Now that the House has passed a bill aimed at encouraging additions to US refining capacity, how do officials at Arizona Clean Fuels LLC feel?
“We’re extremely positive and optimistic,” spokesman Ian Calkins responded. “It would help us significantly with the state and federal permits we need to get, to the extent that the process is streamlined and to the extent that there’s a greater sense of urgency.”
The Arizona group is trying to build a 150,000 b/d refinery east of Yuma for about $3.1 billion, with the actual refinery budgeted at $2.5 billion and associated crude oil pipeline, pumping station, and Gulf of California port costing $600 million. So far, a group of local investors has put up about $30 million.
The refinery, which would cover about 1,450 acres, would produce 85,000 b/d of motor gasoline, 35,000 b/d of diesel fuel, and 30,000 b/d of jet fuel. Arizona Clean Fuels estimates it would take 3-4 years to build once permits and land transfers were obtained.
Sense of urgency
Calkins said the group welcomes the sense of urgency regarding domestic refining capacity that has developed among government policy-makers and the public. “We haven’t had it since the project’s inception. In fact, it’s been nothing but an uphill battle since Arizona Clean Fuels was conceived,” he told me.
Arizona’s Department of Environmental Quality issued a permit for the project on Apr. 14. “This is the toughest air quality permit ever proposed for a refinery,” the agency’s director, Steve Owens, said at the time. The permit is for 5 years but expires within 18 months if construction has not commenced.
Calkins said Arizona Clean Fuels is “optimistically close” to an agreement with Mexico to supply crude oil and with various potential sources of financing, both domestic and international.
“Until now, projects like ours have had to grapple with a strong sense of uncertainty in the permitting process. Now, investors see growing support at the state and federal levels,” he said.
Moves in Congress
Arizona’s congressional delegation was busy on bills last month that potentially could benefit the project. On Sept. 21, House Republican Policy Chairman John B. Shadegg introduced one with a provision that would have required the US energy secretary to establish a regulatory assistance office as an advocate for applicants and ensure permits are issued on time.
A week earlier, Sen. Jon Kyl introduced a bill in Hurricane Katrina’s wake that would allow a refiner to write off, in the first year of operation, the cost of building a new refinery, rebuilding one destroyed by a natural disaster, or installing new equipment to increase overall output by 5% or more.
The Arizona Republican noted that a similar provision was included in the Senate version of the energy bill Congress passed this summer, but the allowed write-off was reduced to 50% during the House-Senate conference.✦