U of Calgary reports says exporting oil through west coast will bring billions, but no info on environmental costs


A report issued by the University of Calgary School of Public Policy says if Canadian heavy oil is piped to the west coast and then shipped to Asia and possibly California, that could add $131-billion US to the Canadian economy between 2016 and 2030.

The report suggests it offers solid numbers in favour of pipeline construction to government and industry. For example it says 649,000 person years of jobs could be added to the Canadian economy over the next few years.

The report is based on differentials on oil prices in various world markets and while the final figures are not certain, the overall tone of the report is optimistic.

There is one flaw in the report. There is no consideration whatsoever by the Calgary economists of the costs of a pipeline breach, major or minor, in the wilderness of northwestern British Columbia nor the cost of a tanker disaster on the west coast. That just does not just include the costs of an extended cleanup of a spill, it also doesn’t consider the costs to the fishery and tourism industries by any such disaster. There is no estimation of the costs to the overall business and the economy of any community affected by any spill.  Nor is there any consideration of the long term effects on the environment itself of any such accident.

Read the report here. University of Calgary report on oil exports (pdf)

Related Globe and Mail Blocking pipelines to B.C. would entail loss of billions: study

Not just energy: Asia’s demand for aluminum brings $2.7 billion upgrade for RTA Kitimat smelter

Rio Tinto Alcan president primary metals, Jean Simon, announces the go-ahead for the Kitimat Modernization Project at ceremony at the plant in Kitimat, Dec. 1, 2011.  (Robin Rowland/Northwest Coast Energy News)

 “It’s a go.”
 The “go” meant  that the Rio Tinto Alcan board had finally approved spending $2.7 billion for the long awaited Kitimat modernization project that would update the 60-year old aluminum smelter, increasing production capacity by 48 per cent to 420,000 tonnes a year.

Rio Tinto Alcan primary metal president Jean Simon  made the announcement Thursday, Dec. 1, 2011 to cheers at a theatre (converted from the dining hall) at the new construction camp at the Kitimat smelter.

That money is in addition to expenditures already approved, bringing the total investment in the modernization project to $3.3 billion  US.

“This will help us put Kitimat and Canada  at the forefront of  the 21st century global aluminum  industry,” Simon said. “It is a truly transformational project.”  He said it was in line with RTA’s long term strategic objective of long life, large scale, low cost assets. The project, Simon said, will take advantage of Rio Tinto Alcan’s competitive advantages: clean self generated hydro power and leading edge technology.

If all goes as expected, the first new metal will be poured in the first of half of 2014.

The new smelter will use a RTA proprietary smelting technology that reduce carbon dioxide emissions by 50 per cent.  
The long planned project had been put on hold in 2008 as the world weathered the financial meltdown.

 Kitimat mayor Joanne Monaghan  said at the ceremony, “This is something our community has been waiting a very long, long time for….Kitimat has suffered through some very had economic times over the last several years and this announcement means we have the certainty that the aluminum business will be here for the next 35 to 50 years… We’ve seen a lot of industry disappear from Kitimat over the past few year and its been hard on our community. In fact, with Methanex leaving, with Eurocan leaving I felt like the mayor of doom.  And then, all of a sudden, all of these things are happening. And I feel like the mayor of boom.

“We know the importance of that first initial investment to show that Kitimat is the strategic place to invest. And when RTA began its expansion, and its construction camp, then all of a sudden three LNG plants came on stream. We had a biomass plant ready to come in. So thank you Alcan for starting that whole trend for people coming into our community.”

It is Asia is fueling Kitimat’s new boom, and not just in natural gas, but also in aluminum.  When Kitimat was planned and built 60 and more years ago, Asia, China, Japan, Korea were in ruins, devastated by the Second World War.  Now it is Asia, and the short great circle route from Kitimat harbour to the market ports, that is one reason that the Kitimat modernization project was approved.

“Most of the aluminum is going into Asia. Korea, Japan and other countries,” Simon said in a post-ceremony news conference.  “We’ve been producing here for 60 years and Kitimat has always been recognized  as a very solid, reliable and good quality producer of aluminum so our customers from Asia are demanding the metal from Kitimat. So this is good news for them too.”

