As featured in bizjournals.com By Emily Burleson – Reporter, Houston Business Journal
Aug 15, 2022

There are some potential hurdles standing in the way of Southern Rock Energy Partners’ proposed $5.5 billion, 250,000-barrels-per-day refinery in Bloomington, Texas, but a company executive says it’s a good time to move forward on the project.

The proposed $5.5 billion-plus project does not have any state or federal permits in place yet, as Southern Rock is still finalizing the location, Steven Ward, the company’s managing member, told the Houston Business Journal. But Southern Rock has “engaged a recognizable and reputable consulting firm” to secure air and wastewater permits, he said.

Lack of momentum in the industry is one of several potential hurdles that could stand in the way of the project, said Ellen R. Wald, an energy and geopolitics expert and senior fellow at the Atlantic Council. No major refineries have been built in the United States in over 45 years, and it would be difficult to replace the more than 1 million barrels per day of crude refining capacity lost to facility closures since 2020.

“We have seen refineries do big upgrades or expansions, but in general it’s very, very difficult from a regulatory standpoint to get a new refinery built,” Wald said.

On the other hand, the declining U.S. refining capacity coupled with high gasoline prices also creates a better business opportunity for a would-be-refinery-builder now than has been seen in recent years, Wald said.

The shale fracking boom that kicked off in the early 2010s elevated U.S. production of light, sweet crude oil, which most refineries here are not optimized to process — leading Congress under the Obama administration to lift the country’s ban on crude exports.

Then “for a while they weren’t interested because prices were low,” Wald said. “It was difficult to make a profit doing refining. That’s changed recently. If oil prices and gas prices stay high, it may be more possible for refineries to make money.”

The newest major refinery built in the U.S. is Marathon Petroleum Corp.’s (NYSE: MPC) Garyville complex in Louisiana, which finished construction on the initial 200,000-barrels-per-day facility in 1976 and started up the next year. Since then, Marathon has expanded Garyville to a whopping 585,000 barrels per day, making it the third-largest refinery in the country.

The 16 refineries erected since then have been much smaller in scale and impact, with none sporting a capacity over 50,000 barrels per day. The shiniest new project is Texas International Terminals’ new 45,000-barrels-per-day crude distillation unit in Galveston, which started up earlier this year.

This summer, tight refining capacity has played a role in spiking and continued elevation of pump prices, and that dynamic is one of the primary reasons Ward said it’s time for a greenfield project.

“Refining capacity in the United States has decreased by 1 million barrels per day and globally by 2 million barrels per day, while demand for fossil transportation fuels continues to increase,” said Ward, who also cited demand for transportation fuels that have lower carbon intensity as why now is the time for this particular project.

The clean aspects of Southern Rock’s plans would be unique for a U.S. refinery, Wald said. Among other features, Ward said the main carbon dioxide stream would be captured and stored, rather than emitted into the atmosphere, in a carbon sequestration complex owned by the company. That would allow the autothermal reformer to produce so-called blue hydrogen, which would be consumed on-site in process heating units and hydro processing units, he said.

In addition, he said the refinery’s electricity needs would be served by 100% renewable sources like on-site solar, geothermal and waste heat, supplemented by renewable power from elsewhere on the Electric Reliability Council of Texas grid.

Beyond the byzantine permitting process, opposition from locals has also played a role in halting new refineries proposed since Garyville came online, Wald said.

But local officials in Bloomington and Victoria County were cautiously optimistic and supportive of the project in interviews with the Victoria Advocate. The superintendent of Bloomington Independent School District, Mark Anglin, told the newspaper that the refinery would be a win for the community.

Southern Rock has asked the Bloomington ISD school board to slash the property taxes on the proposed refinery in return for the added tax revenue and jobs the project would bring. The company applied to limit the value of the facility to just $20 million for a decade under a state program known as Chapter 313, which expires at the end of 2022.

See original source here: https://www.bizjournals.com/houston/news/2022/08/05/southern-rock-refinery-bloomington.html