NEWS BULLETIN

February 09, 2004 --- Vol. 10, No. 17February 2004

Alaska, Flint Hills reach agreement on royalty oil contract

Alaska Gov. Frank Murkowski announced today that the state of Alaska has reached agreement with Flint Hills Resources on the sale of North Slope royalty oil for use in the North Pole refinery Flint Hills is buying from Williams. The contract allows Flint Hills to purchase up to 77,000 barrels per day for up to 10 years.

Murkowski said the negotiated contract, which will be presented to the Alaska Royalty Oil and Gas Development Board Feb. 17, and then must be approved by the Legislature, “includes a 30 cent per-barrel premium over the normal royalty-in-value sale price, up from 15 cents in the most recent long-term contract with Williams.” The state also reached an agreement on gasoline and jet fuel price parity between Anchorage and Fairbanks, the governor said.

The state said Flint Hills has agreed to maintain a “wholesale truck-rack posted price” of gasoline in Fairbanks — on an annualized basis — not to exceed that of Anchorage. Flint Hills also agreed to charge the same or lower price in Fairbanks as would be charged in Anchorage for jet fuel, and to work with Fairbanks International Airport to promote it as a fueling stop for cargo carriers between Asia and Europe.

The governor said at a North Pole press conference that this contract is for 10 years: a five-year contract with five one-year extensions. The option is for a minimum of 24,000 barrels per day and a maximum of 77,000 bpd.

The state is expected to see an additional $8 million per year from the new contract, based on the 30 cent per barrel premium.


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