U.S. refinery strike affects one-fifth of national capacity

HOUSTON The largest U.S. refinery strike in 35 years entered its fourth week on Sunday as workers at 12 refineries accounting for one-fifth of national production capacity were walking picket lines.

Sources familiar with the negotiations said talks may resume by mid-week to end the walkout by 6,550 members of the United Steelworkers union (USW) at 15 plants, including the 12 refineries.

Representatives of both sides said no date has been set to restart negotiations, however.

The strike comes as U.S. workers seek more pay in a strengthening economy. Wal-Mart Stores Inc has said its U.S. workers will get a raise to at least $9 an hour, while West Coast port workers have reached a tentative deal for a new contract after a months-long dispute.

The refinery work stoppage began on Feb. 1 when talks for a new three-year contract between the USW and lead oil company negotiator Shell Oil Co broke down.

Talks were resumed but halted again after nearly reaching an agreement on Friday, said sources familiar with the negotiations.

After the latest breakdown between the two sides, Steelworkers leaders targeted Shell, which is the U.S. arm of Royal Dutch Shell Plc, calling workers out at a chemical plant and three refineries in the company's Motiva Enterprises [MOTIV.UL] joint-venture with Saudi Aramco [SDABO.UL].

The work stoppage now includes the nation's largest refinery, Motiva's 600,250 barrel per day (bpd) Port Arthur, Texas, refinery.

USW members are also picketing at Motiva's 235,000 bpd Convent, Louisiana, and 238,000 bpd Norco, Louisiana, refineries and the Shell chemical plant in Norco.

In a letter to striking employees at the Shell and Motiva plants, company officials said Shell has offered annual pay raises of 2 percent in each of the first two years of a proposed three-year pact and a 2.5-percent increase in the third year.

The company has also offered to study issues of worker fatigue, which has been cited as a factor in at least one fatal accident in the past 10 years.

Shell also told striking employees the key sticking point was non-union contractors who perform daily maintenance. The USW would like to see them replaced with union workers.

"Hiring flexibility is a proven way to protect our core Shell workforce and the long-term economic viability of our workforce," the letter said. "This strategy has served us all well, as we have not had to conduct any layoffs in decades."

A union spokeswoman declined comment on Sunday about the letter.

The Shell letter did not address the absence of "no-retrogression" language, which keeps agreements from previous contracts, including several on safety, in place. The lack of a no-retrogression clause has become a sticking point in talks, union leaders have said.

Shell spokesman Ray Fisher said no-retrogression language has not been a focus of the talks so far.

"The four key areas of focus in the negotiations are wages, healthcare, use of contractors and fatigue," Fisher said. "The union's 'no retrogression' proposal has not yet been a focus area of our negotiations."

The USW's lead negotiator, International Vice President Gary Beevers, has told Reuters that safe staffing levels were a point of contention in the talks.

Workers are also striking at the Shell refinery and chemical plant in Deer Park, Texas, and at plants owned by Lyondell Basell, Marathon Petroleum, and Tesoro in California, Kentucky, Texas and Washington.

Only one refinery has shut down due to the strike -

Tesoro's 166,000-bpd plant in Martinez, California, which was previously scheduled to undergo maintenance.

The USW wants a new pact that would cover 30,000 workers at 63 U.S. refineries with two-thirds of domestic capacity.

Refiners are using trained replacement workers, primarily managers and engineers, to keep plants running at near normal rates.

(Reporting by Erwin Seba; Editing by Chizu Nomiyama, Franklin Paul and Tom Brown)