Flint Hills refinery: changing hands again.

• Author: Bradner, Mike
• Position: SPECIAL SECTION: Oil & Gas

Community and business leaders in Fairbanks are very worried about the potential loss of the Flint Hills Resources refinery that operates at North Pole, east of the Interior city. Flint Hills has said that it will close the refinery this summer due to a variety of problems but has also been working on a possible sale. A sale to another owner has been complicated, however, by contamination that was discovered on the property and the financial liabilities that have been created.

The possible loss of the refinery is a blow to the community not just in terms of jobs--Flint Hills employs 126 in Alaska--and taxes paid to local municipalities. The refinery is also important symbolically because it made the Interior largely sufficient in fuel supply, an important consideration given the region's traditionally cold winters.

Flint Hills has asked the State of Alaska to consider a way to protect a new buyer from lawsuits and penalties over the contamination. State officials are working on this, but issues of liability from pollution are complex and it may take some time.

Interior Fuel Needs

Since large oil discoveries were made in the late 1960s on the North Slope and the Trans Alaska Pipeline System (TAPS) was first planned, a key goal of community leaders in Interior Alaska was to encourage development of a refinery in Interior Alaska to supply fuel needs.

There was a strong desire to no longer depend on a long fuel supply chain from Southcentral Alaska and the Pacific Northwest, particularly since large volumes of crude oil were flowing through TAPS right past Fairbanks.

The concern was not so much price, fuel prices in the Interior have never been a bargain, but more the possibility of a fuel supply disruption in an extended transportation system from Southcentral Alaska and the Pacific Northwest.

Flint Hills does not divulge information on quantities of fuel it produces, but according to information published by the state Division of Oil and Gas in 2013 in its Best Interest Finding for a sale of royalty oil, Flint Hills was producing, per day, about 670,000 gallons of jet fuel, 143,000 gallons of gasoline, 41,000 gallons of home heating oil, and 68,000 to 194,000 gallons of other products such as high-sulfur diesel; HAGO, a form of heavy oil used in power generation; naphtha; and asphalt.

The numbers are based on refinery operations at less than full capacity and when Flint Hills was taking about thirty thousand barrels per day of state royalty oil that it purchased to make products. When all three of the refinery's crude...