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District of Kitimat calls for plebiscite on the Northern Gateway project

Councillor Phil Germuth listens as District of Kitimat Council debates his motion that would have required Enbridge to enhance monitoring of leaks on the pipeline in the Kitimat watershed. (Robin Rowland/Northwest Coast Energy News)

District of Kitimat Council voted Monday night to hold a plebiscite on whether or not the community supports the controversial Enbridge Northern Gateway project.

District council and staff will decide the actual question for voters and the date for the plebiscite in the coming couple of weeks.

A staff report described a plebiscite as “a non-binding form of referendum,” as defined by the BC Local Government Act.

The council decision comes after the Northern Gateway Joint Review Panel released its decision on December 16, that approved the pipeline and tanker project along with 209 conditions.

After the release of the Joint Review decision, the District of Kitimat issued a news release saying, “Kitimat Council has taken a neutral stance with respect to Northern Gateway. Council will take the necessary time to review the report in order to understand the content and reasons for the decision.”

On January 16, 2012 the council adopted a resolution “that after the completion of the JRP process, the District of Kitimat survey the residents of Kitimat regarding their opinion on the Enbridge Northern Gateway project.” After the JRP decision, the District reaffrimed that it would “undertake a survey of Kitimat residents to determine their opinions of the project now that the JRP has concluded its process.”

District staff had recommended hiring an independent polling firm to conduct the survey, pointing to a pollster’s ability to craft the appropriate questions and provide quick results.

Council quickly shot down the idea. A motion by Councillor Mario Feldhoff to use a polling firm did not get a seconder.

Councillor Rob Goffinet, who made the motion for the plebiscite, noted that even as a politician he doesn’t answer phone calls from unknown numbers. He said, “People do not want a pollster to phone them and do a check list how do you feel on a project. How can we be assured if someone in or out of their home will answer a call from a pollster? I would give total responsibility to every adult citizen of Kitimat who has a point of view to express it in a yes or no ballot.”

Councillor Phil Germuth added, “Those are the same companies that went out prior to the last provincial election and said one party was going to wipe it out and we know what happened there.” Germuth was referring to BC Premier Christy Clark’s come from behind majority victory which was not predicted in the polls.

Germuth told the meeting he believed an unbiased question could be posed in the form of a referendum on the Northern Gateway project. “I have full confidence in our staff that they will be able, along with some assistance from council, to develop questions that are not going to appear biased. It should be very simple, yes means yes, no means no.”

Councillor Mario Feldhoff, who earlier in the evening had, for the first time, declared that he is in favour of the Northern Gateway project, told council that he preferred using a polling firm because it could come back with a “statistically significant” result.

Council voted six to one in favour of the plebiscite. The lone dissenter was Councillor Edwin Empinado who told his colleagues that a mail-in ballot, another of the options presented by staff, would be more inclusive. Empinado said he was concerned that a plebiscite would mean a low voter turnout.

Warren Waycheshen, the district’s deputy chief administrative officer, told council that the plebiscite would have to be held under the provisions of BC’s Local Government Act which covers elections and referenda, but with the plebiscite the council would have more flexibility in deciding how the vote would take place. The act would still cover such things as who was eligible to vote and the use of campaign signs.

Councillor Mario Feldhoff reads a statement at council, supporting the findings of the Joint Review panel on the Northern Gateway project. (Robin Rowland/Northwest Coast Energy News)

The neutrality that council had maintained for at least the previous three years began to break down during Monday’s meeting meeting when Germuth proposed a motion that would have required Enbridge to install within Kitimat’s jurisdiction a detection system capable of locating small volumes of leakage from the pipeline, a measure that is likely beyond the recommendations of the JRP decision.

It was then that Feldhoff became the first Kitimat councillor to actually declare for or against the Northern Gateway, telling council, saying he agreed with the JRP, “The overall risk was manageable and the project was in Canada’s interest. On the whole I am in favour of the conditions and recommendations of the JRP… Not only am I a District of Kitimat Councillor, I am a Canadian. To my mind, opposition to the JRP Northern Gateway report at this stage is yet another case of NIMBY-ism, not in my backyard.”

In the end, at Feldhoff’s urging, the council modified the original motion, so that it called on the District to meet with Enbridge to discuss an enhanced pipeline leak detection system where a leak could “impact the Kitimat watershed.”

It’s not clear what Council will do with the result of the plebiscite, since it is “non-binding.”

In the past two years, Terrace, Prince Rupert and Smithers councils, together with Kitimat Stikine Regional District and the Skeena Queen Charlotte Regional District, all voted to oppose Northern Gateway. Those were all council votes, taken without surveying local opinion.

Most of the decisions are in the hands of the federal government which has 180 days from the release of the JRP report to approve the project.

Joint Review Panel tells northwestern BC to bear the “burdens” of Northern Gateway for the good of Canada

Joint Review Panel cover — Cover of Volume 1 of the Joint Review Panel ruling on Northern Gateway

If you read both the 76 pages of Volume One of the Northern Gateway Joint Review decision and the 417 pages of Volume 2, a total of 493 pages, one word keeps reappearing. That word is “burden.”

The JRP panel asks “How did we weigh the balance of burdens, benefits, and risks?”

And it says:

Many people and parties commented on the economic benefits and burdens that could be brought about by the Enbridge Northern Gateway Project. In our view, opening Pacific Basin markets wouldbe important to the Canadian economy and society. Though difficult to measure, we found that the economic benefits of the project would likely outweigh any economic burdens.

The JRP notes:

The Province of British Columbia and many hearing participants argued that most of the project’s economic benefits would flow to Alberta, the rest of Canada, and foreign shareholders in oil and pipeline companies. They said British Columbia would bear too many of the environmental and economic burdens and risks compared to the benefits.

But, as the panel does throughout the ruling, it accepts, with little, if any, skepticism, Northern Gateway’s evidence and assertion:

Northern Gateway said about three-quarters of construction employment would occur in British Columbia, and the province would get the largest share of direct benefits from continuing operations.

It does touch on the “burdens” faced by the Aboriginal people of northern BC and others in the event of a catastrophic spill.

In the unlikely event of a large oil spill, we found that there would be significant adverse effects on lands, waters, or resources used by Aboriginal groups. We found that these adverse effects would not be permanent and widespread. We recognize that reduced or interrupted access to lands, waters, or resources used by Aboriginal groups, including for country foods, may result in disruptions in the ability of Aboriginal groups to practice their traditional activities. We recognize that such an event would place burdens and challenges on affected Aboriginal groups. We find that such interruptions would be temporary. We also recognize that, during recovery from a spill, users of lands, waters, or resources may experience disruptions and possible changes in access or use.

And the JRP goes on to say:

We recommend approval of the Enbridge Northern Gateway Project, subject to the 209 conditions set out in Volume 2 of our report. We have concluded that the project would be in the public interest. We find that the project’s potential benefits for Canada and Canadians outweigh the potential burdens and risks….

We are of the view that opening Pacific Basin markets is important to the Canadian economy and society. Societal and economic benefits can be expected from the project. We find that the environmental burdens associated with project construction and routine operation can generally be effectively mitigated. Some environmental burdens may not be fully mitigated in spite of reasonable best efforts and techniques…. We acknowledge that this project may require some people and local communities to adapt to temporary disruptions during construction.