644-henning1.jpgPaul Henning, RTA vice president of BC operations, is not only a corporate manager. He was the very entertaining master of ceremonies for the announcement. (Robin Rowland/Northwest Coast Energy News).

Paul Henning, VP BC Operations and strategic projects Western Canada, was asked if Kitimat can handle the demand and possible bottle necks  with, as well as Kitimat modernization, three LNG projects, possibly the Enbridge Northern Gateway pipeline and perhaps other projects in the coming couple of years.

“The good news is that we’re first,” Henning said.  “The folks who grab the ball usually have a chance. We’re working with those folks.  People availability will be the key. I think there’s a lot of common sense going on, these are mega projects.  Mega projects need lots of people. I wouldn’t call it coordination, but there is an understanding.  They understand our timing, we understand their timing.   

“All being equal we’re not competitors.  It’s going to be an extended boom for the region. And of course, the projects are stacked, all trying to happen at the same time.

“It’s challenging,  just for resources and infrastructure. If they can be spread, it’s a win, win, win. At the end of the day  Our business drives what we do in the timing. Their business care drives their timing. At the end of the day, we’re first in.”

Thursday wasn’t the best day to show Kitimat off to the world, with a cold wind driving sleet, snow and rain all at the same time.  BC Premier Christy Clark’s plane was turned back from Terrace Kitimat airport and a second aircraft with RTA CEO Jacynthe Cote was redirected to Prince Rupert.

RTA employees and guests watch a slideshow of historic photos of the early days of Kitimat before the official ceremony announcing the go-ahead for the Kitimat modernization project.  (Robin Rowland/Northwest Coast Energy News) 

As the audience and guests waited for the arrivals that were not to come, there was a slideshow of historic photos on giant LED screens, showing the early days of Kitimat, the construction of the dam, transmission lines, townsite and the potlines.

Then the elaborate ceremony began, with Paul Henning acting as master of ceremonies, introducing the Haisla Spirit of the Kitlope drummers before Simon made the “go” announcement.

It was good community relations that helped the RTA board give the go-head, Simon said.

“We will also honour the landmark Haisla Nation, Rio Tinto Alcan Legacy Agreement and are proud of this partnership to provide opportunities and training and that is resulting in increasing numbers of Haisla Nation members working on the project,” said Simon.

Haisla chief councillor Ellis Ross had been flying up with Christy Clark, so Councillors Henry Amos, Alex Grant and Keith Nyce were at the ceremony on behalf of the  Haisla.  “On behalf of the Haisla Nation, we offer you a warm welcome to our Traditional Territory. The Haisla Nation has worked very closely with RTA and supported the reality of this important and exciting decision. Together with RTA, our Nation is very proud of the legacy agreement we have reached.”  Nyce said.

The Haisla are not only our closest neighbours but our best friends,” Henning said at the news conference.  “It hasn’t always been like that. I think leadership from the Haisla, starting with Steve Wilson,  transferring to Ellis Ross. Ellis has taken it to another level.  The recognition of wanting to engage in the future was the key. We had to recognize and respect that past, to learn how to work together and build for the future.

“It’s actually a cohesive joint approach to  economic development and sustainability within the Haisla First Nation and the plant. It actually betters the plant because we have employees that live here, work here,  there are 120 Haisla folks who are working within the operation. That to me is sustainability in real time.”

Henning is also confident that the company will successfully negotiate a new contract with the Canadian Auto Workers local.  Henning said that 2007 contract was designed to get the company  through to first hot metal but then the financial crisis struck.”The good news gives us certainty.”Henning said. “We know what we have to drive for. We’ll get a contract, we’ll get a contract, we always do. Some are prettier than others.  The confidence from this is a great start.   The union were here today,  I am confident that we will get through and get a contract that really fits this program.”

After he took the podium, Michel Lamarre, director of the Kitimat Modernization Project joked. “We often say that when we get married, and it’s raining, the marriage is very strong and I think this is going to be the case for the KMP project.”  He said Kitimat management had made a very solid case for a very solid project to the RTA board.

645-lanarre.jpgMichel Lamarre, director of  the Kitimat modernization project, talks about the challenges of the next two years until first metal in 2014.  (Robin Rowland/Northwest Coast Energy News)

“We are building a state of the art facility which will be a jewel. This is something we can all be proud of… The next two years will be very busy and very exciting. Let’s build the project with zero harm, zero harm to the people who are building it and zero harm to the environment.”

