This is an archived article that was published on sltrib.com in 2006, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Given the continuing high price of gasoline in the state, Utahns driving past the five oil refineries just north of downtown Salt Lake City are much more likely to curse their presence than utter their praises.
Yet thanks to those refineries, Utah is unlike most other states. It is nearly self-sufficient when it comes to gasoline.
And that can be either helpful or harmful to Utah motorists' pocketbooks, depending on whether those refineries - they are owned by Chevron, Flying J, Holly Corp., Silver Eagle and Tesoro - are selling their gasoline above or below the average national wholesale price.
"I used to drive past those refineries every day and I was always torn about having them there," said Laura Moncur of Salt Lake City. "But I also was glad they were around so I could drive my Beetle to work every day."
Utah drivers are now paying an average of $2.64 for a gallon of unleaded regular gasoline, compared with a average national price of $2.29. The average price in Utah has dropped 9 cents in the past week, compared with a 3 cent decline nationally.
Few, if anyone, remember a time when there weren't refineries just north of downtown Salt Lake City churning out gasoline.
Oilman John C. Howard and his Lubra Oil Manufacturing Co., which produced lubricating oils and harness dressing, completed the construction of the first refinery in 1909. It was followed by others over the next several decades.
Since then, all of Utah's refineries continually have been refurbished and upgraded, said John Felmly, chief economist for the American Petroleum Institute. "Some may consider Utah's refineries 'old' but you can say the same thing about most other refineries in this country. There hasn't been a new refinery built in this country since 1976."
Over the decades, Utah's refineries have come to play an integral role in the state by supplying much of the fuel needs of a growing modern economy. To Lee Peacock of the Utah Petroleum Association, a trade group that represents Utah oil refining and production companies, the state would be far worse off without them.
"A couple of years ago a petroleum products pipeline serving the Phoenix area unexpectedly ruptured, and all of a sudden that city was desperately short of gasoline," Peacock said. "If we didn't have those refineries we'd be sitting at the end of some gasoline products pipeline and the chances of our fuel supplies suffering a major disruption would be a lot greater."
As it now stands, the chances are remote that all of Utah's refineries, along with the lone refined petroleum products pipeline that brings in gasoline from Sinclair, Wyo., would go down all at once and seriously disrupt fuel supplies, Peacock said.
Combined, Utah's five refineries process about 166,000 barrels of crude oil a day, which primarily is produced in Canada, Colorado and Wyoming and shipped into the Salt Lake Valley over two pipelines. That's enough crude to produce more than 1 billion gallons of gasoline a year, or roughly the equivalent of the 24-story Wells Fargo Building in downtown Salt Lake City being filled and drained of fuel about every 37 days.
Utah's oil refineries are diminutive, compared with the massive 500,000-barrel-per-day facilities found in California, Texas and Louisiana. The tiny Silver Eagle Refining refinery in Woods Cross processes about 10,250 barrels of crude per day, while the Tesoro refinery is the largest in the state, handling approximately 58,000 barrels daily.
Still, Utah's refineries have managed to survive, and even prosper. This while a growing number of small refineries nationwide are going out of business - their profit margins squeezed by new air-quality regulations and federal and state demands they produce lower-polluting formulations of gasoline and diesel fuel.
Refineries in Utah, like their national counterparts, typically make a profit of about 4 cents for every gallon of gasoline they produce. About 19 percent of the retail price of gasoline represents the refinery cost of turning crude oil into motor fuel.
Smaller refineries, such as those in Utah, are having a harder time making a profit, said John Felmly. "A lot of the smaller refineries [nationally] have a hard time keeping up with the capital investments they need to make."
In Utah, though, the state's refineries fit well with the size of the market.
There isn't as much hesitancy as there might be elsewhere about making needed investments because the market for gasoline in Utah is growing, said Don Sorensen, manager of the Tesoro refinery in Salt Lake City.
Two years ago, for example, Tesoro completed the construction of a $20 million "cogeneration" plant at its refinery that now produces up to 22 megawatts of electricity a day and enables the company to sell its excess power to Rocky Mountain Power. And more recently, it completed a $25 million unit to remove sulphur from diesel fuel so it could meet new Environmental Protection Agency fuel standards.
Utah's demand for gasoline has pushed production at the state's refineries to an all-time high.
Capacity in Utah's refineries hit a high of 89.7 percent in 2004, the highest since 1970s. Through this July, refineries were operating at 91.1 percent capacity, according to the Utah Geological Survey. During the same time period last year, they were operating at 88.8 percent capacity.
Eventually that demand could result in capacity expansions at Utah refineries, or possibly a new petroleum products pipeline would come into the state, Peacock said. "If any such plans exist now, they're being kept confidential. But you'd have to see a continuing period of strong demand to justify a decision to investment the millions of dollars that would be needed" for such projects to happen.
Like Utah, the refineries in the rest of the country are operating at near capacity, said Nicole Friedman of the National Petrochemical and Refiners Association.
Yet there is little talk of anyone building a new refinery from the ground up. "Given all the environmental regulations and the costs, it is a lot easier and far cheaper to expand existing refineries," she said. "And that's what we are seeing."