Flint Hills agrees to release financial information to state
Originally published Saturday, June 28, 2008 at 12:00 a.m.
Updated Monday, June 30, 2008 at 10:39 a.m.
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Stumble It!CORRECTION: A June 28 article about Flint Hills’ North Pole Refinery misidentified one of the legislators who met with Department of Natural Resources staff in Anchorage to encourage cooperation. The story below has been updated.
FAIRBANKS — State officials said Flint Hills has agreed to share financial information, a move that could take negotiations between the two parties to the next level.
Flint Hills, owner of Alaska’s largest refinery, is asking the state for financial help in the form of lower contract rates for state royalty oil processed at the North Pole facility. Commissioner Tom Irwin said recently that he could not justify contract changes without access to company financial information that he had requested and been denied.
Visits from two legislators and a letter from Sen. Lisa Murkowski to Gov. Sarah Palin may have helped re-open communication between Flint Hills and the Department of Natural Resources.
While in Anchorage for legislative pipeline hearings last week, Sen. Gene Therriault, R-North Pole, and Rep. John Coghill, R-North Pole, met with Irwin and Division of Oil and Gas Director Kevin Banks “encouraging that they divert some of their time and energy to this issue,” Therriault said.
“We felt this was certainly important enough to the local area and the state,” he said. “Resolution usually has to start with communication.”
Alaska’s largest refinery turns state crude oil into gasoline, heating oil and other products, and is a significant producer of jet fuel supplied to Anchorage and Fairbanks.
Therriault said he hopes the state and Flint Hills can agree on how to share information, which in turn would allow continued negotiations on state assistance.
Also applying pressure, Murkowski sent a letter to the governor emphasizing the refinery’s value to Interior Alaska and beyond.
“Given the fundamental importance of the refinery to the state’s economy, I encourage the state to consider contract revision talks that could benefit the State overall and the Fairbanks economy in particular,” Murkowski wrote.
The refinery owners want the state to lower the price the refinery pays for state royalty oil, a price negotiated in 2004 when Flint Hills bought the facility. Under the existing royalty-in-kind contract, Flint Hills pays a premium. Those high prices are contributing to poor profit margins, the company told the state.
“At the very least, it seems like there should be some consideration on whether that premium should be considered,” Therriault said.
Flint Hills spokesman Jeff Cook declined to comment except to say that his company is working with DNR and hopes to “find a solution to get them the information they need.”
Banks said Flint Hills seems to be more willing to share information than before, and that he is optimistic the state will get the information it needs to properly evaluate Flint Hills’ request for aid.
“We are certainly talking to them,” he said, adding that circumstances have certainly changed since the original contract was signed.
“When we negotiated this contract, the price of oil was in the $30s,” he said. “Now it’s $140.”
The refinery’s fate remains uncertain as company officials consider three options, according to an e-mail sent to employees by Flint Hills president Brad Razook in May.
Those options included reconfiguring the plant, investing in upgrades to increase plant volume and lower costs, or selling the plant and fuel terminals in Anchorage. A decision is expected by the end of the year.
Therriault said airport operations in Anchorage, which rely on the refinery, are a “huge economic driver.” Legislators representing Anchorage and its environs should support state aid to Flint Hills, he urged.
Community Discussion
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Thank you to all parties involved. Resolution comes from discussion, transparency and a common interest. Now how can we get the heating oil down to a price that people can afford so they don't freeze to death this winter? Better hurry quick too. The Yukon River starts to freeze-up in a couple of months and there are a whole lot of empty tanks in rural Alaska. And from the sounds of it, Fairbanks ALASKANS
could use a break too.
How does the headline match the story? More News-Miner BS. There is not one quote in the entire story that emphatically states that Alaska is being given the information Tom Irwin has sought.
"Banks said Flint Hills seems to be more willing to share information than before, and that he is optimistic the state will get the information it needs to properly evaluate Flint Hills’ request for aid.
“We are certainly talking to them,” he said,..."
And where is the financial harm? "Those high prices are contributing to poor profit margins, the company told the state."
Poor profit margins? That is not saying that they are taking a loss. Poor little Charlie and David Koch- the billion brothers who own the refinery. They aren't making enough profit margin. Boo Hoo.
Close the refinery. The vast release of cancer causing air pollution from that refinery is not welcome here- nor are the lung cancers and leukemia caused by the release of those aromatic hydrocarbons.
Take a look around the refining business and you'll quickly see companies taking big hits, including losses, all due to the price of oil. Gasoline and other fuels do not increase or decrease in price at the same rate as oil. So you take these crumbling profit margins couple them increasing operating costs (energy, chemicals, materials) and one is able to see Flint Hills' side of the story.
Some want to close the refinery. Really? And we'll do what in the meantime? It's clear to me that Alaskan's can rally around a project and get it completed in no time. Oh wait nevermind, how long have we been arguing over a gasline?
The number one priority here is figuring out a way for the State and Flint Hills to work together; benefiting the State, its citizens and Flint Hills.
