One by product of the long-delayed Keystone XL pipeline decision is that rising volumes of Canadian crude, particularly Alberta oil sands, are being refined in the Midwest rather than being shipped to U.S. refineries on the Gulf of Mexico. The increasing production is also generating attendant slag heaps of petroleum coke, or “petcoke,” whose particles wafting along on the wind has local residents claiming it endangers their health.

Residents of the southeast side of Chicago, tired of the fact that the owners of the heaps don’t even bother to cover them, on 25 November filed a class-action lawsuit against several Koch Industries subsidiaries, which have been buying up the petcoke slag across the country, presumably for sale to lucrative Asian markets. The lawsuit charges that Koch Carbon, KCBX Terminals, George J. Beemsterboer Inc. and KM Railways in improperly storing the petcoke residue has resulted in its coating the homes and property of residents throughout the surrounding South Chicago neighborhood. The suit states, “Instead of safely disposing and deconstructing the petcoke, (the) defendants have chosen to sell it and distribute it and mark it for profit. It is a marketing enterprise that despoils and degrades every environment it touches.” BP is also named as a defendant as residents maintain that much of the problem petcoke is coming from BP’s nearby Whiting, Indiana refinery. The six-count lawful suit alleges willful and wanton conduct, abnormally dangerous activity, strict liability in tort, trespassing, public nuisance, private nuisance and declaratory relief, with the residents seeking an undisclosed amount in damages.

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Not that the defendants shouldn’t have seen it coming. On 4 November Illinois Attorney General Lisa Madigan filed a suit against Koch Industries subsidiary KCBX Terminals for alleged air pollution caused by petcoke and coal at its storage site on the banks of the Calumet River, contending that the growing mounds are sending clouds of black dust into nearby neighborhoods. Two weeks later, Chicago Mayor Rahm Emanuel ordered the city’s Department of Public Health to develop regulations to control petcoke.

While petcoke does have its industrial uses, the heart of the legal action is that the affected citizens believe that the defendant companies are either too penny pinching or too disinterested to bother to store their petcoke away from the elements, which allows it to pollute the environment. Residents of Detroit, where Koch Carbon owns a large petcoke stockpile from the Marathon Petroleum refinery in Detroit, which began refining Alberta oil sands bitumen a year ago, are considering similar legal action.

Nearly pure carbon, petcoke is a potent source of carbon dioxide if burned, which has led to it being banned as a domestic fuel source in the U.S.

Overseas is another story. According to the U.S. government’s Energy Information Administration, demand for U.S. petcoke is strongest in Asia, where it is used for generating electricity, making steel, and manufacturing cement, with U.S. petroleum coke exports January-February 2012 averaging roughly 470,000 barrels per day. The major foreign markets for U.S. petcoke export markets are China, Japan, India, Brazil, Turkey, and Mexico. While petcoke is not as valuable as other higher-priced U.S. petroleum product exports such as gasoline and diesel fuel, it was nevertheless a major contributor in 2011 to the United States becoming a net exporter of petroleum products for the first time since 1949.

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A major player in these petcoke exports is now the Oxbow Corporation, owned by William I. Koch, selling 11 million tons annually.

One thing is certain - as now almost 56 percent of Canada’s oil production is from the petroleum-soaked oil sands of northern Alberta, the problem of disposal of growing mounds of petcoke in the U.S. from 2,000 miles away can only increase. If the plaintiffs in the Chicago lawsuit prevail, then Koch subsidiaries and BP may well see a portion of their oversea petcoke sales profits be diverted to tidying up an environmental problem that they themselves caused and declined to clean up.

By. John C.K. Daly of Oilprice.com