Agrium now included in refinery tax credit bill pending in Juneau

  • By Tim Bradner
  • Wednesday, April 16, 2014 5:12pm
  • News

JUNEAU – A bill extending state tax credits to oil refineries in the state has been expanded to include the Agrium Corp. fertilizer plant in Nikiski.

Tesoro Corp.’s refinery in Nikiski is also among the refineries that could benefit from House Bill 287, now in the House Rules committee. The bill would also extend Tesoro’s contract to purchase state royalty crude oil from the state.

Agrium is considering reopening its plant, which manufactured fertilizer and ammonia from natural gas until 2007. House Speaker Mike Chenault, R-Nikiski, proposed the amendment to add Agrium to HB 287 in a Rules committee meeting Wednesday morning.

The bill was originally introduced by Gov. Sean Parnell to grant Tesoro its extension to buy royalty oil.

PetroStar Inc., which operates two small refineries at North Pole, near Fairbanks, and at Valdez, asked the governor to support state incentives to aid in-state refineries, which are facing commercial challenges. The company, a subsidiary of Arctic Slope Regional Corp., is confronted by many of the same problems faced by Flint Hills Resources, operator of another refinery at North Pole, which has decided to close its refinery.

Parnell agreed to support incentives, in the form of tax credits and a provision to encourage producers to sell oil to in-state refineries, and supported the language being added to the Tesoro royalty oil bill, which has been in the House Finance committee.

The committee felt the tax credit proposals were too generous, however, and scaled them back.

Parnell at first proposed a tax credit for refined products that are produced by in-state refineries based on the volumes of products produced, in effect an operating subsidy.

That was removed by the House Finance Committee but a second part of the incentive proposal, a 10 percent refinery investment tax credit, was increased to 40 percent.

PetroStar said the tax credits would help it in financing capital improvements that would make its two refineries more competitive, but it is not clear that the new scaled-back proposal is enough to help the company.

The two PetroStar refineries face difficulties, the company said, because of high crude oil prices and payments that must be made to the Quality Bank, a mechanism that compensates companies that ship oil through the Trans Alaska Pipeline, as well as the state of Alaska, for any degradation of the quality of oil in the pipeline.

The two PetroStar refineries face economic difficulties because of high crude oil prices and because payments must be made to the Quality Bank, a mechanism that compensates companies that ship oil through the Trans-Alaska Pipeline System, as well as the State of Alaska, for any degradation of the quality of oil in the pipeline.
PetroStar takes crude oil from TAPS and removes parts of the oil to make jet fuel, diesel and other products, and returns the unused part of the crude oil, which has less value, to the pipeline.

Tesoro does not have the Quality Bank problem because it does not take crude oil from TAPS and return unused oil to the pipeline. Also, Tesoro’s refinery has equipment to use more of the crude oil for products that does PetroStar’s smaller refineries.

Under tax credit proposal a refinery would take its credits against its Alaska corporate tax liability, but if there are more credits than tax owed the credits can be turned into the state and paid in cash.

As an example, a $25 million investment by PetroStar would net tax credits for $10 million. If $25 million were invested in both of the company’s two refineries, a total of $50 million, PetroStar could be paid $20 million, either as an offset to state corporate tax liability or in cash.

Tesoro, which didn’t ask for the state’s financial help, would get $10 million if it invested $25 million.

Tesoro spokesman Matt Gill said his company’s priority is the part of HB 287 that extends the royalty oil contract.  “We don’t oppose the tax credits, and in fact we support them now in an effort to help out our Interior refineries,” Gill said.

Tesoro did have concerns with the earlier version of the incentive that included a direct tax credit subsidy out of concerns “for how it would affect the competitive playing field,” Gill said. But this concern is reduced now that the incentive program is scaled back, Gill said.

Fairbanks legislators are concerned about PetroStar’s North Pole plant since it is the main supplier of jet fuel to Eielson Air Force Base. Fairbanks has been courting the U.S. Air Force to keep the base open and to attract a squadron of new-technology fighters to Eielson.

Loss of a local supplier of jet fuel could imperil those efforts, said state Rep. Doug Isaacson, R-North Pole. “If Eielson goes, there goes a third of Fairbanks’ economy,” he said.

The bill raised some critical voices in the Finance Committee, however. Rep. Alan Austerman, R-Kodiak, co-chair of the committee, said he is concerned that a refinery that is unprofitable — thus paying no state corporate income tax — would receive state payments.

Democrats in the Republican-controlled Legislature are voicing criticism of creating a new state subsidy program when the state faces huge budget deficits and spending on services like education face cuts.

