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Flint Hills cites costs for gas trucking decision

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Posted: Tuesday, November 20, 2012 11:57 pm | Updated: 12:08 pm, Mon Jan 21, 2013.

FAIRBANKS — A decision by Flint Hills Resources Alaska to end talks on a natural gas trucking plan was partly motivated by lowered energy costs at its North Pole Refinery, a company spokesman said Tuesday.

Flint Hills spokesman Jeff Cook said the refinery has taken numerous steps in the past year to reduce its energy consumption. The most significant moves included the installation of a new heat-recovery system at the facility and a decision to shut down one of its refinery units in April. He said additional changes have been made but declined to discuss them for proprietary reasons.

Together, those moves have significantly reduced energy costs at the plant, he said.

“We’re in a much better position than we have been,” Cook said.

Those lower costs made a planned natural gas trucking partnership between Flint Hills and Golden Valley Electric Association less of a necessity, he said. Flint Hills announced Monday it was ending talks until more is learned about the demand for a natural gas processing facility.

GVEA said it plans to continue with the trucking plan without Flint Hills.

Flint Hills and GVEA began working together in August 2011 on a plan to truck liquefied gas from the North Slope to the Fairbanks area. Both said at the time that lower-cost trucked gas was crucial to reducing their energy costs.

Flint Hills, in particular, said that finding cheaper energy was critical to staying competitive. Because other refineries are able to use natural gas instead of more expensive crude oil, the North Pole refinery has struggled to remain competitive.

“It keeps us in business,” Cook said at the time the partnership was announced. “When you’re financially challenged like we are ... you can’t continue to do this long term.”

But Cook said steps taken to boost efficiency at the plant in the past year have helped. The refinery also began the process of idling its No. 1 crude unit in April, citing “challenging economics and rising crude prices.”

He said, however, that if GVEA does follow through with its trucking plan, Flint Hills could potentially be a customer. Part of the electric utility’s plan could involve selling surplus gas in the Fairbanks market once its generation needs have been met.

“Obviously, if cheaper and cleaner energy can come along, we’re going to look at it,” Cook said. “It needs to be economical, but if it is we’d be interested.”

Contact staff writer Jeff Richardson at 459-7518. Follow him on Twitter: @FDNMbusiness.

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