Great Lakes, Great Peril: Oil and Water
Little city is at center of a great debate
Pipes link the Great Lakes with massive oil reserves in friendly Alberta. They may bring jobs, energy and pollution. And it's all happening as the century of oil gives way to the century of water.
By Dan Egan of the Journal Sentinel
Posted: Dec. 6, 2008
Great Lakes-Alberta tar sands connection
Journal Sentinel
First of two parts
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 that's been 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% 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.
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 the bitumen 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 that the volume of Canadian oil processed in Wisconsin, Illinois, Indiana, Minnesota, Ohio and North Dakota will nearly double from 2007 to 2015.
It's going to mean a lot more locally refined fuel in a region that must now import it from faraway 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, economic development director for the City of Superior, a gritty industrial hub with a skyline of smokestacks, grain elevators and coal piles. "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 Department of Natural Resources documents.
"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 in Superior.
"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 of that size could have on Lake Superior, the largest and most pristine of the five Great Lakes. They fret that the expansion could harm the lake's ecology and squelch the area's recreation and tourism industry.
Refineries are reviled by many of the people 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 the pipeline company 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," said Murphy refinery manager Kowitz.
Hard lines drawn
Oil industry experts say modern pollution controls can ensure that refineries tap the lakes without harming them.
Not everyone is convinced the emerging nexus of Great Lakes water and the 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."
Douglas County Supervisor 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 a cup of coffee at a lakeside Perkins in Superior. "Lake Superior is."
There is indeed a growing awareness of just how precious the Great Lakes are - and will be - in a century in which many are predicting fresh water will become more coveted than oil.
The significance of this can't be underestimated for a system of linked lakes that hold 20% of the world's fresh surface water and 90% of the nation's.
Recognizing the lakes' ecological and economic value, President George W. Bush this fall signed the Great Lakes Compact, which prohibits most water diversions outside the Great Lakes basin. Bush signed the measure after the compact received overwhelming bipartisan support from the eight Great Lakes state legislatures, as well as the U.S. House and Senate.
Its passage is the latest example of the region becoming increasingly protective of the lakes.
President-elect Barack Obama promised in his campaign to push for $5 billion to help restore the lakes - money he said would be generated by increased taxes on oil and gas companies.
And it was probably no coincidence he pitted the health of the Great Lakes against Big Oil.
The BP fight
In the summer of 2007, Great Lakes advocates launched a ferocious fight over BP's plans to increase its daily pollution discharges into Lake Michigan as part of its $3.8 billion Indiana refinery retrofit.
Democratic U.S. Rep. Rahm Emanuel, Obama's incoming chief of staff, wrote a resolution decrying the company's plans to increase discharges of ammonia and suspended solids, saying, "Congress simply will not stand by while our lakes are treated as a dumping zone."
Picketers popped up at BP filling stations. Conservationists mocked the company's "Beyond Petroleum" slogan; Illinois Republican Congressman Mark Kirk took to the House floor and proclaimed that BP actually stood for "Bad Polluter."
Yet the outrage at BP probably overstated the threat.
Headlines said the permit allowed 54% more ammonia discharges. That's about 100 gallons per day. Scientists call that an ecologically insignificant amount for a water body the size of Lake Michigan.
The company also was given the green light to increase its discharge of suspended solids from about 3,600 pounds per day to 5,000 pounds. That material, which escapes filtration, can contain everything from organic waste to flecks of dangerous metals. The Milwaukee Metropolitan Sewerage District is allowed to discharge more than 11,000 pounds of suspended solids per day into Lake Michigan.
None of that mattered to refinery opponents. What mattered was the idea that the Great Lakes were headed in the wrong direction by allowing a company to dump more pollution instead of less. It didn't matter that the refinery was adding capacity, or that it would be processing the dirtier bitumen.
BP ultimately backed off and agreed to pursue an expansion that would not lead to increased discharges into the lake. Whether it succeeds remains to be seen, but the victory emboldened Great Lakes advocates.
Addressing a group of conservationists in Chicago after BP backpedaled, Emanuel said that 10 years ago things would have gone BP's way, but today "there is an alternative and a different consciousness."
