State should buy North Pole refinery
Ownership could secure local supply
Published Sunday, December 21, 2008
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Stumble It!Thanks to the News-Miner’s story this past week, we have a clearer picture of what Flint Hills has in mind for its refinery, and consequently our royalty oil and oil needs for the community. They could leave us with a thoroughly used industrial site and no local fuel production.
We have been here before. That refinery has been sold and resold many times, and the last time it was on the market, I wrote something similar to what I am going to say again: It is way past time to make the refinery a cooperative utility (yes — like Golden Valley Electric Association) or run it as a public utility in the public interest.
Here’s what I said in September 2003, right before Flint Hills bought the refinery for something like $283 million: “I see no compelling financial or legal barriers to the state of Alaska (through bonding from) the Permanent Fund, AIDEA or (by establishing) a dedicated public corporation, to own and operate our refinery for local needs … returning local profits to our economy. But I am not a legal scholar and would like to hear from one on this issue. A governor or local legislator who had our interest at heart would’ve hired a good attorney or oil expert to make this case for us, don’t you think?”
Well, yes I do think. And I think we should work to secure that refinery for our oil needs, and do it now. The management has clearly stated that they have no intention of investing in any necessary maintenance or capital improvement for the refinery, so if we don’t do it, we might be in a bit of a squeeze. Try to imagine what would happen if that refinery were suddenly to just stop producing all its present petroleum products: No local jet fuel, no competition or ability to know real costs (much like now, unfortunately), no secure sources using our own royalty oil, no secure supply line for heating fuel or gasoline or diesel fuel. We’d be much worse off, an especially threatening situation as the price of oil drops and the economy sinks.
But think of the benefits of a state-owned refinery, run as a public utility (my preference), or as a public corporation (but with transparency guaranteed). Each option has its plusses and minuses, but either is likely to be much better than the present situation. Flint Hills, a fully owned subsidiary of Koch Industries, is an entirely private corporation. It offers no public ownership or stock. We can’t even buy it through stock purchase. We’re stuck unless the corporation wants to sell, and not only do they appear to want to unload their refinery, they don’t care to do anything to make sure it is in good working order. Let me say clearly that private ownership has not served us well with regard to petroleum refining in the Interior, and I don’t want private ownership to continue. Flint Hills’ position has been that the company won’t disclose any of its financial records on costs and important economic conditions about oil and gasoline production, which are so crucial to this community. We deserve to know and to control our royalty oil.
If this refinery is for sale, the decisions and conditions surrounding the transaction deserve wide public scrutiny and discussion, and all parties should weigh in, including the local utility, GVEA, since it owns the connecting pipeline between the Alyeska pipeline and the refinery (in case you didn’t know). We definitely should hear from the present employees of the refinery. They might have some interesting things to say, and you surely would want to keep the employees on board, regardless of what ownership type is ultimately selected. No point harming more Alaskans and throwing them out of work when we very much need their skills and experience.
Every indication is that the refinery needs investment and upgrades to its production facilities. It is essential to do this for many of the same reasons I have already covered. Time to get active and demand our state and local government join with interested citizenry, to help us in securing our economic future for the duration of oil production. Doing nothing is simply not an option. But we can take many positive steps. Opportunity knocks whether the economy is strong or not. If this isn’t a good use of some of the Permanent Fund compared to losing $10 billion to $12 billion in the stock market, then don’t do it. I think any reasonable person would conclude otherwise. Not only should we do this, we must do this! Let’s get our best minds at the negotiating table, and get ourselves a refinery.
Rich Seifert of Fairbanks is an energy and housing specialist.
Community Discussion
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Rich, how about thinking a little bit further outside the box?
"Flint Hills’ position has been that the company won’t disclose any of its financial records on costs and important economic conditions about oil and gasoline production, which are so crucial to this community."
But without having that financial information you still suggest the state should buy the refinery? That doesn't seem very thoughtful.
A refinery purchase is a long term capital investment- here is what should really be considered:
1. The massive environmental contamination in the soil beneath and around the refinery. Who pays to clean that up?
2. The 24/7 airborne release of carcinogenic VOC's from the refinery. Do we really want those cancer causing compounds in the air we breath?
3. Do we have enough royalty oil available to purchase (in the future) to keep the refinery at capacity? North Slope oil production is in a steady decline. In a few years there will not be enough royalty oil available to keep the refinery at capacity.
