Refinery explosion roils northern Minnesota's asphalt supply


ANGORA, Minn. — Dave Clement used to expect a daily delivery of two truckloads of asphalt binder from the Husky Energy refinery in Superior, Wis., to his worksite's mobile asphalt plants, where it would be mixed with gravel and placed on the road.

But ever since the refinery exploded in April, Husky has been offline and Clement, an asphalt manager at KGM Contractors based out of Angora, has been dealing with higher asphalt prices, driven up by a lower supply and compounded by having to transport the oil further from its source.

When Husky was operating, most of Clement's projects were within 100 miles of Superior. The same truck could fill up at the refinery, drop it off at the worksite and repeat that process once more within a typical work day.

"Now, with the oil 500 miles away, they can't make it in one day," Clement said. "One truck can't even make one load. One truck can make half a load a day. It takes four times as many trucks."

The rising cost of asphalt affected projects in two northern Minnesota counties.

Krysten Foster, a highway engineer for Cook and Lake counties, said it no longer made sense to bid out for pavement for next year's projects after asphalt prices threatened to raise project costs by $150,000.

While the county still plans to reconstruct 10 miles of Mineral Center Road and a section of County Highway 17 this year, the last four miles will have to wait until prices stabilize.

"Other producers in our region weren't fully ramped up to make up for what we lost with Husky being out of service," Foster said. "We're hoping that changes by next year or 2020 at least, and obviously the sooner Husky gets back open safety, the better from a paving perspective."

Foster said they might switch to a different type of binder, but that could mean a shorter lifespan for the road.

"Even if we switch to something that's more readily available from a different supplier, we would still have to truck it all the way from Grand Portage," Foster said.

Foster said an alternative binder was found for Lake County's Stanley Road project, "but we're hearing Lake County might see increased prices next year."

But finding new suppliers is not easy.

"There aren't too many refineries a person can deal with," Clement said.

Superior refinery a major asphalt supplier for area

When fully operational, the Superior refinery processes 45,000 barrels of oil per day. A quarter of those barrels — or 11,250 — are asphalt, according to Husky spokesperson Mel Duvall.

Those numbers, in part, led Husky to purchase the refinery from Calumet in 2017.

"One of the factors that made Superior really attractive to us is the fact that it makes asphalt," Duvall said. "The heavy oil we produce is ideally suited for asphalt."

Patrick DeHaan, the head of petroleum analysis at Gasbuddy, said that while Husky's supply in the region has gone down, the demand for asphalt is currently high because of the summer construction season.

"Less supply, consistent demand generally pushes prices up," DeHaan said.

And then there's the higher cost of transportation.

"That asphalt is now coming from further distances away," DeHaan said.

For now, Clement said he's looking into sourcing asphalt from Minnesota, the Midwest and Canada.

Husky has also stepped up.

"We are sourcing asphalt from other providers, and our offsite Crookston and Rhinelander asphalt terminals are moving the volumes they have in place along with asphalt being brought in from other suppliers," Duvall said.

That will have to do for now. Husky is aiming for a 2020 reopening, but still has to wait for a federal investigation to finish before they can rebuild their facilities.

Future projects could be affected

Both the Minnesota Department of Transportation and St. Louis County made their 2018 projects available for bidding before the April explosion, so this summer's construction was unaffected by the higher costs.

If asphalt prices don't decrease by next year, however, future projects could be affected, according to Steven Henrichs, a MnDOT senior engineer in the materials and road research section.

St. Louis County public works director and highway engineer James Foldesi has observed rising asphalt prices but can't pinpoint why.

"I think some of that higher cost is probably due to asphalt supply, but we can't tell which is which. We just get a price," James Foldesi said

Will it affect any of next year's projects?

"We won't really be able to tell until bidding begins for 2019 projects," Foldesi said.

Even though Husky's Superior refinery won't be online by next construction season, Clements and KGM are hopeful other suppliers in the region will step up to help stabilize prices and ensure 2019 construction can continue.

"Maybe over the winter time, these guys will make more asphalt and these prices will come down," Clements said.

Foster hopes so, too.

"We're hoping that asphalt prices stabilize if not next year, at least by 2020, such that we can finish the paving," Foster said.