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 TWO: What the State Dept. Keystone EIS says about Kinder Morgan and Vancouver harbour

The US State Department report on the controversial Keystone XL pipeline project also looks at the Kinder Morgan Transmountain pipeline (both the existing line and the proposed second line) and, in at least one part of the report, seems to speculate that, once expansion of the Panama Canal is completed in 2014, there could be larger tankers in Vancouver harbour, something that up until now, both Kinder Morgan and Port Metro Vancouver have denied. However, the State Department report does not say how the port of Vancouver could handle larger tankers.

The State Department EIS says if larger tankers were loaded at Vancouver, it could be economic for crude from the Kinder Morgan Transmountain pipeline to be moved to the US Gulf Coast.

Using heavy crude as a basis, a present day movement via Trans Mountain to Vancouver and thence on a Panamax tanker via the Panama Canal to Houston would have a total freight cost (pipeline tariff plus tanker freight and Panama toll) of around $8.50-9.50/barrel (bbl).

Recognizing that Kinder Morgan plans to enable future shipment in larger Suezmax tankers, and that the Panama Canal Authority is expanding the Canal to take tankers of that size, the rate using a Suezmax would be approximately $1/bbl lower. These rates compare to approximately $8/bbl to move heavy crude via pipeline from Hardisty to Houston. Thus, while in normal markets, a tanker movement from Western Canada would be somewhat more costly than via pipeline, in a scenario where ability to move WCSB crudes by pipeline to the U.S. Gulf Coast were constrained, refiners in the U.S. Gulf Coast could opt for tanker transport.

(The Panama Canal expansion program began in 2006 and is scheduled for completion in 2014)

Latest progress report (pdf)

According to the progress report the current Panama Canal has the capacity for ships that are 32.3 metres wide by 304.6 metres long, This will increase to 49 metres wide by 366 metres long.

Later in the report the State Department goes on to say that bitumen and crude could, as an alternative to Keystone, go to Vancouver:

Under this option, WCSB [Western Canada Sedminetary Basin] would be shipped by existing railways or new pipelines from the Hardisty region to Vancouver or Kitimat, British Columbia for shipment by marine transport through the expanded Panama Canal and delivery to Gulf Coast area refiners. This option considers moving up to 730,000 bpd of heavy crude to the Port of Vancouver and then to the marine docks at the Westridge marine terminal in Vancouver or the port in Kitimat. Under this option, crude oil could move either via rail or by a new pipeline from the Hardisty region.

Currently, Kinder Morgan is planning an expansion of the existing Trans Mountain pipeline originating at Edmonton, increasing its capacity from 300,000 bpd (current) to up to 890,000 bpd(planned for operations in 2017).

The Trans Mountain pipeline runs into Vancouver via the existing Burnaby terminal over to the Westridge dock for loading heavy crude onto vessels. The pipeline has sufficient commitment from shippers to proceed with engineering and permitting processes. Kinder Morgan indicates that the project would significantly increase tanker traffic from about 5 to 34 cargoes per month, or up to about 400 cargoes per year . The increased marine traffic is due to increased volume to be shipped, and lack of sufficient channel draft to load larger vessels.

Kinder Morgan on its website says

The proposed expansion at Westridge Terminal is based on the loading of Aframax tankers, the same tankers currently being loaded at Westridge. Larger tankers are not permitted in the Vancouver harbour, and are not under consideration for the expansion. Proposed changes at the dock include new loading facilities, fire protection, vapour recovery, secondary containment, and emergency response equipment.

To connect the Burnaby Terminal with the Westridge Terminal, the proposed expansion includes two new, four-kilometre pipelines each with a diameter of 762 millimeters (30 inches). These two new delivery lines would provide product deliveries to tankers at two new dock berths, and provide the scheduling flexibility required for a marine operation.

