HollyFrontier 2013 Annual Report Download - page 52

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A significant portion of our current capital spending is associated with compliance-oriented capital improvements. This spending
is required due to existing consent decrees (for projects including FCC unit flue gas scrubbers and tail gas treatment units), federal
fuels regulations (particularly, MSAT2 which mandates a reduction in the benzene content of blended gasoline), refinery waste
water treatment improvements and other similar initiatives. Our refinery operations and related emissions are highly regulated at
both federal and state levels, and we invest in our facilities as needed to remain in compliance with these standards. Additionally,
when faced with new emissions or fuels standards, we seek to execute projects that facilitate compliance and also improve the
operating costs and/or yields of associated refining processes.
El Dorado Refinery
Capital projects at the El Dorado Refinery include naphtha fractionation, an additional hydrogen plant and a Low-Nox addition
to the FCC unit flue gas scrubber. Continuing project work is planned to include upgrades to the FCC unit to improve liquid yield,
upgrades to the crude unit desalter and a new tail gas treatment unit to reduce air emissions in compliance with the El Dorado
Refinery's existing EPA consent decree.
Tulsa Refineries
Capital spending for the Tulsa Refineries in 2014 includes previously approved capital appropriations for a gasoline-blending
system and numerous infrastructure upgrades. Spending on maintenance capital items and general improvements continues at an
elevated level at the Tulsa Refineries due to perceived opportunities.
Navajo Refinery
The Navajo Refinery capital spending in 2014 will be principally on previously approved capital appropriations as well as
maintenance capital spending. Included among previously approved capital projects is a $25.0 million upgrade to the Navajo
Refinery's waste water treatment system.
Cheyenne Refinery
We are continuing with our previously approved plan to install a new hydrogen plant at the Cheyenne Refinery. The hydrogen
plant, along with a previously approved naphtha fractionation project, is anticipated to allow us to reduce benzene content in
Cheyenne gasoline production, while at the same time improving the refinery's overall liquid yields and light oils production.
Previously appropriated projects still underway at Cheyenne include wastewater treatment plant improvements, a wet gas scrubber
for the FCC unit to reduce air emissions, a redundant tail gas unit associated with sulfur recovery processes and additional investment
in the waste water treatment plant to reduce selenium concentration in waste water.
Woods Cross Refinery
Engineering continues on our previously announced expansion project to increase planned processing capacity to 45,000 BPSD,
which is expected to cost $300.0 million. On November 18, 2013, the Utah Division of Air Quality issued a revised air quality
permit (the “Approval Order”) authorizing the expansion. On December 18, 2013, two local environmental groups filed an
administrative appeal challenging the issuance of the Approval Order and seeking a stay of the Approval Order. The matter is now
pending before an administrative law judge of the Utah Department of Environmental Quality. The expansion is expected to be
completed in the fourth quarter of 2015. This project work includes a new rail loading rack for intermediates and finished products
associated with refining waxy crude oil. Long lead equipment has been ordered and detailed engineering is approximately 60%
completed. The expansion, and expected completion timeline and cost, are subject to the Woods Cross refinery successfully
obtaining the Approval Order.
Regulatory compliance items or other presently existing or future environmental regulations / consent decrees could cause us to
make additional capital investments beyond those described above and incur additional operating costs to meet applicable
requirements.
HEP
Each year the Holly Logistic Services, L.L.C. board of directors approves HEP’s annual capital budget, which specifies capital
projects that HEP management is authorized to undertake. Additionally, at times when conditions warrant or as new opportunities
arise, special projects may be approved. The funds allocated for a particular capital project may be expended over a period of
several years, depending on the time required to complete the project. Therefore, HEP’s planned capital expenditures for a given
year consist of expenditures approved for capital projects included in its current year capital budget as well as, in certain cases,
expenditures approved for capital projects in capital budgets for prior years. The 2014 HEP capital budget is comprised of $7.3
million for maintenance capital expenditures and $26.2 million for expansion capital expenditures. HEP expects to spend
approximately $52.0 million in cash for capital projects approved in 2014 plus those approved in prior years but not yet completed,
such as the projects discussed below.
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