Domestic Crude Oil Drives a Cautious Refining Revival

N.Y. Times photo

NIXON, Tex. — Since its construction in 1980, the small hard-luck refinery on the outskirts of this little cattle town has been locked shut for more years than it has been open. Situated a hundred miles inland and with domestic crude oil production declining year after year, the refinery could not compete with the large refineries on the Gulf Coast that imported vast supplies of high-quality oil from Nigeria, Angola and North Africa. Rust built up around the refinery’s pipes and storage tanks over the decades, just as it did on dozens of other refineries that closed. But suddenly a technological drilling revolution has unlocked a gusher of superior-grade sweet crude from the Eagle Ford shale field just east and south of Nixon. Two years after a small Houston company named Blue Dolphin Energy reopened the mothballed plant, trucks now line up to take fuels for shipment across the state. Local residents complain a bit about the traffic. But otherwise Nixon, a town of 2,500 people outside San Antonio where the roads are lined with cactus and many storefronts downtown are still empty, is buoyant with newfound optimism. The refinery has employed more than 50 local residents who were mostly out of work. The local barbecue joints and Mexican restaurants are full with workers and truck drivers, sales taxes have doubled and property values have quadrupled since the refinery reopened. Along with the local oil boom, the reopening of the refinery has allowed the town to add a policeman to its five-man department, repave streets and add a well to its water system. Investors are even talking about building a hotel in town. “We were a dead town before the oil industry came in,” said George Blanch, Nixon’s city manager. “Now we’re on the edge of a boom.” The rebirth in Nixon could be a symbol for what is happening in the refinery business around the country. Long plagued by boom and bust cycles, refiners are now enjoying a rare golden age fueled by cheap and plentiful domestic oil and natural gas. Major refiners like Tesoro, Valero, HollyFrontier and Marathon Petroleum are expanding existing refineries in Utah, Texas, Kansas and Illinois to process the light grades of oil that come out of the new shale fields like Eagle Ford. Smaller companies are investing in “teapot” refineries like Nixon’s to take advantage of the new market conditions.