NEXT ISSUE Production from the two CHS refineries leans heavily toward diesel fuel to meet the demands of customers in agriculture and other heavy-equipment markets. To better balance refining gasoline with diesel fuel, CHS is making a concerted effort to expand the number of Cenex ® branded retail locations, including purchasing and rebranding 33 Zip Trip convenience stores in the Spokane, Wash., area. Watch for a story in the next issue of C about the expanded presence and promotion of the Cenex brand. Tar Sands Bring Canadian Crude Boom It’s well-known that Saudi Arabia is number one in world oil reserves, but who’s number two? Fields of Canadian tar sands, located in the province of Alberta, represent the world’s second largest source of producible oil reserves — an estimated 175 billion barrels of oil. Current output of these oil sands topped 1 million bar-rels a day in 2006, and that yield is expected to double by 2010 and triple by 2015. Tucked into about 50,000 square miles of Canadian tundra, the tar sands are a combination of clay; sand; water; and heavy, black, viscous oil called bitumen. It takes about two tons of tar sands to produce one barrel of oil. Only about 75 percent of the bitumen can be recovered from sand. The remaining sand mixture is returned to the mine. While the process of squeezing oil from this sticky black sand is labori-ous and costly, it became profitable as crude oil prices crept upward over the last few years. Now oil from the tar sands represent about 40 percent of Canada’s oil produc-tion. The rest comes from traditional wells near Edmonton. Small areas of tar sands can be found in the United States, as well. The largest deposit, in eastern Utah, holds an estimated 12 to 19 billion barrels of crude oil. 4 UPGRADES SATISFY ENVIRONMENTAL RULES. “With today’s industry environment, we can’t afford to sit still.” •• LEARN MORE •• Watch construction of the Laurel, Mont., coker from start to finish at www.chsinc.com/c. Staying on top of changing environmental regulations governing energy products and refineries is a full-time job. In early 2006, the Laurel refinery completed a $90 mil-lion upgrade that would allow the facility to produce all ultra-low-sulfur diesel (ULSD). Federal regulations, which went into effect in 2007, now require all diesel fuel for off-road vehicles to contain no more than 500 parts per million (ppm) of sulfur. The allowed threshold will drop to just 15 ppm by 2010, so all diesel fuel will need to be ULSD by then. “We opted to make all the diesel we produce ultra-low-sulfur right away,” explains Knepper, “mainly because having only one type of diesel made storage and transportation easier.” The next hurdle in federal fuel regulations is reducing benzene levels in gasoline to 0.62 percent by 2012. That will require another processing modification, he says. “We haven’t started that upgrade project yet, but plans are in the works.” Similar upgrades have been completed or are under consideration at the NCRA refinery. “Our last major capital investment was the $350 million it took to upgrade to produce ULSD in 2005,” says Menard. “Along with the reduced benzene upgrade, we’re also considering replacing our existing coker and expanding production. With today’s industry environment, we can’t afford to sit still.” 5 MORE TERMINALS BOOST DELIVERY. Two new petroleum terminals will improve distribution and year-round supply of fuels for the CHS system. In Missoula, Mont., a 148,000-barrel (6.2 million gallons) terminal was finished in May and connects to the Yellowstone Pipeline, which runs to Laurel. The Logan, Mont., termi-nal, planned to be online in July, has a storage capacity of 90,000 barrels (3.8 million gallons) and is connected to the Laurel refinery by rail. Both will supply CHS customers with bulk diesel fuel, gasoline and ethanol-blended gasoline, and have been designed to accommodate biodiesel blends in the future. “We’re also considering building a smaller terminal near Moses Lake, Wash.,” says Knep-per. “We’re always looking for economical ways to improve distribution and eliminate bottlenecks.”