Murphy Oil owners want to expand in Superiorby Bob Kelleher, Minnesota Public Radio
You may have noticed the high gasoline prices lately. Experts blame the latest increase on a flooded refinery in Kansas. They say area gas prices will spike from time to time until there's a better supply for this region.
That may be coming, with plans for a new oil refinery in South Dakota, and in Wisconsin, a major expansion is proposed for a refinery in Superior.
Yet, not everyone thinks new oil refineries are such a great idea.
Superior, Wis. — Dave Podratz sees the need from his office on the southern side of Superior. He runs the Murphy Oil Refinery across the street. It's a couple of acres of tall stacks and dozens of huge white storage tanks all linked by a maze of pipes. Podratz says the Midwest is woefully short of oil refineries like his.
"It's one of the reasons you're seeing some of the highest prices in the country in the Midwest right now, is because we don't have enough refining capacity in this region," Podratz says.
In fact, there have been no new oil refineries built in the United States in about 30 years.
"For one it's a very capital intensive business," says Podratz. "It costs a lot of money to build refineries, especially now. Steel prices are through the roof. Refineries take a lot of steel. Skilled labor is tough to find."
But the economics may be changing. Tight capacity can push gas prices higher, as we've seen this summer. When retail gas prices go up, independent of the cost of crude oil, refineries can make money.
That may be why a Dallas Company has proposed a 400,000 barrel a day refinery for southeastern South Dakota. Meanwhile, Podratz has unveiled a tentative plan to expand Murphy Oil's Superior refinery, from 35,000 barrels a day to 235,000.
Some people say that would be great for Superior.
"We're talking a potential of $6.2 billion investment," says Jeff Vito, Superior's Planning Director. "To put that in some perspective, the total value of the city of Superior is about a billion-and-a-half dollars.
An expansion creates some 400 new jobs directly, with three times that many in the area.
"These are the types of jobs that really help build a community, and help sustain a community for the long term, and really help elevate the quality of life," Vito says.
So it's great news, right? Well, not to everyone. There's the obvious concerns for air or water pollution or just the kind of obnoxious smells a refinery can generate. But there might be even more compelling reasons to not do it.
"It's ultimately not going to make a difference how many more refineries we have, because the least common denominator is basically how much oil, how much crude we've got," says Timothy Olhoff, a Duluth resident who's concerned about petroleum-based energy and global warming.
"The only way to really make a transition to something that we really need to do, is to pursue something that is given to us on a regular basis," Olhoff says.
That would be energy from things like the wind, or the sun.
That's what Michael Noble has been arguing for years. He directs the renewable energy advocacy group Fresh Energy.
"That's the obvious question," Noble says. "Is building a new mega refinery part of the direction we should really be going? And, I think history will begin to raise the question, 'Wasn't 2005, 2010 about the time we should be long moving toward a transition to better and smarter fuels to run our economy?'"
Tight refinery capacity can lead to high prices, and that might be a good thing, according to Akshay Rao, a Marketing Professor at the University of Minnesota.
"There is a fairly vocal and persuasive argument that perhaps that is a good thing, and perhaps the hidden costs of cheap gas are not being taken into account, including our defense budget and climate change," Rao says. "And so the more expensive gas gets the better off we are."
Whether good or bad, neither the South Dakota proposal or the Superior expansion is a sure thing. Dave Podratz is still looking for a partner in the Murphy Oil expansion - someone who can spare a couple billion dollars.
"I would love to see it happen," Podratz says. "I think a lot of folks in Superior would love to see it happen. It'd be great for the regional economy. I think it would be good for the energy security of the country. It's something we're working very hard to make it happen, but it may or may not happen."
And, at best, neither project would be completed for several years.
- Morning Edition, 07/24/2007, 7:20 a.m.