UPDATE 2-Tesoro fined $2.38 million for deadly blast

Mon Oct 4, 2010 5:37pm EDT

* Seven killed in Anacortes, Washington, blast April 2

* Largest fine ever levied by state agency

* Tesoro says reviewing state probe (Adds background, CSB probe paragraphs 14-18)

By Erwin Seba

HOUSTON, Oct 4 (Reuters) - Washington state fined Tesoro Corp (TSO.N) $2.38 million for an April 2 blast at the company's Anacortes refinery that killed seven workers, after a state investigation found the explosion could have been avoided.

"The bottom line is this tragedy was preventable," said Judy Schurke, director of the state's Department of Labor & Industries, at a news conference Monday in Mount Vernon, Washington.

The fine -- the biggest the state agency has ever levied -- follows a probe of the blast that found 39 willful violations and five serious violations of worker safety standards.

Tesoro has 15 working days to appeal the findings. If it appeals, the fines will be put on hold until the process is complete.

A Tesoro spokesman said the company was reviewing the investigation results.

"We cannot comment further until we have had time to thoroughly review the Labor & Industries citations," said Tesoro spokesman Lynn Westfall.

Investigators found Tesoro failed to follow safety regulations, industry practices and the company's own policies with regard to inspection and maintenance of a heat exchanger on a naphtha hydrotreater.

"Without proper testing, I don't think it was a question of whether it would blow up but when it would blow up," said Dr. Michael Silverstein, assistant director of the division of Occupational Safety and Health for the Labor & Industries Department.

Seven workers were engulfed in a huge fireball early on April 2. The blast resulted from welds on an operating heat exchanger failing, the investigation found.

The workers were attempting to restart another heat exchanger on the hydrotreater when the fireball caught them off guard.

The heat exchanger had last been properly inspected in 1998 and was scheduled for inspection in 2008. That inspection did not take place, investigators found.

The welds failed because cracks had developed over the 40-year lifespan of the heat exchanger.

"If Tesoro had tested their equipment appropriately and had followed their other safety requirements, we believe that they would have found the cracks that caused this explosion and, either by replacing the equipment or repairing it, prevented this from happening," Silverstein said.

Inspections of the Tesoro refinery prior to the explosion found problems similar to those revealed in the explosion, Silverstein said.

"Each time we've been in this refinery, we've found similar problems," he said.

Tesoro is not the only refiner Washington regulators have found to violate maintenance and accident prevention standards in process safety management, Silverstein said.

"We've seen similar problems in all the refineries in Washington," he said. "The federal government has found similar problems at refineries across the country."

The U.S. Chemical Safety Board said it continues an investigation into the explosion.

(Editing by Sofina Mirza-Reid)

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