Superior at center of oil production plans
By Dan Egan/Milwaukee Journal Sentinel, Superior Telegram
Published Wednesday, December 24, 2008
SUPERIOR — U.S. dependence on foreign oil conjures images of derricks pecking at Saudi Arabian sands or supertankers steaming for coastal refineries.
But here is a more apt icon for our future reliance on other nations’ fossil fuels: fields just south of Lake Superior pocked with gymnasium-sized tanks of oil piped 1,000 miles from tar sands in Alberta — one of the largest proven “unconventional” oil reserves in the world.
Very quietly, little Superior has emerged as a mainline for the nation’s energy infrastructure. About 9 percent of the country’s imported oil, roughly 1.2 million barrels a day, already flows into this city of 27,000 at the headwaters of the world’s largest freshwater system.
A nearly sevenfold expansion of Murphy Oil in Superior could be one of many on the Great Lakes. Superior has emerged as a mainline for the nation’s energy infrastructure, with about 9 percent of the country’s imported oil already flowing into the city of 27,000 at the headwaters of the world’s largest freshwater system even before Enbridge’s “Alberta Clipper” expansion is complete.
And that figure is about to balloon with the opening of a $3 billion “Alberta Clipper” pipeline that could ultimately deliver some 800,000 barrels a day of the gooey tar sands oil, called bitumen, to an existing tank farm just outside downtown Superior, before it is shipped to refineries around the region.
The black stew won’t arrive from Canada refinery-ready. That means billions of dollars must be pumped into retrofitting the regional refineries so they are able to strip away impurities.
Oil prices have plummeted in recent months, and some refinery upgrade plans have been put on hold, but the pressure to add refining capacity in the region won’t disappear.
This year alone, the Canadian Association of Petroleum Producers predicts $20 billion will be spent in Alberta developing the tar sands, which cover an area the size of Florida. The industry group also projects the volume of Canadian oil processed in Wisconsin, Illinois, Indiana, Minnesota, Ohio and North Dakota will nearly double between 2007 and 2015.
It’s going to mean a lot more locally refined fuel in a region that must now import it from places such as the Gulf Coast.
It’s going to mean an alternative to American reliance on unfriendly parts of the world for its energy lifeblood. It’s going to mean an economic boost tied to refinery expansions. And it could mean more pollution for the Great Lakes, the source of water for 40 million people.
Refining the issue
To gauge the potential of this budding relationship between the Great Lakes and Canada’s tar sands, just look at what’s planned for the tiny Murphy Oil refinery in Superior, which hopes to turn its sip from the pipelines into a gulp.
Murphy, which has a checkered environmental record in Wisconsin, wants to boost its refining capacity in Superior nearly sevenfold — from 35,000 barrels daily to 235,000. That’s almost 10 million gallons a day.
Billed as a refinery expansion, it would essentially be a tear-down and rebuild of a nearly 60-year-old facility, and it is an economic undertaking the likes of which northern Wisconsin has never seen.
“Let me try to put it into some perspective,” said Jeff Vito, Superior’s economic development director. “They’re talking about a $6 (billion) to $7 billion investment. The total value of the city of Superior (today) is about $1.5 billion.”
The proposed Murphy expansion will “likely be the largest project in the history of the state of Wisconsin,” according to the Department of Natural Resources.
“For the region, this would be the equivalent of getting the Olympics and having them five years in a row,” said state Sen. Bob Jauch, D-Poplar, an unabashed proponent of the expansion. “They’re talking about 5,000 jobs in the construction phase.”
Those construction jobs would eventually evaporate. But Murphy said a new refinery would create 300 to 400 permanent full-time positions in addition to the company’s 150 current employees.
“Our economy would be transformed and the future of the region, which has long been bleak, will be substantially enhanced,” Jauch said.
It would come at a cost. The DNR reports the expansion could consume 300 to 400 acres of wetlands just south of the Lake Superior shore. Conservationists say that would make it the most destructive wetlands project in Wisconsin since the 1972 passage of the Clean Water Act.
