HollyFrontier 2014 Annual Report Download - page 50

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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 and an additional hydrogen plant. They also include the
installation of an FCC gasoline hydrotreater in order to meet Tier 3 gasoline requirements. Continuing project work is planned to
include 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 2015 includes previously approved capital appropriations for numerous infrastructure
upgrades, including a project to improve FCC yields. Spending on maintenance capital items and general improvements continues
at an elevated level at the Tulsa Refineries due to lower maintenance capital expenditures made prior to HollyFrontier's purchase
of the facilities.
Navajo Refinery
The Navajo Refinery capital spending in 2015 will be principally directed towards 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 now-completed 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 flue gas scrubber for the
FCC unit to reduce air emissions and a redundant tail gas unit associated with the sulfur recovery process.
Woods Cross Refinery
Engineering and construction continue on our previously announced expansion project to increase planned processing capacity
to 45,000 BPSD, at a cost currently expected to range between $350.0 million and $400.0 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. On March 25, 2014, the administrative law judge (“ALJ”) issued a recommendation to the
Executive Director of the Utah Department of Environmental Quality (the “DEQ”) recommending that the motion to stay the
Approval Order be denied. On May 8, 2014, the Executive Director of the DEQ issued an order approving the ALJ's recommendation
and denying the motion to stay the Approval Order. The environmental groups did not file an appeal of this denial. The merits
briefing and oral argument were completed in September 2014. On October 1, 2014, Holly Refining & Marketing Company -
Woods Cross LLC, our wholly-owned subsidiary, and the State of Utah jointly submitted proposed findings of fact and conclusions
of law to the ALJ. 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. 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, including those related to recently promulgated Federal Tier 3 gasoline standards.
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 2015 HEP capital budget is comprised of $10.0
million for maintenance capital expenditures and $73.0 million for expansion capital expenditures.