February 6, 2014 [OPIS] - Further to Flint Hills Resources Alaska LLC's (FHRA) plans to close its North Pole refinery this spring, the company said it would entertain offers for the assets associated with the refinery as an ongoing enterprise or as a terminal/marketing operation.
The decision to close the plant had been made after a “long, thorough and deliberate process,” Mike Brose, FHRA vice president and refinery manager, said in a statement.
A major factor in the refinery’s closure is an ongoing environmental issue. Brose said ground contamination that occurred when Williams Companies Inc. owned the plant has added to the economic uncertainty of operating the refinery.
“So far, neither Williams nor the state of Alaska have accepted any responsibility for the cleanup,” Brose said. “With the already extremely difficult refining market conditions, the added burden of excessive costs and uncertainties over future cleanup responsibilities make continued refining operations impossible.”
The North Pole refinery’s primary product is jet fuel, FHRA spokesman Jeff Cook told OPIS, but it also manufactures gasoline and, on a seasonal basis, asphalt oil.
The “extraction unit” producing gasoline will be shut on May 1, while Crude Unit No. 2 will shut down shortly thereafter depending on operational requirements, but no later than June 1.
The company, owned by privately held Koch Industries, will continue to operate the 720,000-bbl terminal at the site, bringing in fuels to meet its existing contracts.
The refinery is rated at 220,000 b/d but has been operating well below that processing capacity for some time because of very challenging refining economics.
Cook said the North Pole refinery had recently been taking in around 85,000 b/d, retaining between 22,000 and 25,000 in products and returning the balance to the Trans-Alaska Pipeline System (TAPS).
The Energy Information Administration put the plant’s capacity at 79,507 barrels per calendar day as of Jan. 1, 2013, with 48,480 more b/d of capacity idled. One 17,000-b/d crude unit was shut in March 2009, and another was idled in April 2012.
As far back as 2008, Flint Hills had been weighing its options regarding the North Pole refinery. Market conditions made difficult by the Great Recession improved for many inland refineries in the continental U.S. as the shale revolution got underway. However, Alaska North Slope crude’s higher cost relative to Midcontinent crudes and much higher natural gas costs in Alaska have put refineries in the state at a disadvantage with competitors out of state.
Flint Hills bought the refinery and terminal from Williams in 2004. The discovery that sulfolane (used in gasoline production) had migrated off the property didn’t come until October 2009.
