Flint Hills refinery unit to shut down sooner than expected


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Flint Hills Resources will have its North Pole refinery crude oil processing unit No. 1 shut down Aug. 1, about a month earlier than the company had said.

The closure will leave the refinery’s crude processing unit No. 2 still operating. The refinery’s crude processing unit No. 3 was shut down in 2010.

The plant at North Pole is near Fairbanks. Flint Hills takes crude oil from the nearby Trans-Alaska Pipeline System to manufacture fuel products.

Flint Hills spokesman Jeff Cook would not provide estimate of the production capability of the remaining unit but said that it is capable of manufacturing gasoline, diesel, asphalt and jet fuel for Flint Hill’s current customers as well as a naphtha that is used for power generation by Golden Valley Electric Association, the Interior Alaska regional electric cooperative.

Meanwhile, the company is working to find jobs for employees affected by the shutdown of the unit, Cook said.

“This will affect about 37 to 38 of our employees but fortunately we have been able to place many of these people with other refineries and facilities operated by our parent company, Koch Industries,” Cook said.

The company now employs about 170 between the refinery and a bulk fuel storage and distribution center in Anchorage, he said.

Fairbanks community leaders are concerned that Flint Hills’ action to move skilled employees to other plants is a signal that the company sees no possibility of restarting the unit in the near future, nor a third processing unit at the refinery that was shut down in 2010.

Jim Dodson, president of the Fairbanks Economic Development Corp., said his organization is focused on helping the refinery alleviate problems that affect its profitability, mainly a less expensive source of energy for refinery operations than the crude oil Flint Hills must now burn.

The company is now in a joint study with Golden Valley of a plan to truck liquefied natural gas from the North Slope to Fairbanks. The LNG would be regasified to power the refinery, removing the need to burn costly oil.

Fairbanks leaders are also pressing the state of Alaska to offer Flint Hills better terms on its state royalty oil contract when the contract is renewed in 2014, Dodson said. The refinery is now totally dependent on the state for a supply of crude oil, and the state charges Flint Hills a premium for royalty crude on top of the value the state receives from producers who pay the state royalty in cash.

“It makes absolute zero sense for the state to charge Flint Hills a bonus on the royalty oil,” Dodson said. “Our state should be focused on helping our industries and retaining jobs rather than maximizing revenue to the treasury,” particularly when Alaska is running billion-dollar revenues surpluses at current oil prices.

The Flint Hills cutback in August will further reduce shipments of fuel from Fairbanks to Anchorage on the state-owned Alaska Railroad Corp. Bill O’Leary, the railroad’s vice president of finance, said fuel shipments have been reduced by half since Flint Hills operated all three of its crude units and shipped gasoline and jet fuel to Anchorage.

Officials at Ted Stevens International Airport in Anchorage said fuel suppliers bringing jet fuel from overseas have been able to replace the jet fuel made by Flint Hills, although a Tesoro Corp. refinery in Kenai, south of Anchorage, also supplies some jet fuel.

Anchorage’s airport is a major refueling point for air cargo operators flying between North America and Asia. About 800 million to 1 billion gallons of jet fuel is purchased annually by air carriers in Anchorage.

 

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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