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April 2007

A More Refined Texas
Port Arthur Refinery Would Become Nation's Largest

When construction crews complete a proposed $3.5 billion expansion of the Motiva refinery in Port Arthur in 2010, it would be the largest oil refinery in the country.

That's a welcome bit of news for an industry that appeared to be slipping down the backside of a peak it hit in fiscal 2006. Texas has bet big on refineries--the state is home to 25, including six of the 12 highest-producing facilities in the nation, according to a January 2006 list by the Energy Information Administration (EIA), part of the U.S. Department of Energy.

While refining and other oil- and gas-related industries, including exploration, extraction and refining activities, and related manufacturing make up only 3 percent of statewide employment, or 317,000 jobs, their ebbs and flows have a disproportionate effect on the state's economy. That's because the sector's high-wage jobs accounted for 11 percent of statewide economic output in 2005.

Texas employment saw substantial jumps in fiscal 2005 and 2006, but will drop about 1.9 percent a year in fiscal 2008 and 2009, according to the Comptroller's Biennial Revenue Estimate for 2008-2009.

Boom in Bloom

That makes Motiva's expansion and the estimated $17 billion it is expected to generate for Jefferson County critical.

"The proposed project is expected to require more than 3,500 construction jobs and generate about 300 new permanent jobs upon completion," said Stan Mays, spokesman for Motiva Enterprises LLC, a U.S.-based refining and marketing joint venture of Saudi Refining Inc. and Shell Oil Company.

Motiva is working with the Texas Workforce Commission, Lamar State College, the Southeast Texas Workforce Development Board, local school systems and other organizations to recruit and train a qualified work force for the project.

Accommodating the facility will bring big changes to Port Arthur, a city of 56,000 that lies 90 miles east of Houston in Jefferson County. The city is already growing, thanks to the Motiva expansion and other area industrial projects, said Verna Rutherford, president of the Port Arthur Chamber of Commerce.

"Our residents are definitely noticing increased activity in the area," she said. "Hotels, apartments and RV parks have been filled to capacity, and many developments are underway for a large number of new homes, apartments, hotels and RV parks."

Even the traffic is thicker, Rutherford said.

"These are great challenges to have, and community leaders are working closely together to create solutions," she said.

The project, scheduled for completion in 2010, would increase refining capacity by 325,000 barrels of crude oil per day, bringing the total to 600,000 barrels, according to Motiva. The refinery's major products include gasoline, distillates, jet fuel, lubricant base oils, chemicals and solvents. On January 1, 2006, Motiva's Port Arthur refinery was the sixth largest in Texas and 12th largest in the United States, according to EIA.

Adding 325,000 barrels per day of refining capacity would be the equivalent of building a new high-capacity refinery in the United States, according to Motiva.

Houston-based Motiva owns and operates refineries capable of refining about 780,000 barrels per day. Its marketing operations support a network of about 7,700 Shell-branded gasoline stations in the eastern and southern United States.

Mays said the domestic oil market can support the expansion.

Keeping it Clean

When Motiva applied for a state permit in 2006 to expand its Port Arthur refinery, one environmental group, Global Community Monitor, assembled a national team to work with a local group, Community In Power and Development Association (CIDA).

"We were concerned with the emissions levels that would be added to our community," said CIDA founder Hilton Kelley.

The group approached Motiva, offered its expertise in the region and was able to come to an agreement during the permit process.

The result was the creation of a $3.5 million community development foundation, which should be operational by June or July of 2007, and enhanced community air monitoring, according to Kelley.

Residents who live within a one-mile radius of the Motiva refinery will receive free health care and free transportation to and from health facilities, Kelley said.

"They [Motiva] will work with people who live on the fence line," Kelley said.

The company maintains that while the proposed expansion would increase refining capacity, modern design and technology would minimize emissions.

"For ozone precursors, specifically nitrogen oxides and volatile organic compounds, the expansion of the refinery would actually decrease these emissions from present-day levels," Mays said. "We've had a tremendous amount of support overall, especially in the way we've approached the project from an environmental standpoint."

Mays said the company has a history of taking environmental responsibility seriously, and the company will continue to do so during the expansion.

Historic Highlights

The current boom is a welcome one, but it is not Port Arthur's first. That came in 1901, when the city got its first taste of the oil business after the Lucas Field Gusher at Spindletop oilfield, according to Yvonne Sutherlin of the Jefferson County Historical Society.

In 1903, the Texas Company, which later became Texaco, began processing crude oil from Spindletop oilfield that was then carried overland by pipeline. That facility later became the Motiva refinery.

In 1957, Port Arthur was known as the world's largest oil refining complex, Sutherlin said. The Motiva expansion will allow it to take the top national spot from another Texas facility, ExxonMobil's Baytown refinery, which refines 557,000 barrels of crude oil per day.

Laura Zvonek

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