Chicago Dust Report: Making Sense of February's Petroleum Coke Announcements


In the latest chapter of Chicago's tussle with petroleum coke, February saw a flurry of announcements about the future of this dirty refining waste on the Southeast side:

- On February 13, the City denied a variance request from KCBX seeking an additional 14 months to enclose huge outdoor piles at the company's South site.

- Five days later, BP announced that it would cease sending the majority of the Whiting refinery's yearly 2.2 million tons of petroleum coke to Illinois - i.e., to KCBX's Chicago sites - beginning in the second half of 2015 (though the company noted it may continue to use some Illinois sites on a short-term basis if needed for business reasons).

- The next day, KCBX announced that it would close its North site by mid-2015 and remove all outdoor piles of coke and coal at its South site by June 2016, the deadline for enclosure of such piles under the City's public health regulations.

- And just five days after KCBX's announcement, nearly 86 percent of voters in the 10th Ward, home to the company's pet coke sites, voted in favor of banning petroleum coke.

So what does all this mean in practical terms for Southeast side communities and movement of petroleum coke and coal in our region?

The community's actions and perseverance are producing real results. Two years ago, KCBX had a permit in hand to operate its massive open piles and the go-ahead to store up to 11 million tons of petroleum coke and coal. Then Southeast Side residents raised their voices to speak up against this blight on their community. Since that time, a number of government entities have responded to the outcry by conducting investigations, bringing lawsuits, and adopting new standards for petroleum coke and coal handling sites. One company that was operating without a permit closed up shop. All along, the community has stood strong and continued to demand relief from these harmful sites, bringing us to where we are today. In the words of Southeast side resident and executive director of the Southeast Environmental Task Force Peggy Salazar, "[t]hese announcements represent a big win for the neighbors of the piles; their vigilance and outcry forced action. But make no mistake, this fight is not over."

Closing KCBX's North site is nothing new. KCBX has publicly acknowledged in the past that its business plan includes moving equipment from the North site to the South site and eventually consolidating its business at the South site. What is new is a closure date for the North site, something that we and SETF have sought. Of course, nothing currently binds KCBX to this timeframe for shutting down the North site, and the company has made no public commitments regarding plans for the site's future.

It is likely that market forces are reducing KCBX's incentive to spend the $120 million it claims would be needed to build an enclosure at its South site. The market for imported petroleum coke in China has softened considerably, negatively impacting prices for U.S. coke producers. In addition, a rush of crude oil from U.S. shale production has "drastically increased" supplies of mid-range sulfur petroleum coke, lowering prices in a market with fluctuating demand. Lower pet coke prices likely mean lower rates paid to move that coke.

KCBX has made clear that, after June 2016, it intends to keep running its South facility indefinitely as a vehicle-to-vehicle transfer site with no onsite storage. Coke and coal at the South site thus would be brought in by railcars and trucks, offloaded to covered (but not fully enclosed) conveyors, and brought by conveyor to loading areas for barges and ships waiting to move down the Calumet River and up to Lake Michigan. This model isn't entirely new either: the sites currently move some of the material they handle in this manner, as explained in the company's December variance application to the City. But the sites have had outdoor storage capacity, which gives them flexibility to hold material until multiple trains deliver enough coke or coal to fill a whole ship, or until the ice on the waterways and Lake Michigan melts, or until various lock delays and/or low water levels resolve. Without such storage, the South site will have to operate with little to no margin in coke and coal flow at all times. Whether it can do so - while relying on rail and waterway systems prone to so many unpredictable factors impacting goods movement - remains to be seen.

Also unclear at this time is how much petroleum coke and coal KCBX anticipates moving through the South site once the outdoor piles go away. If the company can manage the timing logistics, its planned configuration (also as described in the December variance application, minus the enclosure) appears to be able to handle millions of tons of coke and coal each year.

BP's decision to stop using KCBX's Chicago sites and to seek another storage and handling location for its petroleum coke signals that the company is looking for a more secure, reliable way to move its refining waste. What remains unclear is just where the waste will go and how it will get there. The company has indicated that it may use another site in Illinois on a short-term basis if needed from a business perspective, leaving open the possibility that we'll see piles building up just outside of Chicago or further south. Two things are clear from BP's announcement: other refineries looking to move petroleum coke should similarly question whether the KCBX Chicago sites can meet their needs, and other communities should be on the lookout for looming coke piles.

In the 15 months between now and removal of piles from KCBX's South site in June 2016, KCBX will keep operating the site with massive open piles and dozers working on those piles, and with its sprinklers applying dirty water retrieved from the site itself. This means the likely continuation of the negative impacts raised by community members.

And what to make of the voters' overwhelming support of a ban on petroleum coke? That message is simple and aligns with all the points above: dirty, low-value and economically uncertain industry has no place next to neighborhoods, and will do nothing to build the Southeast Side into a revitalized community.