FAIRBANKS - Flint Hills Resources Alaska has scrapped plans for a $200 million expansion to produce low-sulfur diesel fuel in North Pole.
The expansion would have meant a huge construction project employing about 400 workers. Instead, Flint Hills will contribute $15 million toward a $45 million sulfur-stripping facility at Tesoro Corp.'s Kenai refinery.
In return, Flint Hills will get up to 6,000 barrels of low-sulfur diesel and gasoline daily.
"It's such a small demand it made more sense at this point," said Jeff Cook, Flint Hills spokesman. "It's going to be the most efficient."
Flint Hills will spend another $8 million to build receiving and distribution facilities at its Anchorage and North Pole properties, Cook said. Tesoro will send the fuel to Flint Hills' Anchorage storage facilities. The fuel will then be sent by rail car to North Pole.
Environmental Protection Agency regulations say the change to low-sulfur road diesel must begin in 2006 and continue through 2007.
In spring 2004, Flint Hills announced plans to purchase the North Pole refinery and other Alaska assets owned by Williams Co. To purchase state royalty oil to process in the refinery, Flint Hills entered into an agreement with the state that included the provision the company would spend $100 million to expand the North Pole refinery.
The state contract also provided that if Flint Hills didn't spend the $100 million, the company would help another refinery in Alaska build the sulfur-stripping unit.