As for the chance of a major oil spill, again the JRP talks about burdens:

The environmental, societal, and economic burdens of a large oil spill, while unlikely and not permanent, would be significant. Through our conditions we require Northern Gateway to implement appropriate and effective spill prevention measures and spill response capabilities, so that the likelihood and consequences of a large spill would be minimized.

It is our view that, after mitigation, the likelihood of significant adverse environmental effects resulting from project malfunctions or accidents is very low.

And concludes:

We find that Canadians will be better off with this project than without it.

In the Joint Review ruling is one fact. Northern British Columbia must bear the “burden” of the Northern Gateway project for the good of Alberta and the rest of Canada. The JRP accepts, without much questioning, Northern Gateway’s assurances that environmental disruptions during construction will be minimal and that the chances of a major spill from either a pipeline or a tanker are minimal.

Canadians as a whole may be better off with the Northern Gateway. Whether the people who live along the pipeline and tanker route will be better off is another question, one which the Joint Review Panel dismisses with casual disdain.

Cover of JRP ruling — Cover of Volume 2 of the Joint Review rulng on Northern Gateway

The politics of the Joint Review Panel

There are actually two Joint Review Panel reports.

One is political, one is regulatory. The political decision by the three member panel, two from Alberta and one from Ontario, is that the concerns of northwestern British Columbia are fully met by Enbridge Northern Gateway’s assurances. There is a second political decision, found throughout both volumes of the report, and the reader sees the Joint Review Panel has the notion that many parts of the environment have already been degraded by previous human activity, and that means the construction and operation of the Northern Gateway will have little consequence.

Here is where the Joint Review Panel is blind to its own bias. With its mandate to rule on the Canadian “public interest,” the panel makes the political determination that, in the Canadian public interest, northwestern BC must bear the “burden” of the project, while other political issues were not considered because, apparently those issues were outside the JRP’s mandate.

…some people asked us to consider the “downstream” emissions that could arise from upgrading, refining, and diluted bitumen use in China and elsewhere. These effects were outside our jurisdiction, and we did not consider them. We did consider emissions arising from construction activities, pipeline operations, and the engines of tankers in Canadian territorial waters.

During our hearings and in written submissions, many people urged us to include assessment of matters that were beyond the scope of the project and outside our mandate set out in the Joint Review Panel Agreement. These issues included both “upstream” oil development effects and “downstream” refining and use of the products shipped on the pipelines and tankers…Many people said the project would lead to increased greenhouse gas emissions and other environmental and social effects from oil sands development. We did not consider that there was a sufficiently direct connection between the project and any particular existing or proposed oil sands development or other oil production activities

If someone in Northwestern British Columbia favours the Northern Gateway project, if they believe (and many people do) what Enbridge Northern Gateway says about the economic benefits, then it is likely they will accept the burden and the further environmental degradation imposed by the Joint Review Panel on this region of British Columbia.

If, on other hand, for those who are opposed to the project, then the decision to impose the burden on this region is both unreasonable and undemocratic (since no one in northern BC, in the energy friendly east or the environmental west has been formally asked to accept or reject the project). For those opposed to the project, the idea that since the environment has already been disrupted by earlier industrial development, that Canadians can continue to degrade the environment with no consequence will only fuel opposition to the project.

As for the assertion that green house gas emissions were not part of the Joint Review Panel’s mandate, that is mendacious. The panel made a political decision on the role of the people of northwestern BC and the state of northwestern BC’s environment. The panel made a political decision to avoid ruling on the role of Northern Gateway in contributing to climate change or the larger world wide economic impact of pipelines and the bitumen sands.

Regulations

The Joint Review Panel is supposed to be a regulatory body and should be pipeline, terminal and tanker project go ahead after the expected court challenges from First Nations on rights, title and consultation and from the environmental groups, then those 209 conditions kick in.

While the Joint Review Panel largely accepts Enbridge Northern Gateway’s evidence with little questions, in some areas the panel does find flaws in what Northern Gateway planned. In a few instances, it actually accepts the recommendations from intervenors (many from First Nations, who while opposed to the project, successfully demanded route changes to through environmentally sensitive or culturally significant territory.)

When it comes to regulations, as opposed to politics, the Joint Review Panel has done its job and done it well. If all 209 conditions and the other suggestions found in the extensive second volume of the ruling are actually enforced then it is likely that the Northern Gateway will be the safe project that Enbridge says it will be and actually might meet BC Premier Christy Clark’s five conditions for heavy oil pipelines across BC and tankers off the BC coast.

But and there is a big but.

The question is, however, who is going to enforce the 209 conditions? In recent conversations on various social media, people who were quiet during the JRP hearings, have now come out in favour of the pipeline project. Read those comments and you will find that the vast majority of project supporters want those conditions strictly enforced. Long before the JRP findings and before Premier Christy Clark issued her five conditions, supporters of the Northern Gateway, speaking privately, often had their own list of a dozen or two dozen conditions for their support of the project.

The people of northwestern BC had already witnessed cuts to Fisheries and Oceans, Environment Canada and the Canadian Coast Guard in his region even before Stephen Harper got his majority government in May 2011.

Since the majority government Harper has cut millions of dollars from the budgets for environmental studies, monitoring and enforcement. The Joint Review Panel began its work under the stringent rules of the former Fisheries Act and the Navigable Waters Act, both of which were gutted in the Harper government’s omnibus bills. Government scientists have been muzzled and, if allowed to speak, can only speak through departmental spin doctors. The Joint Review Panel requires Enbridge Northern Gateway to file hundreds of reports on the progress of surveying, environmental studies, safety studies, construction plans and activities and project operations. What is going to happen to those reports? Will they be acted on, or just filed in a filing cabinet, perhaps posted on an obscure and hard to find location on the NEB website and then forgotten?

Will the National Energy Board have the staff and the expertise to enforce the 209 conditions? Will there be any staff left at Environment Canada, Transport Canada, Fisheries and Oceans and the Canadian Coast Guard where the conditions demand active participation by government agencies, or ongoing consultation between federal agencies and Northern Gateway? Will there actual be monitoring, participation and consultation between the project and the civil service, or will those activities amount to nothing more than meetings every six months or so, when reports are exchanged and then forgotten? Although Stephen Harper and his government say the Northern Gateway is a priority for the government, the bigger priority is a balanced budget and it is likely there will be more cuts in the coming federal budget, not enhancements to environmental protection for northwestern BC.

The opponents of the project might reluctantly agree to the 209 conditions if Harper government forces the project to go ahead. It will be up to the supporters to decide whether or not they will continue their support of Northern Gateway if the 209 conditions are nothing more than a few pages of Adobe PDF and nothing more.

Commentary: The earthshaking difference between Enbridge and LNG

Joint Review Panel — The Northern Gateway Joint Review panel, Kenneth Bateman, Sheila Leggett and Hans Matthews, listen to final arguments in Terrace, June 17, 2013. (Robin Rowland/Northwest Coast Energy News)

Buried deep in the LNG Canada environmental assessment application, a reader will find a key difference in attitude with at least one of the group of companies planning liquified natural gas development in the northwest and Enbridge Northern Gateway.

It’s an earthshaking difference, since it’s all about earthquakes.

