BTU Weekly

Crown's Woes Resonate Throughout the Energy Industry

DURING THE PAST THREE years, Crown Central Petroleum Corp. has perpetuated its refusal to comply with several national oil bargaining agreement guidelines established upon the contract's renewal in February of 1996. Crown's contract renewal proposals have been in direct opposition of employer standards upheld by the Paper, Allied-Industrial, Chemical and Energy Workers International Union, formerly known as the Oil, Chemical and Atomic Workers Union.

At the request of a federal mediator, PACE and Crown have joined on numerous occasions since February 1996 to resolve their outstanding issues, but any resolution has been turned down by both sides. The difference in labor ideologies between the two organizations resulted in a three year lockout of 252 PACE members working at Crown's Pasadena, TX refinery, and a subsequent boycott by PACE of all the company's service stations and convenience stores in seven states. Crown has gone on record accusing PACE members of sabotage, which brought investigative teams from the FBI and NLRB to its Pasadena refinery. However, no evidence of the allegations have been discovered; regardless, Crown has deposed 21 nondefendant employees suspected of sabotage. Ironically, Crown invited the same workers it seemed of foul play To work the day following the lockout, provided they would accept Crown's contract renewal proposals.

"Crown's allegations are vehemently denied by PACE and members of Local 4-227 locked out in Pasadena," said Joe Drexler, Director of Special Projects, PACE Int'l. Union. "PACE and the former OCAW have requested a face-to-face meeting between Henry Rosenberg (Chairman of the Board, President and CEO of Crown) and Boyd Young (President of PACE) and Robert Wages (President of OCAW), but he (Rosenberg) has declined."

Rosenberg could not be reached for comment.

The contract dispute has centered around two issues PACE asserts are essential to "holding up a settlement." Crown has focused on adopting a "discharge" policy, which PACE feels would grant Crown "a unilateral right to fire employees without due process." A second issue is giving Crown the right to lay off employees for up to 120 days during temporary shutdowns, without factoring in the seniority of its employees. Crown has told the union that this measure would only be taken in "unique" situations, but PACE has not been satisfied with the policy's definition.

"The Union has stated a willingness to give Crown the flexibility to use affected employees for whatever jobs are needed during shutdowns, but employees would maintain pay rates per their permanent job classification and layoffs could only be done by seniority," cited Drexler, who added, "There is not a collective burgeoning agreement in the oil industry which gives the company this right.'

Crown could not be reached for comments on these issues. On Thursday, April 22, 1999, Crown shareholders attended their annual meeting in Ellicott City, MD, where the looming conflict took center stage, as well as other issues that have negatively effected the company's economic and social creditability. Specifically, the decline in stock values and increasing spending costs attributable to the Pasadena lockout and declining profit margins.

Although details of the meeting have not been disclosed, shareholders were no doubt introduced to management's explanations as to why the company is faltering. In its March 15, 1999 issue, Petroleum Finance Week revealed Crown has recorded the largest drop in 1998 earnings (-230%), the lowest earnings per share (-$2.54), the largest drop in revenues (-21%), and the steepest decline in refinery margins (-41%) among twelve independent refineries covered in an article.

Crown has also been confronted with an extensive PACE report about the company's SEC ruling. The report states Crown made "misleading statements and omitted important facts" in their filings. Sanford Lewis, PACE attorney and an author of the report, documented $70.7 million in undisclosed costs and risks, and referred to it as "a hidden ledger sheet'. Further documentation reveals 1999 gasoline sales dropping $10 million, prompting company spending up to $5 million; a $1.1 million penalty for air pollution at its Pasadena refinery and costs amounting to $14 million in additional environmental enforcement charges, and a potential loss of $23 million in federal contracts due to discriminatory and civil rights violations claimed by employees.

Crown's litigation costs from 1998 are estimated at $2.6 million; future capital improvement costs for sulfur emissions controls at the Pasadena refinery are estimated at $13 million; and other future environmental upgrades will cost $5 million, cited the PACE report. Furthermore, according to the Harris County Pollution Control Board, where Crown's Pasadena, TX refinery is located Crown, has been the oldest and worst polluter an the Houston Ship Channel.

Crown's legal, social and economic woes are immense, as well as the problems afflicting the Union, its workers. the industry, and the environment. The amalgamation of corporate and non-corporate distress has created a fragile platform for both parties to stand comfortably to achieve their goals. Aside from PACE, public interest groups such as the NAACP, NOW, AFL-CIO, Sierra, UFCW, UAW, Teamsters, ATU, USA, and the IAM have joined the fray and raised the stakes on what has unfolded as one of the most significant legal battles to impact an independent energy company and its labor, economic, social, and environmental branches. For over three years the public has seen this calamity grow, but until PACE or Crown stands down, or a third party intervenes, any notion of a settlement is still only a notion. However, the ultimate disposition of the conflicts could be precedent setting for the energy industry as a whole.