The weather was just too nasty for an official ground breaking ceremony at the construction site, so it was moved indoors, with RTA executives and employees, the Haisla representatives and Mayor Monaghan turning the shovels into a ceremonial pile of dirt.

The indoor groundbreaking ceremony marking the approval of the Kitimat modernization project. Left to right Michel Lamarre, director KMP,  RTA operations employee Ron Leibach, Brent Hegger, VP major projects, Kitimat mayor Joanne Monaghan, Jean Simon, RTA president primary metals, Paul Henning, VP BC operations and Henry Amos, Councillor, Haisla Nation.  (Dwight Magee/RTA)

Flaherty talks tough with U.S. in wake of Keystone pipeline delay : reports

Energy Politics

Finance minister Jim Flaherty is “talking tough” according to the Globe and Mail’s Steven Chase  and threatening the Americans with the Northern Gateway pipeline in the wake of the postponement of the Keystone XL project.

Finance Minister Jim Flaherty [is] warning the postponement could kill the project and accelerate this country’s efforts to ship oil to Asia instead.

“The decision to delay it that long is actually quite a crucial decision. I’m not sure this project would survive that kind of delay,” Mr. Flaherty told Bloomberg News. “It may mean that we may have to move quickly to ensure that we can export our oil to Asia through British Columbia.”

The original Bloomberg article also reports:

Flaherty, 61, will travel later this week to Beijing, where he will discuss increasing energy exports to China and facilitating investment in Canadian natural-resource assets. Enbridge Inc. (ENB) has proposed building a pipeline, called Northern Gateway, that would transport crude from Alberta’s oil sands to Canada’s Pacific coast, while Kinder Morgan Inc. plans to expand its Trans Mountain route to do the same.

Kinder Morgan aims to expand Trans Mountain pipeline: Globe and Mail

Energy Link

Nathan Vanderklippe writes in The Globe and Mail  Kinder Morgan aims to expand Trans Mountain pipeline

A second project has been launched to carry major new volumes of oil-sands crude to Pacific waters, amid mounting industry interest in exporting Canadian oil to Asia.
Kinder Morgan Canada has begun accepting bids from companies prepared to ship oil on a proposed expansion of its Trans Mountain system, which runs 1,150 kilometres from Edmonton to Burnaby, B.C.

The Trans Mountain pipeline system, which runs from Edmonton to Burnaby, B.C., would be twinned to carry more crude.

The process is called an “open season,” and serves as an important kickoff to a project that has ambitions similar to the controversial $6.6-billion Northern Gateway pipeline proposed by Enbridge Inc. It also promises to raise a new front in the battle between industry and environmental critics over building infrastructure to move oil across B.C. and onto tankers.

Both Northern Gateway and the Trans Mountain expansion seek to open new access to Pacific tidewater, providing a connection to Asian markets for an industry that is increasingly eager to break its dependence on the United States as virtually its sole export destination…

Enbridge plans natural gas pipeline along Northern Gateway route

Enbridge CEO Pat Daniel has told Reuters in New York that the company would prefer to supply natural gas through Kitimat to Asia “over any other export project” and that Enbridge plans to build a natural gas pipeline along the route of the
proposed Northern Gateway bitumen pipeline.

Pat Daniel was interviewed by Reuters reporter Edward McAllister.  In a story with a New York place line the agency reports:

Pipeline operator Enbridge Inc 
would prefer to supply natural gas to the Kitimat liquefied natural gas
plant in British Columbia over any other export project in western
Canada, the company’s chief executive told Reuters on Thursday.

Enbridge is interested in joining one of two proposed Canadian LNG
projects to ship natural gas to Asia, it said this week, as ample North
American supply pushes gas prices far below global levels.

But the location of Kitimat has attracted Enbridge more than Royal Dutch Shell’s  potential project in Prince Rupert, also in British Columbia, company head Patrick Daniel said in an interview.

“Kitimat is the preferred project. Pipelining into Kitimat is
relatively straight forward compared to Prince Rupert, which is the
other proposed port,” Daniel said, though talks continue with both

Enbridge plans to build a natural gas pipeline along the route of the
proposed Gateway oil line, which would transport natural gas from Horn
River and other natural gas fields to the coast by 2016, Daniel said.

