Indiana town, Canadian crude, and a large BP (“Big Pockets”) investment

With almost 5,000 residents and positioned on the edge of Lake Michigan, only 17 miles southeast of Chicago, the small town of Whiting is owner of the largest inland refinery (6th largest overall) in the U.S. with 413,000 barrels per day of crude distillation capacity.  Over the last several years, the large BP oil refinery of Whiting has gained national attention from the “largest, most complex refining project undertaken in BP’s recent history.” [1]  The Whiting Refinery Modernization Project (WRMP) is a large investment by BP (estimated $3.8 billion), expecting to capitalize on heavier (and dirtier) crudes from Canada.  The Whiting refinery currently receives three different kinds of crude, including heavy crude from Canada (~30%), sweet and sour crude from southwest U.S. domestic sources, and mixed grades of foreign and domestic offshore oil.  The WRMP will enable BP to increase the use of Canadian crude from 30% to 80-90%. [2] 

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<Image adapted from BP presentation (Oct 2012)>

Here’s the question- is this a good thing?  The Canadian crude is plentiful and cheap, but has higher content of pollutants.  From a national security perspective, a Canadian source appears more attractive than overseas sources.  The WRMP is also providing benefits to the local community through temporary jobs (~8,000 contractors in 2012) for the modernization work, as well as job sustainment for the Whiting refinery employees (~1,850). [1]  On the other hand, BP has been under scrutiny from the U.S. Environmental Protection Agency (EPA) since the start of the modernization project for not obtaining the necessary permits.  There has also been backlash over the project from other environmental groups and Illinois congressmen, since the refinery is a major source of air pollution in the Chicago area.  After all, the EPA has already cited BP for violating federal pollution limits on benzene for over six years. [3] 

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<Actual photo (Jan 2013) of BP’s massive modernization project, with downtown Chicago in the far background.>

BP undoubtedly knows that there is a lot at stake with its Whiting expansion project, claiming to dedicate $1 billion (out of the $3.8 billion) to cut down on mercury and other pollutants through water treatment. [4]  In addition, BP recently agreed to spend $400 million to “significantly reduce noxious air pollution from its massive refinery,” while also paying another $8 million to resolve previous clean-air violations. [5]  For now, this has eased tensions with the EPA and allowed the WRMP to continue, with expected completion in mid-2013.  With the ultimate goal to boost profits, BP’s completion of this project should set a precedent for other refineries to run Canadian crude in the future.  From a wider view, this will inevitably bring up more questions and trade-offs between national security, environmental concerns, local economic benefits, and policy standards regarding oil refineries.

References

[1]  “Whiting Refinery Modernization Project” http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/W/WRMP.pdf

[2] http://www.hydrocarbons-technology.com/projects/bt_whiting/

[3] http://articles.chicagotribune.com/2009-06-03/news/0906020510_1_bp-air-pollution-air-enforcement

[4] http://www.wbez.org/story/lot-stake-bp-whiting-expansion-95709

[5] http://articles.chicagotribune.com/2012-05-23/news/chi-bp-agrees-to-spend-400-million-to-reduce-pollution-at-whiting-refinery-20120523_1_whiting-refinery-massive-refinery-bp-s-whiting

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