Chicago confronts dirty bonanza of Canadian tar sand boom

March 19, 2014 12:20 pm
Chicago confronts dirty bonanza of Canadian tar sand boom
By Neil Munshi in Chicago
A bulldozer rumbles over a mountain of fine black powder amid the abandoned shells of long-shuttered steel mills in a poor neighbourhood on the far southeast side of Chicago.

The powdery substance – familiar to locals as the black dust coating their houses, cars and, many say, lungs – is petroleum coke, a byproduct of the Canadian tar sands boom. It is stored at two terminals owned by KCBX on the banks of the Calumet River. A dust storm last autumn spurred the community to action.
“You couldn’t see across the street, it was so black,” says Carol Harris, who lives two blocks from a KCBX site. “I thought it was a tornado.”
Community activism has brought the substance to the attention of local, state and federal officials, who have initiated a flurry of legislative action, litigation and regulatory scrutiny. The recent furore has pit regulators and a poor community against Charles and David Koch, the billionaires who own KCBX. The brothers are behind Koch Industries and countless conservative causes, including groups that question the science behind climate change and challenge environmental regulations.
Petcoke is piling up from Texas to Toledo as the increase in oil production from Canada’s tar sands drives expansion at refineries throughout the country. Last year, Detroit fought for the removal of its own three-story-high, blocks-long piles of petcoke at another terminal owned by Koch, the product of a nearby Marathon plant that has ramped up processing of heavy Canadian crude.
The tar sands boom, along with the shale revolution, has buoyed hopes of North American energy independence and bolstered support for the controversial Keystone XL pipeline, which if approved will carry oil from Canada to the Gulf of Mexico. But the high carbon oil has come under fire from environmentalists because of its quantities of heavy metals and toxic chemicals.
Chicago’s petcoke piles originate just over the Illinois state border, at BP’s sprawling 1,400-acre refinery in Whiting, Indiana. In December BP brought on stream a new coker, the result of a $4bn modernisation effort designed to allow it to handle more tar sands. The coker allowed BP to increase its heavy Canadian refining capacity from 20 per cent to 80 per cent of its total 400,000 barrel a day crude capacity.
Petcoke production, which results from all oil refining, will triple, from 730,000 tonnes a year to 2.19m tonnes, making the Whiting facility one of the largest petcoke producers in the world. Petcoke is most often sold as a cheap fuel in emerging markets, which have looser emissions standards.
Earlier this month, Mayor Rahm Emanuel proposed an ordinance that would ban new petcoke facilities in Chicago and prevent expansion of existing operations. Illinois governor Pat Quinn has called for statewide rules, similar to an earlier proposal from Mr Emanuel, that would require the full enclosure of all petcoke piles. The US Environmental Protection Agency has also launched an inquiry.
The mayor’s proposal came days after the state attorney-general filed a second lawsuit against KCBX, alleging water pollution violations caused by runoff. A lawsuit last autumn alleged air pollution violations.
Since last autumn, KCBX has spent $30m on environmental monitoring, improvements and a “dust suppression system” – an industrial sprinkler system designed to dampen the coke so it does not blow away, says Jake Reint, spokesman for Koch.
The company was “disappointed by the state’s decision to file a lawsuit on a matter that we believe can be resolved outside of court”, Mr Reint says. In a letter to residents, KCBX said it would consider building an enclosure.
Scott Dean, spokesman for BP, says KCBX was responsible for complying with regulatory requirements. But, he says, “we support implementation of regulations that result in the desired effect of reducing dust emissions without imposing unreasonable regulatory burdens on industry.”
“As long as [KCBX] continue to comply with their permit and regulations, we don’t foresee a change,” Mr Dean adds.
That does not sit well with locals. At a community meeting at the East Side United Methodist Church this month, residents complained about blackened windows and houses, never being able to picnic outside and keeping children indoors when the wind picked up off the Calumet River.
The attorney-general’s office has asked locals to keep logs – and take pictures and video – documenting the uncovered trucks hauling petcoke, swirling black dust storms and other violations which are common complaints and would provide evidence for its lawsuit.
For the better part of the 20th century, the southeast side of Chicago was home to some of the most polluting industries in the Midwest. But the steel mills and manufacturing plants that employed hundreds of thousands of locals shut down decades ago.
The fact that KCBX has been storing petcoke for decades, as the company frequently notes, or that the southeast side has long dealt with pollution, is not relevant, says Kate Koval, who lives two blocks from one of the sites.
“I think it was an unwritten social contract – people were willing to put up with pollution because that pollution provided a steady job and a house and college for your kids,” says Kate Koval, a community activist leading efforts to ban petcoke. “But that’s not the case any more.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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