Superior refinery owner considering Lake Superior crude oil loading dock

The owner of Superior’s refinery is considering building a loading dock on Lake Superior in or near the Twin Ports to ship crude oil on the Great Lakes.

“Calumet is currently assessing the viability of the project and gauging interest in the marketplace,” Todd Borgmann, vice president of business development at Calumet, said in a statement released Friday. “We would expect to have this project fully operational during the shipping season of 2015 and are currently in talks with potential customers and partners.”

Jennifer Straumins, president and chief operating officer of Calumet, said the project would “provide connected refineries with another form of access to heavy Canadian and light Bakken crude oil.”

Bakken crude is produced in oil fields across western North Dakota and eastern Montana, where an oil boom is reshaping the world’s petroleum markets.

The boom taking place across that region is the result of advances in drilling technology combined with oil prices that have made that drilling profitable.

Calumet is the latest company seeking to capitalize on the boom, Ethan Bellamy, senior energy research analyst at Robert W. Baird & Co., said in an e-mail.

“Crude has always moved by rail, pipe and barge, so this is just the energy industry doing what it has always done, just in a new place and for a new resource,” Bellamy said.

Pipelines are the cheapest way to move petroleum products, Bellamy said, but their delivery points are fixed. Railcars, barges and ships can move to different delivery points. That allows crude to go to the highest bidder.

Indianapolis-based Calumet processes crude oil and other raw materials into lubricating oils, solvents and waxes used in consumer, industrial and automotive products. Calumet also produces gasoline, diesel and jet fuel. Calumet has 11 facilities in Northwestern Wisconsin, northwest Louisiana, northern Montana, western Pennsylvania, Texas and eastern Missouri.

Calumet shares closed up 17 cents Friday to $32.92. The shares gained 51 percent last year compared with a 13 percent gain for the Standard & Poor’s 500.

Efforts to reach company officials after Friday’s statement was released were unsuccessful.

ENVIRONMENTAL CONCERNS

Environmental groups, which already have been fighting a proposed pipeline to bring more crude from the Canadian tar sands oil fields into the U.S., aren’t thrilled about putting it on ships.

Josh Mogerman of the Natural Resources Defense Council noted that a pipeline spill two summers ago, of Canadian tar sands oil, fouled Michigan’s Kalamazoo River, a Lake Michigan tributary.

“That should give anyone who cares about the Great Lakes pause,” he said.

Global oil prices are driving the efforts to transport the commodity by means other than pipelines.

“The (oil) price justifies the cost of unconventional methods,” of transporting crude, including by rail and ship, said Jim Ritterbusch, president of Ritterbusch and Associates, an oil trading and advisory firm in Galena, Ill. The Calumet proposal “is just another example of that pattern.”

At the beginning of this century, oil was trading at about $25 a barrel, according to the U.S. Energy Information Administration. On Friday, crude closed at $95.88 a barrel.

SUPERIOR REFINERY

There has long been talk of moving oil out of Superior by ship.

The Superior refinery, which Calumet purchased 2011 from Murphy Oil, was established after a pipeline from western oil fields was completed in 1950. The original plan was to ship the oil from Superior on freighters.

Because ships can’t sail on the Great Lakes during the winter when ice sets in, the oil was to be stored during the cold months at a tank farm in Superior.

A group of Superior businessmen decided to capitalize on all that standing oil by building their own refinery, which relies on pipes to help move its products south.

“We’re not back to déjà vu, but almost,” Ron Johnson, Duluth Seaway Port Authority trade development director, said of the proposal to move crude via freighter.

Such a proposal has been a topic of discussion in the region recently, according to Johnson. “There has been some speculation and analysis on what it would take to ship it by tanker,” he said.

There is plenty of oil that needs to be moved.

Oil production in North Dakota was about 734,000 barrels a day toward the end of last year. At the beginning of this century, the state was producing 90,000 barrels a day.

All that additional oil is coming from shale rock and is extracted using horizontal drilling and hydraulic fracturing techniques.

Shale deposits typically are thin layers of rock that cover a wide area, according to the Energy Information Administration. Horizontal drilling lets producers drill through a much greater portion of the rock than they can with vertical wells. Horizontal wells can traverse 5,000 feet or more of a given shale deposit, the EIA says. A vertical well goes straight down, tapping only a small part of the shale.

Hydraulic fracturing or “fracking,” is a process by which the shale is “fractured” to release the petroleum products it holds. Mines in western Wisconsin are among the producers of sand that is a pivotal part of the process.

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