JUNEAU—The CEO of Flint Hills Refinery responded in a letter to Gov. Sean Parnell that the sale of the North Pole plant is now unlikely following the governor's letter to the company saying that the state will continue to hold Flint Hills liable for the cleanup of widespread sulfolane contamination.
Parnell said Monday in a letter to Flint Hills CEO Brad Razook that the state won't hold a buyer of the plant responsible, however.
Razook wrote back to Parnell on Tuesday.
“I am now in the position of having to tell the buyer that it appears the state of Alaska has no interest in seeing this refinery operate in the future without extracting unreasonable concessions from Flint Hills,” Razook wrote.
Razook also took issue with Parnell’s offer to protect the potential buyer. He said that the state’s sulfolane standards are too low and make it difficult to tell the difference between a new spill and an old spill, which he said could put Flint Hills on the hook for future spills.
“While I understand that you believe releasing a potential new buyer from the existing liabilities clears the path for a sale, the liability problem is actually exacerbated for Flint Hills,” he wrote. “It would be unrealistic to expect us to transfer the refinery to another party and potentially be responsible for cleaning up that party’s spills as well.”
Last week Flint Hills announced it had multiple interested buyers of the plant and requested the state help the parties resolve issues stemming from the spilling of sulfolane by previous owners into the soil and groundwater of the North Pole area. Flint Hills said it has spent $75 million on cleanup and mitigation for the spills and has provided some form of assistance to 550 homes and businesses.
Included in the requests were protection for the potential buyer from responsibility for the old spills, as well as an offer from Flint Hills to pay for 10 percent, capped at $25 million, of a public water system for the affected properties in exchange to be cleared from responsibility.
Parnell wrote on Monday that he would absolve a buyer of the refinery from cleanup costs for the past chemical spills on the property, but said he would still be holding Flint Hills and former owner Williams Alaska responsible for the off-site environmental cleanup.
On the rejected offer, of which Parnell said was too early to decide if a piped water system is effective or acceptable, Razook said he felt that was a fair deal.
“Residents and businesses in North Pole would be assured a supply of clean water free of any sulfolane,” he wrote in Tuesday’s letter. “Flint Hills would contribute financially to that solution and, as a consequence of that contribution, would be released.”
Parnell said he has directed the Department of Law and the Department of Environmental Conservation to continue working for a solution on the cleanup issue, as well as pursue former owner Williams Alaska for cleanup costs.
Parnell, however, said he would not change the cleanup standards.
Razook also took issue with what he called “arbitrary and unreasonable” cleanup standards set by the Department of Environmental Conservation, saying that a cleanup level of 14 parts per billion would “make it difficult for anyone to operate it.”
Flint Hills has appealed the standard. An initial decision on whether the appeal will be heard is due this month.
Flint Hills announced plans to close last month, a move that would eliminate 80 jobs, and cited the state’s cleanup level as a primary factor in the decision.
When questioned on the closure and DEC’s standards, Parnell said he believed the changing market and economics of refining in Alaska were more to blame than the environmental standard.
Razook also addressed the market forces in his Tuesday letter, saying employees have worked on it but that the governor’s “positions on the sulfolane contamination put us in a position where overcoming the economic challenges would not be enough to make this refinery viable.”
The Flint Hills CEO also put to rest rumors that Flint Hills was seeking an improved royalty oil contract with the state, saying “I can categorically assure you that those rumors are false.”
Razook closed his letter with a blunt call to action for the governor to cut a deal.
“Frankly, it will take your help for this refinery to be operated in the future, because the path we are on is years of litigation over a site that no buyer will touch,” he wrote. “Offering to release a buyer from the state’s claims, when you know that will increase Flint Hills’ exposure to liability and leave the buyer vulnerable to claims from Williams, just isn’t enough. … Flint Hills Resources has no intention of running a refinery in Alaska.”
Parnell’s spokeswoman Sharon Leighow issued the following statement in response to Tuesday’s letter:
“Governor Parnell has cleared a path for a refinery buyer and is committed to a strong in-state refining industry,” she said. “The governor encourages interested parties to contact the Attorney General’s Office to discuss a prospective purchaser agreement in which they would not be held liable for previous environmental contamination at Flint Hills.”
Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.