Christy Clark flies to Kitimat, spins on LNG, flies out again

Energy Environment Politics
529-6166894394_e7958e02d3.jpgBC Premier Christy Clark meets with the leaders of the Haisla First Nation at Kitamaat Village, Monday, Sept. 19, 2011.  (BC government hand out )

BC Premier Christy Clark made a flying visit to Kitimat Monday, Sept. 19, 2011, dropping into Kitamaat Village to meet with the leaders of the Haisla First Nation and, as part of the flying, boarded a helicopter to take a look at the  KM LNG at under construction at Bish Cove, before flying out again.

It was all part of the premier’s campaign style job strategy which sees Clark touring the province this week and unveiling a complete jobs package on  Thursday.

The proposed liquified natural gas terminals at Kitimat are not as controversial in this region as the proposed Enbridge Northern Gateway pipeline.  There is general support for the LNG projects, allowing for  safety concerns about LNG tankers and environmental problems from the construction of the pipeline.

Clark’s visit to the Kitimat region is controversial here because from all appearances, there was little or no substance.   If the visit had in been the early decades of the last century, when politicians traveled by train rather than helicopter, it would have been a “whistle stop,” nothing more.

A BC premier visiting the traditional territory of the Haisla First Nation should, of course,  make a courtesy call on the leadership in the village, although it appears the visit was  short, routine  rather than a truly substantial meeting.

As for the rest of the Kitimat region was concerned,  the premier’s short in and out photo op was not aimed at helping the people of Kitimat but appeared to be more spinning her jobs strategy throughout the rest of the province which is less familiar with the history of  development in Kitimat.   

No one in the local media, the Northern Sentinel, Kitimat Daily nor Northwest Coast Energy News were given any information about timing of the premier’s visit, perhaps because local reporters might ask tougher questions than the BC legislature  pool traveling with Clark. The Northern Sentinel only found out about the time of  the meeting after  one of the numerous calls made by local media was actually returned in time for their reporter to be in the village for the premier’s visit.

As of Sunday, no meeting between the premier and Kitimat Mayor Joanne Monaghan was scheduled.  At the last minute, after some political arm twisting, the premier did have a brief  ten to fifteen minute   meeting with Monaghan and Municipal Manager Ron Poole at the village on Monday.  (It should be noted that members of Kitimat council will meet with Clark at the up coming convention of the Union of BC Municipalities).

At 14:55 Monday, Sept. 19, Clark (or her PR team) tweeted.

We’re taking steps to get #kitimat’s liquefied natural gas plant running by 2015. A strong LNG industry means local jobs. #bcpoli

The message was quickly retweeted by Clark supporters. That tweet raised eyebrows, since the process for the KM LNG is already well under way, with construction apparently on schedule for the 2015 date when the first natural gas will flow into a tanker.  The licence for KM LNG is in the hands of  the federal National Energy Board. 

What the tweet meant became clearer once the premier’s office issued a news release  

Christy Clark’s “more aggressive approach to the development of the natural gas sector” includes traditional small c conservative elements:

Cutting red tape: accelerate the lengthy permitting processes and improve the decision making required to bring large-scale production facilities from a concept to a reality, and that these commitments will be a greater priority for B.C. on a go forward basis.

Skills training: working with industry partners for some time on the future skills required to support a new LNG industry. The goal is to ensure the post-secondary system is able to deliver the targeted training necessary to grow the oil and gas industry, including LNG.

Attracting investment:  by working with industry stakeholders and First Nations to remove the barriers and secure the investment required to establish up to three LNG plants by 2020. As of today, the Province is aware of a handful of LNG proposals.

The only practical element in Clark’s announcement was help for the Haisla First Nation in dealing with multiple developments: (as related in the news release)

The Province’s assistance is timely,” said Haisla Nation Chief Councillor Ellis Ross. “Our own training capacity is limited by resources and capabilities, and these have been exhausted given the projects now underway on our territory and the demands they place on our people for skills and training. Our economic future has never looked better, and this assistance will help us deliver on this promise to our community.”

Michael Smyth of The Province (along with a number of Tweeters) noted that most of Clark’s announcement was recycled.