4. What should the long term heating solution be for Fairbanks? Wouldn't we all be better off if we invested in the Susitna Hydroelectric project? That would result in a 200 year supply of 100% clean power. No air pollution. No lead or radiologicals would be released like we have from coal. Residents could heat with low cost electric heat. Safer, cheaper, and far more reliable than a boiler or wood stove. Fairbanks would finally have clean air. What about the tens of thousands of buried oil tanks all around the FNSB? If we continue heating with oil- those tanks are going to leak- and many already are. That is a looming, and very expensive problem. One can not sell a house if there is a buried oil tank in Southern Alaska- no one wants to deal with the potential contamination issues.
Our cars could be powered by electricity, CNG, or hydrogen- and no gasoline will be required. Some of those cars can be purchased TODAY. The future is not bright for polluting (and expensive) gasoline vehicles.
So in the near future- what value will that refinery really have? The production of jet fuel. A higher quality jet fuel could come from Tesoro's plant.
We can do a lot better investing in Susitna.
Alaska crude is expected to drop below $30 a barrel. How soon we forget about 4 years ago, this State did not have enough money to pay for the current government funding. The surplus will disappear paying for what is already there, where does everyone think the money is going to come from for all these projects.
Unnrealistic at this time to expect the overall population of Alaska to go to other forms of energy.
I can see it now in a typical -40 or more Jan. Hydrogen vehicles with frozen tailpipes blocking the exhaust or fueling stations with frozen lines.. The other group with battery operated cars strewn about the highways because they wanted to use the electricity to stay warm and ended up with not enough electricity to get to work, CNG cars not able to even start due to lowered pressure in there tanks..Maybe buying a fleet of tow trucks would be a good investment in the long term LOL...
I am joking of course but saying forget the refinery because it's possible to have a hydrogen,electric cars etc is nothing more than pie in the sky at this point in time..down the road once many things are worked out and a infrastructure is put in place to refill the the Hydrogen cars (Gas pipeline) etc then maybe but that will be along time down the road easily 10 plus years or more..till then the refinery is something to think about purchasing as a co-op.....oh and the comment about clean-up is easy, anyone who purchases the land can require the previous owner too bear the responsibilty of the cleanup.
Rich Seifert is thinking in the right direction; secure and stabilize the interiors' energy future. Tranquility_Base raises good counterpoints. I agree with T_B that the state should not purchase the Flint Hills refinery. Flint Hills has reached the conclusion that the Beluga Coal-to-Liquids project being planned threatens the future demand for their products even if they make the investment in upgrading the refinery to produce low sulfur diesel. The Beluga project WILL produce low sulfur diesel by the Fischer-Troepch process. The points raised by T_B are all valid reasons to decline the option to purchase. The most logical developments for Interior energy are those that have been proposed by a number of commentators recently. Propane/ethane stocks are readily available and should become the foundation for Interior industry and energy. ANGDA is already headed in this direction. Distant Thunder has made good suggestions, fairbanksgas has made good points, and so have several others in regard to LPG/ETHANE replacing both diesel and gasoline as the foundation energy source for Interior, riverine, and coastal Alaska. Interested readers should follow very closely the work being done by ANGDA in this regard. They have an excellent web site.
This State has a problem with handling it's own. Greed takes over and the people pay for it. Purchasing the refinery would bring costs higher to Alaskans. The State has no problem discounting for outsiders while the insiders pick up the tab. Flint Hills is holding back financial record because they have probably ripped us off beyond belief. Doesn't matter who owns it, Alaskans will be taken advantage of. Just my opinion.
Seifert was right 5 years ago and he's right now. There is nothing currently visible as a replacement for the bulk of the petroleum products - gasoline, fuel oil, diesel, etc - used in Fairbanks and running the refinery as a utility would make all of that available more or less at cost. Flint Hills has been making a ton of money on us and ships all of it Outside in wheelbarrows. They have very much the same attitude as BP - i.e. don't spend any money on maintenance or upgrades, just take as much profit as possible as quickly as possible. It's true that they won't open their books now, but would have to open them if they were negotiating the sale of the refinery.
According to reports Flint Hills has provided information on costs and profits to the state in their talks. Yes, they have been milking the operation and the people of the Interior. A cooperative isn't a bad idea if the refinery can be acquired at a reasonable cost without staggering liabilities. But it would be an interim operation until other better options are developed and put into play. This refinery is obsolete and inadequate to serve long term needs.
As is typical for 90% of American Style corporate businesses that have the personality of a vacuum-cleaner we have no doubt that Flint Hills has probably run the refinery into the dirt, quite literally take some core samples under the facility to see for sure.
