Consultant predicts Chevron refinery will close

Chevron Corp. will likely follow Tesoro Corp.’s lead and close its Campbell Industrial Park refinery within a few years as the environment to do business in Hawaii becomes more difficult, an East-West Center energy expert said Wednesday.

If both of Hawaii’s refineries are closed, the state would have to import 100 percent of its gasoline and other refined products, a shift that would not affect consumer prices, said Fereidun Fesharaki, an East-West Center senior fellow and chairman of a global energy consulting firm.

The refineries, which already have a hard time making money in the relatively small market, are being squeezed further by the state’s shift away from oil to renewable energy sources and pending Environmental Protection Agency regulations that will make it virtually impossible to use fuel oil for electricity generation, Fesharaki said at a media briefing.

Fuel oil sales to Hawaiian Electric Co. and the Kauai Island Utility Cooperative make up a significant portion of Chevron’s and Tesoro’s sales.

Tesoro announced on Jan. 8 that it plans to close its Campbell Industrial Park refinery in April and begin the process of converting it into an import, storage and distribution terminal. The company hopes to find a buyer for its assets, which include 31 Tesoro gas stations around the state.

"There is a reasonable likelihood that the Chevron refinery will also close but that’s probably a couple of years down the road," Fesharaki said.

Although Hawaii’s transition to clean energy will take place through the next several decades, new EPA rules reducing allowable emissions from power plants are scheduled to be phased in from 2016 to 2017, he said. The regulations will increase the pressure on Hawaii’s utilities to stop burning the low sulfur fuel oil they now burn and switch to cleaner fuels, such as liquified natural gas, Fesharaki said.

The new rules, known as "mercury and air toxics standards," are aimed mostly at reducing emissions from coal-fired power plants. The rules also will apply to Hawaii’s power plants using low sulfur fuel oil.

The utilities also have the option of continuing to burn low sulfur fuel oil and installing expensive scrubbing equipment to cut emissions. Switching to diesel also would bring emissions below the EPA target levels. However, both options would be significantly more expensive than burning liquified natural gas, which would have to be shipped in, Fesharaki said.

Hawaii Gas, the state’s only gas utility, has applied with the Federal Energy Regulatory Commission to ship natural gas to Hawaii. Its plan is to initially bring in small amounts in containers, and later larger quantities in specialized ships.