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Flint Hills to shut down processing unit at North Pole refinery
Fairbanks Daily News-Miner ^ | Apr 10, 2012 | Jeff Richardson

Posted on 04/11/2012 5:00:38 AM PDT by thackney

Flint Hills Resources announced plans Tuesday to idle one of its two operating refinery units in North Pole, a move that will result in layoffs for roughly a quarter of its local employees.

In a news release, the company blamed the move on “challenging economics and rising crude prices.”

The process of idling the No. 1 crude unit will lead to a gradual reduction of 35 to 40 workers at the refinery during the next five months.

Flint Hills has struggled with high costs at its North Pole location for years, saying the refinery’s dependence on crude oil as a power source puts the plant at a disadvantage against competitors who have access to cheaper natural gas. The refinery previously idled its No. 3 crude unit in 2010 as a cost-cutting measure.

In a statement, refinery manager Mike Brose called the latest move “the most difficult decision we have had to make in operating this refinery.”

Flint Hills will continue operating its remaining No. 2 crude unit, which produces jet fuel, gasoline, asphalt and some specialty fuels. Refinery spokesman Jeff Cook said the remaining unit should be able to compensate for the idled unit and that the company will still be able to meet its contractual commitments.

Brose said operating a single crude unit gives the North Pole refinery the best opportunity to survive as it pursues a cheaper energy source.

Flint Hills launched a partnership with Golden Valley Electric Association last August to truck liquefied natural gas from the North Slope. That effort, which isn’t expected to provide gas until 2014, is envisioned as a way to slash energy costs.

Cook said the refinery and GVEA are moving ahead with that plan and that Flint Hills hopes it will offer cheaper power that will eventually allow it to restart its idled refinery units.

“That’s certainly our hope to be in a position where we can lower our energy costs,” Cook said.

The project will require construction of a plant to liquefy natural gas on the North Slope, along with a storage facility that will return it to gaseous form in North Pole. A fleet of about 40 trucks will be needed to transport gas between those two points along the Dalton Highway each day.

Meanwhile, Cook said, the North Pole refinery is struggling in an already challenging environment. According to Flint Hills, 16 refineries have closed in North America and Europe during the last several years.

Fairbanks North Star Borough Mayor Luke Hopkins said the move by Flint Hills is another example of the damaging effect of expensive energy on the Interior.

“If we don’t get lower-cost energy here, it’s going to continue to be these impacts on our economy, our community, our families,” he said.

Sen. John Coghill, whose district includes the refinery, said the announcement is another reason why getting affordable natural gas to the Interior should be a top priority for lawmakers.

“A lot of people think that Flint Hills is gouging, but they live in the same high cost environment as the residents,” he said. “We need to get some natural gas down here so we can reduce the home heating and the cost to run our refineries.”

The employees affected by the layoff plans will have opportunities to apply for other positions within the company, according to the Flint HIlls news release. Those who don’t shift to other jobs in the company will receive severance packages and support finding work, according to the company.

Flint Hills Resources, which is based in Wichita, Kan., has 151 employees at its North Pole refinery. It purchased the refinery in April 2004.


TOPICS: News/Current Events; US: Alaska
KEYWORDS: energy; refinery

1 posted on 04/11/2012 5:00:51 AM PDT by thackney
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To: thackney
announced plans Tuesday to idle one of its two operating refinery units in North Pole

Santa has been unavailable for comment.....

2 posted on 04/11/2012 5:03:56 AM PDT by Hot Tabasco
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http://www.adn.com/2012/04/10/2416196/tuesdays-oil-gas-gold-and-zinc.html#storylink=rss

North Slope oil yesterday was $118.77 a barrel.

So while refineries using natural gas as an energy source see prices of under $2 per million BTU, this refinery was paying over $21 per million BTU.


3 posted on 04/11/2012 5:09:27 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

No one in Wichita could ever understand why Charles agreed to buy this dog...


4 posted on 04/11/2012 5:11:58 AM PDT by Eric in the Ozarks (Beware the Sweater Vest)
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To: thackney

Good! I wish that all the oil companies would destroy the essential parts along with the blueprints for them,destroy their refineries and let these bastards that are always griping about “big oil” destroying the environment,making outrageous “profits” could go back to living like they did in the middle ages. Let them see who would pay their welfare checks them. Whether it is form a government funded university professorship or in “public” housing fornicating and doing dope.


5 posted on 04/11/2012 5:12:21 AM PDT by sport
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To: Eric in the Ozarks

If the gas pipeline was in now, either to Canada or to Valdez, this plant would have all three units running today.

Depending on Alaska politicians is a very risky business.


6 posted on 04/11/2012 5:15:45 AM PDT by thackney (life is fragile, handle with prayer)
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To: sport

The comments at ADN show how clueless many are and incapable of doing math.


7 posted on 04/11/2012 5:16:44 AM PDT by thackney (life is fragile, handle with prayer)
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To: Eska

North Pole ping


8 posted on 04/11/2012 5:18:53 AM PDT by thackney (life is fragile, handle with prayer)
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As a reference point, I’ve seen older refinery use 0.7 million BTU per barrel of oil processed in South Texas.

Newer or upgraded refineries can reduce well below that, but some are even worse.

If the raw energy cost alone of refining the crude oil are $15 a barrel, there is no way to be cost competitive, even against refineries barging fuel up from Washington State.


9 posted on 04/11/2012 5:22:41 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

I did not know the refinery burned crude oil to operate.
That’s gotta be a huge disadvantage.


10 posted on 04/11/2012 5:38:07 AM PDT by Eric in the Ozarks (Beware the Sweater Vest)
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To: Eric in the Ozarks

No natural gas in the area has been commercially produced.

