* Pipe failure triggered Aug. 6 fire at S.F. Bay refinery
* Safety board releases technical report on pipe, accident
* Chevron says working to improve
SAN FRANCISCO, Feb 13 (Reuters) - Federal safety investigators on Wednesday criticized Chevron's response to a leak at its Richmond refinery crude unit that sparked an August inferno, risking lives and limiting the San Francisco Bay plant's output.
"On the day of the accident, Chevron should have shut down the crude unit as soon as a leak was observed and removed workers to a safe location," U.S. Chemical Safety and Hazard Investigation Board Chairman Rafael Moure-Eraso said.
"Continuing to troubleshoot the problem and having firefighters remove insulation searching for a leak - while flammable hydrocarbons were flowing through the leaking piping - was inconsistent with good safety practice," he said in the statement.
In its technical report on the damaged, 8-inch pipe at the heart of the fire, the CSB found a "deformation" in the area of likely rupture consistent with force applied on the outside of the pipe, "possibly from a fire pike."
Chevron said it was taking corrective actions to strengthen its management oversight, process safety, mechanical integrity, and leak response, while adding that its own investigation of the fire was nearly complete.
"While we do not agree with some of the characterizations in the CSB news release, we are committed to discussing the findings from our investigation and our corrective actions with the investigating agencies," Chevron said in a statement.
The crude unit at the 245,000 barrel-per-day refinery is still expected to restart by the end of March, a spokesman said.
Chevron has not said how limited the refinery's output is, but the impact was clear with the company's average fourth-quarter U.S. refining input down 226,000 bpd from the second quarter - the last period when Richmond was fully running throughout.
Last month, the California Division of Occupational Safety and Health (Cal/OSHA) imposed a record fine of nearly $1 million on Chevron and found that the second-largest U.S. oil company had not complied with state safety standards and put workers and the public at risk.
"Richmond and the entire East Bay need assurances that our refineries will be operated safely," Nancy Skinner, a local state assembly member, said in a statement. "Monetary penalties alone may not suffice."
The CSB does not have law enforcement or regulatory authority. It is authorized by Congress to investigate chemical accidents, determining not only the root causes of fires and explosions, but also recommending changes in industry practices and regulatory enforcement.
The report out on Wednesday was part of a cooperative effort between the CSB, Cal/OSHA, the United Steelworkers and Chevron.
Cal/OSHA Chief Ellen Widess said the report confirmed what Chevron already knew about the pipe being corroded and requiring replacement.
"Chevron's own metallurgists and pipe inspectors reached the same conclusion and recommended as far back as 2002 that Chevron take action to protect its workers, the community and the environment by replacing the pipe that finally ruptured in 2012," she said.
The CSB found that 19 Chevron employees were initially caught in a vapor cloud after the initial hydrocarbon release, but 18 escaped before the fire started and one escaped without injury after the ignition.
The incident resulted in six minor injuries, while more than 15,000 residents in the surrounding area sought treatment at medical facilities as a result, the CSB noted.
Moure-Eraso said he hoped the report's findings received widespread attention throughout the petrochemical industry as a precaution to all refiners to watch out for potential corrosion.
The CSB identified the corrosion of the pipe wall last September, when it said that Chevron had been concerned about corrosion in the section.