[IPSM] Superior at center of oil production plans (Wisconsin: New Refinery hub for tar sands)

[Macdonald Stainsby]

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