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Refineries, consumers hit with rising prices
State oil refineries face heavy legislation
by Lauren Kramer

If you’ve filled up your car lately, you realized with a shock that gas prices are soaring. At $2.32 per gallon vehicular travel is becoming more expensive and everyday gas prices are inching closer to their 1981 high of $2.86 per gallon.
It’s a fact that has everything to do with the price of crude oil, which set record high prices during the week of April 14, at $58 per barrel. By comparison, a year ago it cost $25 per barrel and in November 2001, it was only $17 per barrel.
To some extent, the price of gas in Washington state is related to supply and demand. More people are driving these days, and the size of the population is increasing. The Washington State Department of Transportation estimates the population will grow to 7.5 million by 2020, up from 5.5 million in 1994. In 1994 there were 10,000 trucks on Interstate 5 each day, a number that will grow to 25,000 in 2020. If the number of cars on the road increases proportionally, chances are consumption of gas will skyrocket too.
But, in addition to consumer consumption, gas prices are also affected by how much crude oil can be processed at local oil refineries. With legislation limiting the amount of oil that can flow into Northwest Washington refineries, prices at the pump might not drop anytime soon.

Operating at full steam
Northwest Washington has four oil refineries that compete directly with each other and produce a total of 577,000 barrels of fuel each day. BP Cherry Point in Birch Bay is the largest, with a capacity of 225,000 barrels a day, while Tesoro in Anacortes produces 115,000. Shell Puget Sound Refinery, also in Anacortes, produces 145,000 barrels per day, while the ConocoPhillips Refinery in Ferndale produces 92,000. When the Ferndale Refinery was built in 1954, it could process only 35,000 barrels of crude oil per day.
The BP Cherry Point Refinery, established in 1971, and designed to process Alaska North Slope crude, has increased its capacity from 110,000 barrels per day to the 230,000 barrels currently produced. In the past decade alone the company has invested nearly half a billion dollars to keep the refinery modern and efficient.
The ability of BP Cherry Point and other refineries to increase their capacity is limited by the Magnussen Amendment, a law passed in the 1970s by Sen. Warren Magnussen. This legislation limits the amount of crude oil that can flow across the docks of BP and other refineries in the state, regulating the size of delivery to a 125,000-ton ship size.
“In some cases, that limits the ability to bring in fully loaded tankers,” explains Frank Holms, Manager of the Northwest region for the Western States Petroleum Association. “There are also restrictions on expansion of the refineries’ terminals.”
For BP Cherry Point, it means the only way to increase capacity is to find ways to improve efficiency.
“We’re trying to de-bottleneck our system, and we have teams of engineers that look at each unit and figure out if it’s capable of producing more fuel through process technology changes and advancements,” said Mike Abendhoff, director of public affairs at BP Cherry Point. “But we’re pretty maxed right now. I don’t think there’s much we can do from a technology standpoint to produce more fuel.
“We’re making as much transportation fuel as we can right now.”

Good neighbors
Oil refineries often get a bad name for polluting the environment and ocean. One aspect of their work that’s not as well publicized is the economic impact they have on their communities. BP, for example, employs a staff of 570, and uses another 300 contractors. Shell PSR employs 410 people directly, using another 100- to-150 contractors on an ongoing basis, while ConocoPhillips employs 300.
“Oil refineries have one of the highest job multipliers of any industry out there right now,” Abendhoff said.
Wages at refineries are roughly double the state average – $74,000 – versus a state salary average of $38,200.
“This is a very capital intensive industry,” Holms said. “We pay very good wages to our employees and make a significant economic contribution to the state.”
In Skagit County, Shell PSR is the single largest taxpayer, paying approximately $7 million in local and state taxes and more than $2 million in annual revenue to the Anacortes Port District.
But it’s not just financial contributions the refineries make, said Gerald Baron, spokesperson for Shell PSR.
“The contributions of Shell employees in Skagit County are more important,” he said. “People who work at the refinery are active and involved in the community, serving as youth sport coaches, non-profit organization leaders and volunteers, and are involved in school activities, their churches, and much more.”
The same is true at ConocoPhillips’ Ferndale Refinery, which initiated a series of three environmental grants in 2001. The first grant, given to five schools in Whatcom County, totaled $75,000 to improve indoor air quality or purchase a low emission vehicle for use in drivers’ education. The second grant provided $10,000 to Whatcom 1000 Solar Rooftop Project to assist in developing alternative power sources in Whatcom County. The third grant provided a $215,000 contribution to the Whatcom Transportation Authority to fund the Diesel Retrofit Project, an initiative to reduce diesel engine emissions.
ConocoPhillips’ also underwrote the bronze statue of Dirty Dan Harris at Fairhaven’s Village Green Park, supports the Bellingham Bells baseball team and works with students in the Junior Bridge Building contest.
Each refinery plays its part in helping the community that surrounds it. In 2003, for example, BP and its Cherry Point Refinery employees made a $210,000 pledge to the United Way’s fundraising campaign.
“This is, once again, an outstanding demonstration of generosity and caring by BP employees,” said Mark Larson, president of the United Way of Whatcom County. “Year after year they have led the way in giving to the United Way campaign in Whatcom County.” Over the last 20 years, BP has donated in excess of $3 million to United Way.

