Bush suggests using mlitary bases for refineries
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(Or: In Case You Were Wondering About the Oil...can you say military-industrial complex?..)
Bush suggests using military bases for refineries
Military sites have problems, some experts say

Houston Chronicle Washington Bureau | April 27, 2005
By DAVID IVANOVICH

WASHINGTON - President Bush hopes to encourage construction of oil refineries by offering up closed military bases as possible sites.

But refining experts are skeptical that the president's plan could overcome the huge costs and vociferous local opposition that have stymied construction of refineries for nearly three decades.

Bush said Wednesday he would order federal agencies, working with the states, to try to prod construction of refineries on old military facilities and "simplify the permitting process for such construction."

Speaking at a Small Business Administration conference, Bush argued that by "easing the regulatory burden, we can refine more gasoline for our citizens here at home. That will help assure supply and reduce dependence on foreign sources of energy."

The U.S. Environmental Protection Agency already is working to simplify regulations to encourage expansion at refineries, Bush said.

The president's proposal comes as the Pentagon is preparing its "hit list" of possible military base closings.

The United States is home to 149 oil refineries, fewer than half the 325 refineries operating in 1981, while gasoline demand is 20 percent higher than it was three decades ago. Refiners have tried to keep up by expanding production capacity at the remaining facilities.

But now the nation's refineries are running full tilt. And even limited mishaps can cause price spikes and supply woes.

Administration officials don't indicate which bases might make good refinery sites, but they are clearly hoping that by building refineries in more remote places, refiners could avoid some "not-in-my-back yard" opposition.

"I'm sure what they're trying to do is address the siting issues," said Bill Klesse, chief operating officer of San Antonio-based Valero Energy Corp.

Bob Slaughter, president of the National Petrochemical and Refiners Association, believes that since these one-time military bases would be federal land, the president's priority of boosting the nation's refining capacity would be given greater weight during the permitting process.

When refiners try to build facilities on more traditional sites, "frankly, the national priority oftentimes seems to get lost in the background."

But Klesse noted: "This would be just one step in this whole process of trying to shorten the siting and permitting time in the building of a refinery."

Economics poses perhaps the biggest hurdle. Profit margins have been much stronger in the past two years, but refiners would have to be persuaded that conditions would remain strong before plunking down $2 billion or more for a new facility.

"It's cheaper just to build out existing capacity," said Aaron Brady, an associate director at Cambridge Energy Research Associates. Even if a refiner were to choose to build a plant, an old military base might not be the most logical choice.

While obtaining the necessary permits for an already polluted military base might be easier than a virgin site, "it may be so dirty they don't want the site," Houston consultant Cal Hodge said.

Refiners "are used to dealing with oil," said Hodge, owner of A 2nd Opinion. "If the site is contaminated with a chemical they're not used to handling, they may not want it."

Refiners like to be near large bodies of water so crude can be brought in by tanker. Many of the nation's military bases are too far inland. And the more remote the site, the more difficult it would be to attract qualified employees.

"We're struggling to find why this is good," Hodge said.

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