health and safety. The local agreements cover such areas as job duties.

Contracts between the companies and the local Steelworkers members must incorporate the terms of the national agreement.

To contact the reporter on this story: Barbara J. Powell in Dallas at bpowell4@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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