Sunoco‘s Philadelphia refinery is on the banks of the Schuylkill River. The company plans to pull out of the refining business altogether, which could help put the Northeast region in a precarious position. Photo: MIKE MERGEN / HC
Northeastern states are slated to lose half of their regional capacity for fuel production by midyear as financial woes push refineries there to idle, a trend likely to increase the region’s dependency on Gulf Coast supply.
A Houston-to-New York pipeline is making major expansions to accommodate growing demand to transport gasoline and other fuels up north from the Gulf Coast to fill the potential supply void.
The Gulf already supplies about half of the Northeast’s demand for petroleum products, said Mindi Farber-Deanda, head of the liquid fuels market team for the U.S. Energy Information Administration.
But the shutdown of production at two major Pennsylvania refineries last year and potential closure of a third could put the region in a precarious position and stress supplies of gasoline, jet fuel and heating oil, the agency concluded in a new report.
“It’s marginal, but it matters,” Farber-Deanda said of the drop in the Northeast’s local fuel production. “Before, you could get a certain percentage of supply from local refineries. Now you get it from Europe and the Gulf.”
The report noted that Northeastern states could experience “spot shortages with price hikes” for gasoline and other fuels as refineries discontinue operations.
Sunoco announced last month that it will idle operation of its 335,000 barrel-per-day refinery in Marcus Hook, Pa., part of the company’s plan to pull out of the refining business altogether. If Sunoco doesn’t find a buyer for its 178,000-barrel-per-day Philadelphia refinery by July, it will go off line, too, the company has said.
ConocoPhillips announced a similar move in September, taking its 185,000-barrel-per-day Trainer, Pa., refinery off line to prepare it for sale.
A combination of the sagging economy and improved fuel efficiency in vehicles and equipment has caused demand for some fuels to plateau. Meanwhile, competition from larger and more efficient refineries on the Gulf Coast and imports from Europe put pressure on local fuel producers, said Bill Day, a spokesman for San Antonio-based refiner Valero.
“They found it very difficult to compete,” he said. “If there was demand for product there, those refineries wouldn’t close down.”
Valero pulled out of the Northeast in 2010, when it sold its Delaware City, Del., and Paulsboro, N.J., refineries.
The struggling European economy has left refiners on the continent with plenty of gasoline to ship overseas.
Cleaner heating oil
A bigger concern for the Northeast is heating oil.
Demand for ultra-low-sulfur heating oil is expected to rise next fall, when regulations taking effect in New York will require use of the cleaner fuel in boilers that warm buildings. A limited number of refineries are equipped to produce it.
“Heating oil concerns are probably the greatest,” said Terry Higgins, executive director of refining for consulting company Hart Energy. “A cold snap, with a strong surge on heating oil needs, could be a strain on the system.”
Room to grow
The Gulf Coast is replete with refineries that are expanding or have room to increase production, he said. Motiva Enterprises, a joint venture of Shell and Saudi Aramco, is nearing the end of a massive expansion of its Port Arthur refinery to increase production of ultra-low sulfur fuel and other petroleum products.
In 2010, Gulf Coast area refiners produced a net 3.4 million barrels per day of ultralow-sulfur distillate fuel oil, a category that includes the clean heating oil, according to Energy Information Administration data. That’s up from just 23,000 barrels per day in 2005.
Colonial Pipeline, a major thoroughfare for shipping fuels from Gulf Coast refineries to East Coast markets, has seen growing demand from refiners to ship larger amounts of its products north, spokesman Steve Baker said.
The 5,500-mile pipeline transports heating oil, as well as gasoline, diesel fuel and other petroleum products.
Last year, Colonial added 120,000 barrels per day of carrying capacity to its system. By mid-2012, it will have expanded the flow of distillates – including heating oil, jet fuel and diesel – by another 55,000 barrels per day. In December, the company announced it would expand its gasoline transport capacity by another 100,000 barrels per day.
In total, the expansions will increase the system’s capacity by about 8 percent, Baker said.
“We have seen a rising demand throughout the year” for fuel transport between the Gulf Coast and the Northeast, Baker said. “These are big capital investments. It’s a significant increase.”
- Gasoline May Rise Above $4 a Gallon as Northeast Plants Shut (businessweek.com)
- Gas could soar past $4 per gallon by summer, analyst says (nj.com)
- Refining Sector Woes Going From Challenging To Worse (TSO, VLO, MPC, WNR, CVI, XOM, CVX, COP, BP) (247wallst.com)
- Amid fears of price spikes, Dems press Chu to fill Northeast oil reserve (thehill.com)
BAYTOWN, TEXAS. Baytown, a highly industrialized city of oil refining, rubber, chemical, and carbon black plants, is on Interstate Highway 10 and State Highway 146, thirty miles east of downtown Houston in southeastern Harris and western Chambers counties. Among its first settlers were Nathaniel Lynch, who in 1822 set up a ferry crossing at the junction of the San Jacinto River with Buffalo Bayou that is still in operation, and William Scottqv, one of Stephen F. Austin‘s Old Three Hundred, who received a land grant in 1824. His two leagues and one labor of land, over 9,000 acres, covered most of the area of present Baytown. Near his home on San Jacinto (Scott’s) Bay, a settlement grew to include a small store and a sawmill. It was called Bay Town.
