The pipeline run adjacent to North Pole near Fairbanks.
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.
Knock on the refinery’s door.
C’mon...freight costs to North Pole have to be sky high. What do they do? Move the oil in on flying sleighs?
It is very near the Alaskan Pipeline. They only get oil from it.
The pipeline run adjacent to North Pole near Fairbanks.
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.
This is also going to cut into the Rail Road dollars losing money hauling to Anchorage.
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.
Thanks. So North Pole really isn’t at the North Pole, then? I wasn’t aware of that.
The production through unit #1 will stop. The production through unit #2 will continue. The will still deliver products but less of them.
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.
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