|from the November 23, 2005 edition -
Refinery bottleneck to easeOil companies already have plans to add 6 percent to US capacity.
Ron Scherer | Staff writer of The Christian Science Monitor
GARYVILLE, LA. - In a move that could bode well for Americans'
gas tanks, the oil industry is quickening its pace of investing in more
Over the past two months, energy companies have announced
refinery expansions of almost 1 million barrels of oil per day - nearly
6 percent of the amount of gasoline produced today. More announcements
may come this spring.
One expansion already being planned is here
at the Marathon Oil refinery - built on a former sugar-cane plantation
- which sustained no significant hurricane damage.
If the oil
companies follow through on their plans, this would be equal to 50
percent of the expansions over the past decade. The new capacity could
help to relieve the persistent tight supplies and price run-ups at the
pump, as happened this fall in the wake of hurricane Katrina.
refining capacity has been the subject of congressional hearings this
fall. And related legislation is pending in Congress.
like refining investment is on the uptick," says Robert Slaughter,
president of the National Petrochemical & Refiners Association in
Washington. "But there are two cautions: All these additions must be
permitted, and people can change their minds."
Among those who
have announced expansions are Valero, adding an additional 400,000
barrels per day, and Chevron and ExxonMobil, each adding 75,000 barrels
per day. Suncor, Motiva, and Citgo also have expansion plans.
prefer expansions - that is, adding more refining facilities - instead
of building new ones on different sites because it's faster and will
probably not require new zoning.
Overall, the new planned capacity is expected to come on line in three to five years.
pace is quickening," says Mark Routt, an energy analyst at Energy
Security Analysis Inc. in Wakefield, Mass. "Even smaller, less
sophisticated refineries are reconsidering expansions."
expansions come as Congress is debating legislation that some hope
would encourage new refining capacity by changing environmental
regulations and streamlining the permit process. The House has already
passed one version that includes a provision to pay oil companies for
delays caused by federal, state, or local authorities or for unforeseen
litigation. A Senate bill failed to get out of committee by one vote,
but it may get attached to another bill, says a staffer.
Marathon Oil refinery in Garyville, about an hour north of New Orleans,
was the last new refinery built in the US - 29 years ago. Late last
month, Marathon said it would spend $2.2 billion to add 180,000 barrels
per day - equal to 6 million gallons of gasoline, diesel, and kerosene
- to its refining capacity of 245,000 barrels per day.
look at our nation's current refinery capacity and see how hard the
refineries are run and then add the outlook for increased petroleum
demand, you see that there is clearly a need for additional refining
capacity," says Gary Heminger, president of Marathon Petroleum Co. LLC,
in an e-mail.
Although Marathon is calling this an expansion, it
is the equivalent of building an entirely new refinery. On a tour, Rich
Bedell, manager of the refinery, points to a sugar-cane field across
the road from the current operation. The new facility will take up 100
of the 320 acres on that side of the road.
"We've got a pretty good buffer zone around us," says Mr. Bedell. "It avoids a lot of the problems other refineries can have."
44 miles south of Marathon is the Meraux refinery, owned by Murphy Oil
Co. During hurricane Katrina, a 250,000-barrel storage tank was
dislodged, and it lost 1.05 million gallons of oil, according to the
Centers for Disease Control and Prevention. The oil mixed with
floodwaters to contaminate 1,385 homes in an area of about one square
Some 114 homes were deemed to have a "heavy" concentration
of oil - meaning more than 50 percent of the property was covered.
Several class-action lawsuits have been filed against Murphy.
hopes of avoiding problems with their neighbors, the Garyville refinery
and a nearby Cargill plant have been steadily increasing the buffer
zone around their plants. In 2003, a group of residents who lived
adjacent to the facilities hired a lawyer, Joel Waltzer, to begin
negotiations over selling their properties to the companies. "I
approached [the companies] and said, 'Look, you will be sued every time
there is an irregularity. Why don't you expand your green zone and
agree to a buyout at terms fair to the community?" says Mr. Waltzer.
Out of 39 properties close to the plant, only six occupied households have decided not to sell.
out residents around refineries is a national trend, says Eric
Schaeffer, director of the Environmental Integrity Project. "We're
starting to see blank areas, driveways that lead to weed lots," says
Mr. Schaeffer, who used to work for the Environmental Protection
Agency. "If your situation is that you live right on the fence line, I
don't blame anyone for wanting to get a fair price and move."
Marathon refinery is unusual in terms of its relationship with the
local community. The refinery sits on what used to be the San Francisco
Plantation, dating back to 1856. Today, the oil company rents out the
Steamboat Gothic plantation house for weddings and other events.
the refinery, surrounded by a maze of pipelines, is a cemetery that can
still be used - mostly by relatives of slaves whose families have ties
to the plantation.
Marathon, like other oil companies, has also
been spending money, most recently $300 million, to meet a federal
mandate to take additional sulfur out of gasoline. "That's a huge
amount of money for no return, no increase in production," says Bedell.
In fact, because refining returns have been low up until recently, the oil companies are cautious about making new investments.
the moment, Marathon is proceeding with the engineering and design
phase. It hopes to get the necessary permits in a year. Then it will
make the final decision whether to actually build.