Union Workers Gear Up for Negotiations With Oil Refiners

The United Steelworkers, which represents about two-thirds of workers at U.S. refineries, said its members are ready to claim their share of the U.S. shale bounty that has boosted refiners’ earnings.

The USW wants a “substantial” increase in wages, stronger rules to prevent fatigue and measures to keep union workers rather than contract employees on the job, Gary Beevers, the USW international vice president who manages the union’s oil sector, said yesterday in Pittsburgh. He said the union is ready for the biggest fight in his time as leader. For the first time in at least 20 years, members decided to set aside funds for workers should they have to strike.

“The last two cycles of bargaining happened when the economy was rough, and we tried to find some reasonable solutions and we did,” Beevers said. “Today, the oil industry is making good money. The price of oil is down. It’s time that we get serious about some things we’ve seen erode over the last several years.”

A nationwide strike of USW workers would threaten to halt as much as 63 percent of U.S. fuel production. This round of negotiations is scheduled to start in early January, before the Jan. 31 expiration of the current contract. At the Pittsburgh conference, union delegates approved a policy that sets the priorities for next year’s talks.

Royal Dutch Shell Plc, which represents the oil industry in bargaining with the USW, is “optimistic that a mutually satisfactory agreement can be negotiated with the USW,” Kimberly Windon, a spokeswoman for The Hague-based company, said by e-mail from Houston yesterday.

Best Performers

Refiners in the Standard & Poor’s 500 have more than doubled since the beginning of 2012, when the steelworkers last negotiated an agreement with companies including Exxon Mobil Corp., Chevron Corp. and Shell. Marathon Petroleum Corp. and Tesoro Corp. went on that year to take their place among the 10 best performers in the S&P 500 Index.

Plants are processing the most crude for this time of year since 2006, taking advantage of a domestic shale boom that has propelled the nation’s oil production to the highest level in at least three decades.

Phillips 66, the largest U.S. refining company by market value, more than doubled profits in the third quarter as crude costs fell. Tesoro and Marathon quadrupled their net income.

Beevers said he senses that refiners are “looking for a fight” in this cycle of contract talks.

“I’m expecting the most difficult negotiations that I’ve seen in the three terms as vice president of the oil sector,” he said. “We have an industry that has very, very good profits telling us we don’t deserve a good piece of the pie, and we disagree.”

Strike Fund

Beevers said the decision to create local funds that would help compensate workers during a strike shows union members are “getting prepared for the worst.”

Todd Spitler, a spokesman for Exxon based in Arlington, Virginia, said the company has met with local union leaders in advance of the current contract’s expiration, “exchanging information, discussing opportunities and working to resolve any local issues.”

“The negotiation process has been successful in the past and resulted in agreements that were mutually beneficial for both the company and the unions,” Spitler said.

Refiners have been cashing in on the biggest-ever domestic oil boom, driven largely by volumes being pulled out of shale formations using hydraulic fracturing and horizontal drilling. The surge in production lowered U.S. oil prices by 14 percent and helped bring down the international benchmark North Sea Brent crude 16 percent in the third quarter.

During the last bargaining year, United Steelworkers and Shell took about a month to reach a national agreement. That contract, which was used as the foundation for individual refinery contracts with union locals, called for pay increases of 2.5 percent in the first year and 3 percent in the second and third years, along with safety improvements.

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