What Cook and the refinery are really saying is that Fairbanks was getting reamed and new one when oil was $30 and not that it is $130 they aren't making the profit they would like. Notice, however, they are not losing money at the $130. Conclusion? Easy, the profits at the $30 were astronomical and this refinery was the SIONGLE MOST profitable of them all.
I hope the state and DNR have the folks on board who can see thru the smoke and dark to sort this out.
If we are renegotiating the contract lets see if we can add a clause where Flint Hills agrees to refine low sulfur diesel fuel.
eat or heat would you be complaining if the State owned the refinery.
Your message is getting messed up, you want the State to spend billions on a gasline, yet you say the refinery will kill us. Maybe you need to call yourself Chicken Little, since no matter what, the sky always seems to fall on you.
All the wasted anxiety and speculation a week ago about the refinery closing and now look where it is. Maybe we all need to be wait and see how things work themselves out before we start the woe is me.
Thats great the State and Flint hills are talking cause the poor guys in the rural areas are taking the price increase in Fairbanks and price increase of Transport to them.so this issue needs to be looked at very carefully and Fairbanks is the Main hub for many Alaskan Villages any Product cost increase will also affect many interior villages.
This is a common scene. A company controls the major (or only) supply of resources and/or jobs in a small community. After getting what they initially ask for in acquiring the business they threaten to close shop unless the public gives them some form of extra financial incentive to increase their profits.
Where is all the talk of fiscal certainty as far as contracts are concerned? Where is the talk of free markets? Where are the capitalist methods of improving facilities and products to lower costs and increase profits. It's all a sham.
I doubt the information that the state eventually gets will be easily deciphered. In the mean time political pressure will build to force the State to improve and guarantee increased profits for billionaires. It would be nice if the State could use the refinery to pass on royalty backed lower fuel prices but the legislature has already received the Governor's proposal to alleviate our fuel prices by directly sending us a bonus dividend.
Let them sell it to someone who will make a commitment our community since they will not.
flint hills says they are not making a profit hmmmmm. then how is petrostar making a profit when their size is 1/3 the size of flint hills? flint hills does not care about alaskans and it is run by koch brothers who are convicted fellons, and have the audasity not to hire anyone with a past criminal record no matter how long ago or how minniscule the charges were. they are thieves and that is that!
Clearly, as pointed out in the article, Flint Hills is paying a "premium" to purchase royalty oil to the state. That premium amounts to millions and millions of dollars. In turn, you and I are the ones who ultimately pay that "premium" to the state every time we purchase gas or diesel refined right here in our own back yard. The state gets richer ($9+ Billion surplus this fiscal year ending today). Alaskans pay more with no relief in sight. Flint Hills gets the blame. Pretty slick.
Senator Murkowski, Senator Therriault, Representative Coghill, Flint Hills Board of Directors: What part of private enterprise do you not understand, the "private" or the "enterprise"? If we subsidize Flint Hills any further, what does Flint Hills provide to Alaska in return, higher prices? Flint Hills asked for and received special treatment, but now their profits aren't as high as they once were so they want more from us because the Governor had foresight and we restructured our tax base with ACES.
Flint Hills deserves to get what goes around. Before the low sulfur issue, diesel was cheaper than gasoline, it's higher now. Let them actually pay market price for the oil that is delivered to their door or better, buy oil from out of state and pay to ship it directly to the plant. Afterall, that is the threat they pose to the state's citizens. They will close and make us buy fuel from out of state and ship it back here for consumption if we don't make their plant MORE profitable.
My household's bottom line has not increased with the oil prices and neither should Flint Hills'. My family is planning to spend our small savings if necessary to get through the winter. If anything the people in Alaska are keeping the refinery in the green and Flint Hills should be grateful that even when people on fixed incomes are worried about making ends meet, the refinery is still profiting.
Seems the state is in a loose-win situation with this one. If we loose the refinery, we get full price for all the oil they don't refine. We also loose one of the biggest monopolies in the state. How has Flint Hills tightened their belts like the residents are being told to do before any "assistance" is given? It must take a lot of electricity to run that plant. What are they doing to reduce their operating cost in terms of energy use or fuel consumption? What kind of fiscal discipline are they displaying to get such attention and consideration?
Folks keep an eye on our government and expect more political and fiscal irresponsibility, especially in the coorporate dealings during this time of great wealth. Kudos to those that have Flint Hills at the table, but don't blindfold yourself to criminal activity and just start writing blank checks.
I hope that when you say premium you really mean $10 million dollar per month discount. There is no mystery you can see the invoice at:
http://fairbanksgas.com/INV_FHR102007fin...
The refinery buys the crude from the State government for about $10 millions dollars per month less than the west coast pays. The low price in Washington today is $4.09 a gallon compared to $4.44 in Fairbanks. You also need to remember that the tax is 28 cents higher in Washington. So the real gas price is 63 cents higher in Fairbanks after the refinery gets a $10 million dollar discount???
Something smells at it's not the sulfur from the Flint Hills low-sulfur plant that was never built.
I think they could hire a dog team to run a treadmill and generate some alternative energy and reduce their costs. Just a thought!
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