Anchorage state Sen. Hollis French, D-Anch., and Rep. Les Gara, D-Anch., object particularly to Tesoro being included in the program because the company has not asked for any help.

 “This is a $10 million gift to Tesoro,” Gara said.

 Chenault’s amendment in the Rules Committee adds the words, “hydrocarbon processing facility” to the bill, which would allow Agrium to quality for credits if it reopens its shut-down fertilizer plant.

The tax credit would help Agrium to some extent but it would not be a decisive factor in a decision to reopen the plant. What is most important, the company has said, is securing long-term supplied of gas at a price that would allow the company to profitably manufacture fertilizer and ammonia.

Agrium has been conducting engineering and environmental studies related to a possible reopening of the plant, which was built in 1969 and operated until being closed in 2007 when natural gas supplies in Cook Inlet became scarce. Now more gas discoveries are being made, which might make the manufacturing of urea fertilizer and ammonia feasible again, Agrium has said.


More in News

Nate Rochon cleans fish after dipnetting in the Kasilof River, on June 25, 2019, in Kasilof, Alaska. (Photo by Victoria Petersen/Peninsula Clarion)
King closures continue; Kasilof dipnet opens Saturday

The early-run Kenai River king sport fishery remains closed, and fishing for kings of any size is prohibited

An "Al Gross for Congress" sign sits near the driveway to Gross’ home in Anchorage, Alaska, on Tuesday, June 21, 2022, after he announced plans to withdraw from the U.S. House race. Gross has given little explanation in two statements for why he is ending his campaign, and a woman who answered the door at the Gross home asked a reporter to leave the property. (AP Photo/Mark Thiessen)
Alaska judge rules Sweeney won’t advance to special election

JUNEAU — A state court judge ruled Friday that Alaska elections officials… Continue reading

Ashlyn O’Hara/Peninsula Clarion 
Soldotna City Manager Stephanie Queen listens to a presentation from Alaska Communications during a meeting of the Soldotna City Council on Wednesday, March 9, 2022 in Soldotna, Alaska.
ACS pilots fiber program in certain peninsula neighborhoods

The fiber to the home service will make available the fastest internet home speeds on the peninsula

Nurse Tracy Silta draws a dose of the Moderna COVID-19 vaccine at the walk-in clinic at the intersection of the Kenai Spur and Sterling Highways in Soldotna, Alaska on Wednesday, June 9, 2021. COVID-19 vaccines for kids younger than 5 years old are now approved by both the Food and Drug Administration and the Centers for Disease Control and Prevention. (Camille Botello / Peninsula Clarion)
COVID shots for kids under 5 available at public health

Roughly 18 million kids nationwide will now be eligible to get their COVID vaccines.

Megan Mitchell, left, and Nick McCoy protest the U.S. Supreme Court’s decision overturning of Roe v. Wade at the intersection of the Kenai Spur and Sterling highways on Friday, June 24, 2022 in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
‘Heartbroken’, ‘Betrayed’: Alaskans react to Roe decision

Supreme Court decision ends nearly 50 years of legally protected access to abortion

Demonstrators gather outside the Supreme Court in Washington, Friday, June 24, 2022. The Supreme Court has ended constitutional protections for abortion that had been in place nearly 50 years, a decision by its conservative majority to overturn the court’s landmark abortion cases. (AP Photo / Jose Luis Magana)
Alaskans react to Supreme Court overturn of Roe v. Wade

The Supreme Court has ended constitutional protections for abortion.

Tara Sweeney, a Republican seeking the sole U.S. House seat in Alaska, speaks during a forum for candidates, May 12, 2022, in Anchorage, Alaska. (AP Photo/ Mark Thiessen)
Lawsuit says Sweeney should advance in Alaska US House race

The lawsuit says the fifth-place finisher in the special primary, Republican Tara Sweeney, should be put on the August special election ballot

Gubernatorial candidate Bill Walker stands in the Peninsula Clarion office on Friday, May 6, 2022, in Kenai, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Alaska AFL-CIO endorses Walker, Murkowski, Peltola

The AFL-CIO is Alaska’s largest labor organization and has historically been one of its most powerful political groups

A portion of a draft letter from Jeffrey Clark is displayed as the House select committee investigating the Jan. 6 attack on the U.S. Capitol continues to reveal its findings of a year-long investigation, at the Capitol in Washington, Thursday, June 23, 2022. (AP Photo/Jacquelyn Martin)
Federal agents search Trump-era official’s home, subpoena GOP leaders

Authorities on Wednesday searched the Virginia home of Jeffrey Clark

Most Read