The documents filed by LNG Canada with the BC Environmental Assessment Office and the Canadian Environmental Assessment Agency acknowledge that there is a possibility of an earthquake (a one in 2,475 year event) at the LNG terminal site.

Northwestern British Columbia was shaken by two major earthquakes in the months before the Joint Review Panel concluded its hearings in Terrace. Both were far from Kitimat, but felt across the District. On October 27, 2012, there was a magnitude 7.8 earthquake on the Queen Charlotte Fault off Haida Gwaii. That quake triggered a tsunami warning, although the actual tsunami was generally limited to the coast of Haida Gwaii. Both landline and mobile phone service in Kitimat was briefly disrupted by both the quake and overloads on the system. Kitimat was also shaken by the 7.5 magnitude earthquake centered at Craig, Alaska a few weeks later on January 9, 2013.

With the exception of one vague reference in its final argument documents presented to the Joint Review Panel, Enbridge has stubbornly refused to consider any seismic risk to the region.

That was the company’s policy long before the October. 27, 2012 Haida Gwaii earthquake and was Enbridge policy after October 27, 2012.

In a public meeting in Kitimat on September 20, 2011, more than a year before the Haida Gwaii earthquake, John Carruthers, Northern Gateway president, insisted to skeptical questioners at a community forum at Mount Elizabeth Theatre that there was no earthquake danger to the proposed Northern Gateway pipeline and bitumen terminal in Kitimat. One of the questioners, Danny Nunes, of Kitimat, asked could the pipes withstand an earthquake? Carruthers repeated that Kitimat was not in an earthquake zone, that the fault was off Haida Gwaii and so would not affect Kitimat.

After the September, 2011 meeting, I asked Carruthers if Enbridge knew about the March 27,1964 “Good Friday” magnitude 9.2 Alaska earthquake that, because of its high magnitude, had caused major shaking in Kitimat. That earthquake destroyed much of Anchorage and triggered tsunamis that caused damage and death across Alaska and in parts of British Columbia, Oregon and California.

Carruthers promised to get back to me and never did.

On June 17, 2013, six months after the Craig, Alaska earthquake, in his opening summation before the Joint Review Panel, Richard Neufeld, lead lawyer for Northern Gateway, stayed on message track, telling the JRP, referring to pipelines: “The route is not seismically unstable. The seismic risk along the pipeline right-of-way is low, with only a few locations of moderate risk encountered, none of which are within the Haisla territory.”

That brought a gasp from spectators in the room, or at least those who had felt the October and January earthquakes.

The following day, June 18, Murray Minchin of Douglas Channel Watch found an anomaly in the Enbridge documentation, arguing in the group’s summation:

“The Proponent’s written final argument gets on shaky ground regarding design and construction of the storage tanks on a ridge beside Douglas Channel in paragraph 249 where they say:

“‘It also involves the safe construction and operation of the Kitimat terminal in Kitimat Arm in an area subject to seismic activity which encompasses both terrestrial and marine components.’

“Now, that’s interesting because isn’t that the first time — the first admission by the Proponent in a little over 10,000 pages of documents that the area they intend to build their project is in a seismically-active area?

“Haven’t they been telling us all along to this point that the only seismic concerns would be from the distant Queen Charlotte fault off of Haida Gwaii?

“Now, this completely contradicts Mr. Neufeld’s statement yesterday where he described the Project area as not “seismically unstable”. So what is it? This is their final argument and they’re contradicting themselves.”

Minchin went on to quote from the Enbridge argument: “’Seismic conditions in the project area have also been addressed.’

“Well, really? Is that a truthful statement, considering Natural Resources Canada has only submitted a preliminary report concerning a 50-kilometre fault line and massive submarine landslides they accidentally discovered last year in Douglas Channel while doing a modern survey of the Channel for navigation hazards.

“How can the Proponent claim to have adequately addressed seismic forces in their design of this Project when they don’t know what those forces are or for what duration they may be subjected to those forces.

“Has there ever been a paleoseismological study in the Project area to establish past earthquake or tsunami history?

“Wouldn’t it be in the best interest of the Proponent, the Panel and Canadians to know the risks before 1.3 billion litres of liquid petroleum products are allowed to be stored on a low ridge right beside Douglas Channel?”

In his final rebuttal on June 24, Neufeld did not address the contradictions that Minchin had pointed out.

Compare Enbridge’s attitude to the view of LNG Canada, which at very least, appears willing to consider that major events could have adverse consequences on the terminal and liquifaction facilities.

The first one is a bit puzzling to Kitimat residents “A 1 in 100 year 24 hour rain event,” after all the town often gets rain for 24 hours straight or more fairly often.
The second, 1 in 200 year flood of the Kitimat River. Flooding has always been a concern and will be even more so, because as the pipelines come into town, whether natural gas or bitumen, those pipelines will be close to the river bank.
The 1 in 2,475 year seismic event. That figure is probably correct for a local event given the geology of the Kitimat Valley—unless, of course, the fault line discovered by the Geological Survey of Canada on Hawksbury Island proves to be a potential danger.
A tsunami.
Change in flow of the Kitimat River.
Even more interesting is that LNG Canada is willing to consider possible effects of climate change on the project, saying: “Predicted climate change effects during the project lifecycle on sea-level rise, precipitation and temperature. Where relevant and possible, the implications of such climate induced changes to the extreme weather events given above will also be addressed.”

Although the hydrocarbon industry as a whole is reluctant to acknowledge climate change, it appears that on a practical level, the LNG Canada partners, if they are about to invest billions of dollars in a natural gas liquifaction plant and marine terminal, will certainly take steps to protect that specific investment from the effects of climate change.

On the other hand, the National Energy Board, as matter of policy and the Northern Gateway Joint Review Panel, both still stubbornly refuse to even consider any effects of climate change, even possible effects locally on a specific project application.

The Joint Review Panel decision on the Northern Gateway is expected sometime in the next three weeks. While most reports seem to indicate that the decision will be released after Christmas before the Dec. 30 deadline, there has been recent media speculation that the decision could be released next week.

In the meantime, Enbridge has pulled out all stops in a public relations campaign to build support for the Northern Gateway. While a recent poll indicates that advertising campaign may be having some success in the Lower Mainland, the same poll showed that 65 per cent of northern BC residents oppose or strongly oppose the Northern Gateway.

The problem for Enbridge is that the new public relations campaign is repeating the blunders that began when they first proposed Northern Gateway in 2005. There have been meetings across the northwest, but those meetings have been invitation only affairs at chambers of commerce and community advisory boards, with possible opponents or skeptics and media perceived as critical of Enbridge not invited. So Enbridge still wants to control the message and will only talk to friendly gatherings.

Then there are the television spots featuring Janet Holder, the Enbridge vice president in charge of Northern Gateway, supposedly showing her commitment to wilderness. Those commercials would have had more credibility if the agency had produced the ads with actual video of Holder walking through the bush, rather than shooting the spots in front of a green screen in a studio, with pristine wilderness stock video in the background, and Holder acting as if she was a model for an adventure clothing company rather than vice president of a pipeline company.

Right-wing business columnists in Toronto and the countless Albertans fume at the so-called “hypocrisy” of British Columbians who support LNG and oppose bitumen.

Of course, those critics didn’t feel the earth move under their feet. The critics don’t see the difference between natural gas and bitumen, differences very clear to the people of British Columbia.

