Labor, supply chain issues drive Superior refinery rebuild to $1.2 billion
It’s three times the original estimate.
SUPERIOR — The cost to rebuild the refinery after it was badly damaged in a 2018 explosion and fire has now tripled original estimates.
Cenovus Energy officials said the cost had reached $1.2 billion, up another $300 million, “due to inflationary impacts on labor and supply chain as well as increased costs stemming from COVID-19 impacts,” Alex Pourbaix, Cenovus president and CEO, said in a call announcing quarterly financial results Wednesday. Original estimates put the rebuild at $400 million.
The company has received $1.1 billion in insurance proceeds to pay for the rebuild. It expects another $100 million from insurance to come in during the second quarter of this year.
Calgary-based Cenovus Energy took over the refinery when it closed on the purchase of Husky Energy last year.
The refinery is expected to be fully operational in the first quarter of 2023, said Keith Chiasson, Cenovus executive vice president of downstream.
“With a nameplate capacity of 49,000 barrels per day, Superior will be an important addition to our heavy oil value chain as the first stop on the Enbridge mainline,” Pourbaix said.
The refinery has been inoperable since the April 26, 2018, explosion and fire that injured 36 people and led to the evacuation of much of the city, largely fueled by the fear of a potential release of hydrogen fluoride. None of the facility's supply of the toxic gas was found to have escaped.
Despite objections from the community and officials, the refinery will continue to use hydrogen fluoride at the rebuilt refinery with added safety measures.
The U.S. Chemical Safety and Hazard Investigation Board has yet to complete its investigation into the incident. During a business meeting Thursday afternoon, the federal agency said it aimed to release the incident’s final report in fiscal year 2023. It had originally said the final report could be finished in mid-2019.
But the agency saw a backlog of cases grow after hemorrhaging staff and ending up with only one board member under the Trump administration , which had proposed cutting the agency three times.
The Biden administration has appointed board members and the agency is filling staff positions in an effort to cut down on the backlog.
Though the CSB is not a regulatory agency — it can't issue fines or penalties — its investigations can dig into an incident's root cause and its recommendations can shape industry standards.