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Legislature Considers $150m to Help Refineries

By | April 15, 2014 - 5:40 pm

The Flint Hills refinery in North Pole plans to cease operation this spring, and the Parnell Administration warns Petro Star’s refinery in North Pole might be next. A bill crafted by the Administration would prop up Alaska’s three remaining oil refineries with $150 million in state funds. Even some legislators who are helping advance the bill say they’re uncomfortable with it.

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But Fairbanks Republican Representative Steve Thompson says he worries it’s not enough money. He says Fairbanks needs Petro Star’s Interior refinery, especially if it hopes to attract the new F-35 fighter units to Eielson Air Force Base.

“No jet fuel? Goodbye. F16s (will) move. That means Eielson is going to close. 1500 civilian jobs. We’re going to have empty houses in Fairbanks. The economy is going to tank further,” he said at a House Finance hearing Monday.

State Natural Resources Commissioner Joe Balash says the high price of North Slope crude makes it hard for in-state refineries to compete with fuel imported from Outside. The Administration originally proposed $300 million in refinery assistance, primarily to help Petro Star, which faces higher costs for crude delivery now that its neighbor, Flint Hills, won’t be contributing.

Anchorage Democratic Representative Les Gara says he wants the refinery to stay open, too, but he calls the bill pending in the House now “insane policy.”

“It’s a bailout, it’s a giveaway, it’s poorly crafted,” Gara says. “It costs the state $150 million over five years, and it gives $50 million to Tesoro who doesn’t even want the money. At a time when we can’t afford our schools we need to come up with smarter solutions than just giving money to companies.”

The bill would allow an Alaska refinery to collect $10 million a year from the state for five years. That would mean $20 million a year for Petro Star, which has refineries in North Pole and Valdez, and $10 million a year for Tesoro’s operation in Kenai. The companies would get the money in the form of tax credits, or in cash if the company doesn’t owe state taxes. The refineries would have to do is show they spent $25 million a year on infrastructure. Gara says the definition is wide open, to include buying or altering any tangible property. And, says Gara, there are no limits on what the refinery can do with its state money. Companies can “keep the money in profits, give the money to their executives, give the money to their share holders,” Gara says “There are no sideboards.”

He proposed offering the refineries low-interest loans instead, but his amendment failed 8-3 in the House Finance Committee Monday. Rep. Tammie Wilson, a North Pole Republican, says Petro Star is too close to the edge for loans.

“Where they’re at right now, they may not be here in five years,” she said. “They’re not going to get a loan for something in which the company might not be able to make it. We have to do something now to make them healthy.”

Petro Star is owned by Arctic Slope Regional Corporation. ASRC Senior Vice President Tara Sweeney, at the Capitol to press for the bill, says she’s doing what she can not to close the refinery.

“The refining industry in Alaska is not healthy. We’re down here working to ensure that it is, and the tools are there that are necessary to keep us afloat,” she says.

“If it does close, the state says it would lose millions of dollars a year in revenues.  But lawmakers who question the refinery assistance bill point out Petro Star hasn’t opened its books for them. Republican Rep Alan Austerman of Kodiak says he’s troubled by the lack of information they’ve received from the state, too.

“We’re just going based upon, a company come(s) to the state of Alaska saying that ‘we’re going to go out of business if you don’t give us some money,’” Austerman says.

Fairbanks Democrat David Guttenberg says the bill was dropped on them in the last days of the session with no meaningful analysis. He’d like not to vote for it but he says they’re in a bind.

“Here we are faced with this, you know, this is what we have. Is it the best thing? I don’t think so. Is it the only thing? Yeah,” Guttenberg says.

The bill cleared the House Finance Committee Tuesday. Sponsors hope to get it through both the House and Senate before the Legislature adjourns this weekend.

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