It’s more than the fact, that so far, the LNG projects have been relatively open and willing to talk to potential adversaries, as Chevron has done on the controversial Clio Bay project; more than the fact that if even a fraction of the LNG projects go ahead, the money coming into northwestern BC means that the handful of permanent jobs promised by Enbridge will be literally a drop in a bucket of warm bitumen.

Although there are many other environmental issues on the Northern Gateway project, the fact the potential for earthquakes in Kitimat is brushed off by Enbridge while LNG Canada is at least willing to consider the problem, sums it all up.

Updated with link to Sept. 2011 questions and answers

While BC is told refining heavy crude is uneconomic, planning for US west coast refineries going ahead

Supporters of David Black’s Kitimat Clean project to build a refinery about 25 kilometres north of Kitimat have been met by skepticism by experts and economists from the Canadian oil patch who keep telling the people of northwestern British Columbia that to create jobs by adding value to Alberta crude is uneconomic.

The Americans, apparently, have a different view, with plans announced for shipping projects in Washington State that could handle not only oil shale crude from the Bakken Formation in the Dakotas but also Canadian “heavy crude” aimed at refineries in Californa, refineries that would require new or renovated facilities.

So let’s add another question to northwest BC’s skepticism about the Alberta oil patch. Why is uneconomic to refine in Alberta or BC, but apparently increasingly economic to refine in California given the cost of building or rebuilding facilites?

Opponents of the Northern Gateway pipeline have always speculated that any bitumen exported from Kitimat could end up in California rather than markets in Asia.

According to reports, the Vancouver, Washington, project plans to load the bitumen on barges for shipment to California, which is likely to cause a storm of controversy with environmental groups in both states, especially if a barge, which has almost no controls compared to a tanker, foundered and ended up on the coast.

The New York Times, on Oct. 31, looked at the issue in a report Looking for a Way Around Keystone XL, Canadian Oil Hits the Rails. The issue of moving crude by rail has been gaining traction in recent months, with growing opposition to pipeline projects. But where do those long trains of tank cars full of crude go?

Times reporter Clifford Kraus says:

The developing rail links for oil sands range across Canada and over the border from the Gulf Coast to Washington and California. Railways can potentially give Canadian producers a major outlet to oil-hungry China, including from refineries in Washington and California.

According to the Times, the plans call for two Canadian export terminals.

“We want to diversify our markets beyond just moving our product south,” said Peter Symons, a spokesman for Statoil, a Norwegian oil giant that has signed contracts to lease two Canadian oil loading terminals. “We can get that product on a ship and get it to premium markets in Asia.”

The Americans, on the other hand, are looking toward refineries.

Again the Times report says:

Several Washington and Oregon refiners and ports are planning or building rail projects for Canadian heavy crude as well as light oil from North Dakota. The Texas refinery giant Tesoro and the oil services company Savage have announced a joint venture to build a $100 million, 42-acre oil-handling plant in the Port of Vancouver on the Columbia River that could handle 380,000 barrels of oil each day if permits are granted.

Not that everything is clear sailing. The Times says there is resistance to a plan to refine heavy crude in California.

The city of Benicia, Calif., last month delayed the granting of a permit for Valero Energy’s planned rail terminal at its refinery by deciding to require an environmental impact report after residents expressed concerns that Valero would use the terminal to import Canadian oil sands crude.

Tesoro and its partner Savage announced the Vancouver, Washington project in April.

With access to rail and existing marine infrastructure, the Port of Vancouver is uniquely positioned to serve as a hub for the distribution of North American crude oil to West Coast refining centers. Tesoro and Savage are ideal partners for this project, having already operated in close partnership for almost ten years on the West Coast. The Tesoro-Savage Joint Venture’s combined capabilities, experience and resources are expected to create substantial benefits for the Port and the Vancouver community in the form of sustainable revenue to the Port and local jobs associated with the facility’s construction and operation.

The Tesoro news release quotes Greg Goff, President and CEO of Tesoro.

Building upon the recent success of the rail unloading facility at our Anacortes, Wash., refinery, where we have been delivering Mid-Continent crude oil via unit train in an environmentally sound and cost-effective manner, this project is the ideal next step for Tesoro as we drive additional feedstock cost advantage to the remaining refineries in our West Coast system.

While the Tesoro April release doesn’t specifically mention heavy crude or bitumen from Alberta, in August, Reuters reporting on a Tesoro results conference call said, the project would “supply cheaper U.S. and Canadian crude to refineries all along the West Coast – both its own and those run by competitors.”

The project, which would initially have capacity of 120,000 barrels a day and could be expanded to 280,000 BPD, is the biggest so far proposed to help Pacific Coast refineries tap growing output of inland U.S. and Canadian heavy crudes.

The project, where North Dakota Bakken and Canadian crude would travel by rail to the marine facility in Vancouver, Washington and then barged to refining centers, is being planned with joint venture partner Savage Companies.

In September, Petroleum News reported

The Port of Vancouver facility will have “a lot of flexibility and capability to take different types of crudes, from heavy Canadian crudes to crudes from the Mid-Continent… So we will source crude from where the best place is,” Goff said on Aug. 2. “The facility also was designed to supply the entire West Coast… We can go from as far away as Alaska to Southern California, in those refineries, which we intend to do.”

Reuters also reported

Regulators also are considering Valero’s permit request for a 60,000 bpd rail facility at its 78,000 bpd Wilmington refinery near Los Angeles, but in June the area pollution regulator said it would take 18 months to finish an environmental review, permitting and construction.
Alon Energy USA also is seeking permits for a rail facility at its Southern California refining system, which shut down late last year as losses mounted on high imported crude costs and low asphalt demand. The company hopes to get those permits by year-end.
Valero spokesman Bill Day on Friday declined to say whether Valero would be interested in tapping inland and Canadian crude through the Tesoro project, but noted that the company values flexibility in getting cheaper crudes to its refineries.

Asked today about the New York Times report, (at the time of his regular news conference, he hadn’t read the story) Skeena Bulkley Valley MP Nathan Cullen said, “I mean there’s been so much uncertainty, in large part created by this government with respect to moving oil anywhere. This is another proposal, it seems every week you wake up, open the papers and there’s another proposal. Some of them are legitimate, some of them are snake oil.

“This one I’m not familiar with, so I can’t make specific comments on it, I will certainly look at it because I’m very interested in energy on the west coast. I’d have to see, given the government we have in Ottawa right now, they’re not friends to communities and First Nations and certainly not friends to the oil sector because they keep causing so much concern within the broader public and hurt the companies’ ability to gain social licence to get a project going.”

Kinder Morgan files last minute objection to Joint Review’s proposed conditions for Northern Gateway

Kinder Morgan has filed a last minute objection to the Northern Gateway Joint Review Panel’s preliminary conditions for the Enbridge project.

One of the objections from Kinder Morgan is the provision in the JRP’s proposed Gateway conditions for “purpose built tugs” to escort tankers (a measure that Enbridge has proposed for the Gateway project). Another provision Kinder Morgan objects to is “secondary containment facilities at marine terminals” likely to become an issue if the Vancouver terminal is expanded by Kinder Morgan.

Overall, Kinder Morgan warns that if the JRP imposes some of the proposed conditions on the Northern Gateway, it could adversely affect future pipeline projects in British Columbia.

