2023 Tesoro Martinez Clean Air Act Settlement Information Sheet

(Washington, DC – April 27, 2023) The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice announced that Tesoro Refining & Marketing Company has agreed to pay a $27.5 million penalty and comply with requirements to limit air pollution from Tesoro’s petroleum refinery in Martinez, California.

Overview
Violations
Injunctive Relief
Pollutant Reductions
Health and Environmental Effects
Civil Penalty
Comment Period
Contact

Overview of Company

Tesoro Refining & Marketing Company (Tesoro) is the owner and operator of the Martinez Refinery, located about 30 miles northeast of San Francisco. In October 2018, about three months after the alleged violation began, Marathon Petroleum Corporation acquired Tesoro’s parent corporation, resulting in Tesoro becoming an indirect subsidiary of Marathon. Tesoro suspended operations at the Martinez Refinery in May 2020 and announced its plan to convert the refinery from producing fuels from crude oil to fuels from renewable sources such as vegetable oils. In May 2022, Contra Costa County approved the renewable fuels project, and, in September 2022, Bay Area Air Quality Management District issued a construction permit for the project.

Prior to idling in May 2020, the Martinez Refinery had a refining capacity of approximately 161,000 barrels per day and was the fourth largest petroleum refinery in California. Tesoro expects it will begin production of renewable fuels in early 2023 and achieve full production of 48,000 barrels per day of renewable fuels by the end of 2023. The renewable fuels part of the former Martinez Refinery will be operated by Tesoro but owned by Martinez Renewables LLC. Martinez Renewables LLC has agreed to comply with the terms of the settlement.

Violations

EPA and the Justice Department allege that Tesoro violated a Clean Air Act requirement at the Martinez Refinery related to Tesoro’s compliance with a 2016 consent decree. Specifically, from July 1, 2018, through about May 1, 2020 (when Tesoro suspended refinery operations), Tesoro failed to comply with a 20 parts per million nitrogen oxide (NO_x) emission limit at the Martinez Refinery fluid catalytic cracking unit (FCCU). FCCUs are major sources of air pollution at petroleum refineries.

Injunctive Relief

The settlement is a modification to the 2016 consent decree (Consent Decree Modification) and has two sets of injunctive relief requirements depending on Tesoro’s choice to convert the refinery to a renewable fuels plant or restart petroleum refining. The Consent Decree Modification provides Tesoro with the flexibility to choose the future operations at the Martinez Refinery, so long as such operations adhere to the requirements of the Consent Decree Modification. The Consent Decree Modification also includes various on-site projects to mitigate the pollution resulting from the alleged violation.

If Tesoro Converts the Martinez Refinery to a Renewable Fuels Plant

NO_x and sulfur dioxide (SO₂) emission reduction requirements for heaters and boilers
Requirements for control of flaring events
Requirements for leak detection and repair
Permanent shutdown of many petroleum refinery emission units
Partial demolition of the FCCU and No. 6 Boiler to render them permanently inoperable
Mitigation Project: prohibition on the use of emission reduction credits generated from the permanent shutdown of petroleum refinery emission units
- Exception: 12 tons per year NO_x, one ton per year SO₂, and ten tons per year volatile organic compounds (VOC) used to permit the conversion to a renewable fuels plant

If Tesoro Resumes Petroleum Refining at the Martinez Refinery

Because Tesoro has yet to convert the Martinez Refinery to a renewable fuels facility, the Consent Decree Modification includes the following requirements (in addition to the 2016 Consent Decree requirements) that apply if Tesoro resumes petroleum refining:

Install selective catalytic reduction control technology on the FCCU prior to restarting the FCCU (estimated cost of $125 million)
Mitigation Project: implement more stringent NO_x emission limits on the FCCU
Mitigation Project: implement more stringent NO_x emission limits on the No. 6 Boiler, which was the third largest NOx-emitting source at the Martinez Refinery prior to the 2020 suspension of refinery operations (estimated cost of $1.2 million)

Additional Mitigation Project

Whether Tesoro converts the Martinez Refinery to a renewable fuels plant or resumes petroleum refining, the Consent Decree Modification requires Tesoro to surrender 122 tons per year of its existing NO_x emission trading credits, which is most of its existing NO_x emission credits.

