City Threatens Per-Barrel Refinery Tax in Latest Battle With Mobil

Once again, Mobil Corp. and Torrance City Hall are at odds.

In March, the city ordered Mobil to come up with $1.7 million for unpaid utility taxes on natural gas pumped into the refinery. Mobil refused--and filed a lawsuit over the issue on March 11.

The city’s response this month: a proposal to tax Mobil $.028 for each barrel it refines. The tax would raise an estimated $1 million in revenue to help offset a $5.3-million deficit in the city’s 1994-95 budget, officials say.

In addition, the city has filed suit against the South Coast Air Quality Management District and Mobil, challenging a permit the district gave to Mobil to expand its production of reformulated fuels. State law requires that only the cleaner burning gasoline be sold in California by March 1, 1996.

Mobil officials object to the proposed per-barrel tax, saying the city should not try to balance its books on the back of one taxpayer. But city officials see it as making up for lost utility tax income.

“I think that the city is looking at a way to even it up again,” said Mayor Dee Hardison. Four years ago, it seemed as if Mobil and city officials had patched things up. The city settled a lawsuit it filed against the oil giant after a 1987 hydrogen fluoride spill caused an explosion and 15-hour fire at Mobil’s Torrance refinery.

Mobil has since stepped up its public relations campaign, including opening the refinery for tours, which have been taken by more than 10,000 residents.

In addition, the company started a newsletter for residents, and replaced a taped emergency message center with a number that connects callers to an environmental foreman, on duty 24 hours a day.

“We’re dealing with a much different refinery now,” said Councilman Dan Walker. “It is safer and better run. They have made some great improvements. But that doesn’t mean we shouldn’t have the refinery tax and eliminate hydrogen fluoride.”

Ever since the explosion, hydrogen fluoride has been monitored closely by city officials. The chemical, one of many used at the refinery, forms a toxic cloud at room temperature that can travel several miles and cause respiratory, eye and skin ailments. As part of its settlement with the city, Mobil agreed to quit using the chemical by 1997 unless a safer form was developed by the end of this year.

But Mobil plans to use hydrogen fluoride in its reformulated gas production, although the company said tests on a safer form have yielded positive results. In its lawsuit, the city also charges that Mobil will use more of the chemical than it does now.

The AQMD has allowed a project “which is designed on the basis of an unquestioned and unexplained assumption that the current use of (hydrogen fluoride) will continue,” according to the lawsuit.

AQMD officials have not responded to the city’s suit, but a spokesman said that all refineries have to come up with reformulated gasoline production.

“The benefit of the cleaner gasoline will outweigh the impact (by the refinery),” said AQMD spokesman Bill Kelly. “You have a trade-off, but there’s a net benefit from doing it.”

Walker, who sponsored an unsuccessful initiative in 1990 that would have restricted the storage and use of hydrogen fluoride at the refinery, said the air quality agency misses the point.

“The AQMD does not live in Torrance,” he said. “Most refineries are not sitting in the middle of a metropolitan area with tens of thousands of people close by.”

Maness, however, said that residents should not be alarmed.

He said Mobil has spent $45 million researching a hydrogen fluoride additive that prevents the acid from vaporizing. Company officials are encouraged by tests using the additive at a plant in New Jersey and hope to use the formula at the Torrance facility.

In addition, he said, the company’s use of hydrogen fluoride will not increase significantly.

City officials say its lawsuit will make sure Mobil fulfills the terms of the settlement. “That’s a risk that we’re trying to minimize,” Hardison said. “We can’t back away from that.”

The legal challenges have been expensive. The city has spent $1.6 million in legal fees since 1989 on disputes with Mobil over the safety of hydrogen fluoride, city officials said. Mobil would not disclose how much it has spent on legal fees.

But, refinery manager Joel Maness said, Mobil, which employs more than 900 people, pays more than $15 million per year to local, state and federal governments, Maness said.

“Do we feel we’re paying our share of taxes? God, yes!” Maness said.

City officials don’t agree. In 1992, the city hired a consulting firm to review Mobil’s tax records. That is when it discovered that Mobil owed the city $1.2 million in the unpaid utility taxes on natural gas. With interest and a 25% penalty, the figure comes to $1.7 million.

Maness said after the company’s Dallas office reviewed the tax records, they advised against paying. In fact, Mobil sent a bill of its own to the city: $860,231 for overpayment of past taxes.

“It wasn’t a matter of the company saying ‘Sue the city’, “ Maness said. “They said ‘You don’t owe the tax.’ Our corporate philosophy is . . . if there’s a tax due we pay it. It doesn’t mean we’re going to pay every demand that comes our way.”