Check other news sources...
http://news.google.com/news?hl=en&ne...
It looks like they made a mess of Port Arthur,TX too...
http://www.beaumontenterprise.com/busine...
Ukpeaġvik Iñupiat Corporation (UIC) should hurry up and go get the bid for doing the environmental remediation of that facility too because they already have a branch office in Port Arthur.
Behold the SUPERHETERODYNE HYDROCARBON --
This is a real game changer for all things hydrocarbon.
From Alaska to Zimbabwe, how mankind relates to hydrocarbons will never be the same...
http://www.globalresourcecorp.com/
I first learned about superheterodyne hydrocarbons from the scientists working at ClearRadar in 1967.
It's good to see mankind is finally filling in this long neglected blackspot in the mosaic of science and technology.
Microwave Gasification is a valuable tool for preforming environmental clean up of contaminated soils.
Adding microwaves and some of our locally produced catalysts found in amateur miners sluiceboxes will make for plenty of interesting science projects UAF can perform while doing cleanup and remodeling of the old refinery complex.
The refinery can be converted to use methanol, ethane, propane as a feedstock.
TAPS is only shipping crudoil at 40% capacity, so ethane/propane can be shipped thru TAPS in between pig-trains during pipecleaning exercises.
The polyolefin unit can be relocated in N-Pole for producing polypellet...
...then we can begin making mega-tons of polypipe for Alaska and export.
With sufficient capacity to make our own polypipe building two-dozen 60" diameter 350psi CNG-methane gaslines southward through all of the passes in the BrooksRange will be fun & EZ.
It's important to do a good job installing these because we don't want them to be as photogenic as TAPS, so we'll carefully bury them with plenty of good ol' hand labor doing artful landscaping around them.
Our country-cook-outs along the gaslines won't be so bad because we'll have plenty of mosquito-magnets installed along the gaslines.
http://images.google.com/images?um=1&...
Whole families from all of the villages will have good paying jobs doing landscaping and wilderness beautification along all of the gaslines..
..and they can find a gas-tap every 10miles to get fuel and wireless internet-broadband will be available everywhere along the gasline network.
Build your own electric work truck or stepvan..
http://anchorage.craigslist.org/search/s...
[they work excellent in cold weather]
http://www.evparts.com/
-------
http://www.google.com/search?num=100&...
-------
http://www.maxwell.com//ultracapacitors/...
-------
..it's easier than you think, and you can toss in one of my diesel-arcwelders I import from China to use as a hybrid 180amp battery charger. These 225lb lightweight welders will burn just about anything for fuel that will pass thru the filter..
I've used gasoline mixed with old hydraulic oil and old motor oil mixed with some fryerfat and paint thinner..
they will run on propane too.
Radical change = high risk. Our Permanent Fund philosophy was predicated on conservative investment policies and has been highly successful but restricted some necessary development. Now we need to develop innovative energy projects for the future of the state. I don't consider propane/ethane, petrochemical industry, or the Fischer-Troepch coal-to-liquids process as "radical". They are already off-the-shelf technologies that are highly appropriate for Alaska. I am also supportive of R & D energy projects.
You want to buy the refinery and have something like GVEA run it?
Have you forgot what GVEA has been doing to us the last couple of years?
You will get something just like the clean coal project. Millions spent and a big pile of metal sitting somewhere. I know it's not all GVEA's fault but the results will be the same, nothing getting done.
The tree huggers will stop anything they think might cause any kind of damage to the earth. As far as what it may mean to you ...
Microwave Gasification has many different applications..
converting sewage solids into turbine fuel
combustion enhancement for CleanCoal
reducing the viscosity of bitumens in crudoil in deep deposits
reducing the viscosity of crudoil in pipelines
here, just have some fun with google and see for yourself--
http://www.google.com/search?num=100&...
Microwave Gasification can be a big improvement for a 1941 Volvo Truck too ---
http://www.youtube.com/watch?v=hSgL0Ie4z...
.....flash/rumble
airboat- My understanding is that our elec bills are way up because of the fuel surcharge. Since 80-90% of our electricity comes from the oil power plant in N.P right next to the refinery I would guess the high fuel surcharge comes from the price Flint Hills is demanding for fuel. If I've got this wrong maybe Mike Kelly can explain it to us.
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Hold on there Tex:
Before you go start countin' the billions to be made in the oil business, remember that there are probably many good reasons the refinery has been bought and sold. None of which may be particularly good for the citizens of Alaska.