As well, Kinder Morgan, it appears, is already concerned that if the proposed oversight of Northern Gateway goes ahead, the Kinder Morgan plan to twin the pipeline from Alberta to Vancouver and expand terminal operations in Vancouver could face ongoing scrutiny and possible delays.

The Kinder Morgan document, from the company’s Calgary lawyer, Shawn Denstedt, of Osler, Hoskins and Harcourt, filed May 31, appeared among all the final arguments filed on Friday by intervenors and governments to the Joint Review Panel on Northern Gateway.

Kinder Morgan’s letter to the JRP comes long after the final deadline for such comments.

Kinder Morgan is a registered intervenor in the Northern Gateway hearings, but has only filed four previous documents during the entire multi-year process. The company does not appear on the list of intervenors scheduled to appear for oral final arguments in Terrace beginning on June 17.

On April 12, 2013, the JRP issued a preliminary list of 199 conditions for the planning, construction and operation of the Northern Gateway project.

Now Kinder Morgan is worried. Denstedt’s letter notes:

we believe a number of the proposed conditions may have a material impact on pipeline and infrastructure development in Canada and consideration should be given to the conditions from this perspective.

Diplomatically, Denstedt goes on to tell the panel:

Our comments are intended to assist the JRP in understanding the potential outcomes of the proposed conditions if they become generally applicable to industry.

Commercial considerations

Under what Detstadt calls “Commercial considerations”, Kinder Morgan says “we observe that several of the proposed conditions are likely to affect the manner and risks involved in procuring pipeline facilities and services.

The list points to

Three layer composite coating or high performance composite coating is required for the entire pipeline although other pipeline coatings are commonly used in the pipeline industry depending upon ground conditions encountered
.
Complementary leak detection systems must be identified that can be practically deployed over extended distances of pipeline.

The construction of purpose-built tugs involves significant cost and lead time

A volume is prescribed for the secondary containment facilities at the marine terminal without reference to existing codes.

The letter goes on to say that if the conditions proposed by the JRP for the Northern Gateway come into effect, in Kinder Morgan’s opinion, it could adversely affect other pipeline projects in the future.

If broadly applied to industry, such conditions may limit the ability of pipeline companies to obtain competitive quotes because there are few sources of the required materials or services. The effect of conditions that require the use of a particular material or service may be to grant commercial benefits to certain suppliers through the regulatory process beyond the requirements of existing codes. Since several export pipelines are currently proposed, there will be a heightened demand for labour and materials in the coming years. The commercial effect of conditions that may exacerbate shortages of labour and materials should be a relevant consideration for the JRP.

Timing

One of Kinder Morgan’s objections is to the timing the JRP proposes for the Northern Gateway project if it applies to other pipelines.

Several of the proposed conditions contain NEB approval requirements and filings deadlines several years prior to operations. For example, plans related to the marine terminal and research programs must be filed for NEB approval three years prior to operations.

We are concerned that requiring reports to be filed for approval several years before operations can create significant schedule risks for infrastructure development projects. For example, a project with a two year construction schedule could take three years to complete with such conditions. Any changes to the construction schedule and anticipated date of operations would affect the filing deadline. Project proponents need sufficient schedule certainty in order to plan major expenditures on labour and materials.

To mitigate such risks, it is relevant for regulators to consider whether the filing deadlines and approval requirements prescribed in conditions could materially alter a project’s schedule. Filing deadlines should be set at a reasonable time before operations in order to minimize the risk that such deadlines materially affect the critical path for a project.

Many of the conditions require NEB approval, and in some cases the participation of other parties in the approval process, in order to be satisfied. Fulfillment of those conditions will require additional time, a Board process and potentially litigation. For example, certain reports must be filed with the NEB for approval prior to commencing construction activities. Other conditions require reports to be filed for approval by the NEB prior to construction with a summary of how concerns from other government agencies and Aboriginal groups were addressed.

So Kinder Morgan says:

In our view, conditions that require subsequent board approvals and that attract the potential for additional regulatory processes should be the exception and not a new standard or norm. There must be clear, well understood rationales given as to why additional approvals are in the public interest.

And so Kinder Morgan asks:

As an alternative, the NEB may utilize its existing powers and processes to ensure that when filings are made to satisfy imposed conditions an additional approval process is not required.

Overall the company sees the rules for Northern Gateway as a step back to the days before deregulation.

A number of the conditions may be interpreted as reflecting a return to a prescriptive approach to regulation. These conditions prescribe detailed audit requirements instead of setting a goal oriented approach to allow the proponent flexibility in mitigating any adverse effects. Such conditions tend to focus on operational aspects that are covered by existing codes and regulations rather than setting goals for the proponent to mitigate any significant adverse effects.

Denstedt, again diplomatically, concludes by saying:

Kinder Morgan wishes to thank the JRP for the opportunity to present these high level perspectives regarding its proposed conditions. Our comments are intended to ensure that the wider implications of the proposed conditions on the pipeline industry and infrastructure development are given appropriate consideration in the deliberations and final recommendations of the JRP.

Kinder Morgan letter to JRP

SFU study says spill hazards for Kitimat from tankers and pipelines much greater than Enbridge estimate

A study by two scholars at Simon Fraser University says that the Enbridge Northern Gateway project is much more hazardous to Kitimat harbour, Douglas Channel and the BC Coast than Enbridge has told the Joint Review Panel.

The study by Dr. Thomas Gunton, director of the School of Resource and Environmental Management at SFU and Phd student Sean Broadbent, released Thursday May 2, 2013 says there are major methodological flaws in the way Enbridge has analyzed the risk of a potential oil spill from the bitumen and condensate tankers that would be loaded (bitumen) or unloaded (condensate) at the proposed terminal at Kitimat.

Enbridge Northern Gateway responded a few hours after the release of the SFU study with a statement of its own attacking the methedology used by the two SFU scholars and also calling into question their motivation since Gunton has worked for Coastal First Nations on their concerns about the tanker traffic.

Combination of events

One crucial factor stands out from the Gunton and Broadbent study (and one which should be confirmed by independent analysis). The two say that Enbridge, in its risk and safety studies for the Northern Gateway project and the associated tanker traffic, consistently failed to consider the possibility of a combination of circumstances that could lead to either a minor or a major incident.

Up until now, critics of the Northern Gateway project have often acknowledged that Enbridge’s risk analysis is robust but has consistently failed to take into consideration the possibilty of human error.

As most accidents and disasters happen not due to one technical event, or a single human error, the SFU finding that Enbridge hasn’t taken into consideration a series of cascading events is a signficant criticism.

Overall the SFU study says there could be a tanker spill every 10 years, not once in 250 years, as calculated by Enbridge.

It also says there could be 776 oil and condensate spills from pipelines over 50 years, not 25 spills over 50 years as projected by Enbridge. (And the life of the project is estimated at just 30 years, raising the question of why the 50 year figure was chosen)

Enbridge track record

The study also bases its analysis of the possibility of a spill not on Enbridge’s estimates before the Joint Review Panel but on the company’s actual track record of pipeline spllls and incidents and concludes that there could be between one and 16 spills (not necessarily major) each year along the Northern Gateway pipeline.

