Refinery to create jobs, add tax revenues

BY KATHERINE YUNG

DETROIT FREE PRESS BUSINESS WRITER


After a lengthy delay, one of Michigan's biggest construction projects in recent years is expected to hit its peak of activity this fall, employing 1,300 workers in southwest Detroit.

Marathon Petroleum is about halfway through upgrading equipment at its Detroit refinery and expanding the facility, the only one in Michigan. Though the $2.2-billion project began three years ago, the work is slated to significantly ramp up in September or October.

The expansion will allow Marathon to process more Canadian oil sands, which will increase pollutants from the refinery from 2009 levels.

Marathon has promised to add 60 jobs and 75 contract positions after the project is completed in the second half of 2012. The company has 560 employees, including 160 contract workers, at the Detroit refinery. The expanded refinery also is expected to generate $230 million in additional city tax revenues during the next 20 years as well as an estimated $85 million in local and state taxes from wages and other spending.

Most important, the investment helps ensure that the 81-year-old refinery will remain open well into the future.

"This project takes us from being one of the slower antelopes to at least being in the middle of the pack," said Tracy Case, manager of Marathon's Michigan Refining Division.

But the massive investment is not without controversy. After the expansion, the refinery will be able to significantly increase the amount of heavy crude oil it processes. A key source of this heavy crude is the huge supply of oil sands in Canada. But environmentalists oppose tapping into the oil sands because they say it is the dirtiest source of oil.

Marathon also has not succeeded in hiring large numbers of Detroit residents, something it had agreed to do when it received the Detroit City Council's approval for $178 million in city tax breaks during a 23-year period.

Continued at: http://www.freep.com/article/2011062...d-tax-revenues

New jobs are great, it just sucks that Southwest Detroit is perpetually the dumping ground for dirty industry, despite being one of the only self-sustaining, functioning, though unglamorous neighborhoods in the city.

Well, according to the article the refinery has been there for 80+ years, so it's not like it's a new development. Also according to the article, the refinery is putting out roughly 1/3rd of the pollutants from ten years ago.

Refinery capacity is a major factor in the cost of gasoline, so extra capacity should bring prices down around here a bit, which will be good for those on a tight budget. I know some skilled trades guys who started turning down jobs because the cost of driving to them would have killed any profit they could have made.

The City of Detroit. What a joke, at least when it comes to the $175 million in tax breaks it awarded Marathon for this deal.

Marathon would have expended the refinery without the tax breaks. If someone at the City had done a little research, they's have found that Marathon wanted badly to get into the Canadian oil sands play, and paid $7 billion to acquire a minority interst in an existing Canadian company active in that area. Marathon was then faced with the problem with what to do with its share of the oil. It could have built a refinery in Canada and shipped down the refined product but that alternative was cost prohibitive, Marathon decided to refine its oil in the U.S. [[it had no other ecomic choice.) It's major refinery in LA had already been designated for a major expansion which would max it out, in order to produce diesel fuel. Detroit is much closer, had the expension capacity, and Marathon had no choice but to expand it, and obviously would have done so without the City's tax breaks.

... the last part of the article-- why have they not followed through on hiring detroit residents? how can this be enforced?

Quote:

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Originally Posted by Hypestyles

... the last part of the article-- why have they not followed through on hiring detroit residents? how can this be enforced?

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Hopefully by rescinding the tax breaks if Marathon fails to meet the resident employment requirements!

According to the article, it sounds like it has something to do with union requirements. Sounds like the new hires need to be in some trade union, but a small percentage of that union's members live in Detroit. I don't know if it's true or not, but I've seen similar problems in other organizations.

Quote:

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Originally Posted by Hypestyles

... the last part of the article-- why have they not followed through on hiring detroit residents? how can this be enforced?

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I have heard from someone with this sort of knowledge, that Marathon made it's 'Detroit hiring' pledge assuming they would be able to find qualified union workers in Detroit. However, they have not been able to find enough people who are actually residents of the city. I believe the number was something like 33% of their required workers for a few certain trades were city residents, an astonishingly low number. So it has not been for a lack of trying on the part of Marathon. I heard this part of the process also slowed down the entire project a bit, as they have made a conscious effort to hold up their end of the bargain.

A guy who lives in my building and I often grab a beer with is one of the project managers down there at the Marathon job, as are his buddies. They are all from California. I'm guessing that upper mgmt is not from MI.

I was impressed by learning that Marathon's total investment of 1.9 billion in southwest Detroit
will create a total of only 135 new jobs. The refining of oil or the oil sands is so very
highly automated that few workers are needed.

The old executive order #22, which has been in place since the early 1980's was put in place by CAY. It was worded that 51% of the workforce hours for Projects in the City of Detroit and Funded in part by the city would require that 51% Detroit Residents be employed for the total hours worked. There have been many projects that could not reach that requirement, due to not enough qualified workers. The new Executive Order #22-2007, is worded the same with requirements, but now comapnies can be fined a % of their contract monthly for not reaching the requirements. The further off the 51% mark the higher the fine.

Quote:

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Originally Posted by renf

I was impressed by learning that Marathon's total investment of 1.9 billion in southwest Detroit
will create a total of only 135 new jobs. The refining of oil or the oil sands is so very
highly automated that few workers are needed.

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The mining of oil sands is also one of the worst environmental violations of the 21st century.

I have learned that whenever a company or a business or a politician says, "Jobs! Jobs! Jobs!" they really mean "Profits! Profits! Profits!" :)