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CHICAGO | KCBX plans to build a huge $120 million indoor enclosure – roughly as large as Navy Pier's Exhibition Hall – where it would consolidate its area coal and petcoke operations.

Chicago is requiring the company to enclose the petroleum coke that's produced during the oil refining process at BP Whiting Refinery and stored in piles on the Southeast Side before being shipped on the Calumet River. Petcoke storage has been a point of controversy since a windstorm blew clouds of it through nearby neighborhoods in August 2013.

The company says the proposed enclosure would be one of the largest private-sectors investments on the Southeast Side since Ford pumped $400 million into modernizing the Chicago Assembly Plant in 2010. KCBX hopes to receive city approval to build the facility on its 82-acre South Terminal on South Burley Avenue and begin construction in the fall.

Portage-based Graycor Industrial Constructors would serve as general contractor for the project, which could create more than 150 construction jobs over two years.

"This is among the largest privately funded projects on Chicago's Southeast Side since the Ford expansion in 2010," said Dan Kilgore, Graycor vice president and general manager. "It is a significant undertaking that will transform this part of the Calumet River and provide a boost in local employment and economic activity."

Graycor will work with the Chicago and Cook County Building Trades Council to hire local workers.

"New private investment in Chicago is exciting news because it translates to more jobs," Building Trades Council President Tom Villanova said. "Skilled men and women in the union trades welcome the opportunities that will be available to them from a project of this scale. I look forward to working with my locals from a variety of union trades to keep Chicago working."

Southeast Side activists say they want mounds of petcoke completely gone from the neighborhood because of concerns about the long-term health effects. KCBX says it can comply with city regulations and prevent future dust clouds by building an enclosure that's 1,000 feet long, 200 feet wide and 100 feet tall.

The steel building would have 5,500 feet of enclosed conveyors and a sprinkler-like system for suppressing dust, which would be covered from the time it arrives on train to when it leaves by boat or truck, KCBX operations manager Mike Estadt said.

The transfer building could store up to 125,000 tons of bulk materials and would have its own water recycling system.

Petcoke now sits out in the open in huge mounds at the terminal, where water canons that sit atop column-like towers keep it damp so it won't be blown away. The powdery substance is a byproduct of the refining process, and the BP Whiting Refinery is now producing three times as much of it now that it refines heavy crude from the oil sands region in Canada instead of Texas sweet crude. 

City, state, and federal officials have cracked down on petcoke storage along the Calumet River after clouds of the black dust went airborne last year. Hammond-based Beemsterboer Slag Corp. closed its terminal, one of three on the South Side. KCBX plans to close one of its two terminals, and consolidate operations at the South Terminal at 10730 S. Burley Ave.

The company already wanted to consolidate to one site because it would be more efficient, but the cost of building two enclosures also would be steep, KCBX spokesman Jake Reint said.

KCBX wants to stay because Chicago is a crucial transportation hub that allows it to serve customers across the globe.

"We are committed to remaining in Chicago, which has long been a critical hub for industry and for transloading bulk materials such as coal and petcoke that are used in the United States and throughout the world as fuel and as material ingredients for other essential products," said Dave Severson, president of KCBX Terminals. "This new facility will allow us to remain in business and continue to meet the needs of our customers."

Last week, Chicago rejected the company's request for looser regulations, including that it be allowed to stack petcoke 45 feet high instead of 30 feet high and that conveyors be covered. 

"Denying these variance requests was the right decision and we hope that the City will take a similar approach to KCBX's effort to delay enclosing its facility for years," said Henry Henderson, Midwest director of the Natural Resources Defense Council.

Residents were concerned that uncovered conveyors and 50 percent taller petcoke piles could cause the dusty materials to blow into surrounding neighborhoods again.

"The city is rightly putting people before petcoke," Henderson said. "The rejection of key variance requests and language in the ordinance make clear that Chicago is not going to be pushed around. There is a lot more to do to safeguard Southeast Siders and correct the unacceptable conditions around these dirty facilities. We hope the city will follow through on today’s action in City Council to impose stringent limits on how much petcoke can be shipped through these facilities each month."

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Business Reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.