Friday, March 21, 2008

What does this mean for Chicago?

Posted By on 03.21.08 at 10:30 AM

I spotted an interesting little story in the Economist the other day. Last December Congress passed and the president signed into law the Energy Independence and Security Act, which was written to promote energy conservation in various ways. The Tribune ran a brief story at the time listing several of the provisions of the act,  but, curiously, not the one that just caught the eye of the Economist. 

This was Section 526, a single paragraph in an 822-page bill: "No federal agency shall enter into a contract for procurement of an alternative or synthetic fuel, including a fuel produced from nonconventional petroleum sources, for any mobility-related use, other than for research or testing, unless the contract specifies that the lifecycle greenhouse gas emissions associated with the production and combustion of the fuel supplied under the contract must, on an ongoing basis, be less than or equal to such emissions from the equivalent conventional fuel produced from conventional petroleum sources."

Mobility-related use = cars, trucks, and buses.

Conventional petroleum sources = Saudia Arabia, Iran, Venezuela.

Nonconventional petroleum sources = ?

Possibly, says the Economist, they equal the vast oil sands of Alberta. "Transforming Alberta's tarry muck into a barrel of oil," the magazine reports, "is an energy-intensive process that produces about three times the emissions of a barrel of conventional light sweet crude."

The Economist reported that "having woken belatedly to the danger, the Canadian government is now scrambling to secure an exception . . . . The fear in Canada is that the American purchasing restrictions, which at present apply only to federal agencies, is the start of a wholesale shift to greener as well as more protectionist policies."

Evidence of Canada's concern is this letter last month from Michael Wilson, its ambassador in Washington, to Secretary of Defense Robert Gates. But why am I going on about this? Are Canada's concerns of any interest to Chicago? I think you'd agree they were, if any local paper that chose to report this story brought out the following facts:

Half the oil coming into Chicago originates in those oil sands. That's expected to rise to somewhere between 70 and 80 percent in the next few years. The British Petroleum refinery in Whiting refines 435,000 barrels of oil a day, of which 30 percent is from the oil sands. BP is spending between $3 and $5 billion to upgrade the refinery so that in time 90 percent of the oil refined there can be from Alberta. (Here's a link to an earlier story of mine that mentions this project, with the numbers that were being used then.)

The Citgo refinery in Lemont refines 170,000 barrels a day, all of it Albertan. The ConocoPhillips refinery in Wood River, Illinois, processes 300,000 barrels a day, today 40 percent of it from the oil sands but tomorrow 90 percent. A Marathon refinery in Detroit processes close to 200,000 barrels a day, and though less than 25 percent of that oil is from Alberta the refinery is being upgraded so that in time it all will be.

There are no pipelines connecting Alberta's oil sands to eastern Canada. The oil's piped south, and a new 42-inch pipeline to Illinois is now being built at a cost of $3 billion. Canada likes to remind the U.S. that its oil reserves are second in the world only to Saudi Arabia's, and that when Americans talk of energy independence as a practical matter they're talking of American-Canadian energy independence since the U.S. can't do it alone.

The point here is that if the U.S. ever actually turned off the spigot to those pipelines it would be a catastrophe for Chicago and the midwest of such proportions it's all but impossible to believe it could ever be allowed to happen. The smaller point is that when you add a local angle to the quite diplomatic skirmishing over a piece of arcane energy legislation, you find yourself with a pretty good story. In this week's Hot Type I write about the failure of the midwestern press to cover the regional economy from an international perspective. This is an example. 

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