Port Metro Vancouver also says on its website:

The role of Port Metro Vancouver is to conduct a rigorous project review to ensure the safe movement of goods through the Port. Kinder Morgan has yet to submit a formal project proposal to Canada’s National Energy Board. If they do, and should approval be granted, the project would then undergo several other permitting processes, one of which is a Port Metro Vancouver Project Permit Review. Vancouver is a very low volume tanker port. Currently, there are about 100 crude oil and chemical tankers calling the port each year. If the Kinder Morgan project receives approval, that number could increase to approximately 400 tankers a year. Other well-run ports such as the Port of Rotterdam handles 8,206 tankers a year, while Singapore handle 22,280 tankers a year.

Will larger tankers be calling at Port Metro Vancouver as a result of the Kinder Morgan Proposal?

There are no plans to exceed the current maximum size of tankers calling at Port Metro Vancouver. Due to depth restrictions in the Burrard Inlet, the largest dimension of tanker that can be handled is the Aframax, a medium-sized tanker with a maximum capacity of 120,000 tonnes. Even then, these vessels can load to only around 80% of capacity due to draft restrictions.

 

The State Department EIS was cautious about the Kinder Morgan project and did not do the same deailed analysis as it did for Prince Rupert.

The substantial increase in tanker traffic from the proposed Kinder Morgan expansion has raised safety and environmental concerns. Moving additional volumes of crude oil from the proposed Project into the Vancouver market by either a new pipeline or rail would result in 400 or more additional vessels loading at Vancouver each year and would require considerably more storage to be built than the current Kinder Morgan operations. The expansion of storage capacity, potential rail off-loading facilities and logistics, and increased marine traffic may make this option logistically challenging in a relatively compressed and populated geographical area.

Moreover, even if a separate pipeline from Hardisty could be planned, mapped, engineered, designed, and permitted starting today, it would likely not be available as an option until well after the proposed [Keytsone] Project’s planned start date. As a result of the logistical challenges in increasing the amounts of heavy Canadian grades of crude oil coming into the Vancouver/Burnaby region over and above the volumes from the Kinder Morgan expansion, this option was deemed to be less viable than movements from Kitimat and Prince Rupert and was eliminated from detailed analysis.

It’s not clear from the Keystone EIS, if the State Department was simply speculating on larger tankers in Vancouver harbour or if it was made of aware of possible hopes for a deep water tanker port elsewhere in the Vancouver harbour area.

 

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

 

The State Department EIS goes on to note:

While no new additional pipeline capacity has been added from Canada into the United States or to the Canadian West Coast since the Final EIS in 2011, a number of projects are proposed, including this proposed Project. The 300,000 bpd Kinder Morgan Trans Mountain pipeline that runs from Edmonton to the British Columbia coast at Vancouver, with a spur to Washington State refineries, has been over-subscribed for some time. A successful open season led the Kinder Morgan to announce and file for expansion to 750,000 bpd by potentially 2017. After a
second open season, Kinder Morgan has increased the expansion to 890,000 bpd. The bulk of the incremental crude moved on the line would potentially be destined for Asia. The review process for this project is continuing, but there is significant opposition based on concerns over environmental impacts associated with the oil sands and with additional tanker movements in the Port Vancouver harbor.

As noted above, 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.

 

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

 

TransCanada plans rugged over-mountain route for gas pipeline to Kitimat

 

Coastal GasLink map
A map from TransCanada’s Coastal GasLink showing the conceptual route of the proposed natural gas pipeline from the shale gas fields in northeastern BC through the mountains to Kitimat and the proposed Shell LNG facility. (TransCanada)

TransCanada plans a rugged over-mountain route for its proposed Coastal Gaslink pipeline to the Shell Canada liquified natural gas project in Kitimat, BC, company officials said Monday, Oct. 15, 2012, in two presentations, one to District of Kitimat Council and a second at a community town hall briefing.

The pipeline would initially carry 1.7 billion cubic feet of natural gas per day from the Montney Formation region of northeastern British Columbia along a 48 inch (1.2 metre) diameter pipe over 700 kilometres from Groundbirch, near Dawson Creek, to Kitimat, site of the proposed Shell Canada LNG Canada project.

Rick Gateman, President of Coastal GasLink Project, a wholly owned TransCanada subsidiary told council that the project is now at a “conceptual route” stage because TransCanada can’t proceed to actual planning until it has done more detailed survey work and community consultations.