Findings for Kitimat

Among the key findings for Kitimat from the SFU study are:

Enbridge said the possibility of tanker spill was 11.3 to 47.5 per cent over the 30 year life of project. The SFU study says the possibility of a spill within the 30 years is 99.9 per cent.
The SFU study says it is likely there will be a small spill at the Kitimat Enbridge terminal every two years.
The SFU study estimates that there will be eight tanker transits each week on Douglas Channel if the Northern Gateway project goes ahead and more if it is expanded. (This, of course, does not include LNG tankers or regular traffic of bulk carriers and tankers for Rio Tinto Alcan)
The SFU study says that while Endridge did study maneuverability of tankers, it paid little attention to stopping distance required for AfraMax, SuezMax tankers and Very Large Crude Carriers.
The SFU study says Enbridge inflated effectiveness of the proposed tethered tugs and maintains the company did not study ports and operations that use tethered tugs now to see how effective tethering is.
The SFU says Enbridge’s risk analysis covered just 233 nautical miles of the British Columbia coast, where as it should have covered entire tanker route both to Asia and California, raising the possibility of a tanker disaster outside British Columbia that would be tied to the Kitimat operation.
Based on data on tanker traffic in Valdez, Alaska, from 1978 to 2008, the SFU study estimates probability of a 1,000 barrel spill in Douglas Channel at 98.1 per cent and a 10,000 barrel spill at 74.2 per cent over 30 year Gateway life. The Valdez figures account for introduction of double hulls after Exxon Valdez spill in 1989 and notes that spill frequency is much lower since the introduction of double hulled tankers.
According to a study by Worley Parsons for Enbridge in 2012, the Kitimat River is the most likely area affected by an unconstrained rupture due to geohazards in the region. According to the Worley Parsons study, geohazards represent the most significant threat to the Northern Gateway pipeline system.

Flawed studies

The SFU scholars list a series of what they say are major methological or analytic flaws in the information that Enbridge has presented to the Joint Review Panel, concluding that “Enbridge significantly understates the risk of of spills from the Northern Gatway.

Enbridge’s spill risk analysis contains 28 major deficiencies. As a result of these deficiencies, Enbridge underestimates the risk of the ENGP by a significant margin.
Some of the key deficiencies include:

Failure to present the probabilities of spills over the operating life of the ENGP

Failure to evaluate spill risks outside the narrowly defined BC study area

Reliance on LRFP data that significantly underreport tanker incidents by between 38 and 96%.

Failure to include the expansion capacity shipment volumes in the analysis

Failure to provide confidence ranges of the estimates

Failure to provide adequate sensitivity analysis

Failure to justify the impact of proposed mitigation measures on spill likelihood

Potential double counting of mitigation measures

Failure to provide an overall estimate of spill likelihood for the entire ENGP

Failure to disclose information and data supporting key assumptions that were used to reduce spill risk estimates

Failure to use other well accepted risk models such as the US OSRA model

SFU reports that Enbridge provides separate estimates of the likelihood of spills for each of the three major components of the project:

tanker operations,
terminal operations,
the oil and condensate pipelines.

The SFU scholars say Enbridge does not combine the separate estimates to provide an overall estimate of the probability of spills for the entire project and therefore does not provide sufficient information to determine the likelihood of adverse environmental effects……

It notes that “forecasting spill risk is challenging due to the many variables impacting risk and the uncertainties in forecasting future developments affecting risk. To improve the accuracy of risk assessment, international best practices have been developed.”

Part of the problem for Enbridge may be that when the company appeared before the Joint Review Panel it has repeatedly said that will complete studies long after approval (if the project is approved), leaving large gaps in any risk analysis.

The SFU study may have one example of this when it says Enbridge did not complete any sensitivity analysis for condensate spills at Kitimat Terminal or the condensate pipeline.

Enbridge response

Enbridge responded by saying

Our experts have identified a number of omissions, flawed assumptions and modeling errors in the study and have serious concerns with its conclusions:
The spill probability numbers are inflated: The author uses oil throughput volumes that are nearly 40 per cent higher than those applied for in this project which also inflates the number of tanker transits using these inflated volumes
The pipeline failure frequency methodology adopted by Mr. Gunton is flawed, and does not approximate what would be deemed a best practices approach to the scientific risk analysis of a modern pipeline system
Mr. Gunton based his failure frequency analysis on a small subset of historical failure incident data. Why would he limit the source of his data to two pipelines with incidents not reflective of the industry experience and not reflective of the new technology proposed for Northern Gateway?
The study results are not borne out by real world tanker spill statistics. Based on Mr. Gunton’s estimates we should expect 21 to 77 large tanker spills every year worldwide while in reality after 2000 it has been below 3 per year and in 2012 there were zero.

Most of Enbridge’s rebuttal is a personal attack on Gunton, noting

We are very concerned about the misleading report released by Mr. Gunton, who was a witness for the Coastal First Nations organization during the Northern Gateway Joint Review Panel process.
Mr. Gunton should have made his study available to the JRP process, the most thorough review of a pipeline that’s ever taken place in Canada. All of Northern Gateway’s conclusions have been subject to peer review, information requests and questioning by intervenors and the Joint Review Panel.

In response, Gunton told the Globe and Mail “the report took over a year to complete and it was not ready in time to be submitted as evidence before the federal Joint Review Panel which is now examining the proposed pipeline.”

Enbridge’s statement also ignores the fact under the arcane rules of evidence, any study such as the one from Simon Fraser had to be submitted to the JRP early in the process, while evidence was still being submitted.

The recent ruling by the JRP for closing arguments also precludes anyone using material that was not entered into evidence during the actual hearings.

That means that the SFU study will be ignored in the final round of the Joint Review Panel, which can only increase the disillusionment and distrust of the process that is already common throughout northwest British Columbia.

Kitimat port announcement surprise to Rio Tinto Alcan, District of Kitimat

The announcement Monday that the federal government intends to turn the private port of Kitimat into a public port, an announcement confirmed by Natural Resources Minister Joe Oliver in Terrace, Tuesday, came as a surprise to Rio Tinto Alcan, which now operates the port.

This morning RTA issued a brief statement:

This announcement was not discussed with Rio Tinto Alcan in advance.
We are endeavoring to have meetings with the federal government to gain clarity on this announcement as it specifically relates to our operations in Kitimat.

On Wednesday, Kitmat Mayor Joanne Monaghan told CFTK news the community was never consulted.

Monaghan told CFTK she still hasn’t been able to get anyone with the federal government to tell her more about the plan.

Since today, Thursday, is budget day, it is likely that federal officials would be unavailable for further comment until next week.

Who pays for upgrades?

Another point that is unclear from Monday’s announcement is whether or not the federal government fully intends to take over the navigation aids and enhancements on Douglas Channel and the BC Coast. If so, that means that the Canadian taxpayer would become, at a time of budget cuts, responsible for millions of dollars that Enbridge Northern Gateway has consistently said that the company will pay for.

Water, not oil, is the hot issue this summer in Kitimat

Rio Tinto Alcan reopens access to Kitimat waterfront

EPA Orders Enbridge to Perform Additional Dredging to Remove Oil from Kalamazoo River

The United States Environmental Protection Agency has ordered Enbridge to dredge the Kalamazoo River to remove addition bitumen.

