Wednesday, May 03, 2006

Can Gulf Coast refineries handle another Katrina?

Ask any oil and gas industry analyst and they'll tell you the problem isn't getting oil out of the ground, it's all about refining it.

There hasn't been a refinery built in the United States since 1976, and 46 percent of the total barrels of oils refined daily in the country come from Texas, Louisiana, Alabama and Mississippi.

In other words, there's a big hurricane bull's-eye on much of the lifeblood and livelihood of the nation.

Refineries have been welcomed for decades in the Gulf area, which explains the high concentration.

And when catastrophic events such as Hurricane Katrina occur, the country suffers strong economic effects.

Can Gulf Coast refineries handle another Katrina?

The industry may find out faster than it would've liked, as Hurricane Rita is on a path to test the coast of Texas.

Density in the Gulf is an issue, along with major ports, pipelines and crude supplies, said Ed Murphy of the American Petroleum Institute in Washington, D.C. The weather is a major factor, and another factor is that they haven't been able to expand refineries.

The addition of refineries probably won't happen anytime soon, Murphy said.

Building a refinery today is somewhere between difficult and impossible, he said. The regulations are unclear, and even companies that expand refineries often are fined. It's a big issue on the local, state and federal levels. You need a long series of events to happen.

Tom Price, vice president of investor relations at Chesapeake Energy, said refineries once sprouted where they were wanted, and that made for a heavy concentration of refineries in the Gulf area.

What happened was that people had an attitude to make sure to stay in an area that already had an appetite for refineries, Price said.

Some other areas want refineries, but it's a battle from the start.

Cushing, a town about 75 miles northeast of Oklahoma City, is a good example, Price said.

The area has had refineries for 50 years plus and they want to build one, he said. In looking at refineries, I see two types of people: the NIMBYs (Not In My Back Yard), and in towns like Cushing, you have what I call PIMBYs (Please, In My Back Yard). When you look at jobs, it's a no-brainer.

Price said that if towns such as Cushing got what they wanted, some of the emphasis would be taken off the Gulf states.

by Jerry Shottenkirk

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