Petroleum Refining in Minnesota

In the aftermath of a fire at the Husky Energy Superior Refinery in Superior, WI, petroleum refining has been in the news recently, with most of the focus on the safety of Minnesota refineries. There are two petroleum refineries in Minnesota and a handful of major pipelines that cross the state from oil-producing regions to the west and north. With refinery safety on the minds of Minnesotans, let’s examine the refineries themselves, as these facilities make a significant economic impact on Minnesota.

As we might expect from the state with the largest refinery in a state with no oil reserves, Minnesota offers a considerable amount of jobs in petroleum: 6,570 of 43,698 workers in the energy sector statewide, according to the Department of Energy.

Relative to its four neighbors—Wisconsin, Iowa, and the Dakotas—Minnesota employs an outsize number of people in the petroleum industry. Among this group of states, only North Dakota employs more people in the oil & gas sector. As the second-largest producer in the country, North Dakota produces 12% of the nation’s total crude oil.

Data sourced from DOE.

Because Wisconsin’s only refinery sits in Superior, just across the St. Louis River from Duluth, some of the economic activity from oil-refining in Wisconsin—and some of the risk—touches the Gopher State. Data about the number of Minnesotans that commute to work across the border there is unavailable—as is data about economic activity induced across the border by the plant’s presence—but we can reasonably infer that some of the economic impact of the Wisconsin facility finds its way across the border through jobs and spending on local goods and services in Minnesota.

Crude oil arrives at these refineries via pipelines and rail cars. The pipeline that connects to the Husky Energy refinery, the Enbridge Mainline, crosses Northern Minnesota, through Kittson and Carlton Counties. It transports mostly heavy, sour crude from the tar sands of Alberta. The Enbridge North Dakota line carries primarily light, sweet crude oil fracked from the Bakken formation to the two refineries in Minnesota: the St. Paul Park Refinery and the Pine Bend Refinery in the Twin Cities. As the fracking boom changed the energy landscape over the last decade, the refineries have adapted to handle different types and sources of oil.

From MN House Research Department at http://www.house.leg.state.mn.us/hrd/pubs/petinfra.pdf. (Note: Flint Hills Refinery refers to Pine Bend Refinery)

The St. Paul Park Refinery is the older, and smaller, of the two, built in 1939. It can convert 102,000 barrels of oil a day into various petroleum products. The refinery employs 411 full-time workers. Ownership of the facility has changed several times over the last decade, and is now again, in a merger that will create the largest refining conglomerate in the country.

The Pine Bend Refinery in Rosemount is owned by Flint Hills Resources, a subsidiary of Koch Industries. The refinery’s production capacity of 339,000 barrels per day makes it the 14th-largest in the country. According to a 2016 research brief by the Minnesota House of Representatives Research Department, a greater percentage of the crude oil at the Rosemount plant comes from Canada than at the St. Paul Park facility. The facility produces about half of the motor fuel for Minnesota, about 40% for Wisconsin, and most of the jet fuel for the Minneapolis-St. Paul International Airport.

Flint Hills Resources employs 1,300 people directly, and is the second-largest employer in Rosemount, after the local school district. The company cites a study from Harrah Analytics that the refinery supports another 4,000 Minnesota jobs. That same study asserts $178.3 million in direct compensation, and $301.4 million in indirect compensation for Minnesota in 2015 from all Koch Industries subsidiaries. A series of upgrades at the Pine Bend facility in the last decade worth more than $2 billion have employed up to 2,500 contractors at a time, and made the facility a consistent source of employment in a variety of building trades.

 

The future of petroleum in Minnesota

Because oil is a global commodity, the future of oil supply affects the refining industry in Minnesota. Global oil markets have adapted to two trends in the last decade: 1) the rise in unconventional sources—tar sands, fracked shale oil, and deepwater sources—as conventional sources have begun to dry up, and 2) several years of low per-barrel prices as conventional oil producers in OPEC have tried to outcompete North American producers. The latter trend of lower prices may soon change, but trends for unconventional sources should not. Nearly all of the oil that flows through Minnesota comes from unconventional sources: fracked shale in North Dakota and oil sands in Canada.

Some analysts have surmised in the last decade that peak oil, when either oil supply or demand hits its all-time high, is near. Major petroleum multinationals—BP, Shell, and Exxon Mobil—tend to agree that oil use will peak between 2030 and 2050.

If those predictions are right, then Minnesotans in the petroleum refining industry should expect changes in the coming decades: peak oil could drive Minnesota refineries to use new sources, or, alternately, close their doors. In the short term, however, North Dakota production expects a big year, while the other major supplier of crude to Minnesota, the Canadian oil sands, also expects production growth through 2036.

As long as unconventional sources of crude continue to flow out of the ground, millions of barrels should flow through Minnesota. The future will require continued balance of various interests: jobs and economic security for workers; safety for workers and surrounding communities; and, thoughtful consideration about how Minnesota invests in workers in a future with less oil.