02.05.2014
North Pole refinery to cease processing crude oil; all but 35 to be laid off
Flint Hills Refinery
Flint Hills Resources North Pole Refinery, shown here Friday, April 13, 2012, announced earlier in the week its plans to idle one of its two operating refinery units, a move that will result in layoffs for roughly a quarter of its local employees.
FAIRBANKS — The Flint Hills Refinery in North Pole will cease gasoline and jet fuel production, the company announced Tuesday.
The process will take place during the next several months, according to a company news release, culminating in the closure of gasoline production on May 1 and the closure of jet fuel and other refined products by June 1.
The company employs 126 people in Alaska and expects to retain about 35 employees to operate its tank farm as a terminal and another 10 employees to operate its Port of Anchorage terminal. Flint Hills spokesman Jeff Cook said all employees will have the opportunity to stay with the company through Nov. 1 as decommissioning takes place.
Flint Hills encouraged its employees to apply for jobs in its other enterprises Outside, which the company said have been growing significantly in recent years.
Flint Hills Resources Alaska Vice President Mike Brose blamed the closure on the volume of resources and money the company had to spend addressing soil and groundwater contamination from the refinery’s previous owner.
“So far, neither Williams (the previous owner) nor the state of Alaska have accepted any responsibility for the cleanup,” Brose stated in the news release. “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.”
Brose said the company will continue to meet its obligations to remove sulfolane from the aquifer on site.
Flint Hills has been plagued with troubles at its North Pole facilities in recent years. In 2012, the company announced it would idle the second of its three refinery units in North Pole, laying off several dozen employees.
The company had continued to operate its final North Pole refinery unit.
That unit produces jet fuel, gasoline, asphalt and specialty fuels.
After idling its second refinery unit, company administrators said they believed Flint Hills would still be able to meet its contractual requirements with the single unit and said they hoped only operating a single unit would allow the refinery to survive while pursuing cheaper energy sources.
The Alaska Department of Environmental Conservation responded with confusion to the company’s decision to focus entirely on regulation in its press release as its reason for closing.
Kristin Ryan, the director of spill prevention and response, said the department did not expect to be singled out, because there appeared to be other factors involved.
“They had expressed (concern) in the past, but we were surprised it was listed as the only reason in the press release,” Ryan said.
The closure will not affect the company’s obligation to clean up the site, Ryan said. She said Flint Hills has always had the option to work with DEC to determine the amount which the company must clean up the site.
“We’ve been waiting on Flint Hills to provide information about how clean they can get it,” Ryan said.
Ryan also said that DEC is, in fact, pursuing the site’s original owner for the sulfolane spill despite what Flint Hills’ announcement might make people think.
Jim Dodson, president of Fairbanks Economic Development Corp., said the closure looks to be the result of myriad factors affecting the refinery in the past several years, including the sulfolane cleanup costs, a “bad” royalty contract with the state, and declining use of Flint Hills’ jet fuel at Ted Stevens Anchorage International Airport.
“If you don’t support the industries in your state, then they’re going to leave,” Dodson said. “It was avoidable.”
Other than the direct impact to the North Pole area, the refinery’s closure could have a negative impact on local taxpayers.
“You look at the tiny little tax base North Pole has and where they get their revenue, I think that’s going to be significant,” Dodson said.
North Pole Mayor Bryce Ward said in a statement he was “extremely troubled and disappointed” to hear about the closure. Ward said he worried the cleanup regulations imposed on the refinery may have been too strict.
Following the announcement, other state legislators said they planned to meet with Gov. Sean Parnell about the closure Tuesday afternoon and would issue a statement after the meeting.
Doug Isaacson, R-North Pole and former mayor of the city he represents, said he was “livid” about the news.
“My worst nightmare as a mayor has come true,” he said.
Isaacson had advocated for a more friendly approach to the royalty oil contract the state inked with Flint Hills last session, but he said that deal came up far too short. He said he hopes this will open up the administrations’ eyes to its unfriendly policies.
“After expressing how livid I am (to the governor) with how predictable this was and how reversible it was, the outcome is will they look at changing the mindset that brought us to this point?” Isaacson said. “Will they allow a new refinery to succeed?
The governor released a statement saying the closure’s negative impacts would be felt across the state. Parnell said he had directed the Department of Labor and Workforce Development to work closely with Flint Hills’ human resources staff to help employees affected by the layoff.
Members of the state’s congressional delegation also responded immediately to the announcement.
Sen. Lisa Murkowski, R-Alaska, called the closure a “major blow to the state” and said she had contacted Alyeska Pipeline Service Co. to ensure the closure would not have a larger impact on the trans-Alaska oil pipeline.
Rep. Don Young, R-Alaska, blamed the closure on “deteriorating conditions caused by diminished supplies and onerous regulation.” Young said if the Flint Hills closure wouldn’t sway opinion on the energy sector, he didn’t know what would.
Petro Star, Inc., another Alaska refining company owned by the Arctic Slope Regional Corp. and with a plant near North Pole, released a statement bemoaning the loss of the Flint Hills refinery.
Petro Star President Dough Chapados said the excessive fees refiners must pay to reinject return oil into the trans-Alaska pipeline “suffocate” Alaska refiners.
Flint Hills Resources is a refining, chemicals and biofuels company based in Wichita, Kan., and owned by Koch Companies Public Sector. In 2012, when the company announced its second unit closure, it employed about 150 people at its North Pole Refinery, which the company purchased in 2004.
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