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Trans-Alaska pipeline flow fight heats up for Flint Hills Refinery

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Posted: Friday, May 27, 2011 11:59 pm | Updated: 1:02 pm, Wed Jan 16, 2013.

FAIRBANKS — As the oil in the trans-Alaska pipeline gradually cools, its owners have begun a public feud about how to keep that slow-moving crude flowing.

Flint Hills Resources Alaska, which runs a refinery in North Pole, is balking at an anticipated mandate to reheat the residual oil it returns to the pipeline. Although no formal request has been made to revise the terms for transporting crude through the pipeline, Flint Hills said in a May 3 filing with the Federal Energy Regulatory Commission that it believes it will be forced by other pipeline partners to heat residual oil to a minimum of 105 degrees Fahrenheit.

In the FERC petition, Flint Hills argued such a mandate would be “unjust, unreasonable and unduly discriminatory and therefore, unlawful.”

Flint Hills owns a share of the 800-mile pipeline, along with BP, ConocoPhillips, ExxonMobil and Unocal. The other carriers filed a protest to the Flint Hills move on Wednesday, saying the company is objecting to a request that hasn’t been made.

The response said that “Flint Hills is asking the commission to address an issue that may never have to be resolved. Flint Hills’ pleading is thus premature.” The request asks FERC to dismiss the petition.

The dispute underscores a harsh reality facing the pipeline — as oil production drops, it becomes harder to keep it flowing through the pipeline. Heating the crude inside is one way to maintain a steady flow to its terminus in Valdez.

Flint Hills spokesman Jeff Cook said the oil the company gets from the pipeline in North Pole today has a temperature of about 40 degrees.

Back in the 1990s, when oil production was much higher, it arrived at temperatures of 100 degrees or more, he said.

Cook said that gradual change has increased costs at the North Pole refinery. Flint Hills must heat that oil up to a temperature of 630 degrees as part of the refining process and doesn’t have access to cheap natural gas like most refineries do.

“It places us at an economic disadvantage that that temperature has dropped,” Cook said.

He said Flint Hills has consistently added that heat back into the pipeline, bringing the temperature of its residual crude up to 100 degrees or more.

But he said the heat can be used in other ways to cut costs at the refinery and Flint Hills shouldn’t be under a mandate to reheat the oil.

The other pipeline owners said in their response that “additional heat will likely be necessary to maintain the operation” of the pipeline but that it isn’t clear whether they’ll seek a minimum temperature requirement for Flint Hills.

Flint Hills is one of a handful of refineries in the state and one of two producing gasoline.

Managers have, beyond the May 3 filing, periodically raised red flags over their operational costs.

Officials from the city of North Pole have tried to help the refinery, for example arguing that the state should consider selling crude to Flint Hills at a lower price.

Gov. Sean Parnell told the Daily News-Miner that the state — a minority owner of all oil pumped from the North Slope — already considers such options when pricing its crude for sale.

“What’s in the public interest is not just economic rents, or the dollar value” of crude on open markets, Parnell said. “I mean, the public interest is broader than just dollar value. And our commissioners and directors recognize that.”

Staff writer Christopher Eshleman contributed to this story. Contact staff writer Jeff Richardson at 459-7518.

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