Those same economic storms have buffeted the government, too, and Clark doesn’t have a lot of money to spend on direct job creation — not if she keeps her promise to balance the budget in 2013.

So, expect many re-announcements of old projects. The proposed Kitimat liquefied natural gas plant Clark trumpeted Monday, for example, was approved three years ago.
She’s also expected to cheerlead the Northwest Transmission Line project this week, another one that’s been in development for years.

Without a lot of money to throw around, Clark will talk about getting government out of the way of private-sector job creation. Deregulation and cutting red tape is less expensive than direct stimulus spending to create jobs.

The environmentalists won’t be happy when she starts fast-tracking permits for mining and other resource extraction, but losing “green” votes is the least of her worries.

Veteran journalist Norm Farrell in his blog “Let’s play political football with Kitimat” gives a list of how often a Kitimat LNG project has been announced going back to an Associated Press report from 1981

The Rim Gas Project, which includes Petro-Canada of Calgary, Westcoast Transmission of Vancouver and Mitsui and Co. Ltd. of Japan, wants to deliver and sell liquefied natural gas to Japan from a plant it will build at Bish Cove, six miles from Kitimat.

And Kitimat Tweeter  YWGSourpuss posted:

Kitimat has kinda sorta might been getting an LNG Plant since I was a teenager. Meanwhile, Methanex and Eurocan were culled, dust blows…

and then

I see media wonks waffling about LNG/Kitimat/need for cheap energy. Remember Kemano Completion? Ask Rio Tinto re: hole in the mountain.

On the Opposition side of the question, Vancouver Sun columnist Vaughn Palmer looked at an apparent split in the opposition NDP over the LNG issue Wednesday, noting that the environment critic NDP environment critic Rob Fleming is concerned about the controversial fracking process used to retrieve natural gas from shale:

When you look at where the gas would come from, we’re talking about major shale-gas deposits. There are big concerns there, from an environmental perspective, around water usage and whether it’s sustainable, and water contamination when it’s injected underground to bring the gas to the surface – the fracking process – and a lot of greenhouse gases produced.

Palmer reports that the NDP house leader John Horgan has indicated  that he and Opposition leader Adrian Dix support LNG exports.

 In Horgan’s estimation, it could be piped to the coast, liquefied and shipped out with minimal risk. “Liquid natural gas doesn’t stick to things. It blows up, or it vents. So the environmental consequence of a catastrophe with an LNG tanker is relatively insignificant,” he told me during an interview on Voice of B.C. on Shaw TV.

“So the risk to our coastline from LNG is insignificant; the benefit to British Columbians is quite significant. And it’s our resource, so we’ll get the royalties for extracting it, we’ll get value added by getting it to an LNG facility, and then we’ll get a better price for it in Asia.

Palmer is concerned about Fleming’s caution not to rush things, stating that

For “you can’t rush these things” is precisely the opposite of what industry analysts are saying about LNG development. The window on the Asian market is closing, and if B.C. doesn’t get moving, the opportunity will be gone. Again.

One wonders where Palmer gets his evidence that window of opportunity for the Asian markets is closing?  With the Fukishima meltdown, the market window for LNG is actually expanding, not just in Japan but across East Asia.  What some in the energy industry are warning about is Canadian gas being exported through the United States, warnings that were prominent at the NEB hearings in Kitimat last June and is largely industry spin trying to hurry the approval process along.

The controversy over fracking will continue, with the energy industry claiming it is safe and the environmental activists saying it is not. What is apparent about fracking as Pro Pubilica have pointed out in their continuing investigation of the issue, is that use of the process on a wide scale is new and there aren’t enough adequate studies of the process. Inadequate study could mean consequences down the road, we don’t know, so there should be some caution.

The blasting continues at the KM LNG site at Bish Cove as the shoreline rocks are levelled to close to sea level.  Meanwhile the political spin pitches just as much hot air and debris into the atmosphere.

Related Links

Vancouver Sun Clark leaves out Island on jobs tour

Northern View: B.C. Jobs Plan’ keys on trade with Asia

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Encana optimistic about natural gas exports, others cautious: CP

Energy Link

Ecana, one of the partners in the KM LNG (Kitimat LNG) is optimistic about prospects for liquified natural gas exports from the west coast of British Columbia, Canadian Press reports from a conference in Calgary.

