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Cheap imported fuel is reason to fear for our refineries

When you fill up at the gas station, do you ever wonder where the gasoline comes from? Saudi Arabia, Venezuela, California?

You probably don't care, being outraged about the price on the pump. But you should.

Most of the fuel we use in Alaska, whether gasoline, diesel or jet fuel, comes from here. We produce it, refine it and pump it.

Some of the fuel used in Western Alaska comes from Asia. In Southeast Alaska much of it comes from the Pacific Northwest. But our Alaska refineries do supply both those markets with some of their needs and that's the important thing. We have the capability.

We're not happy about the price but we are blessed with the security of being able to supply our own needs. We're not at the end of a long fuel transportation line from Washington or California, as we once were.

I think we should have that concern about our food supply but that's a topic for another day.

We need to be worried about our refineries, however. In Fairbanks, Flint Hills Resources, which operates a refinery at North Pole east of the city, is closing down its second crude oil processing unit this summer. A third unit was taken out of commission two years ago. That leaves only one unit.

The reason for the shutdowns is that Flint Hills is finding it difficult to compete with fuel importers who can bring foreign jet fuel into Anchorage cheaper than the refinery can make it in Fairbanks and move it to Anchorage, which it has previously done.

We should care that our in-state manufacturers are being displaced by foreign manufacturers and Alaskans being put out of work but I haven't heard much from Alaska politicians on this. I know free markets should be left unfettered but I think the state, at least, shouldn't do things to make things worse for our local guys.

In this case, the state should look seriously at whether to continue to charge a premium -- a profit, so to speak -- on state royalty crude oil sold to Flint Hills. The refinery depends on a contract to buy state-owned royalty oil for its plant.

This contract is up for renewal soon and I would encourage state officials to reconsider the premium on oil sold to Flint Hills.

A side note: The state gets a one-eighth royalty on all oil and gas production from state lands. It has the option of taking the oil in "value," or in cash, or "in kind," the physical oil or gas.

The state has usually chosen to take most of its oil royalty in kind for a variety of reasons but a big one is to have oil available for independent refiners to encourage them to supply Alaskans with fuel.

Fairbanks community leaders are worried about the Flint Hills refinery and the closing of its processing units. The security of fuel supplies is important to the community and to the military bases in Interior Alaska. Interior villages should be concerned too, because most of their heating oil comes from Flint Hills.

Tim Bradner writes for an Alaska economic reporting service. He also consults for private clients and writes for business publications. His opinion column appears every month in the Daily News.



By TIM BRADNER