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Alaska’s Largest Refinery to Close Down

By Charles Kennedy | Sun, 09 February 2014 00:00 | 0

Alaska’s largest refinery by capacity may shut down operations permanently beginning in May this year, citing the massive costs associated with clean-up.

The North Pole refinery, operated by Flint Hills Resources LLC—a subsidiary of Koch Industries Inc.--will halt operations at its extraction unit on 1 May, which will effectively stop gasoline production, and close down the No. 2 crude unit by 1 June, which will halt production of refined products such as jet fuel, Bloomberg reported.

This is the second such announcement by the refinery in two years. In early 2012, the North Pole refinery halted operations at its No. 1 crude unit, citing the rising crude prices and the rising cost of cleaning up contaminated soil and groundwater.

“Our company has spent an enormous amount of money and resources addressing soil and groundwater contamination,” Mike Brose, manager of the North Pole refinery, said in the statement.

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“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.”

Costs related to the cleanup of sulfolane groundwater contamination, from historic spills of the industrial solvent at the refinery are making operations too expensive.

The state of Alaska recently set a strict sulfolane contamination threshold for ground water cleanup.

Shutting down the North Pole refinery will remove a key source of heat for crude oil shipped down the Trans Alaska Pipeline, according to local media sources. Portions of oil unused by Flint Hills to produce fuel are returned to the mainline. According to Alyeska Pipeline Service Company spokeswoman Michelle Egan, the heat added at the refinery has become increasingly important to ensure oil keeps flowing during the winter.

As such, adjustments to pipeline interface infrastructure at North Pole may be required.

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According to a statement sent to Bloomberg by a Koch Industries spokesman, Flint Hills will sell refined products at the terminals in Alaska using fuel shipped by rail or truck from refiners in the state and “other potential sources.”

The statement also noted that the company “will entertain offers for the assets associated with the refinery as an ongoing enterprise or as a terminal/marketing operation.”

The refinery has 720,000 barrels of tank storage capacity that’s linked to the company’s North Pole terminal.

The closure of the refinery will also mean job cuts. The company estimates that 81 members of the 126-member workforce will be cut after 1 November.

By. Charles Kennedy of Oilprice.com

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