"That's our Grand Canyon. That's our Yellowstone National Park," Emanuel shouted, stabbing his finger toward Lake Michigan. "You touch it, you'd better know what the hell you are doing!"
The tough talk was echoed in a letter from a coalition of Great Lakes mayors to the Indiana regulators who had approved the higher BP discharges.
"We are gravely concerned that the quality and environmental protection of the entire Great Lakes system has been placed in serious jeopardy by this decision," the mayors wrote.
The mayors drew a hard line - a line that some might want to cross in the future.
One of the signatories was Superior Mayor Dave Ross.
Flowers and oil
"We expect controversy from this," Jauch said of Murphy's plans. "There are some very important issues that the company acknowledges."
Perhaps the biggest is the fact that the area planned for expansion lies in wetlands that drain into Lake Superior. The wetlands have been designated as low quality by the state, Jauch said, and their loss can be compensated by restoring wetlands somewhere else.
"This entire community is all wetlands," he said of Superior. "If you don't mow it, cattails will grow."
Retired DNR wetland expert Duane Lahti said he has walked the wetlands in question, and they are far from pristine.
"They have been altered throughout history through logging, agriculture and construction of street and utility corridors," he said. "They do, however, have functions and values."
The DNR reports that the wetlands in this area, despite their degradation, harbor populations of rare plants and are habitat for many native animals. Conservationists say an environmental survey of the land should be done before anyone can say the area is expendable.
"Naturally, we're concerned about the proposed destruction of more than a half square mile of biologically significant wetlands," said Erin O'Brien of the Wisconsin Wetlands Association. "But the precedent that would be set if the permits are granted is an even greater concern."
Murphy's Kowitz calls the Superior refinery site a "wonderful spot" to process the tar sands bitumen.
"We have an existing refinery. We have access to electricity through Minnesota Power, access to water, access to crude," he said.
"We're going to put in state-of-the-art equipment, and we're going to do everything we can to safeguard the environment while providing jobs and petroleum products that people need," Kowitz said.
Jauch said his support for the expansion is contingent upon it being done in an environmentally friendly way, and he is "convinced in the end that what Murphy puts out in discharge will be less than it is now."
But even Kowitz said an expanded refinery is "not likely to have zero increases" in its discharges into Lake Superior and the air above it, given the fact that it wants to increase its refining capacity sevenfold.
"If the public outcry is too great, well, those things happen," he said. "Someone will run the bitumen crude somewhere."
Jauch predicts little opposition from those who live in the area.
"The local people aren't fighting it," agreed 81-year-old Everett Schaefer, who grumbled about the fuss people are making over the need to protect "swamp ground."
The owner of a second-hand store and restaurant in Superior, Schaefer said his town is so desperate for the economic bump a new refinery would bring that he's willing to pitch in to get it built.
"Heck," he said, "I'd go out there and work for free."
Flower shop owner Laura Laberdie sees only an upside to Murphy's plans.
"If my customers are working full time, they're more likely to buy flowers," she said. "If the restaurants are busier, then they can afford to buy more flowers."
Standing behind a counter in an outfitters' store that sells $700 fishing rods, drinking from a Starbucks mug and sporting a baseball hat with a KUMD public radio logo on it, 61-year-old retired railroad engineer Larry Markley is a self-described liberal with a keen interest in the health of the 350-mile-long lake across the street.
He said he doesn't like that the region is becoming inextricably hitched to the Alberta tar sands, but he isn't sure what to do about it. Tar sands oil production is becoming increasingly controversial because of the amount of energy it takes to bring the stuff to the surface and the effect mining is having on Canada's boreal forests.
"The process of procuring oil from that tar, I have a lot of problems with that, but what are my choices as a citizen?" he said. "Drill more around the U.S.? Or import from other countries besides Canada? Neither of those are very attractive."
Markley said too many jobs in town don't pay a wage high enough for a family to buy a house and send their kids to college, and he's willing to put up with a well-regulated refinery if it will help.
"It's an American dilemma," he said of the oil. "We've got to keep using this stuff. We can't deny that."
