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I have been hearing a lot of talk lately regarding that there have been no new refineries built in this country because of insurmountable government regulations and militant environmentalist wack-o interference.

I have my suspicions that this may be all just a bunch of far-right hot air. My hunch is that the reasons for not building new refineries has more to do with other business factors and little to do with hostile governments or environmental wack-os. But maybe I am incorrect. My questions to this board is; has any company actually applied to build a new refinery and been turned down? Has anyone attempted to build a new refinery and been blocked by protesters?

Does anyone know of specific cases?

Thanks


Yes Beridian I will give you a specific case-- Arizona Clean Fuels. This group has been trying to get a permit to build a refinery, guess where? ... in Arizona. They have been trying to get a permit since the late 90's. As of 2006, as I seem to recall they had none.

And no Beridian, the difficulties in getting environmental permits for refineries, and for that matter any other industrial and chemical expansion or grass roots projects is not "all just a bunch of far-right hot air." In fact, the continuos delays the industry has experienced, especially since the passage of the clean air act, is due in great measures to provisions of the Clean Air Act that were introduced in 1991, which when combined with very clever lawyers by Friends of the Earth, Greenpeace, Sierra Club and other environmental zelots who tie up in court projects even when permits are issued, create an environmental milieu which is very negative for new project developments. This modus operandi discourages companies from even embarking in the long tedious permitting process.

All of this raises the need for higher refining margins for U.S. projects to become attractive ... and here is the kicker. In a globalized world where margins are established by worldwide conditions and competitions, when the cost of environmental permit become extremely onerous in places like the U.S., it is economically impossible to justify building a refinery here, and investments and expansions move overseas. Which is what has been happening with Exxon in many refining/chemical projects.

Let me illustrate.

For example, if Exxon, which is the company I work for at its Baton Rouge Refinery, were to want to do a grass roots refinery elsewhere in Louisiana -- especially given that our Baton Rouge refinery which was initially built in the middle of nowhere in the 1920's is currently totally landlocked because of population and urban growth in the last 80 years, we would have to spend first about $350 million dollars in the design of the new facilities and submit it as part of the permitting package to the government. How do you like that?

Who can afford to spend $350 million and wait 7 or 8 years for a permit even if at the end of the process you had the certainty that you were going to get it? But the reality of obtaining a permit is quite different in practice.

I repeat; which investor in its right mind would risk $350 million dollars of shareholder's money, so that at the end of a 7 or 8 year process they may get the permit, and even if they were to get the permit the evidence has shown that there is often no assurance that the legally clever environmental lobby would not tie a company like Exxon in court for another 7 or 8 years? It has happened.

Why spend the $350 million in the design of another refinery in Louisiana at all when it is cheaper to go to Ireland, where corporate taxes are 11% versus our 35%, and where on top of all of that the environmental permitting process is much simpler and more industry friendly?

What is also a lot of "hot-air" is all the complaining your friendly democratic politician do when they label companies that "export jobs", as "traitors." Now, really? Do you think it is rational if it were your money to invest, that you would do it in a higher tax state like N.Y. rather than in a lower tax state like Louisiana? I think I know the answer. Likewise when it comes to selecting the U.S. or a foreign country with lower taxes and lower barriers to environmental permitting.

Let's face it, does it not make more economic sense for companies to move their operations overseas as a result of lower taxes and easier permitting process rather than be exposed to the kind of torture that the Arizona Clean Fuels corporation has been put through for more than a decade in order to build a refinery?

At our Baton Rouge refinery, especially in the Chemicals area, we have been forced to shutdown some units in the past decade and move production overseas because we are no longer competitive, even when we factor in the cost of transportation back to U.S. market of our overseas production, it is still cheaper to operate overseas. And my company has to compete with foreign companies that produce the same product overseas and bring it here to the U.S. for sale. Are you going to buy my higher priced Baton Rouge production instead of a cheaper overseas alternative of similar quality? ...fat chance.

It is easy to call us "traitors" and accuse us of "corporate greed" and of being "uncaring" because we are shifting jobs overseas. But the reality is that as long as we continue to operate in an environment where regulations and the permitting process essentially chokes the growth of our industrial base, we will continue to lose Jobs. In my opinion this phenomena of jobs losses and the erosion of our industrial capacity, and thus the root causes, remains pretty much unexamined by our press and our politicians at large. And thus as a consequence the general public is totally ignorant of these facts an unable to demand action.

Thus my long term fear is that we will continue as a country to go down in competitiveness, lose jobs to overseas investments, and lose our standard of living.

Ironically, we will have super pristine air and beaches so that the rich industrialists from other countries can come and bathe at our shores while we flip hambugers for their children at lunch time which will be the only jobs that we would have left. Car and steel manufacturing just to name two industries would have moved overseas by then.

This is a terrible trend and unless we begin examining regulations on a cost/benefit basis -- something the environmental lobby has cleverly convinced politicians and prevented industry from integrating as part of the permitting process, we will lose our leading edge in many technologies and jobs. This is what has given us a higher standard of living. I am afraid that unless we reverse the trends of the last 20 years, our industrial base will continue to erode and we will eventually become a second rate power, like for example, the Brits, the French and the Germans.

We have become such zealots about environmental regulations that I recall reading a while back that had a certain piece of legislation been passed recently by Congress, we would not have been able to import Canadian Oil produced made from tar sands. Now how stupid can we be?

I don't know whether it is either out of ignorance or because of the ideological filter that exists in most of our media today, but I have yet to hear a swell of public opinion demanding that we ease the permitting process to build more refineries and more of other industrial processes.

Instead, what you hear is a drumbeat from the press and many politicians with all sort of stories bordering on hysterical conspiracy theories, accusations of indutry collusion to withold supplies, greed, and all these populist nonesense that do not address the kernel of the refining capacity problem. Which is by the way similar in its philosophical essence to the Oil Exploration prohibition on our Outer Continental Shelf.

Hope this helps.

Madame Butterfly
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