Conservationists also worry about the effect a refinery that size could have on Lake Superior, the largest and most pristine of the five Great Lakes. They fret the expansion could harm the lake’s ecology and squelch the area’s recreation and tourism industry.
Refineries are reviled by many who depend on them; they are so controversial that a major one has not opened in the U.S. since the 1970s. They’re resented for the pollution their smokestacks spit into the sky and the thousand of pounds of gunk their discharge pipes dump daily into area waters. They’re resented for the sulfury stink they emit and the flames that lick from their stacks.
It’s a dirty — but necessary — business that many simply don’t want done in their backyards.
“Once you become a refinery town on that scale, you’ll never be anything other than a refinery town,” said Douglas County Supervisor Bob Browne, a retired welder who has done contract work at both the Murphy refinery and the Alberta tar sands.
More expansions planned
The Murphy expansion is just a plan at the moment. The company reports it has spent about $7.5 million gobbling up neighboring properties, and preliminary engineering studies have begun, but no earth will be turned until the company finds a financial partner. Given the turmoil in the financial markets, that isn’t likely to happen soon.
“Even though we’ve done a bunch of work, we’re still five years away — if we started today,” said Jim Kowitz, acting manager at the Superior refinery.
But the oil is coming to the Great Lakes one way or another, and so are other refinery expansions.
British fuel giant BP is in the midst of a $3.8 billion retrofit of its Indiana refinery on Lake Michigan just south of Chicago. Marathon Oil has a $1.9 billion project under construction in Detroit (though it announced in October that the drop in oil prices was forcing it to rethink its opening date, slated for 2010).
BP has another tar sands retrofit planned for its refinery in Toledo, Ohio. Shell Oil had designs for a tar sands upgrade at its refinery along the St. Clair River in Sarnia, Ontario — those ambitions also are now on hold.
There are refineries outside the region that will be processing tar sands oil, but the Great Lakes are the logical place for much of this fresh crude to pool.
Pipelines from Alberta are in place or under construction, and there is ample room to expand their capacity. The Superior-bound Alberta Clipper is already under construction by Enbridge in Canada and is going through the permitting process in the U.S. Its owners plan to have it online by 2010.
The region is also home to a fleet of existing refineries that can be expanded — a huge plus because building a new refinery from scratch is a dicey prospect because of all the pollution permits required.
It’s also a ready-made fuel market with 40 million residents. And there is, of course, more than enough water in the Great Lakes to supply the thirsty refineries.
Production of Canadian bitumen is expected to triple to 3.5 million barrels per day by 2020. Alberta doesn’t have the capacity to refine all that stuff, so the plan now is to mix it with a more liquid petroleum product, called diluent, so it can be piped south for processing.
This has the Great Lakes poised to emerge as the Gulf Coast for the Canadian tar sands, which hold a reserve of 173 billion proven barrels of oil — more than any place outside Saudi Arabia, according to the Province of Alberta.
“This is going to be a giant (entry) point for bitumen, regardless of what we do,” Kowitz said of Murphy Oil’s expansion plans.
Hard lines drawn
Oil industry experts say modern pollution controls can ensure refineries tap the lakes without harming them.
Not everyone is convinced the emerging nexus of Great Lakes water and Canadian tar oil will be benign.
“The ongoing, hasty growth in oil sands production has already created an urgent need to develop infrastructure downstream to handle the dirty bitumen ... pipelines stretching thousands of kilometers across North America and massive, multi-billion dollar expansion of refineries in the Great Lakes region,” states an October report released by the University of Toronto’s Munk Centre for International Studies.
“We are already well into the development of a continent-wide industrial supply chain — a pollution delivery system — that could cause irreversible damage to the Great Lakes.”
Browne isn’t flatly opposed to the notion of Murphy boosting refining capacity. He just has a hard time stomaching the idea that it would happen so close to the shore of his great lake.
“The Gulf Coast isn’t fresh drinking water,” he said, sipping coffee at a lakeside Perkins in Superior. “Lake Superior is.”
— Copyright © 2008
Milwaukee Journal Sentinel
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