Tribe enters accord on a new refinery

An Indiana company is partnering with the Ute Indian Tribe to explore options for building a new oil refinery in eastern Utah.

On Thursday, Calumet Specialty Products Partners, an Indianapolis-based company, said it would work with the Uintah and Ouray Reservation in exploring the feasibility of building a refinery on the reservation.

Jennifer Straumins, senior vice president at Calumet, said the company has agreed to work with the tribe and possibly be a financial backer if a refinery proves tenable.

The reservation is located in the Uinta Basin, which accounts for the Utah's largest percentage of oil production, particularly black wax crude oil.

"We've processed this oil in one of our plants before and we have the reputation of doing things a little differently, being willing to take some chances where other people might not be interested," Straumins said. "We've had quite a bit of project experience."

Calumet has retained Merrill Lynch & Co. as its financial adviser. The tribe has retained the Jurrius Ogle Group LLP to assist it in the transaction.

"Obviously, there are a lot of permitting issues to work through," Straumins said. "It would be a lengthy process, probably years."

No one has built an oil refinery in the United States for 30 years, but the tribe has pursued the idea of a new refinery in response to Salt Lake-area refineries that have shunned the state's black wax crude in favor of a cheaper crude imported from Canada.

In addition, Utah refineries are paying less and less for the Utah oil, which is causing some producers to shut down wells.

"The tribe is interested in pursuing the next step," said Cameron Cuch, a member of the Ute Tribe and an analyst for Ute Energy. Cuch said a new refinery could cost between $200 million to $300 million.

"For producers here in the Uinta Basin, it is just not economical for them to develop in our state," Cuch said. "We've noticed over the last couple of months a significant amount of rigs leaving our state. We need to come up with a solution to address that."

A new refinery could benefit Utah motorists by offering more competition for refined gasoline products, according to Jeff Thredgold, president of Utah-based Thredgold Economic Associates and an economic consultant to Zions Bank.

"Anytime you provide an addition major player in a market, you, in theory, get more competition," Thredgold said. "Gasoline buyers could benefit a little bit, but again it could also be some posturing by the tribe to get perhaps a slightly better deal from the local refiners today."

Calumet specializes in processing crude oil into customized lubricating oils, solvents and waxes used in consumer, industrial and automotive products. The company owns three refineries in Louisiana.

---

E-mail: danderton@desnews.com