Interim Joint Committee on Natural Resources and Environment


Minutes of the<MeetNo1> 4th Meeting

of the 2014 Interim


<MeetMDY1> September 4, 2014


Call to Order and Roll Call

The<MeetNo2> 4th meeting of the Interim Joint Committee on Natural Resources and Environment was held on<Day> Thursday,<MeetMDY2> September 4, 2014, at<MeetTime> 9:00 AM, in<Room> Catlettsburg, Kentucky at the England Hill School. Senator Jared Carpenter, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Jared Carpenter, Co-Chair; Representative Jim Gooch Jr., Co-Chair; Senators Ray S. Jones II, John Schickel, Brandon Smith, Johnny Ray Turner, and Robin L. Webb; Representatives Hubert Collins, Tim Couch, Keith Hall, John Short, Kevin Sinnette, John Will Stacy, Fitz Steele, Jim Stewart III, and Jill York.


Legislative Guests:  Representatives Rocky Adkins and Tanya Pullin.


Guests: Rich Hernandez, David Earl, and Linda Callahan-Brown, MPC.


LRC Staff: Tanya Monsanto, Stefan Kasacavage, and Kelly Blevins.


The minutes of the July 3, 2014 and August 7, 2014 meetings were approved, without objection by voice vote, upon a motion by Representative Stacy and second by Representative Collins.


Introduction and Overview of MPC

            Mr. Rich Hernandez, General Manager of Marathon Petroleum Company Catlettsburg, Kentucky Refining, stated that Marathon Petroleum Company is a Fortune 25 company. Marathon Petroleum Company has been in business since 1887 in the Midwest and the Gulf Coast. The fourth largest refiner in the United States, in 2013 Marathon Petroleum Company reported revenues and other income of $100.3 billion; after subtracting expenses, the net income for 2013 was only $2.11 billion. One of the ongoing expenses for refineries is the purchase of crude oil, for which Marathon Petroleum spends $60 billion each year.


Marathon Petroleum Company employs approximately 30,000 people and owns 1,490 Speedway convenience stores and 5,300 Marathon Brand retail outlets. The corporate values relating to health and safety, environmental stewardship, honesty and integrity, corporate citizenship, and diversity and inclusion are the foundation of company operations. The company promotes individual civic responsibility, and many of the company’s employees participate on several local boards and committees including those for United Way, Kings Daughters Medical Center, Our Lady of Bellefonte Hospital, and the Ashland Community and Technical College. Each year, Marathon Petroleum hosts a local career fair for local eighth graders to promote and disseminate information on possible careers and fields of study.


Marathon Petroleum Company has an integrated network. Marathon owns and operates seven refineries across the United States, as well as biodiesel/ethanol facilities, terminals, pipelines, coastal water terminals, and inland water terminals. Seventy-six percent of crude oil that Marathon Petroleum Company processed was produced in North America. This crude was used to produce gasoline, distillate for various fuels, diesel, kerosene, and asphalt. The United States and Canada are positioned to grow the crude oil and condensate supply, and Marathon Petroleum is well situated to access and move domestic supplies. The company is investing in processing capabilities at its Canton, Ohio and at its Catlettsburg refineries to increase the capacity from the Utica fields.


            Marathon Petroleum recently purchased Hess Retail, and this addition of retail outlets will greatly expand Marathon’s marketing footprint and improve the company’s ability to move product from Florida into New Hampshire. The overall industry contribution to Kentucky’s economy is remarkable. Statewide oil and gas provides or supports 86,210 jobs with an average salary for non-gas station oil and natural gas employees of $58,971. This is higher than the average salary of $38,373 across all industries and sectors in Kentucky. The oil and gas industry contributes $3.6 billion to Kentucky income and $7 billion to the Commonwealth’s economy.


            Marathon Petroleum employs 2,290 workers in Kentucky. Its state assets include one refinery, a marine operations and maintenance center, and 10 product terminals. There is a refining engineering and information technology support office, 594 Marathon Brand retail outlets, and 145 Speedway convenience stores. The company has a long and interesting history in the Commonwealth and places great importance on the workforce.


            The Catlettsburg refinery produces 5.6 million gallons of gasoline daily. In terms of refinery outputs, 52 percent is gasoline and other components, 31 percent is distillate and jet fuel, and 17 percent is asphalt and specialty products.


            Mr. David Earl, Manager of Operations for Marine Transportation, shared the history of the importance of Marathon Petroleum Company’s marine transportation. The fleet includes 16 inland towing vessels, 200 owned and leased barges, two harbor boats, 26 chartered inland vessels, and ten chartered blue water vessels. Marathon products are moved by marine transport to major markets in Cincinnati, Louisville, Pittsburgh, New Orleans, and Texas City. There is a Marine Repair Facility in Catlettsburg. These vessels require ongoing maintenance and care, which means marine transportation plays a role in vessel engineering, mechanical and electrical maintenance, materials and distribution, welding, planning, and barge cleaning. Marathon Petroleum Company’s Marine Transportation operation employs 440 people. Of that number, 220 reside in 25 Kentucky counties. River transportation is an environmentally friendly mode of transportation. A typical Marathon eight-barge tow holds 7.14 million gallons of product, which is the equivalent of 368 railcars or 1,152 tank trucks. In 2013, Marathon Petroleum Company transported approximately 3.5 billion gallons of product with no product being released into the environment.


            Ms. Linda Callahan-Brown, Government Affairs Manager, Public and State Government Affairs for Marathon Petroleum Company, explained the company’s legislative and regulatory issues of interest. Changes in tax reform, transportation funding, energy security and rapidly rising electricity rates, and renewable fuel standard compliance are of a few of the issues the company will be monitoring in future legislation.

            In response to a legislator’s question regarding reformulated gas and its effect on gas prices, Ms. Callahan-Brown explained that by opting in to reformulated gas, Kentucky opens itself up to other possibilities. To tap into other products, there are stringent requirements that must be met under the United States Environmental Protection Agency (US EPA). Mr. Hernandez explained that there is additional processing that goes into the production of reformulated gas so there would be an added cost to consumers.


            Mr. Hernandez responded to a legislator’s comments and question regarding Utica shale efforts, explaining that the company’s planning is ongoing and evolving and to forecasting how the company will utilize that is difficult. He said that there are many opportunities, and a great deal of work is going on to build and grow the company.


The documents distributed during the meeting are available with meeting materials in the LRC Library. There being no further business, the meeting was adjourned.