The EPA issued this news release

CHICAGO (March 14, 2013) – The U.S. Environmental Protection Agency today issued an administrative order that requires Enbridge to do additional dredging in Michigan’s Kalamazoo River to clean up oil from the company’s July 2010 pipeline spill. EPA’s order requires dredging in sections of the river above Ceresco Dam, upstream of Battle Creek, and in the Morrow Lake Delta.

EPA has repeatedly documented the presence of recoverable submerged oil in the sections of the river identified in the order and has determined that submerged oil in these areas can be recovered by dredging. The dredging activity required by EPA’s order will prevent submerged oil from migrating to downstream areas where it will be more difficult or impossible to recover.

Enbridge has five days to respond to the order and 15 days to provide EPA with a work plan. Dredging is anticipated to begin this spring and is not expected to result in closures of the river. EPA’s order also requires Enbridge to maintain sediment traps throughout the river to capture oil outside the dredge areas.

On July 26, 2010, Enbridge reported that a 30-inch oil pipeline ruptured near Marshall, Michigan. Heavy rains caused the spilled oil to travel 35 miles downstream before it was contained.

SPECIAL REPORT: Keystone study looks at increased BC west coast tanker traffic, oil terminal at Prince Rupert

The future of tankers sailing along the British Columbia coast, and the export of crude through BC could change drastically by the end of 2014.

By some time in 2014, the planned expansion of the Panama Canal will be complete, allowing more large ships, including tankers, to pass through the Canal and ply up and down the west coast.
It is also possible that British Columbia coastal ports could not only be used for export of bitumen from the Alberta oil sands and liquified natural gas from northeast BC, but also for oil shale crude found in the Bakken Shale formation in North Dakota and Montana, possibly later shale oil from Saskatchewan and Manitoba.

Those startling conclusions are found in the full draft supplementary Environmental Impact Statement (EIS) on the Keystone XL pipeline project issued last week by the United States States Department. (Most media reports concentrated on the EIS executive summary, the details on British Columbia are contained in the actual report).

The Keystone EIS surprisingly contains a number of scenarios in British Columbia, even though BC is thousands of kilometres from the proposed TransCanada pipeline from the bitumen sands to the refineries on the US Gulf Coast.

The State Department report had to give President Barack Obama all possible options and that it why the EIS report included what it calls “no action alternatives” –what would happen to the bitumen and oil if Obama rejects the Keystone pipeline. Assuming that the oil, whether bitumen or Bakken oil shale has to get to the Gulf refineries by other means, the EIS takes a close look at one case, via CN rail to Prince Rupert, from Prince Rupert by tanker down to the expanded Panama Canal, then through the Panama Canal to the oil ports of Texas and Louisiana.

Another possibility, although less detailed in the EIS, also considers scenarios where bitumen from the Alberta oilsands or shale crude from the Bakken formation was shipped to Vancouver via the Kinder Morgan pipeline system, to Kitimat via the proposed Northern Gateway pipeline.

The State Department rejected the Kinder Morgan and Northern Gateway options for detailed analysis because of the controversy over both projects.

The Keystone EIS was released by the State Department on Friday, March 1, 2013, and is seen as generally favouring TransCanada’s Keystone XL pipeline project. Despite the EIS report conclusions that the Keystone project would have little adverse impact, the final decision by President Obama will be largely political.

The Prince Rupert scenario

The State Department “Supplementary Enviromental Impact Statement” on the Prince Rupert and several other scenarios were undertaken

In developing alternative transport scenarios, efforts were made to focus on scenarios that would be practical (e.g., economically competitive), take advantage of existing infrastructure to the extent possible, used proven technologies, and are similar to transport options currently being utilized.

The State Department studied a scenario that would

Use of approximately 1,100 miles (1,770 kilometres) of existing rail lines from the proposed Lloydminster rail terminal complex to a new approximately 3,500-acre (1,400 hectare) rail terminal complex where the oil would be offloaded from the rail cars, with a short pipeline connection to the port at Prince Rupert.

That possible replacement for Keystone scenario calls for adding approximately 13 trains with 100 tanker car per day on the CN and Canadian Pacific rail lines between Lloydminster and Prince Rupert. (There is also a separate scenario for a rail route from Alberta to the US Gulf Coast. That scenario is not examined in this report)

That, of course, would be in addition to the already heavy rail traffic to Prince Rupert with grain and coal trains outbound and container trains inbound, as well as the VIA Skeena passenger train.

(David Black who is planning a possible refinery at Onion Flats, north of Kitimat, has said that if the Northern Gateway pipeline is stopped, the Kitimat refinery could be serviced by six trains per day, 120 cars in each direction.)

The railway to Prince Rupert is evaluated using the same criterion under US law that was used to evaluate the Keystone project, including affects on surface water, wetlands, the coast, wildlife, threatened and endangered species, fisheries, landuse, construction, green house gases and even sea level rise.

The EIS for Prince Rupert, however, dodges one of the key questions that is plaguing the Northern Gateway Joint Review panel. While it points out the possible dangers of an oil spill, the report does not go into any great detail,

The overall EIS view of the impact of a Prince Rupert project would likely bring protests from those who already oppose the Northern Gateway pipeline project.

the transport of the crude oil via tankers from Prince Rupert to the Gulf Coast area
refineries would not have any effects on geology, soils, groundwater, wetlands, vegetation, land use, socioeconomics, noise, or cultural resources, other than in the event of a spill.

The State Department scenario says there would be

one to two additional Suezmax tanker vessels per day (430 tankers per year) would travel between Prince Rupert and the Gulf Coast area refinery ports via the Panama Canal.

That, of course, could be in addition to any tankers from the Northern Gateway project, if it is approved, as well as tankers from the liquified natural gas projects at both Kitimat and Prince Rupert.

Expanded Panama Canal

The concept of the Suezmax tankers is critical to the west coast, even if none of the scenarios eventually happen.

The State Department report notes that the Panama Canal is now being expanded, and that beginning sometime in 2014, larger ships, including tankers, can go through the canal. The current size is Panamax (maximum size for the current Panama Canal) to Suezmax (the maximum size for the Suez Canal).

(The Panama Canal expansion program began in 2006 and is scheduled for completion in 2014.
Latest Panama Canal progress report (pdf)

The Vancouver Kinder Morgan Scenario

According to the State Department that means even if the even bigger Very Large Crude Carriers are not calling at west coast ports to take petroleum products to Asia, the Suezmax tankers might likely be calling in Vancouver at the terminal for the existing (and possibly expanded) Kinder Morgan pipeline.

Both Kinder Morgan and Port Metro Vancouver have said that the ships that call at the Kinder Morgan Westridge Terminal are Aframax tankers, and even they are not loaded to capacity, because of the relatively short draft in the Burnaby area of Vancouver harbour. Both Kinder Morgan and Port Metro Vancouver say that there are no current plans for larger tankers to call at Westridge.

Port Metro Vancouver tanker diagram — Port Metro Vancouver diagram showing the tankers that are permitted and not allowed in Vancouver harbour. (Port Metro Vancouver)

So one question would be is the State Department report pure speculation or is there, perhaps, somewhere in the energy industry, a hope that one of Vancouver’s deeper draft ports could be the terminal for a pipeline?