Later area settlers included Ashbel Smith, who in 1847 purchased a plantation named Evergreen on Tabbs Bay. He lived there for forty-nine years. Also living in the area for a time were Mrs. Anson (Mary Smith McCrory) Jones, David G. Burnet, and Sam Houston.qqv At the outbreak of the Civil War Smith organized a local unit called the Bayland Guards for Confederate service. They later became part of the Second Texas Regiment and saw action at Shiloh and Vicksburg.
A shipyard established at the mouth of Goose Creek in the early 1850s by John and Thomas S. Chubb built one ship, the Bagdad, which was launched in 1864 and had to run a Yankee blockade at Galveston to escape. In 1867 Dr. Smith and several associates founded the Bayland Orphans’ Home for Children of Confederate soldiers (see BAYLAND ORPHANS’ HOME FOR BOYS) on the west side of Goose Creek. The orphanage moved into Houston in 1888.
The area, though, remained largely undeveloped and isolated into the twentieth century. A rough county road ran from Crosby to Cedar Bayou, a small community of stores, shipyards, and brickyards. The only other entry into the area was by boat. Then, in 1908, after two unsuccessful drilling attempts, an oil strike was made beside Tabbs Bay. In 1916 the Goose Creek oilfield became famous as the first offshore drilling operation in Texas (second in the nation) and the third-largest producing field, after the Humble and Sour Lake oilfields.qqv
The towns of Pelly and Goose Creek developed near the oilfield in 1917–18. In 1917 Ross S. Sterling and his associates decided to build a refinery near the Goose Creek field and founded the Humble Oil and Refining Company (Exxon Company, U.S.A.qv). They bought some 2,200 acres in the William Scott survey and called their site Baytown. Construction began in the fall of 1919.
Baytown grew up around the refinery. At first the community was only a collection of army tents, barracks, and small shacks; it became permanent in 1923 when Humble laid out streets, provided utilities, sold lots, and even furnished financing for employees’ homes. Humble also furnished housing for its supervisors and skilled employees in a special “company addition” and built a large community building for their recreational needs. A special management-labor Joint Conference was formed to handle work-related problems. Later, this group also discussed municipal problems and became, in effect, the city council for the community. These and other employee-relations programs were initiated to reduce labor problems like those that had occurred in the Texas-Louisiana oilfield strike of 1917. Leading up to that incident, management policies, inflation, and poor working conditions had brought about the organization of a union local in Goose Creek in December 1916. When the oil producers refused to discuss grievances with union representatives in October 1917, 2,000 Goose Creek workers joined approximately 10,000 oilfield workers in seventeen Texas and Louisiana oilfields in a walkout on November 1, 1917. With hired guards and army troops maintaining order, the producers negotiated directly with the Department of Labor in January 1918 and effected a settlement that rejected all significant union demands. This near total victory for the producers undermined union effectiveness for several years. In the late 1930s and early 1940s the Congress of Industrial Organizations made several attempts to represent Humble employees instead of the Joint Conference, and later the Baytown Employees Federation attempted to organize, but each time Humble employees voted for the company union by large margins.
Due to this pervasive paternalism of Humble, the community of Baytown never incorporated, and this enabled Pelly to annex the “contiguous and unincorporated” territory of Baytown in December 1945. But, when Pelly and Goose Creek voted to consolidate in early 1947, the citizens selected the name Baytown for their new combined city. On January 24, 1948, the city of Baytown was established.
Baytown grew in population from 20,958 in 1948 to 67,117 in 1990 and in area from 7½ square miles to more than thirty-two. Its boundaries stretch from near the San Jacinto River eastward into Chambers County and include several former communities such as Cedar Bayou and Wooster.
Exxon, still a major employer, runs one of more than ten major petrochemical plants now in the Baytown area. In 1970 United States Steel opened the Texas Works near Baytown, and during its peak years the plant employed more than 2,000 workers with an annual payroll of $35 million. Due to the nation’s economic downturn and the decline of American steel in the early 1980s, the plant closed in July 1986.
In 1992 Baytown had twenty-three public schools, Lee College (a two-year community college), sixty-seven churches, seven banks, two savings and loan associations, three credit unions, three modern hospitals, a daily newspaper, a radio station, cable television, and a large public library. One of the nation’s largest single-level shopping malls houses major retailers and employs nearly 2,000. The city is served by two railroads and an interstate highway. In September 1953 the Baytown-La Porte Tunnel, which crossed the Houston Ship Channel, opened for traffic. In the mid-1990s the innovative eight-lane, 450-foot, twin-tower, cable-stayed Fred Hartman Bridge replaced the forty-year-old tunnel. In 2000 Baytown had 66,430 residents and 2,565 businesses.
Anne Rebecca Daniels, Baytown during the Depression, 1929–1933 (M.A. thesis, Lamar University, 1981; Ann Arbor: University Microfilms, 1983). Margaret Swett Henson, History of Baytown (Baytown, Texas: Bay Area Heritage Society, 1986). Henrietta M. Larson and Kenneth Wiggins Porter, History of Humble Oil and Refining Company (New York: Harper, 1959). Walter Rundell, Jr., Early Texas Oil: A Photographic History, 1866–1936 (College Station: Texas A&M University Press, 1977). Buck A. Young, “A Remembered Utopia,” East Texas Historical Journal 20 (1982).
Buck A. Young