Northern Tier Energy LP (the “Company”) is an independent downstream energy limited partnership with refining, retail and logistics operations that serves the PADD II region of the United States.
Northern Tier’s refining business primarily consists of a 97,800 barrels per stream day (“bpsd”) refinery located in St. Paul Park, Minnesota. The refinery’s complexity allows it to process a variety of light, heavy, sweet and sour crudes into higher value refined products.
The St. Paul Park Refinery is one of only two refineries in Minnesota and one of four refineries in the Upper Great Plains area within the PADD II region. The PADD II region covers Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, Ohio, Oklahoma, Tennessee and Wisconsin. The refinery’s strategic location allows direct access, primarily via the Minnesota Pipeline, to what the Company believes are abundant supplies of advantageously priced crude oils. Of the crude oil processed at the St. Paul Park Refinery in the years ended December 31, 2014, 2013 and 2012, approximately 37%, 50% and 47%, respectively, was Canadian crude oil and the remainder was primarily comprised of light sweet crude oil from the Bakken Shale in North Dakota. Many of these crude oils have historically priced at a discount to the NYMEX WTI. Further, over the past several years, NYMEX WTI has traded on average at an additional discount relative to Brent crude oil.
The Company expects to continue to benefit from access to these growing crude oil supplies. By 2030, according to the Canadian Association of Petroleum Producers (“CAPP”), total Canadian crude oil production is expected to grow to 6.4 million bpd from 2013 production of 3.5 million bpd. Crude oil production from the Bakken Shale in North Dakota has also increased significantly, helping to grow crude oil production in North Dakota from approximately 98,000 bpd in 2005 to approximately 1.2 million bpd as of December 2014, and is currently expected to continue to grow due to improvements in unconventional resource production techniques.
The refinery’s location also allows for distribution of refined products throughout the midwestern United States. The refinery produces a broad slate of refined products including gasoline, diesel, jet fuel and asphalt, which are then marketed to resellers and consumers primarily in the PADD II region. Approximately 85%, 80% and 80% of total refinery production for the years ended December 31, 2014, 2013 and 2012 was comprised of higher value, light refined products, including gasoline and distillates.
Northern Tier also owns various storage and transportation assets, including a light products terminal, a heavy products terminal, storage tanks, rail loading/unloading facilities, the Aranco and Cottage Grove pipelines and a Mississippi river dock.
Approximately 59%, 70% and 78% of the refinery’s gasoline and diesel volumes for the years ended December 31, 2014, 2013 and 2012, respectively, were sold via the refinery light products terminal to company-operated and franchised SuperAmerica branded convenience stores and other resellers. The decline since 2012 is due to increasing crude throughput capacity at the refinery and selling the resulting incremental finished products through the Magellan Midstream Partners, LP (“Magellan”) pipeline. Northern Tier has a contract with Marathon to supply substantially all of the gasoline and diesel requirements for the independently-owned and operated Marathon branded convenience stores in the refinery’s distribution area. Beginning in December 2012, Northern Tier initiated a crude oil transportation business in North Dakota to allow the Company to purchase crude oil at the wellhead in the Bakken Shale while limiting the impact of rising trucking costs for crude oil in North Dakota.
The refining business also includes Northern Tier’s 17% interest in MPL Investments, Inc. (“MPL Investments”) and the Minnesota Pipe Line Company, LLC (“MPL”), which owns and operates the Minnesota Pipeline, a 455,000 bpd crude oil pipeline system that transports crude oil (primarily from Western Canada and North Dakota) for approximately 300 miles from the Enbridge pipeline hub at Clearbrook, Minnesota to the refinery. The Minnesota Pipeline has historically transported the majority of the crude oil used and processed in the refinery.
As of December 31, 2014, Northern Tier’s retail business operated 165 convenience stores under the SuperAmerica brand and also supported 89 franchised convenience stores, which are also operated under the SuperAmerica brand. These convenience stores are located primarily in Minnesota and Wisconsin and sell various grades of gasoline and diesel, tobacco products and immediately consumable items such as beverages, prepared food and a large variety of snacks and prepackaged items. The St. Paul Park refinery supplied substantially all of the gasoline and diesel sold in company-operated stores and the franchised convenience stores within the refinery’s distribution area for the years ended December 31, 2014, 2013 and 2012. Northern Tier Energy also owns and operates Northern Tier Bakery LLC (“SuperMom’s Bakery”), which prepares and distributes baked goods and other prepared food items for sale in the company-operated and franchised convenience stores and other third party locations.