Rails to Rupert

The Keystone EIS for the first time outlines the railway to Rupert senario, which has long been touted by some supporters as an alternative to the Northern Gateway project, but without the detailed analysis provided for Northern Gateway by both Enbridge and those opposed to the project. Although based largely on published documents and in some ways somewhat superficial (the State Department can’t find any cultural resources in Prince Rupert), the EIS largely parallels the concerns that are being debated by in Prince Rupert this month by the Northern Gateway Joint Review Panel.

Northwest Coast Energy News Special report links

What the Keystone Report says about Kitimat and Northern Gateway
What the Keystone Report says about the Kinder Morgan pipeline to Vancouver.
What the Keystone Report says about CN rail carrying crude and bitumen to Prince Rupert.
The State Department Environmental Impact Study of the railway to Prince Rupert scenario.

State Department news release

State Department Index to Supplemental Environmental Impact Study on the Keystone XL pipeline

PART ONE: What the State Department Keystone EIS says about Kitimat

The United States Department draft Environmental Impact Statement (EIS) not only had to evaluate the main subject, the controversial Keystone XL pipeline project, but possible alternatives as well.

So that’s why the EIS took a couple of looks at Kitimat, with two possibilities for replacing the Keystone XL with a Kitimat terminal.

• Rail to Vancouver or Kitimat, British Columbia and tanker to the Gulf Coast area refineries
• The proposed Nothern Gateway Pipeline project.

The study doesn’t just include various forms of diluted bitumen from the Alberta bitumen sands, but petroleum products from the Western Canadian Sedimentary Basin (WCSB) and crude oil from the Bakken shale shipped to the refineries on the US Gulf Coast which would be served by the Keystone XL pipeline if it was not approved.

The EIS examined the Northern Gateway project and rejected the Enbridge pipeline as a possibility for Alberta bitumen and crude because of the continuing controversy.

However, a reading of the report shows that there could be pressure in the future for a bitumen or crude export terminal at Kitimat that would be served by the existing CN rail line (even though the State Department report prefers Prince Rupert as the best choice as an alternative to Keystone).

Enbridge is proposing to construct the Northern Gateway pipeline, which would transport up to 525,000 bpd of crude oil 1,177 km from Bruderheim, Alberta, to the Port of Kitimat, British Columbia. The port would be improved with two dedicated ship berths and 14 storage tanks for crude oil and condensate. Enbridge intends for the pipeline to be operational around 2017. A regulatory application was submitted in 2010, which is undergoing an independent review process led by the Canadian National Energy Board and the Canadian Environmental Assessment Agency. The pipeline would traverse First Nation traditional lands and important salmon habitat. The project has been controversial and has encountered opposition from some
First Nation bands and other organizations. Opposition to the project remains strong as evidenced by media reports of the January 2013 public hearings in Vancouver on the permit application. It remains uncertain at this time if the project would receive permits and be constructed, and therefore the option of moving additional crude to Kitimat was eliminated from detailed analysis.

The report goes on to say that Enbridge is moving the target for the Northern Gateway due the controversy and the longer than expected Joint Review Panel hearings

Enbridge is now stating in investor presentations that the Northern Gateway pipeline
(525,000 bpd expandable to 800,000 bpd) may be operational by “2017+”

However the State Department report does seriously consider transportation of WCSB crude by rail to Vancouver, Kitimat and Prince Rupert. The report takes an in-depth look at the railway to Prince Rupert option.

One reason is that even if it is transported by rail, the market in Asia is still more attractive to the energy industry than using Kitimat or Prince Rupert as a possible terminal for export to the US Gulf.

The transportation costs of shipping to Asia via the Canadian or U.S. West Coasts
would be significantly cheaper than trying to export it via the U.S. Gulf Coast.

The total per barrel cost of export to Asia via pipeline to the Canadian West Coast and onward on a tanker is less than just the estimated pipeline tariff to the U.S. Gulf Coast for the proposed Project, and is less than half the cost of the Gulf Coast route to Asia. If pipelines to the Canadian West coast are not expanded or approved, even incurring the additional cost of rail transport to the West Coast ports (Vancouver, Kitimat, or Prince Rupert), estimated at $6 per barrel, results in a total transport cost to Asia that is still 40 percent cheaper than going via the Gulf Coast Absent a complete block on crude oil exports from the Canadian West Coast, there would be little economic incentive to use the proposed project as a pass through. The high costs of onward transport to other potential destinations tend to mitigate against WCSB heavy/oil sands crudes being exported in volume from the Gulf Coast.

The EnSys 2011 study found that the rail systems of the United States and Canada were not at that time running at capacity, that there is significant scope to expand capacity on existing tracks through such measures as advanced signaling, and that adequate cross-border Canada/U.S. capacity exists to accommodate growth in rail traffic that would be associated with movements at the level of 100,000 bpd cross-border increase per year or appreciably higher. In addition, rail lines exist to ports on the British Columbia coasts (notably Prince Rupert, Kitimat, and Vancouver), which could be used for export of Western Canadian crudes.

And later in the report:

both of these proposed pipeline projects to Canada’s West Coast face significant
resistance and uncertainty, but there are strong cost advantages when compared with moving WCSB crude to the Gulf Coast even if rail were used to access the Canadian West Coast In fact, using rail and tanker to ship crude oil from the WCSB via the West Coast to China is comparable to the pipeline rate to reach the U.S. Gulf Coast. An increase in the transport costs to the Gulf Coast (utilizing alternative transport options such as rail) would have a tendency to increase the
economic incentive to utilize any West Coast export options, if they are available.

The report also notes the change in Canadian laws in the omnibus bills pushed through by Stephen Harper’s Conservative government:

Also not examined above, are more speculative political impacts that might occur as a result of a decision on the permit application for the proposed Project. In 2012, the Canadian government enacted new laws changing the way some major infrastructure projects, such as pipelines, are reviewed. Among the changes made were limits on the amount of time for such reviews. A declared intent was to promote alternative routes for the export of WCSB crude oils, especially
ones that would reduce reliance on the United States as, essentially, the sole market option.

In other words, even if Northern Gateway is stopped, there could be considerable pressure to export bitumen and crude oil from Alberta not only through Prince Rupert, the site preferred by the State Department EIS, but though Kitimat as well.

That might just open the door for David Black’s proposed $16 billion refinery at Onion Flats near Kitimat. As noted elsewhere on the site Black has possible investors for construction of a new oil refinery approximately 25 kilometers to the north of Kitimat BC on a 3,000 hectare site.

Black’s Kitimat Clean website says the refinery would process 550,000 barrels per day (87,445 cubic meters per day) of diluted bitumen from the oilsands region of Alberta delivered to the site by pipeline or by rail. The diluent will be extracted at the refinery and returned to Alberta if needed there. If not, it would be processed into gasoline. The bitumen will be converted into fuel products, primarily for export.

Black’s plans call for connecting the Northern Gateway bitumen Pipeline to the site. From the refinery six dedicated product pipelines will run to a marine terminal on the Douglas Channel. The Douglas Channel is a wide and deep fjord. VLCC (Very Large Crude Carrier) tankers will transport the refined fuels to markets around the Pacific Rim.

If the Northern Gateway is stopped, Black’s plans call for 12 additional 120 car trains running through every day. (Six in each direction)
Northwest Coast Energy News Special report links

State Department news release

State Department Index to Supplemental Environmental Impact Study on the Keystone XL pipeline