Red Tape
Refineries are no stranger to regulatory requirements and their survival relies on their ready compliance, no matter what the cost. This year, new gasoline requirements are being introduced that stipulate the removal of sulfur from gasoline to reduce air pollution.
“This requires significant investment,” Holms said, adding that next year a new regulation will enforce the same procedure for diesel fuel.
ConocoPhillips’ Ferndale Refinery recently underwent a $220 million upgrade project in anticipation of this legislation. Part of the upgrade involved the installation of a new catalytic gasoline desulfurizer and a new Merox treating unit that improves the refinery’s ability to remove sulfur compounds from olefins and light gasoline.
At Shell PSR, the Low Sulfur Gasoline Project was in place in October 2003, while the Ultra Low Sulfur Diesel project is underway, and will be completed by June 2006. Baron estimates Shell has invested somewhere between $400 and $500 million in clean fuel projects and environmental projects.
And, over the past year and a half, BP Cherry Point Refinery spent $115 million on a clean gasoline unit and $75 million on a clean diesel unit.
So, as the prices at the pump continue to rise, so do the costs to the areas four refineries that supply much of this liquid gold to the public.

Refineries, consumers hit with rising prices State oil refineries face heavy legislation by Lauren Kramer If you’ve filled up your car lately, you realized with a shock that gas prices are soaring. At $2.32 per gallon vehicular travel is becoming more expensive and everyday gas prices are inching closer to their 1981 high of $2.86 per gallon. It’s a fact that has everything to do with the price of crude oil, which set record high prices during the week of April 14, at $58 per barrel. By comparison, a year ago it cost $25 per barrel and in November 2001, it was only $17 per barrel. To some extent, the price of gas in Washington state is related to supply and demand. More people are driving these days, and the size of the population is increasing. The Washington State Department of Transportation estimates the population will grow to 7.5 million by 2020, up from 5.5 million in 1994. In 1994 there were 10,000 trucks on Interstate 5 each day, a number that will grow to 25,000 in 2020. If the number of cars on the road increases proportionally, chances are consumption of gas will skyrocket too. But, in addition to consumer consumption, gas prices are also affected by how much crude oil can be processed at local oil refineries. With legislation limiting the amount of oil that can flow into Northwest Washington refineries, prices at the pump might not drop anytime soon. Operating at full steam Northwest Washington has four oil refineries that compete directly with each other and produce a total of 577,000 barrels of fuel each day. BP Cherry Point in Birch Bay is the largest, with a capacity of 225,000 barrels a day, while Tesoro in Anacortes produces 115,000. Shell Puget Sound Refinery, also in Anacortes, produces 145,000 barrels per day, while the ConocoPhillips Refinery in Ferndale produces 92,000. When the Ferndale Refinery was built in 1954, it could process only 35,000 barrels of crude oil per day. The BP Cherry Point Refinery, established in 1971, and designed to process Alaska North Slope crude, has increased its capacity from 110,000 barrels per day to the 230,000 barrels currently produced. In the past decade alone the company has invested nearly half a billion dollars to keep the refinery modern and efficient. The ability of BP Cherry Point and other refineries to increase their capacity is limited by the Magnussen Amendment, a law passed in the 1970s by Sen. Warren Magnussen. This legislation limits the amount of crude oil that can flow across the docks of BP and other refineries in the state, regulating the size of delivery to a 125,000-ton ship size. “In some cases, that limits the ability to bring in fully loaded tankers,” explains Frank Holms, Manager of the Northwest region for the Western States Petroleum Association. “There are also restrictions on expansion of the refineries’ terminals.” For BP Cherry Point, it means the only way to increase capacity is to find ways to improve efficiency. “We’re trying to de-bottleneck our system, and we have teams of engineers that look at each unit and figure out if it’s capable of producing more fuel through