At the same council meeting, documents from Shell Canada notified the District that it has formally applied to the National Energy Board for an export licence for the natural gas.

Rick Gateman
Rick Gateman, president of TransCanada’s Coastal GasLink addresses District of Kitimat Council, Oct. 15, 2012. (Robin Rowland)

Gateman told council that since the pipeline itself will be completely within the province of British Columbia, it comes under the jurisdiction of the British Columbia Environmental Assessment process and the BC Oil and Gas Commission and that the NEB will not be involved in approving the pipeline itself.

At first, the Coastal Gas Link pipeline would be connected to the existing Nova Gas Transmission system now used (and being expanded) in northeastern British Columbia.

From Vanderhoof, BC to west of Burns Lake, the Coastal GasLink pipeline would be somewhat adjacent to existing pipelines and the route of the proposed Enbridge Northern Gateway bitumen pipeline and the proposed Pacific Trails natural gas pipeline.

Somewhat south of Houston, however, the pipeline takes a different route from the either the Northern Gateway or Pacific Trails Pipeline, going southwest, avoiding the controversial Mount Nimbus route.

Howard Backus, an engineering manager with TransCanada told council that the route changes so that Coastal GasLink can avoid “congestion” in the rugged mountain region.

Backus said that the Pacific Trails Pipeline for Apache and its partners in the Kitimat LNG project “is skirting” Nimbus while Enbridge plans to tunnel through the mountain. That tunnel is one of the most controversial aspects to the Northern Gateway project. The local environmental group Douglas Channel Watch has repeatedly warned of the dangers of avalanche and geological instability in the area where the Northern Gateway pipeline emerges from the tunnel. Enbridge has challenged Douglas Channel Watch’s conclusions in papers filed with the Northern Gateway Joint Review panel.

Under TransCanada’s conceptual route, the pipeline heads southwest and then climbs into the mountains, crossing what Backus calls “a saddle” (not a pass) near the headwaters of the Kitimat River. The pipeline then comes down paralleling Hircsh Creek, emerging close to town, crossing the Kitimat River and terminating at the old Methanex plant where Shell plans its liquified natural gas plant. (That means that if the conceptual plans go ahead, the TransCanada pipeline would climb into the mountains, while Pacific Trails finds a way around and Enbridge tunnels).

Backus told council that going north “created more issues,” but did not elaborate.

Backus assured people at the town hall that energy companies have a lot of experience in building pipelines in mountainous areas, including the Andes in South America.

Asked by a local businessman at the town hall if it was possible to build a road along the route of the pipeline, Backus said the mountain areas would be too steep.  Any pipeline maintenance would have to be done by tracked vehicle, he said.

Gateman told council that the pipeline would be buried along its entire route. If Shell increases the capacity of its LNG facility in Kitimat, the Coastal Gaslink pipeline could increase to 3.4 billion cubic feet a day or perhaps even more. For the initial capacity, the company will have one compressor station at the eastern end of the line. If capacity increases or if the route requires it, there could be as many as five additional compressor stations. (TransCanada’s long term planning is based on the idea that Shell will soon be adding natural gas from the rich Horn River Formation also in northeastern BC to the Kitimat export terminal.)

TransCanada will begin its field work, including route and environmental planning and “community engagement” in 2013 and file for regulatory approval in 2014. Once the project is approved, construction would begin in 2015.

Gateman said that TransCanada is consulting landowners along the proposed right of way and “on a wide area on either side.” The company also is consulting 30 First Nations along the proposed route. Gateman told council, “We probably have the most experience of any number of companies in working directly with and engaging directly with First Nations because of our pipelines across Canada.”

(Despite Gateman’s statement, the TransCanada maps showed that the Coastal Gaslink Pipeline would cross Wet’suwet’en traditional territory and officials seemed to be unaware of the ongoing problems between Apache and the Pacific Trails Pipeline and some Wet’suwet’en Houses who oppose that pipeline).