Encana sees renaissance in natural gas, while others more bearish on prospects

Laurgen Krugel reports

Encana Corp. foresees a “renaissance” in natural gas prices once
terminals begin to pop up along the West Coast to export the fuel to
energy-hungry Asian markets, but others addressing an energy conference
on Tuesday weren’t quite so enthusiastic.

“We think that the prices are going to stay robust in Asia.
You look today in Japan, it’s still US$13 (per 1,000 cubic feet) over
there,” Mike Graham, who heads up Encana’s Canadian division, told the
Peters & Co. event….

John Langille, vice-chairman of Canadian Natural Resources Ltd. said he’s not quite so gung-ho….

:Canadian Natural has a large land position in northeastern B.C.’s shales, but has been focusing most of its attention on developing oil- properties in Western Canada and abroad. It has signalled no interest so far in jumping aboard the LNG bandwagon, though Langille said eventually the gas will have to find its way out of North America.

“And that will happen, but it’s a five-year scenario before that happens,” he said.

Australia, Canada rivals in “new frontier” of liquified natural gas

Canada and Australia are rivals in the “new frontier” of liquified natural gas export sales to Asia, a panel of energy marketing executives told the National Energy Board Tuesday at hearings into the KM LNG in Kitimat.

The “marketing panel” testifying before the board included Kenny Patterson, Vice President LNG Marketing and Shipping for Apache Energy, Sean Bolks, Apache Director of Corporate Risk Management, Jamie Bowman, Vice President of Marketing for EOG and David Thorn,Vice President, Canadian marketing for Encana and two consultants.

Patterson told the NEB at more than one point during his testimony that Canada was the “new frontier” for liquified natural gas, and so was attracting a good deal of interest from countries across East Asia who need more natural gas supplies.

Patterson and the other executives on the panel refused to be specific on who the customers actually are, despite cross-examination from NEB counsel Parvez Khan and additional questions from the NEB presiding member Lynn Mercier.

Patterson said Apache couldn’t go into individual buyers, so Khan asked: “How many different buyers n a general sense?” to which Patterson replied that in Asia, the KM LNG partners, which include Apache, EOG and Encana, were general discussions with seven to eight major Asian LNG companies as well as other smaller players.

That answer came despite the fact that earlier in the day in Kuala Lumpur at the Asia Oil and Gas Conference, Mate’ Parentich, general manager of LNG marketing at Apache, said the company would soon conclude talks on the sale of 85 percent of liquefied natural gas from the Kitimat terminal.

Asked for specifics by Bloomberg News, a Houston based Apache spokesman Bill Mintz then said that no binding contracts had yet been signed for the Kitimat project.  

Bloomberg later moved a corrected and updated version of the story, including the statement that no contracts have yet been signed.

Khan asked about one Memorandum of Understanding signed with KM LNG. Again the panel refused to be specific. Bowman said the MOU had been signed with the previous partnership in KM LNG and while the MOU had not yet expired, it was subject to further negotiations. 

Khan and Mercier were both aware that any agreements with potential buyers were “subject to regulatory approval,” which, of course, is the National Energy Board’s role, but again they were unable to drag any specifics out of the executives on the marketing panel.

The panel members told the NEB members that Korea and Taiwan are already well established LNG markets and China was beginning to be more aggressive as an LNG buyer. Japan, which was devastated by the earthquake in March and lost of a lot nuclear powered electrical generation capacity is now scrambling to catch up with its Asian neighbors. The executives told the NEB panel that both Indonesia and Malaysia will also become more important buyers for LNG in the Canadian market as their domestic demand grows.

Noting that Patterson is based in Perth, Australia, Mercier asked the executives about the recent announcement by Shell that it would build a floating LNG platform off Australia.

Panel members replied that the Asian markets want long term, secure sources of supply, with multi-billion dollar contracts for between 10 and 20 years. As stable, market-driven countries with ample supplies of natural gas, both Canada and Australia could fulfill those needs, panel members said. Companies operating in both countries would require those multi-billion, multi-year contracts to justify the investment in natural gas extraction and transportation.

Jamie Bowman, Vice President of Marketing for EOG  listens as fellow panel members testify before the NEB. (Robin Rowland/Northwest Coast Energy News)