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Trouble in the air 

Santa Barbara County’s Greka Energy faces a massive civil lawsuit in light of repeated leaks and spills

Captain Charlie Johnson responded to the scene around 5:30 p.m. on Sept. 23.

He’d gotten the call earlier in the day: A county hazardous materials specialist had noticed a rotten-egg smell while driving the 101 near Clark Avenue in Santa Maria, and immediately notified the Air Pollution Control District (APCD).

Upon word from the APCD, a raft of firefighters and hazmat specialists responded to the suspected source of the odor: Greka Energy Corp.’s Bradley Three Island lease, east of the freeway on Telephone Road.

“A significant hydrogen sulfide gas release was discovered,� said Johnson, the Santa Barbara County Fire Department’s information official. “There were five leaks, all visible to the naked eye — which is highly abnormal.�

Hydrogen sulfide is dangerous at 100 parts per million. Officials detected 10,000 parts per million, Johnson said.

“That’s deadly to life and health,� he said. “Especially in the fog, where vapors don’t dissipate readily, it can lead to a deadly concentration.�

The fire department ordered an emergency shutdown and issued a stop-work order on the facility until permanent repairs could be hashed out with the county and put in place.

“No temporary repairs are allowed, and that’s because of Greka’s past practices,� Johnson said. “They buy old, aging facilities from other companies, and in the past they’ve only done temporary repairs, patch-type work.

“We continually see problems with Greka facilities,� he continued. “We’ve had aging facilities, problems with maintenance, spills, leaks, all kinds of things. But this has been the only actual shutdown so far. It’s very significant.�

This incident is the latest in what has surely been a long line of legal headaches for company officials. Just 10 days before the Bradley Three Island shutdown, the Colorado-based oil and gas corporation was slapped with a massive civil lawsuit by the Santa Barbara County District Attorney’s office.

The suit lists 104 causes of action against the company, each a short paragraph, and cites violations ranging from operating equipment without proper permits to failing to maintain functional fire hydrants.

Greka Energy Corp., owner of the Santa Maria Asphalt Plant on Sinton Road, is the current target of a massive Santa Barbara County lawsuit that names 104 causes of action.


Greka officials could not be reached after repeated tries for comment for this story, though the company denied the allegations in a statement released on Sept. 16, three days after the lawsuit.

The company could be fined thousands of dollars in penalties for each day of each separate violation if found guilty, according to the district attorney’s office. Greka operates almost 70 onshore production, processing, and transportation facilities in Santa Barbara County, including the Santa Maria Asphalt Refinery located on Sinton Road, according to the suit.

Greka is the county’s largest onshore oil company, according to Ed Brannon, district deputy with the Department of Conservation’s Division of Oil, Gas, and Geothermal Resources.

The company is also active throughout Central and Southern California, with additional holdings in Bakersfield, the Los Angeles Basin, and Orange County, Brannon said.

The suit alleges numerous safety and permit violations at Greka’s Santa Maria-area facilities, including several instances of harmful pollutant emission, failure to clean up hazardous waste, failure to properly mark underground pipelines for construction purposes, failure to report a continuous hydrogen sulfide leak at a Cat Canyon facility, and failure to maintain aging equipment.

In one incident, the company is accused of building and operating a railcar system for naphtha — a volatile flammable liquid — without proper authority. Another cause of action alleges that Greka stuck an identification plate from a permitted engine onto a non-permitted engine at one of its facilities.

Most of the incidents took place in either 2003 or 2004, according to the suit.

Greka’s attorney Jeffrey Valle said the county’s case was weak, even with 104 causes of action.

“It’s pretty thin,� he said. “Each cause is only about two sentences long — you can’t even understand what it’s saying. In order to state a cause of action, you must set forth all of the elements that make up the event.�

Valle is considering filing a motion to claim that the causes of action are insufficient.

“We’re still analyzing everything, but let me assure you, the company intends to vigorously defend itself against the charges,� he said.

Deputy District Attorney Jerry Lulejian expressed confidence in the case.

“We have a strong basis for filing these causes,� he said. “These are things we think we can prove.�

As part of its lawsuit, Santa Barbara County also maintains that Greka unfairly sued its former safety manager, Gary Lowrey. Greka filed a lawsuit against Lowrey in August, which alleged that after taking leave from Greka in 2002 — and later being fired — Lowrey took company documents and information to third parties in violation of a confidentiality agreement he signed.

