By Bill Rigby and Erwin Seba
SEATTLE/HOUSTON (Reuters) - Five Tesoro Corp employees were killed and two critically injured in a fire at the oil company's 120,000 barrel-per-day refinery in Anacortes, Washington on Friday, cutting production at the plant to about one-third of capacity.
The fire started in the highly flammable naphtha unit, which was undergoing maintenance, at 12:30 a.m. PST (0730 GMT) and was contained by 2 a.m.
The blaze shut the plant's hydroprocessing units, the company's chief financial officer said, adding that other units could be shut after a damage assessment.
The crude distillation unit was still running but the plant was only at one-third capacity, a spokesman said. Earlier, the company said it was running at 70 percent to 75 percent capacity.
Tesoro, which was cited for violations at the Anacortes plant in 2008, said it planned to make up any lost production by boosting output at its other West Coast refineries.
The U.S. Energy Information Administration said this week there were 32.5 million barrels of gasoline in inventory on the West Coast, well above what is needed to supply the region.
Market reaction may be muted when trading resumes on Monday.
"(West Coast) stockpiles are more than 10 percent higher than last year," said David Hackett, president of energy consultancy Stillwater Associates. "Inventories are very healthy, especially for this time of year."
TWO WORKERS STILL CRITICAL
Four workers -- two women and two men -- were airlifted to hospital in Seattle, about 70 miles south of the refinery, with severe burns. The two women later died and the two men remained in critical condition, a hospital spokeswoman said.
The U.S. Chemical Safety Board said it was sending a team of investigators.
"It's a major case," CSB spokesman Daniel Horowitz said.
The Tesoro Anacortes fire is the deadliest accident involving production at a U.S. refinery since the BP Texas City explosion on March 23, 2005 that killed 15 workers and injured 180.
Four contract workers at the Lyondell Basell refinery in Houston were killed when a crane collapsed in July 2008 and two workers were killed in a fire in March at Holly Corp's Artesia, New Mexico, refinery.
The CSB is already investigating an October fire at Tesoro's Salt Lake City refinery.
PREVIOUS SAFETY ISSUES
Following an inspection of the Anacortes refinery in 2008, Tesoro was cited for 17 serious violations with fines totaling $85,700, according to the U.S. Occupational Safety and Health Administration.
Fourteen of the violations were deleted and the fines reduced to $12,250 after Tesoro agreed to fix the problems instead of contesting them.
The Anacortes fire could mean expensive legal trouble for Tesoro.
"I can confidently predict there are lawyers already on site or in contact with unions representing Tesoro employees and signing up claimants as we speak," said Lester Brickman, a professor at the Benjamin N. Cardozo School of Law in New York.
"The ultimate liability depends on the number of people who had sufficient proximity to the fire to have viable claims."
The fire started in a part of the plant processing naphtha, a liquid that boosts gasoline octane to make premium grades of gas required by some higher-performance cars.
"Naphtha is a very volatile substance and, if Tesoro were found to have been significantly negligent, that could magnify its liability," Brickman said.
(Additional reporting by Janet McGurty in Toronto, Sweta Singh in Bangalore and Jonathan Stempel in New York; Editing by Andrew Hay and Jan Paschal)