Engineering News

Memphis Refinery Could Close with Ethanol Changes - Valero Exec
May 08, 2009

Valero Energy Corp. could shut down its Memphis refinery if state legislation sought by Tennessee fuel wholesalers over blended ethanol wins approval, a Valero executive told Shelby County legislators Wednesday.

The Valero refinery at Interstate 55 and West Mallory employs 310 full-time employees and about 200 contract workers. It is Tennessee's only oil refinery, and was previously owned by Premcor and before that by Mapco.

Lisa Wheeler, public affairs manager of Valero's Memphis refinery, said the company estimates it would cost Valero $130 million to $150 million over two years in new equipment to comply with the bill.

"In today's economy and the current climate that we're in, there's no way" the company could make that investment and "the plant could close if the bill passes," Wheeler told state legislators from Shelby County at their luncheon meeting.

The legislation won approval 28-1 in the state Senate on April 16 and is scheduled for review in the House budget subcommittee Wednesday.

It is sought primarily by the Tennessee Fuel and Convenience Store Association, which generally represents the wholesalers in the fuel business who buy gasoline and other fuel from refineries and deliver it to retailers.

The legislation is essentially a fight between the major oil companies and refiners on one side and the wholesalers and ethanol producers on the other. They are battling over which side gets the economic and tax benefits of changes in federal law dealing with ethanol.

The bill specifically requires suppliers of gasoline products, including Valero, to make those products available to wholesalers without ethanol already blended in so that the wholesalers can blend in the ethanol themselves.

The battle originates with a complex system of tax credits and renewable fuel mandates created by the federal Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007. In essence, the bill changes who receives tax credits under the federal law.

But Valero argues that the measure will increase gasoline costs for consumers, conflicts with Congress' intent in the 2005 and 2007 legislation, and interferes with private contracts for the sale of fuel products.

Bill Day, Valero's corporate spokesman at its San Antonio headquarters, said the company "would have to consider (closing the Memphis refinery) frankly because with the recession already in place and margins being what they are, things are tight at the refinery and spending that much money, it wouldn't make any sense for us.

"No decisions have been made. We're not drawing a line in the sand. We just want people to understand what it is that they're asking," Day said.

Source: The Commercial Appeal, Memphis, TN

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