Judge gives oil giants small victory in suit against state.

CARB ruling sparks complaints of favoritism on quotas

A superior court judge has given four oil giants, including two Los Angeles-based majors, a small victory by granting an expedited review of their suit against the California Air Resources Board over alleged favoritism in granting production quotas.

Downtown L.A.-based Atlantic Richfield Co. and Unocal Corp., together with White Plains, N.Y.-based Texaco, joined a petition filed by San Francisco's Chevron Corp. two weeks ago asking the court to set aside a recent CARB decision giving a rival supplier a higher production quota than it was originally granted. And on March 11, Judge Roger K. Warren said he would move quickly to resolve the dispute.

The CARB decision granted Tosco Refining Co., a Concord, Calif.-based independent refiner, permission to produce more than its allotted quota of higher emissions diesel fuel -- which is exempt from pollution standards.

"We want a strong message sent to the California Air Resources Board that when companies such as Chevron invest millions of dollars to comply with its rules, that it should enforce these rules even-handedly," Chevron spokesman Alfred Jessel said.

As of last Oct. 1, large oil refiners were required to produce diesel fuel having an "aromatic hydrocarbon content" of no more than 10 percent. These companies spent millions of dollars to meet the new standards.

Due to acknowledged cost constraints, independent refiners like Tosco were allowed to sell an exempt amount of higher-emissions diesel fuel. This amount was equal to 65 percent of the refiner's average output sold during the top three years between 1983 and 1987.

In Tosco's case, that worked out to about 5.2 million barrels of diesel oil between Oct. 1, 1993, and Sept. 30, 1994, according to CARB records.

Spread evenly over a 12-month period, Tosco's exempted barrels per day would come to about 14,000.

But Tosco increased its output of exempt diesel fuel to 45,000 barrels a day, it reported in the Application for Variance that it filed with CARB in December. Tosco claimed it had increased production to "avoid or at least alleviate a possible shortage of vehicular diesel fuel in California" resulting from the new regulations.

At the current rate of production, Tosco calculated that it would reach its exempt volume cap for the 12-month period by mid-February, forcing the company to withdraw from California's diesel fuel market. To avoid this, Tosco asked CARB to increase its exempt volume by another 8.1 million barrels through September 1994.

This is not the first time the Tosco issue has gone to court.

Atlantic Richfield Co. filed suit Jan. 6 against CARB to challenge the agency's failure to confront Tosco as it hiked its daily output late last year to a level that would use up its annual quota in less than a year's time.

The suit, said Arco spokeswoman Annie Reutinger, "dealt primarily with the CARB's policy during the fourth quarter of 1993."

Five days after Arco filed its suit, representatives from Arco, Chevron, Texaco, Unocal and Fairfax, Va.-based Mobil Corp. testified at a CARB hearing against granting Tosco a variance.

Disagreeing with their arguments, CARB on Feb. 7 granted Tosco the added exemption it had requested - and that is the subject of the new suit.

As of press time, CARB still had not formally responded to the Chevron suit.

Despite this, Chevron's Jessel said the court's March 11 decision forces CARB to acknowledge the seriousness of its actions and the importance of timeliness in resolving this dispute. Without the recent decision, he explained, the case against CARB "could have taken years."

As it stands now, Jessel noted, Chevron and the other oil firms will file a formal brief with the Superior Court on March 21. CARB will have until April 25 to reply, and the Chevron group will reply to the reply by May 3.

A hearing on the merits of the case is scheduled for May 13.