The accord is believed to be the first time a US oil company agreed to offset emissions of heat-trapping gases from a refinery expansion, Brown said at a news conference.

Conoco has proposed a refinery expansion including a hydrogen plant to produce steam and electricity to make cleaner-burning gasoline and diesel fuels.

Under the accord, the hydrogen plant initially will emit about 500,000 metric tons of carbon dioxide a year, and Conoco agreed to offset any CO2 emissions beyond that level if it raises its use of hydrogen.

Brown had challenged the Conoco expansion and increased emissions at the local county board of supervisors before the parties worked out the agreement.

Conoco also will audit all its refineries in California and identify all emission sources and possible reductions, and it also will look at energy efficiency measures for the Rodeo refinery.

The agreement helps California to meet greenhouse gas reduction coals in the the state's landmark law adopted last year to fight global warming, Brown said.

The law requires California to cut emissions by 25 percent by 2020 but measures have not been detailed yet and regulations do not begin to take effect until 2012.

Brown also said a proposal by Chevron Corp to expand its Richmond, California, refinery "raises the same kind of issues" as the Conoco plan, adding the state has filed a comment on the environmental review for the plant.