Struggle on the Other Coast, Part III – Georgetown International Environmental Law Review

StruggleOnTheOtherCoast Part III

Struggle on the Other Coast, Part III

By Corey Kestenberg, Staff Contributor

The juxtaposition between corporate profits and human and environmental safety has long been an issue requiring a constant balancing act. This struggle is highlighted by the recent . In this three-part installment piece, GIELR Online explores the issue by examining the actions of Chevron, and the reactions emanating from the adjacent located in Richmond, California. Part I provides a history on Chevron’s operation in Richmond, its harmful effects on the community, and the mixed reactions to the business. Part II delves into the community and judicial backlash against Chevron, and the heavier burdens imposed upon its future projects. Part III wraps up the piece by posing the following question: how can the community, the industry, and the government motivate safer corporate practices by large companies like Chevron?

Environmental Regulation: Does It Mean Anything to Chevron Richmond? 

“‘Chevron is regulated by strict environmental standards enforced by government agencies like the Bay Area Air Quality Management District whose role it is to protect public health . . . It is our role to make sure the refinery meets or exceeds these standards.’”

         –Melissa Hollander, Chevron Spokesperson, 2011[1]

After the 2012 Chevron Richmond refinery fire, an Environmental Protection Agency (EPA) inspection of the refinery revealed 62 separate violations of federal environmental law.[2] Chevron prescribes practices for itself to help it comply with the federal Clean Air and Water Acts, the California Environmental Quality Act (CEQA), and the Bay Area Air Quality Management District’s (Air District) regulations.[3] However, on numerous past occasions, Chevron has been out of compliance. From April 2009 to August 2012, Chevron Richmond failed to comply with the Clean Water Act during all, but one, business quarters, and had been in high priority violation[i] of the federal Clean Air Act from 2006 to 2010. In the five years before the fire, Chevron Richmond racked up almost 100 Clean Air Act citations, which cost the company hundreds of thousands of dollars.[4] The Air District has also issued citations to Chevron Richmond—a $190,000 civil penalty for air quality violations from 2010-2012 (not including the 2012 refinery fire) and a $170,000 civil penalty for air quality violations due to flaring during 2005-2009.[5]

In late December 2013, the EPA increased the civil penalties for Clean Air and Water violations; however, the maximum penalties are still in the hundreds of thousands of dollars.[6] It is unclear whether penalties totaling mere hundreds of thousands of dollars are enough to compel Chevron, which makes billions of dollars annually,[7] to comply with environmental regulations, or whether other tactics would ensure better compliance with these regulations.

Some scholars believe that government can take measures to encourage self-regulation, while also maintaining deterrence-based approaches like threatening sanctions or penalties.[8] One way of bringing about self-regulation is by prompting industry to disclose regulatory violations, without facing penalties. Under this model, industry would voluntarily commit to correcting past illegal behavior. Through this method, normative pressure to comply with environmental law can be placed on companies, and when combined with frequent surveillance or monitoring of the regulated industry, can prompt the industry to stay committed to self-regulation.[9]

On the other hand, studies have shown that the EPA’s use of enforcement measures, including civil and criminal monetary penalties, help to specifically deter—deter the penalized company from violating an environmental regulation in the future—as well as help to generally deter—deter other companies in the industry from violating environmental regulations.[10] Over the past 14 years, the EPA has entered into 32 settlement agreements with petroleum refining companies who have violated the Clean Air Act.[11] The terms of a 2003 settlement with Chevron included a requirement for the company to spend $275 million on new technologies that would reduce nitrogen oxide and sulfur dioxide emissions. Even though Chevron was not required to pay civil penalties, other companies did pay civil penalties totaling hundreds of thousands of dollars.[12] It seems as though even if EPA only has legal authority to issue lower value civil penalties, its ability to require companies to come into technical compliance by spending millions or hundreds of millions of dollars on refinery updates may provide a means of deterring companies from violating environmental law in the future.

One year after the 2012 Chevron Richmond fire, California levied a fine of just under $1 million on Chevron—the maximum penalty possible under state law. The Division of Occupational Safety and Health issued the fine, not an environmental regulator.[13] Additionally, Chevron reached a deal with the Contra Costa County District Attorney’s Office in which it would pay $2 million in fines and restitution.[14] Although $3 million hardly cuts into Chevron’s profits,[ii] the combining fines does offer a framework for issuing future penalties: State and federal regulatory agencies can collaborate to maximize their civil penalties and deterrence.

Enforcement is an important part of the regulatory system, but Rafael Moure-Eraso, the Chairman of the U.S. Chemical Safety Board, the body that investigated the Chevron Richmond refinery fire, believes the key to refinery compliance and safety is for the EPA to “use its power under the Clean Air Act’s general duty clause[iii] to compel chemical facilities to take steps to make their operations inherently safer.”[15] Under this model, the EPA would have mandated Chevron Richmond to install new corrosion-resistant pipes in place of its decades old, heavily corroded pipes. Under this model, there likely would have not been a 2012 fire.[16]

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[i] High priority violation is the term used to describe a regulated party’s actions, when the EPA, state, or local regulators have collected enough information to conclude that the regulated party is out of compliance with one or more requirements of the Clean Air Act. U.S. Environmental Protection Agency, Important Note Regarding Clean Air Act High Priority Violations (HPVs), updated Jan. 26, 2012, http://www.epa.gov/reg3artd/enforce/mainenf/hpvlist2.htm.

