Air Date: Week of September 16, 2005

With the shutdown of oil refineries on the Gulf Coast and the resulting run-up in oil prices, some, including members of Congress, are asking if we should be building more oil refineries in the US. Robert Slaughter, president of the National Petrochemical and Refiners Association, talks with host Steve Curwood about what, if anything, we can do to get ourselves out of this oil crisis.

Transcript

CURWOOD: Nearly half of America's oil refineries are along the Gulf Coast between Texas and Alabama. So when Hurricane Katrina took a number of them off line, drivers immediately felt the impact with record gas prices, as there were no other refineries to take up the slack.

No new refineries have been built in the U. S. since the 1970’s, and many of the older and dirty ones have been retired. Now some say we need more refineries, built to strict clean standards. Among them is Robert Slaughter, he’s president of the National Petrochemical and Refiners Association. Mr. Slaughter, why do we need new refineries?

SLAUGHTER: Well, basically, because we have been unable to keep up even with the growth in demand in the United States for most of the last ten years. The number of refineries and the refining capacity peaked in 1981 at the end of the price control period. Some refining capacity has been added back over but we still have demand for well over 20 million barrels a day of product and we only have 17.1 million barrels of capacity in the United States.

CURWOOD: I’m confused here. If there’s so much demand why are we short of refining capacity? If your industry can sell a lot of gasoline why won’t folks have the plants to refine it?

SLAUGHTER: Well, it’s very difficult to build heavy industrial facilities in the United States. It’s very difficult to get through the permitting process and to get new refineries built. We’ve been adding capacity at existing refining sites but there have been times over the last ten years when that has been difficult to do. The other factor that’s been very important is that for the past 15 years before 2003 the return on investment in refining was very small. It is only in the past two years when refining margins have improved and we think we’re going to see a big uptick in refining investment this year. But that just was not the case in the last several years and it takes a few years to bring capacity online.

CURWOOD: Why is the refinery business so highly regulated?

SLAUGHTER: Well, you know, there are a number of environmental restrictions that come out of the Clean Air Act; there are also the Clean Water Act and, you know, it’s just the refining industry has always been very pervasively regulated and most of the regulations are environmental.

CURWOOD: As I understand it, environmental critics of the refining industry say that these new refineries, in fact, would be pretty clean. Is that a fair assessment?

SLAUGHTER: Yeah, I believe all of us would agree that new refineries would be pretty clean and, of course, even the existing refineries have considerably improved their environmental performance with newer technologies that have been installed. But the new refineries, unfortunately it is very difficult to build these facilities in the U.S., would be the cleanest of all.

CURWOOD: I understand that some folks would like to see the environmental regulations relaxed for a refinery. That, in fact, maybe a federal rule imposed over the matrix of state rules that now govern it. How do you feel about that?

SLAUGHTER: What people are talking about is that the permitting process for changes in a refinery, such as adding additional capacity, currently can take two years and the process could be shorter. I mean if, as Congress seems to feel now, there is a national interest in having more refining capacity in the United States, the question is whether, as Congress has just done in the case of liquified natural gas facilities, if the state permitting process is taking a great deal of time and just seems to have no end and the national interest in having facilities is not being recognized, you could give a federal department the authority of looking at that process and the determinations in deciding whether it should grant the permit.

CURWOOD: Bob Slaughter is president of the National Petrochemical and Refiners Association in Washington, DC, Bob, thanks for taking this time with me today.

SLAUGHTER: Thanks for the opportunity, I appreciate it.

Links

National Petrochemical and Refiners Association

Refinery Reform Campaign