Pollutant Impacts

When fully implemented, the new controls and requirements under the Consent Decree Modification are estimated to achieve the following emissions reductions, in tons per year (tpy):

If Tesoro Converts the Martinez Refinery to a Renewable Fuels Plant

If Tesoro converts the facility to a renewable fuels plant, the Consent Decree Modification requires Tesoro to retire and forego annual emissions credits of the following pollutants:

NO_xby approximately 440 tpy (includes the 122 tpy surrendered credits)
SO₂ by approximately 327 tpy
Carbon monoxide by approximately 697 tpy
VOCs by approximately 69 tpy
Fine particulate matter (PM2.5) by approximately 301 tpy
Greenhouse gases (as carbon dioxide equivalent) by approximately 1,342,025 tpy

A company can receive emission credits by shutting down equipment and then apply such credits to offset emissions from new projects or trade such credits to other companies for their use. By requiring Tesoro to surrender existing credits and forego petroleum related shutdown credits if it converts to a renewable fuels plant, the settlement prevents Tesoro and other local sources from using these credits.

If Tesoro Resumes Petroleum Refining at the Martinez Refinery

If Tesoro resumes petroleum refining at the Martinez Refinery, the Consent Decree Modification requires the installation of NO_x controls and compliance with more stringent NO_x emission limits. These requirements, together with the retirement of existing NO_x emission credits, will reduce NO_x emissions as follows:

NO_x by approximately 261 tpy (includes the 122 tpy surrender of credits)

Health and Environmental Effects

Nitrogen Oxides (NO_x) – NO_x can cause ground-level ozone, acid rain, particulate matter, global warming, water quality deterioration, and visual impairment. NO_x plays a major role, with volatile organic chemicals, in the atmospheric reactions that produce ozone. Children, people with lung diseases such as asthma, and people who work or exercise outside are susceptible to adverse effects such as damage to lung tissue and reduction in lung function.
Sulfur Dioxide (SO₂) – High concentrations of SO₂ affect breathing and may aggravate existing respiratory and cardiovascular disease. Sensitive populations include asthmatics, individuals with bronchitis or emphysema, children, and the elderly. SO₂ is also a primary contributor to acid deposition, or acid rain.
Volatile Organic Compounds (VOCs) – VOCs, along with NO_x, play a major role in the atmospheric reactions that produce ozone, which is the primary constituent of smog. People with lung disease, children, older adults, and people who are active can be affected when ozone levels are unhealthy. Ground-level ozone exposure is linked to a variety of short-term health problems, including lung irritation and difficulty breathing, as well as long-term problems, such as permanent lung damage from repeated exposure, aggravated asthma, reduced lung capacity, and increased susceptibility to respiratory illnesses such as pneumonia and bronchitis.
Particulate Matter (PM) – PM, especially fine particles (PM2.5), contain microscopic solids or liquid droplets that are so small that they can get deep into the lungs and cause serious health problems. PM is linked to a variety of problems, including increased respiratory symptoms such as irritation of the airways, coughing, or difficulty breathing, decreased lung function, aggravated asthma, and premature death in people with heart or lung disease.
Greenhouse Gases (GHG) – The release of GHGs into the atmosphere traps heat. The continued release of GHGs at or above the current rate will increase average temperatures around the globe. Increases in global temperatures will most likely change our planet’s climate in ways that will have significant long-term effects on people and the

Civil Penalty

Tesoro will pay a $27.5 million civil penalty, plus interest accruing from November 1, 2020.

Comment Period

The proposed settlement, which is a modification to the 2016 consent decree, is lodged in the U.S. District Court for the Western District of Texas. The modification to the 2016 consent decree will be subject to a 30-day public comment period and final court approval. Information on submitting comments is available at the Department of Justice website.

Contact Information

Patrick W. Foley
Senior Environmental Engineer
U.S. Environmental Protection Agency (2242A)
1200 Pennsylvania Ave., N.W.
Washington, DC 20460-0001
(202) 564-7978
[email protected]