BP PLC (BP-N37.920.070.18%) on
Wednesday said it will spend $400-million (U.S.) to install pollution controls
at its giant Whiting, Indiana refinery to allow it to process heavy crude oil
from Canada, in a deal with U.S. and state regulators.
The consent decree reached with the
U.S. Justice Department and Environmental Protection Agency also requires
London-based BP to pay $8-million to resolve prior alleged clean-air violations
at its 405,000-barrels-per-day plant, the sixth-largest U.S. refinery.
The deal, announced by the
government and confirmed by BP, brings to an end years of opposition that might
have left BP unable to use $4-billion worth of new processing units being
installed at Whiting that will allow it to run Canadian oil sands crude as
early as 2013.
U.S. Midwest refiners have looked to
boost their profits by refitting to process plentiful supplies of Canadian
heavy oil, which is cheaper and has a higher content of pollutants that cause
acid rain, smog and haze.
As part of a settlement, BP will
install an estimated $400-million of pollution-control equipment at the
refinery while finishing a crude slate expansion project.
“We look forward to completion of
the modernization project, which will improve the refinery’s efficiency and
competitiveness while continuing to reduce emissions,” said Whiting refinery
manager Nick Spencer in a statement.
In a statement released on Wednesday
afternoon, the Natural Resources Defense Council, which participated in
opposition to BP’s crude slate expansion, said the new pollution equipment will
cut emissions from the refinery’s flare system by 90 per cent.
The head of Global Community
Monitor, which works with local environmental justice groups, said the
agreement could set a precedent for refineries seeking to run Canadian oil
“It sets a pretty high bar,” said
Denny Larson, head of Global Community Monitor. “For a refiner contemplating a
tar sands expansion, after seeing this, they may not want to go there.”
Canadian oil sands crude has become
highly desired as a feedstock for refiners because it is cheaper than other
crude oil grades. It is easier to obtain for U.S. refiners because of its
source in Alberta.
Iain Conn, global head of BP’s
refining and marketing, said in March that the company had decided to make the
investment in the Whiting refinery and put refineries in California and Texas
up for sale because of the appeal of Canadian crude.
“We are moving to a Northern Tier
refining strategy,” Conn said.
Oil sands crude has drawn opposition
from environmental groups because it has high levels of heavy metals, is
caustic and said to produce higher levels of air pollutants. The mining of oil
sands crude, which is cut from pits in Alberta, and then refined into a liquid,
is also said to produce high levels of greenhouse gases.
Opposition to the use of oil sands
crude has temporarily halted TransCanada’s Keystone XL pipeline project to
bring the oil to refineries on the U.S. Gulf Coast.