[ii] Chevron’s profits in 2012 totaled $26.2 billion. Chevron, CNN Money, May 20, 2013, http://money.cnn.com/magazines/fortune/fortune500/2013/snapshots/385.html.

[iii] The Clean Air Act General Duty Clause is found at section 112(r)(1) of the Clean Air Act. To summarize, it says that owners and operators of pollution emitting establishments must take steps to prevent the release of harmful chemicals by maintaining a safe facility; if a harmful release does occur, the owner or operator must minimize the risks posed by the release. U.S. Environmental Protection Agency, The General Duty Clause, March 2009, http://www.epa.gov/oem/docs/chem/gdc-fact.pdf.

[1] Robert Rogers, Environment Advocates Protest Outside Chevron Refinery, Richmond Confidential, June 21, 2011, http://richmondconfidential.org/2011/06/21/environment-advocates-protest-outside-chevron-refinery/.

[2] Robert Rogers, Chevron’s Plan to Modernize Richmond Refinery Draws Criticism, Contra Costa Times/ West County Times, Apr. 17, 2014, http://www.contracostatimes.com/west-county-times/ci_25590885/residents-express-outcry-over-chevron-richmonds-modernization-project..

[3] See Bay Area Air Quality Management District, http://www.baaqmd.gov/Search.aspx?q=chevron (last visited May 9, 2014); see also California Environmental Air Quality Act, http://resources.ca.gov/ceqa/ (last visited May 9, 2014); see also U.S. Environmental Protection Agency, Air Pollution and the Clean Air Act, http://www.epa.gov/air/caa/ (last visited May 9, 2014); see also U.S. Environmental Protection Agency, Summary of the Clean Water Act, http://www2.epa.gov/laws-regulations/summary-clean-water-act (last visited May 9, 2014).

[4] Antonia Juhasz, Chevron’s Refinery, Richmond’s Peril, Los Angeles Times, Aug. 14, 2012, http://www.tombutt.com/forum/2012/120815.htm.

[5] Bay Area Air Quality Management District, Air District Settles Case with Chevron: Refinery to pay $170,000 for Air Quality Violations, Press Release, Aug. 4, 2011, http://www.baaqmd.gov/~/media/Files/Communications%20and%20Outreach/Publications/News%20Releases/2011/settle_110804_chevron.ashx?la=en; Bay Area Air Quality Management District, Air District Settles Case with Chevron: Refinery to Pay $190,000 for Air Quality Violations Recorded 2010-2012, Press Release, July 31, 2013, http://www.baaqmd.gov/~/media/Files/Communications%20and%20Outreach/Publications/News%20Releases/2013/settle_chevron_130731.ashx?la=en.

[6] Thomas Hogan, EPA Increases Some Civil Monetary Penalties; Majority Remain Unchanged Until 2017, Environmental Law Strategy, Nov. 7, 2013, http://www.environmentallawstrategy.com/2013/11/epa-increases-some-civil-monetary-penalties-majority-remain-unchanged-until-2017/.

[7] See Chevron, CNN Money, May 20, 2013, http://money.cnn.com/magazines/fortune/fortune500/2013/snapshots/385.html.

[8] Jodi Short and Michael W. Toffel, Making Self-Regulation More Than Merely Symbolic: The Critical Role of the Legal Environment, Georgetown Public Law and Legal Theory Research Paper No. 11-14 (2010), http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1460&context=facpub&sei-redir=1&referer=http%3A%2F%2Fscholar.google.com%2Fscholar%3Fstart%3D10%26q%3Doil%2Brefinery%2Bcompliance%2Bwith%2Benvironmental%2Blaw%26hl%3Den%26as_sdt%3D0%2C9%26as_ylo%3D2010%26as_vis%3D1#search=%22oil%20refinery%20compliance%20environmental%20law%22.

[9] Id.

[10] Wayne B. Gray and Jay P. Shimshack, The Effectiveness of Environmental Monitoring and Enforcement: A Review of the Empirical Evidence, 5 Review of Environmental Economics and Policy 3, 16 (2011), http://intl-reep.oxfordjournals.org/content/5/1/3.full.

[11] U.S. Environmental Protection Agency, Petroleum Refinery National Case Results, http://www2.epa.gov/enforcement/petroleum-refinery-national-case-results (last visited May 8, 2014).

[12] U.S. Environmental Protection Agency, Hess Corporation Clean Air Act Settlement, http://www2.epa.gov/enforcement/hess-corporation-clean-air-act-settlement-0#penalty (last visited May 8, 2014); U.S. Environmental Protection Agency, Chevron USA Clean Air Act Settlement, http://www2.epa.gov/enforcement/chevron-usa-clean-air-act-settlement (last visited May 8, 2014).

[13] Jason Dearen, Chevron Fined Nearly $1 Million For California Refinery Fire, Huffington Post, Jan. 30, 2013, http://www.huffingtonpost.com/2013/01/31/chevron-fined_n_2587468.html.

[14] Chevron Pays $2m Fines and Pleads No Contest to Richmond Fire Charges, Guardian, Aug. 5, 2013, http://www.theguardian.com/business/2013/aug/05/chevron-fines-charges-richmond-fire-california.

[15] Rafael Moure-Eraso, The Next Accident Awaits, N.Y. Times, Jan. 28, 2014, http://www.nytimes.com/2014/01/29/opinion/the-next-accident-awaits.html?_r=0.

[16] Id.

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