Also remember that there are more than just a few environmental issues to be dealt with on that site. Just how contaminated is the site?
I think that if the state wants to get into the energy business, they should build and own the gas pipeline. Start with something new and compliant with current environmental regulations.
I don't think the issue of worker's wages is all too relevant, there would be plenty to go around. It also costs money to keep highly trained and competent people around to take care of your nest egg.
However, please take note that public infrastructure in Alaska doesn't have a good track record. They tend to be turned into political footballs.
What was the name of that place that publically owned place I worked at?-OH yeah, MUS.
State-owned refinery? How is that state-owned dairy doing? If your wish is to create more state jobs...
Flint Hills knows it will be stuck with very large cleanup costs. It took twenty years to get cleanup costs from Exxon.
Take it over for next to nothing and create a test bed facility for new technology that will train our people to lead the nation in energy systems for tomorrow. Invest in US. Then we can make the changes that are needed right here at home.
You know... More and more, there appears to be a case that we are not getting equal treatment by our state government. They are increasingly focused on Anchorage, and all of us outer areas get second rate billing at best. How is that, you ask?
If the state government was as concerned with the interior as Anchorage, they would have settled the Healy Clean Coal plant years ago (and gotten it running), they wouldn't be trying to shift funding from UAF to UAA, and (as this article mentions) would have gotten the North Pole Refinery into the Public domain or control.
Since we do not rate as much as their Anchor town needs, our problems only rate getting talked about occasionally, but nothing actually gets done on the matter.
Oh dad nab it!! I have been censored. Well I guess I should have used a more civil tone, or poor wittle Wich would have his feewings hurt.
Bottom line is that I don't believe the state needs to buy, take over or acquire that which should be left to the private sector. Those who choose to acquire degrees in Socialism should move to Mr. Hugo Chavez neighborhood. Then you can all sit around the camp fire and sing Kumba-ya.
I guess my SNL line about "Jane you ignorant ...." didn't go over well with the DNM staffer.
If I owned the refinery I'd erect a building around it made of AAC, then install Capacitative Deionization cAerogel Electrode Air-Cleaners in the air-con system.
http://images.google.com/images?gbv=2&am...
Refineries are kinda ugly to look at, and a properly ventilated building enclosure will improve working conditions summer/winter.
Reginald - I too was censored back in November and used the SNL comment once too! So, I was highly amused to read your post! I think wittle Jay Ramras should buy the FH Refinery! Put his money where his mouth is - WHY are we still paying well over the the National average for gas! It is $1.45 in the South! I hope Jay has a very Merry Christmas!
Koch owns BOTH Flinthills & Petro Star? When did THAT happen? I thot Petro-Star/Sourdough Fuels was owned by ASRC. As far as the price of motor fuel goes, it will NOT come down until someone OTHER than Flinthills / Tesoro has storage facilities to import motor fuel to Alaska in order to compete with the local supply. Has anyone checked as to what it would cost for a Tanker-Load of Gasoline from Cherry Point Refinery in Washington? (Cherry Point gets 100% of its Crude from Valdez) I bet it would be cheaper per/gal than what we are paying now. All these other energy ideas are fine... except they are not yet in the workable stage, especially for Northern Alaska, YET. Until that time, we will have to depend on Petroleum products to keep us going. If they would every get the Healy Power Plant operating, we wouldn't have the oil sur-charge on our light bill. Also, keep in mind that the pipeline can only transfer the amount of oil that leaves Valdez... those tanks there are FULL all the time. There are fewer refineries to take our crude now than when the pipeline started, so it isn't ALL about declining production.
Petro Star is a fully owned subsidiary of ASRC.
http://www.petrostar.com/home/home.asp
AKOdin, the legislative committee asked they vary same question regarding bringing in gas from Cherry Point. The expert economist hired by the legislature said that the marine transportation would cost 4 cents and he estimated that the total cost including docking fees and terminaling costs would be under 15 cents per gallon. If we had the facilities we would never pay more than retail price in Washington where they have 28 cents of fuel tax. Today they are paying $1.53 a gallon in Yakima, WA and our lowest price in town is $2.42.
Thank you Fairbanksgas, I was hoping that the OBVIOUS question wasn't being ignored.
Remember that part of the oil tariff includes money set aside for future decommissioning and removing the oil pipeline. Who wants to bet that when the time comes, our oil patch friends won't have the money to do that?
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