process technology changes and advancements,” said Mike Abendhoff, director of public affairs at BP Cherry Point. “But we’re pretty maxed right now. I don’t think there’s much we can do from a technology standpoint to produce more fuel. “We’re making as much transportation fuel as we can right now.” Good neighbors Oil refineries often get a bad name for polluting the environment and ocean. One aspect of their work that’s not as well publicized is the economic impact they have on their communities. BP, for example, employs a staff of 570, and uses another 300 contractors. Shell PSR employs 410 people directly, using another 100- to-150 contractors on an ongoing basis, while ConocoPhillips employs 300. “Oil refineries have one of the highest job multipliers of any industry out there right now,” Abendhoff said. Wages at refineries are roughly double the state average – $74,000 – versus a state salary average of $38,200. “This is a very capital intensive industry,” Holms said. “We pay very good wages to our employees and make a significant economic contribution to the state.” In Skagit County, Shell PSR is the single largest taxpayer, paying approximately $7 million in local and state taxes and more than $2 million in annual revenue to the Anacortes Port District. But it’s not just financial contributions the refineries make, said Gerald Baron, spokesperson for Shell PSR. “The contributions of Shell employees in Skagit County are more important,” he said. “People who work at the refinery are active and involved in the community, serving as youth sport coaches, non-profit organization leaders and volunteers, and are involved in school activities, their churches, and much more.” The same is true at ConocoPhillips’ Ferndale Refinery, which initiated a series of three environmental grants in 2001. The first grant, given to five schools in Whatcom County, totaled $75,000 to improve indoor air quality or purchase a low emission vehicle for use in drivers’ education. The second grant provided $10,000 to Whatcom 1000 Solar Rooftop Project to assist in developing alternative power sources in Whatcom County. The third grant provided a $215,000 contribution to the Whatcom Transportation Authority to fund the Diesel Retrofit Project, an initiative to reduce diesel engine emissions. ConocoPhillips’ also underwrote the bronze statue of Dirty Dan Harris at Fairhaven’s Village Green Park, supports the Bellingham Bells baseball team and works with students in the Junior Bridge Building contest. Each refinery plays its part in helping the community that surrounds it. In 2003, for example, BP and its Cherry Point Refinery employees made a $210,000 pledge to the United Way’s fundraising campaign. “This is, once again, an outstanding demonstration of generosity and caring by BP employees,” said Mark Larson, president of the United Way of Whatcom County. “Year after year they have led the way in giving to the United Way campaign in Whatcom County.” Over the last 20 years, BP has donated in excess of $3 million to United Way. Red Tape Refineries are no stranger to regulatory requirements and their survival relies on their ready compliance, no matter what the cost. This year, new gasoline requirements are being introduced that stipulate the removal of sulfur from gasoline to reduce air pollution. “This requires significant investment,” Holms said, adding that next year a new regulation will enforce the same procedure for diesel fuel. ConocoPhillips’ Ferndale Refinery recently underwent a $220 million upgrade project in anticipation of this legislation. Part of the upgrade involved the installation of a new catalytic gasoline desulfurizer and a new Merox treating unit that improves the refinery’s ability to remove sulfur compounds from olefins and light gasoline. At Shell PSR, the Low Sulfur Gasoline Project was in place in October 2003, while the Ultra Low Sulfur Diesel project is underway, and will be completed by June 2006. Baron estimates Shell has invested somewhere between $400 and $500 million in clean fuel projects and environmental projects. And, over the past year and a half, BP Cherry Point Refinery spent $115 million on a clean gasoline unit and $75 million on a clean diesel unit. So, as the prices at the pump continue to rise, so do the costs to the areas four refineries that supply much of this liquid gold to the public.
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