Mat-Su official disputes claims that new Port MacKenzie tank farm was factor in refinery closure

Richard Mauer

JUNEAU -- The Mat-Su port administrator rejected claims by Koch Industry officials, Gov. Sean Parnell and a North Pole legislator that the big tank farm going up at the port next summer has something to do with the looming shut down of the Flint Hills Refinery near Fairbanks.

"If they're trying to blame it on Port MacKenzie, that's not where the blame should be," said Marc Van Dongen, port director for the Mat-Su Borough.

Fingers quickly began pointing Tuesday over the loss of the refinery and about 80 jobs. Some of the blame was cast across Cook Inlet from Anchorage, where a 7 million gallon tank farm for refined petroleum products will be built with 90 percent state financing. The tanks can store fuel brought to Southcentral Alaska by tanker from anywhere -- and provide competition for the jet fuel and gasoline made by Flint Hills and hauled to Anchorage on railroad tank cars.

A spokesman for Flint Hills, owned by the billionaire Koch brothers, said Tuesday that the tank farm would hurt the refinery. Rep. Doug Isaacson, a North Pole Republican, said he was "livid" that the state "paid $15 million to help support the import of refined fuel from out of state."

Then in a news conference Wednesday, Gov. Sean Parnell said he too was unhappy to learn that the state was involved in financing the Port MacKenzie project.

"You're talking to the guy who stood up in front of 800 people and said we will not import into Cook Inlet, over my dead political body, and so for me to find this out was a surprise," he told reporters. "I think we have enough resources in this state to produce and develop them for our people."

But two of Parnell's commissioners supported the state carrying $14 million of the $15.5 million in loans to the tank farm owner, Central Alaska Energy LLC. Minutes of the Alaska Industrial Development and Export Authority Board for July 25, 2013, show the motion to accept the loan was made by Susan Bell, commissioner of commerce, community and economic development, and seconded by Bryan Butcher, then commissioner of revenue. The AIDEA board approved the loan unanimously.

Asked whether any official was in trouble for approving the loan, Parnell said at his press conference, "I need to find out more before I can answer that question."

His spokesman, Sharon Leighow, said Thursday that AIDEA would brief Parnell on the loan.

"There's no relationship between our loan to Central Alaska Energy and the announcement from Flint Hills," asserted AIDEA spokesman Karsten Rodvik.

Marc Van Dongen, the director of Port MacKenzie, said the blame for Flint Hills' closure is better placed with Ted Stevens Anchorage International Airport, where Flint Hills jet fuel has been consumed.

"Look at the airport in Anchorage -- they built four 4.2 million gallon tanks last year -- 16.8 million gallons. That's what's causing the problem," Van Dongen said. "How could ours be causing the problem when it hasn't even been built yet? They can purchase fuel cheaper by importing it on barges or fuel vessels to the Port of Anchorage and then having it come over by pipeline (to the tanks at the airport) than apparently what Flint Hills can do at their refinery."

But airport manager John Parrott said Van Dongen's attempt to redirect blame his way is misplaced. It's true that new tanks were built there -- in 2012 -- but the state-owned airport had nothing to do with the project, he said.

A consortium of airlines, concerned that Flint Hills might be unable to supply their needs, financed and built the tanks privately, Parrott said, adding 16 million gallons of capacity to the existing 20 million gallons. The airlines have another 20 million gallons of fuel storage at the Anchorage port, he said.

Before the recession, airlines took on about 2½ million gallons of fuel a day. The recession brought a drop in flights, and Flint Hills shut down one of its refinery towers, Parrott said.

"When demand started coming back, it wasn't enough demand to justify firing that tower back up, but it was more demand than the other providers could meet," Parrott said. The airlines looked to other sources and needed more storage to accommodate the larger loads brought in by ship.

Is Outside fuel cheaper than Flint Hills product?

"I don't refine, buy sell, use or transport fuel -- those business deals are proprietary between the providers and the carrier," Parrott said. "If you look at what's happening, it would appear to be cheaper because that's what they're doing."

Parnell's reference at the news conference to an earlier speech was his Nov. 14, 2012, address to the Resource Development Council, spokeswoman Leighow said. A videotape of that address on the state website shows he was mainly referring to a suggestion by Mayor Dan Sullivan that natural gas -- not refined fuel -- be brought into Southcentral.

"Mayor Sullivan, importing gas, I don't think so," Parnell said at the start of his RDC speech. "We have got to do better than that, and I am willing to work my tail off to make sure we don't have to do that. My hope that these (drilling) incentives will work within Cook Inlet so that's not necessary, not when our resources here are so vast. Importing has got to be a last option, or a last resort."

Van Dongen, the Mat-Su port director, said the new tanks were primarily built to hold gasoline, diesel fuel and other products for distribution to service stations in the region and by barge to western Alaska. Ironically, with the closure of Flint Hills, fuel could also be brought north by railroad to the Fairbanks area, he said.

"The real problem is Flint Hills apparently can't produce fuel at a competitive price cheaper than what you can pay to import it," Van Dongen said. "It's hard to imagine they can't do that -- they're right on the trans-Alaska pipeline, they've had essentially a monopoly. Whatever price they set for fuel, that's what we all have to pay. Every time I go down to the Lower 48, I'm paying about a buck a gallon less than what I pay up here and it boggles my mind why that's the case."

Rodvik, the AIDEA spokesman, said the agency approved the loan because it matched its energy development goals. The tanks "are a critical piece of infrastructure essential for any port," he said.

"We support the governor's vision for economic development in our state," Rodvik said. The agency is actively involved in financing the effort to bring natural gas to Fairbanks, he said.

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