The pipeline does have the advantage that they don’t have to deal with their residual oil. They just put it back into the pipeline and it is blended in with the crude sold to the rest of the West Coast. The pipeline gets the advantage of significant added heat at this point.


11 posted on 04/11/2012 5:43:56 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

They could sell that resid in the USGC for more than WTI (if they could get it there.)


12 posted on 04/11/2012 5:47:24 AM PDT by Eric in the Ozarks (Beware the Sweater Vest)
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To: Eric in the Ozarks

It adds to the pipeline. I’m sure it is not a free give-away.


13 posted on 04/11/2012 5:49:57 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

I recall the NP refinery once had a hammer lock on the jet fuel biz but some new entrant took away most of this business.


14 posted on 04/11/2012 5:53:21 AM PDT by Eric in the Ozarks (Beware the Sweater Vest)
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To: Eric in the Ozarks
40 trucks hauling gas cylinders 24/7......big bucks for the truckers...

how far is the round trip..?

thanks in advance.

15 posted on 04/11/2012 5:59:34 AM PDT by spokeshave
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To: spokeshave

It is most likely moved on barges from Washington State. All of the other refineries in Alaska are rather small.

http://www.eia.gov/petroleum/refinerycapacity/table3.pdf


16 posted on 04/11/2012 6:09:23 AM PDT by thackney (life is fragile, handle with prayer)
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To: Eric in the Ozarks

Jet Fuel is big business in Alaska. Lots of Cargo 747 going stopping for a fill up between Asia and Lower 48. They sell about 3 times as much Jet Fuel in Alaska than Gasoline OR Diesel, Fuel Oil and Kerosene combined.

http://www.eia.gov/dnav/pet/pet_cons_prim_dcu_SAK_a.htm


17 posted on 04/11/2012 6:15:19 AM PDT by thackney (life is fragile, handle with prayer)
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To: FRiends
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18 posted on 04/11/2012 6:18:40 AM PDT by deoetdoctrinae (Gun-free zones are playgrounds for felons)
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To: thackney

They should hired me as a consultant. I would have told them that transportation and freight costs would have killed them.


19 posted on 04/11/2012 7:11:36 AM PDT by ProtectOurFreedom
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To: ProtectOurFreedom
I would have told them that transportation and freight costs would have killed them.

And you would have been wrong.

This plant is not economical due to requiring North Slope Alaskan Crude as their power source as well as their feedstock.

If they were using Natural Gas for heat and electrical power, they would be doing just fine.

The market is in Alaska and the feedstock is in Alaska. They are losing out to refineries that actually take Alaskan crude, ship it to Washington, refine it and barge it back to Alaska.

20 posted on 04/11/2012 7:24:51 AM PDT by thackney (life is fragile, handle with prayer)
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To: spokeshave

Knock on the refinery’s door.


21 posted on 04/11/2012 1:10:16 PM PDT by Eric in the Ozarks (Beware the Sweater Vest)
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To: thackney

C’mon...freight costs to North Pole have to be sky high. What do they do? Move the oil in on flying sleighs?


22 posted on 04/11/2012 7:25:07 PM PDT by ProtectOurFreedom
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To: ProtectOurFreedom

It is very near the Alaskan Pipeline. They only get oil from it.


23 posted on 04/12/2012 2:48:02 AM PDT by thackney (life is fragile, handle with prayer)
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To: ProtectOurFreedom

The pipeline run adjacent to North Pole near Fairbanks.


24 posted on 04/12/2012 3:09:06 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney
About a dozen years back, Alaskans passed a state referendum to build a nat gas pipeline from North Slope. The politicals side tracked the referendum over the years.

Remember all the Repub Politicians that went to jail or resigned from office during the Palin Administration over corruption with the oil companies. We've had high oil prices for years here in Alaska. Personally, I fill up my truck maybe twice a month; don't drive too many miles in our rural community; so the higher prices don't hit me as hard as it does urban Alaskans.

Every day, 6-8 double tankers go up the Taylor hauling diesel & gas into Canada. They must have had excess capacity at Flint Hill. I hate seeing anybody layed off, but I really believe there must be much more to the picture than what is usually portrayed; been watching this game for the last 20 years up here.

Snow's a meltin, thinking about putting the snowmachines away, pulling the 4 wheelers out and setting up the bear stands.

25 posted on 04/12/2012 3:41:13 AM PDT by Eska
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To: Eska

This is also going to cut into the Rail Road dollars losing money hauling to Anchorage.


26 posted on 04/12/2012 3:57:32 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

Not a good thing, cutting workforce at flint hills, but I thought I read production would stay the same. Might have to do with making the place more efficient with less overhead. I’ve seen that happen in Alaska more times than not. They might be wanting some tax relief too; might hear more down the road. I once heard somebody mention that the state should buy flint hills and develop it themselves, but nobody wants another state failure. Having a refinery here might be crucial for Alaska also.


27 posted on 04/12/2012 6:43:29 AM PDT by Eska
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To: thackney

Thanks. So North Pole really isn’t at the North Pole, then? I wasn’t aware of that.


28 posted on 04/12/2012 6:44:20 AM PDT by ProtectOurFreedom
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To: Eska

The production through unit #1 will stop. The production through unit #2 will continue. The will still deliver products but less of them.


29 posted on 04/12/2012 7:02:04 AM PDT by thackney (life is fragile, handle with prayer)
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To: ProtectOurFreedom

The true North Pole is in the middle of the Arctic Ocean.

Many years ago this town near Fairbanks was in talks with a Toy Manufacture. They changed the town name to North Pole trying to increase the deal as the manufacture would get unique marketing advantage. The manufacturing never happened but the name remains.


30 posted on 04/12/2012 7:08:38 AM PDT by thackney (life is fragile, handle with prayer)
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