In many ways, Washington’s five oil refineries comprise one of the state’s most forgotten industries. Yet, every day they process more than 500,000 barrels of crude oil into nearly 11 million gallons of gasoline and 2.2 million gallons of jet fuel — fuel we need to get to work across town and to travel across the globe.
Along with gasoline, diesel, jet and marine fuels, these refineries produce a number of things we often take for granted. Drive down your street or commute across the I-90 bridge and you travel over asphalt that was likely produced at the U.S. Oil and Refining plant on Tacoma’s tide flats. A wide range of other products we use in our daily lives come from the crude oil we pump from the ground and refine. The thousands of sterile medical devices that doctors and hospitals use to save lives every day are composed largely of medical-grade plastics made from petroleum.
Washington once had six oil refineries shipping refined products throughout Northwest and beyond. But in 1998 the small Sound Refinery in Tacoma, which primarily made asphalt, closed. Today, the state’s five operating refineries represent nearly 4 percent of the nation’s domestic refining capacity — about 553,900 barrels of crude oil per day.
But why are they here in this far corner of the country, seemingly isolated from major population and industrial centers? Western Washington offers is a good natural location for oil refineries. Much of the state’s refining capacity was built in the 1950s along the shores of Puget Sound to serve growing West Coast markets. Most of the crude oil that comes to Washington for refining arrives by tanker from Alaska and elsewhere, and the protected harbors of Puget Sound near Anacortes, Ferndale and Tacoma are ideally suited for the big ships to safely tie up and unload their cargoes of “black gold.”
Since refineries require a lot of electricity to process petroleum, the region’s relatively cheap hydroelectricity was and still is a real advantage. Oil refineries use fractional distillation to separate raw crude oil into a variety of lighter, more useful products, like gasoline and liquid petroleum gas. Power-hungry cracking towers are used in this process. Siting refineries where there is an abundant supply of electricity is crucial.
Proximity to West Coast markets is also important. From an energy supply standpoint, the West Coast of the United States is an island. Unlike the East Coast, the oil and gas pipeline system on our side of the country is rather basic. There are no pipelines that go over the mountains to meet up with the rest of the national fuel infrastructure. This means that every drop of petroleum and it’s refined products used on the West Coast comes in via ship or through a pipeline via Canada, and is shipped out via ship or pipeline to California. If production at even a single refinery on the West Coast is interrupted, it will have major ramifications throughout the region.
The Alaska connection
Washington’s largest refinery, and one of our nation’s newest, was constructed in 1971 by ARCO at Cherry Point primarily to process crude oil from Alaska’s North Slope. In fact, it was ARCO’s drillers who first hit the mother lode at Prudhoe Bay in 1968, discovering the largest oil deposit in both the United States and in North America. The oil field — covering 213,543 acres and containing about 25 billion barrels of oil — is still in production, though output has slowed.
Today, ARCO’s successor company, BP (formerly British Petroleum), operates the west side of the mammoth Alaska oil field as well as the BP refinery near Ferndale. As the flow of oil from Alaska has slowed, refineries in Washington have had to adapt and diversify.
Many different types of crude oil now come into Washington from around the world for refining, augmenting the declining flow from the Alaskan wellhead. Over the past decade, Washington’s refineries have had to make massive capitol investments in order to deal with these different crude oils. In addition, more stringent environmental standards have added complexity and cost to the process, but new products like the low-sulfur diesels have been brought to market.
Petroleum industry means jobs to Washington
Washington’s refineries provide good family family-wage jobs with generous benefits. According to a 2007 Washington Research Council report, oil refineries in Washington provided 1,767 full-time jobs, paying an average annual wage of nearly $80,000 in 2005. In addition, the refineries employed, at comparable wages, 1,676 contract workers on an average day, doing maintenance and repairs and building new facilities to protect the environment, improve safety and upgrade production technology.
Refineries created additional jobs in Washington when they purchased supplies and services. According to the report, the sum of these effects brought in 16,000 jobs and three-quarters of a billion dollars in personal income for Washingtonians in 2005. That’s not chump change. The state also collects $27.8 million in sales tax and $46.5 million in business and occupation taxes from refining crude in Washington
Giving back to the community
In addition to providing people with jobs and communities with economic prosperity, Washington’s petroleum refiners give back even more. All of them are active in their local communities, not only through charitable contributions, but also through volunteering thousands of hours to community service.
The BP refinery at Cherry Point is a good example. “One of the things we are proud of up here is how we support our community,” said Bill Kidd of BP Cherry Point. Kidd also serves on AWB’s executive committee.
“Last year, BP gave over a million dollars to local charities,” said Kidd. “Most of this focused on education and the environment. And that was only the beginning.”
“BP employees are involved in so many charities and organizations around the community. It’s something we’re really proud of,” he concluded.
What the future holds
Future prospects are good for Washington’s five refineries. These facilities have invested hundreds of millions of dollars in environmental technology to ensure that they comply with all federal, state and local environmental standards. Along with the environmental upgrades, the industry pays $3.3 million in annual environmental operating fees.
Since it is difficult to site new oil refineries in the United States, large companies like Conoco-Phillips, Shell, BP, and Tesoro continue upgrade their facilities. If additional crude supplies from Alaska were available, it would help in the long term. For example, AWB has lobbied to open a small portion of the Arctic National Wildlife Refuge for environmentally sensitive exploration and production.
The big question is, what will happen with respect to future climate change legislation at the national, regional and state levels? Carbon-based fuels like crude oil and coal are being targeted. Many elected officials want massive reductions in tailpipe emissions from autos, trucks, trains, ships, airplanes and power plants and often require costly changes in refining processes and additives on a state-by-state level. That, in turn, drives up the cost of a gallon of gas.
Finally, like other businesses, oil refiners must be competitive, as well. If costs and restrictions become too onerous and make the facilities unprofitable, these operations will struggle. That will not be good for our state’s economy or the jobs these refineries create.