In 2003, Lowrey gave a deposition in support of a separate lawsuit filed against the company, in which he went on record about safety and employee-training problems he perceived within the company. Lowrey also reportedly supplied numerous company documents to investigators now attached in support of the district attorney’s current lawsuit.

Santa Barbara County says Greka’s suit against Lowrey, which seeks compensation for unspecified damages, has had a “chilling effect� on his willingness to speak further, and silenced two other potential witnesses, impeding the district attorney’s case and violating public policy in the process.

Santa Barbara County Fire Department officials ordered the closure of Greka’s Bradley Three Island lease, located on Telephone Road, after several potentially deadly hydrogen sulfide leaks were discovered.


The county is also currently seeking a preliminary injunction that would shut down 11 of Greka’s North Santa Barbara County facilities — including its North Orcutt and Los Flores lease facilities — until the company properly obtains needed operating permits, and would require the creation of a new employee training program, among other demands.

Though the initial hearing for the injunction was set for Oct. 12, Greka was granted a weeklong delay to Oct. 19 by Judge Rodney Melville, and was seeking up to three more weeks of delay as of press time.

“It’s just a matter of finding out legitimately how much time we need to respond to the suit,� Greka’s Valle said. “There doesn’t even seem to be any basis or any need for the injunction.�

Greka is no stranger to making waves in the county. According to a 2003 Santa Barbara News-Press article, the company racked up more than 70 violations and citations between May 2002 and Sept. 2003, and recent county fire department statements reported one crude oil spill, one gas release, and two oil and produced water spills at four different Greka facilities, the most recent spill occurring on Oct. 3.

Intervention has occurred on a state level as well. The California Department of Fish and Game settled with Greka for monetary damages after the company spilled thousands of gallons of oil and byproduct water in two separate incidents in 2000 and 2002.

Deputy District Attorney Lulejian said the county made its first felony filing against Greka back in 2002, in connection with an explosion near the Santa Maria Asphalt Refinery, which injured two fieldworkers. That case went to trial for a week in December 2003, and ended with misdemeanor convictions for two Greka employees who violated safety codes by venting the natural gas that caused the fire. Greka settled for $200,000 in civil penalties in that case, Lulejian said.

One of the workers settled with the company for an undisclosed amount of money in a related suit, Lopez v. Greka Energy, in which Lowrey gave his deposition.

Greka is owned by Randeep Grewal, who’s also the company’s president and CEO. Grewal took the company private by buying out shareholders in 2003. He came to Santa Maria in the 1990s with the plan of buying out old oil wells and using them to search for new reservoirs, according to an interview in the News-Press article. Though most of the company’s operations are based on the Central Coast, it maintains offices in New York and has also operated in Louisiana and China.

The business model for Grewal’s corporation would appear to be one of vertical integration, said Steve Chase, Santa Barbara County’s deputy energy director.

Chase has been directly involved in regulating the Santa Maria Asphalt Refinery, which supplies asphalt for several private and government contracts on the Central Coast. Greka acquired the refinery from Conoco/Phillips in the late ’90s, he said.

“My sense of their business plan is that it’s absolutely brilliant,� he said. “Oil sells either high or low, but asphalt doesn’t. If you’re an oil company with an asphalt refinery, you can sell into two different markets. When oil is low, you use it to make asphalt. When it’s high, you sell it.

Chase feels the county’s complaints stem from the belief that Greka’s plentiful onshore oil acquisitions have gotten in the way of spending money on maintenance and training.

“These problems with breakdowns and maintenance upgrades, the flurry of spills and releases — it is my perspective that these are preventable and stem from under-funding the old onshore facilities,� he said.

Chase said the company’s county-mandated responsibilities to permit compliance and proper operation supercede its big ideas.

He said Greka has spent a substantial amount of money bringing the refinery up to a satisfactory level, however. And while he acknowledges the strength of Greka’s business plan, he predicts a major local impact if the company suffers from its legal troubles.

“They employ more than 100 people,� he said. “There’s a lot at stake if this company folds, but the county simply cannot tolerate spills and releases. There have been far too many, and something’s got to be done.� ³


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