Plans to build the first American oil refinery in 30 years are in a holding pattern, as the developer seeks a long-term crude oil supplier and investors for the site in eastern Yuma County.
Ian Calkins, a spokesman for Arizona Clean Fuels Yuma, said the company has received permission from the Mexican government to build a pipeline through Baja California to the refinery. However, he said Pemex, Mexico’s state-run oil company, has thus far been unwilling to commit to a long-term deal to supply the refinery with crude oil.
For the past year, he said, the developer has been exploring other alternatives for an oil supply, including Canada and Brazil. Mr. Calkins said the company is continuing to negotiate with Pemex, since receiving oil from Mexico “is the most logical source.”
“A lot of it is just pure negotiations and whether two parties can come to an agreement,” he said. “To date, they’ve just been unwilling to make that long-term commitment.”
Mr. Calkins said the company is seeking a 10-year contract.
1st refinery since 1976
Arizona Clean Fuels Yuma wants to build a $3 billion, 150,000-barrel-a-day refinery near Wellton, about 30 miles east of Yuma, that would process oil into gasoline, diesel and jet fuel.
The refinery would be the first built in the United States since 1976, due largely to regulatory barriers, low profit margins and a not-in-my-backyard mentality of communities across the country, industry experts say. As a result, nearly half of all U.S. refining capacity is located near the Gulf of Mexico, where the bulk of American oil is pumped.
Mexico, Mr. Calkins said, knows that no U.S. refinery has been built in three decades and has been insistent the refinery be built and operational before they commit any of their crude oil.
Potential investors, meanwhile, are hesitant to commit additional money to the project until a reliable source of crude oil has been secured.
“Therein lies the problem,” Mr. Calkins said. “It’s a catch-22.”
The Wellton refinery would create about 85,000 barrels of gasoline, 35,000 barrels of diesel and 30,000 barrels of jet fuel per day. The bulk of the product would be shipped to Phoenix via the existing fuel pipeline that runs from California to Arizona, though a portion of the gasoline and diesel would be returned to the Mexican state of Sonora if Mexico supplies the crude oil.
Construction of the refinery is expected to begin in 2006 or 2007, once a source of crude oil has been established. The first phase of the project is expected to take about three years to complete.
In works since 1989
Arizona Clean Fuels has been trying to build a refinery in Arizona since 1989, when plans initially called for the site to be in Mobile, about 20 miles southwest of the Valley. The project died in the mid-1990s amid neighborhood and environmental opposition but was revived in 1999. In 2003, company officials opted to move the site to Wellton after a revision to the federal ozone non-attainment zone for the Valley was expanded to include Mobile.