From the Times Picayune:
nola.com
Refinery seeks bonds to help it grow
But it's holding off on making decision Saturday, June 16, 2007
By Matt Scallan
Valero Energy Corp. is taking another step toward expanding its Norco refinery by seeking approval of $1 billion in Gulf Opportunity Zone bonds from the St. Charles Parish Council.
Company officials stressed that they have not committed to the project to expand the refinery's capacity from 220,000 barrels of crude per day to 380,000 barrels, but the company is lining up permits and financing before making the decision.
"The permitting process is kind of lengthy, so it's best to get the permits in place before taking it to the board for approval," Valero spokesman Bill Day said Friday.
Day said the refinery expansion is in the company's long-term plans, but it hasn't decided when to move forward with it. The company applied for environmental permits for the project in October.
The council is scheduled to consider a resolution supporting the project at its Monday meeting. The deal must also get approval from the State Bond Commission.
The St. John the Baptist Parish Council recently granted $1 billion in Gulf Opportunity bonds to Marathon Oil Co. to help finance that company's $3.2 billion expansion of its Garyville refinery.
The St. Charles bond request comes shortly after Valero postponed planned expansions of plants in Texas City, Texas, and in Canada, citing high construction costs that stem from a shortage of skilled labor in the refining business. However, the company is committed to the Texas project, Day said.
Parish President Albert Laque said he's hopeful the Norco project will happen.
"It would definitely be a good thing for the parish," Laque said. "These are good jobs, and Valero is a good neighbor. They want to be a part of the community."
Growing demand for fuel has increased the profitability of oil refining in recent years, said Larry Wall, a spokesman for the Mid-Continent Oil & Gas Association of Louisiana.
Refining is the big bottleneck in the supply because it's so difficult to add capacity," Wall said. "Because it takes so long to build a new refinery, companies are concentrating on expansion."
The shutdown of several refineries around the country in May, including a fire at the Marathon refinery in Garyville, sent gasoline prices skyrocketing to new highs, but some of that was caused by Wall Street speculation, Wall said.
Corey Faucheux, St. Charles Parish's economic development director, said Valero made its request on short notice but had been discussing the expansion with officials for some time.
"We were doing what we could to get them to make an additional investment in the parish," he said.
The bonds that the parish is supporting lower the company's interest costs for the project. Investors are willing to lend the company money at a lower interest rate because the income isn't taxable.
Industrial bonds have long been used as an enticement to industrial expansion, but the GO Zone legislation increases the amount of money that can be borrowed, Faucheux said.
The bonds must be sold by the end of 2010 to qualify for the program, he said. |
