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(Reuters) – Marathon Petroleum (NYSE:MPC) will pay a $27.5 million penalty and surrender emissions trading credits after the operator of the Martinez, California, plant violated a legal agreement requiring it to lower pollution levels, the U.S. Department of Justice said on Thursday.
Tesoro Refining and Marketing failed to limit nitrous oxides emissions (NOx) from its fluid catalytic cracking unit, a pollutant that contributes to smog, as part of a 2016 settlement agreement, the Environmental Protection Agency said.
Marathon Petroleum acquired Tesoro in 2018, months before the violations started, according to the EPA.
The company idled the 166,000 barrel per day Martinez refinery in 2020 and began converting it into a renewable fuels facility using feedstocks such as vegetable oils to produce fuels instead of crude oil. The project began the first stage of startup earlier this year.
The Justice Department requires Tesoro, owned by Marathon, to adhere to strict pollution controls at the plant and forego hundreds of annual tradable emission credits as part of a California regulatory scheme.
It will prevent the company from using emission credits to offset emissions from new projects or trade them to other companies, limiting emissions in the San Francisco Bay area, the Justice Department said.
Marathon agreed to surrender most of its existing NOx emission trading credits and to forego almost all trading credits from the shutdown of petroleum refining equipment.
The settlement includes new requirements that will apply when the plant fully converts to producing biofuels as part a joint venture with Finnish refiner Neste.
As a renewable fuels plant, the new agreement will result in annual air emissions reductions of about 440 tons of NOx, 327 tons of sulfur dioxide, and the equivalent of 1,342,025 tons of carbon dioxide, the Justice Department said.
NOx can cause ground-level ozone, acid rain, particulate matter, global warming, water quality deterioration, and visual impairment.
