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Vol. 13, No. 50 Week of December 14, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

Palin administration reviewing options to keep Flint Hills North Pole refinery open

Flint Hills Resources has decided not to sink more money into its North Pole refinery, but instead of continuing to look for a buyer, the company has pledged to keep the refinery open for another six months while it works with the Palin administration to find a way to position the refinery for long-term success.

According to a Dec. 10 press release from Alaska Gov. Sarah Palin’s office, one of the options being discussed is the state taking ownership of the refinery, possibly through the Alaska Railroad Corp., or a similar state-owned structure.

“After completing our review, we have determined that significant investment in the plant is not an option,” Flint Hills spokesman Jeff Cook told the Fairbanks Daily News-Miner. “We remain interested in discussing any other alternatives with the state, including selling the plant.”

Cook said the refinery has been losing money in 2008, partly because of high oil prices and partly because of increases in federal emissions and environmental standards.

Earlier in the year Flint Hills said it was reviewing four options for its North Pole refinery — determining if major plant upgrades could increase capacity and lower costs; reconfiguring the plant to make it economic; selling it; or closing it.

Because the refinery is a “major employer in Alaska and is vital to the operations of the Anchorage International Airport, the Port of Anchorage and the Alaska Railroad,” Palin said the state agreed to analyze the refinery’s economics and help come up with a successful business solution. That analysis will be done under the Alaska Department of Natural Resources, and is expect to take three to six months.

One hundred and seventy-five people are employed by Flint Hills Resources in Alaska, and 45 percent of the Alaska Railroad’s business comes from the refinery.

Adding to the challenge facing DNR and Flint Hills is British Columbia’s Prince George airport, which recently extended its runway from 7,400 feet to 11,500 feet, and is looking to take away business from the Anchorage airport.

To entice international carriers to land and refuel in Prince George the airport is offering lower landing fees and less expensive jet fuel. If they succeed, the flow of jet fuel from North Pole to Anchorage would decline and probably be “the final nail in Flint Hills Resources’ coffin,” a source connected to the Alaska Railroad told Petroleum News Dec. 10.

—Kay Cashman



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