Express oil pipeline a boon to Frontier

CHEYENNE – A controversial new pipeline from Canada is giving Frontier Oil Corp.’s Cheyenne Refinery a new lease on life.

Completion of the Express Pipeline from Alberta to Wyoming earlier this year has brought Frontier a new source of high-sulfur “sour” crude oil to refine into gasoline and other petroleum products, eliminating its need to augment supplies of sour crude with more expensive “sweet” crude.

“It’s certainly going to prolong any possibility that we would have to shut down, because let’s face it, if we can’t get crude, we’re out of business,´ said Gary Schaeffer, Frontier’s community-relations and human-resources manager. “What we intend to do is to supplement what we cannot get from Wyoming. If we can find it within the state, we get that first, but if we can’t find it here, then we go to the pipeline.”

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Frontier Refining Inc., the refinery subsidiary of Frontier Oil, converts Wyoming’s “sour” crude – crude oil with heavy sulfur content – into clean-burning fuels, but it has become vulnerable because of a continuing decline in Wyoming oil production.

“This plant was built for Wyoming sour crude, and so if we have to run sweet crude, we can’t compete, because it’s so much more expensive,” Schaeffer explained. “That is a very large reason that we exist – we’ve got that $8 a barrel margin roughly, and it isn’t economical for us to run sweet. It’s too cost prohibitive. At best we break even, but usually we lose money.”

Frontier’s reliance on sour crude put it in the middle of the battle last year over the Express Pipeline, a Calgary-to-Casper pipeline that began pumping Canadian crude oil this spring. Express connects with other pipelines in Casper, and much of the Canadian crude will end up at refineries in the Midwest, but it was fought vigorously by Wyoming’s independent oil producers, who contend it will drive down crude oil prices and make it difficult for them to survive.

“That kind of got us crosswise with the governor and the independents, though I think they understand the business side of it,” Schaeffer said. “Wyoming crude production is dropping between 7 and 12 percent a year, and we need at least 28,000 barrels a day. At one point over the last few years, we were 10,000 barrels a day short, so we had to make it up with something else. Thus came our support for the Express Pipeline – they can supply us with the rest of that crude.”

Schaeffer said Frontier went to the independents and said, “Listen, if you can supply us with the crude, we’ll help you fight the pipeline. If you can’t, don’t put us out of business. Let us survive.

“They weren’t happy with it, but I think they understood it’s business,” he said. “We would love to get Wyoming sour crude. If we can get all we need, shoot, we’ll never use what’s coming out of the pipeline, but that just hasn’t been the recent history.”

As refineries go, Frontier is small, but it has found a niche fueling up to 40,000 cars a day between Denver and Casper.

You won’t find Frontier brand stations on the corner, but if you filled up in the Cheyenne area or even Fort Collins or Greeley, chances are you’re running on Frontier gasoline, even if you gassed up at a Conoco or Total station.

“We have a marketing agreement with Total and with Conoco -they’re in Denver, so our customers in that area get their fuel from them, and their customers here get it from us,” Schaeffer said. “We just put in whatever additives they want to the basic blend stock, and they pick it up and truck it out.”

Frontier was founded in 1934 as Capitol Oil and Refining Co., a small 700-barrel capacity local refinery. Since then, it has grown to a modern refinery with $300 million in annual sales, 275 employees and a daily capacity of 41,000 barrels, still small by industry standards but filling the gap between Denver and Casper refineries.