The United Steelworkers union, which represents employees at more than 200 U.S. oil refineries, terminals, pipelines and chemical plants, began a strike at nine sites on Sunday, the biggest walkout called since 1980.

The USW started the work stoppage after failing to reach agreement on a labor contract that expired Sunday, saying in a statement that it “had no choice.” The union rejected five contract offers made by Royal Dutch Shell Plc on behalf of oil companies including Exxon Mobil Corp. and Chevron Corp. since negotiations began on Jan. 21.

The steelworkers’ union hasn’t called a strike nationally since 1980, when a stoppage lasted three months. A full walkout of USW workers would threaten to disrupt as much as 64 percent of U.S. fuel production. Shell and union representatives began negotiations amid the biggest collapse in oil prices since 2008. 

“The problem is that oil companies are too greedy to make a positive change in the workplace,” USW International vice president Tom Conway said in the statement. “They continue to value production and profit over health and safety, workers and the community.”

Ray Fisher, a spokesman for The Hague, Netherlands-based Shell, said by email on Saturday that the company remained “committed to resolving our differences with USW at the negotiating table and hope to resume negotiations as early as possible.”

The USW asked employers for “substantial” pay increases, 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 in an interview in Pittsburgh in October.

The refineries called on to strike span the U.S., from Tesoro Corp.’s plants in Martinez, California; Carson, California; and Anacortes, Washington, to Marathon Petroleum Corp.’s Catlettsburg complex in Kentucky to three sites in Texas, according to the USW’s statement.

The sites in Texas are Shell’s Deer Park complex, Marathon’s Galveston Bay plant and LyondellBasell Industries NV’s Houston facility, according to union. LyondellBasell activated its work continuation plan, according to spokesman George Smalley on Sunday.

A spokesman for Marathon confirmed work stoppages at its Catlettsburg refinery and Galveston Bay plant. Marathon has “plans in place to ensure the continued safe operation of its facilities and stands ready to continue negotiations at the local level,” Marathon spokesman Brandon Daniels said by email on Sunday.

The walkout also includes Marathon’s Houston Green cogeneration plant in Texas and Shell’s Deer Park chemical plant.

The refineries on strike can produce 1.82 million barrels of fuel a day, about 10 percent of total U.S. capacity, data compiled by Bloomberg show.

“There will be a knee-jerk reaction in gasoline and diesel prices because we don’t know how long this is going to be or how extended it might be,” Carl Larry, Houston-based director of oil and gas at Frost & Sullivan, said by phone Sunday. “It’ll be bearish for crude, but we’ve already accounted for a lot of the fact that refineries are in maintenance.”

U.S. benchmark West Texas Intermediate oil fell as much as $1.21 a barrel, or 2.5 percent, to $47.03 in electronic trading on the New York Mercantile Exchange. It jumped 8.3 percent on Friday, the biggest one-day advance since June 2012.

Gasoline for March delivery fell 1.44 cents a gallon, or 1 percent, to $1.4644, and the diesel contract for the same month was 1.32 cents lower at $1.6876.

More refineries are standing by to join the sites on strike, according to two people familiar with the plan who asked not to be identified because the information isn’t public.

Tesoro received a strike notification from its Mandan, North Dakota, refinery, in addition to plants in Martinez, California, Carson, California and Anacortes, Washington, according to spokeswoman Destin Singleton on Sunday.

Notice allows workers to prepare for a walkout and doesn’t necessarily mean a strike will occur, according to the union. The remaining USW-represented sites are operating under rolling, 24-hour contract extensions, the USW said.

The local USW at BP Plc’s 405,000 barrel-a-day Whiting refinery in Indiana has agreed to a rolling 24-hour extension, Scott Dean, a spokesman for the London-based company, said by email Sunday. All BP facilities with USW-represented workforces are now operating under rolling 24-hour extensions, according to Dean.

Shell activated a contingency plan to continue operations at the Deer Park refinery, Fisher said on Saturday.

Beevers said in October that he was expecting “the most difficult negotiations that I’ve seen” as workers fought for better pay and benefits. Local USW units established funds to help compensate workers during a strike for the first time in at least 20 years.

Refiners’ shares on the Standard & Poor’s 500 have more than doubled since the beginning of 2012, when the steelworkers last negotiated an agreement. Marathon and Tesoro went on that year to take their places among the 10 best performers in the S&P 500 Index.

U.S. fuel producers have been cashing in on the biggest-ever domestic oil boom, driven largely by volumes extracted from shale formations using hydraulic fracturing and horizontal drilling. The surge in output has lowered U.S. oil prices by 55 percent since June 20 and contributed to a global supply glut that has also sent international prices tumbling.

During the last bargaining year, United Steelworkers and Shell took about a month to reach a national agreement. The USW rejected at least four offers that year before agreeing to a contract that called for pay increases of 2.5 percent in the first year and 3 percent in the second and third years.

The national agreement, which addresses wages, benefits and health and safety, serves as the pattern that companies use to negotiate local contracts. Individual USW units may still decide to strike if the terms they’re offered locally don’t mirror those in the national agreement. 


(Bloomberg)