Gateman told council that the pipeline would be designed to last at least 60 years. He said that in the final test stages, the pipeline would be pressured “beyond capacity” using water rather than natural gas to try and find if any leaks developed during construction.

He said that the company would restore land disrupted by the construction of the pipeline, but noted that it would only restore “low-level vegetation.” Trees are not permitted too close to the pipeline for safety reasons.

TransCanada made the usual promises the region has heard from other companies of jobs, opportunities for local business and wide consultations. (TransCanada may have learned lessons from the botched public relations by the Enbridge Northern Gateway. A number of Kitimat residents have told Northwest Coast Energy News that TransCanada was polling in the region in mid-summer, with callers asking many specific questions about environment and the spinoffs for communities).

Councillor Phil Germuth questioned Gateman about the differences between a natural gas pipeline and a petroleum pipeline. Gateman replied that the pipelines are pretty much the same with the exception that a natural gas pipeline uses compressor stations while a petroleum pipeline uses pumping stations. Gateman did note that the original part of the controversial Keystone XL pipeline that would carry bitumen through Alberta and US mountain states to Texas was a natural gas pipeline converted to carry the heavier hydrocarbons.

Although the natural gas projects have, so far, enjoyed wide support in northwestern British Columbia, environmental groups and First Nations have raised fears that sometime in the future, especially if there is overcapacity in natural gas lines, that some may converted to bitumen, whether or not Northern Gateway is approved and actually goes ahead.

Shell application to NEB

In a fax to District of Kitimat council, Shell Canada Senior Regulatory Specialist Scot MacKillop said that the Shell had applied to the National Energy Board on September 25, 2012 for a licence to export LNG via Kitimat for the next 25 years.

The Shell proposal, like the previous Kitimat LNG and BC LNG proposals, are export applications, unlike the Enbridge Northern Gateway which is a “facility application.”
In its letter to Shell’s lawyers, the NEB took pains to head off any objections to the project on environmental or other grounds by saying:

the Board will assess whether the LNG proposed to exported does not exceed the surplus reaming after due allowance has been made for the reasonably foreseeable requirements for use in Canada. The Board cannot consider comments that are unrelated…such as those relating to potential environmental effects of the proposed exportation and any social effects that would be directly related to those environmental effects.

What is it about Douglas Channel islands? Now a US agency has added a “Douglas Island”

US FERC Map of LNG terminals in North America
Map from the United States Federal Energy Regulatory Commission showing LNG export terminal projects in North America (FERC)

What is it about the islands in Douglas Channel? First, Enbridge gets in to a lot of hot water, so to speak, for erasing the islands in Douglas Channel in an animation promoting the Northern Gateway Pipeline.  See for example The Vancouver Sun on back on Aug. 16, 2012, when it picked up a story from the Times Colonist – Enbridge map sinks islands, angers critics.   The controversial video segment showed Douglas Channel wide open for navigation, rather than marked with about one thousand square kilometres of mountainous islands. Map of Douglas Channel Islands from Leadnow.ca This map, created by the Leadnow.ca and  Sumofus.org websites was widely used by the media to show the difference.  Enbridge later amended its video with a disclaimer that it is “broadly representational.” A video by Shortt and Epic Productions “This is Not An Enbridge animation” showing the beauty of northwestern BC quickly went viral.

As this was happening, the United States government Federal Energy Regulatory Commission issued a map that shows Liquified Natural Gas import and export terminals across North America, a map that adds an island to the Channel–“Douglas Island.”

In fact, the map manages to get a lot about Canadian LNG projects wrong. It locates the BC LNG project on the non-existent Douglas Island. The company’s name Douglas Channel Energy Partnership actually gives the proper location this way

 south of the Moon Bay Marina, within the District of Kitimat and the asserted traditional territory of the Haisla Nation. The site is approximately 10 km southwest of Kitimat and 7 km north of Bees Cove Indian Reserve 6 (Bish Cove)

The small cove where BCLNG will put its barges to create the LNG is often locally called North Cove.

The FERC map also misplaces the Shell LNG project, now known as LNGCanada, in Prince Rupert, even though Shell confirmed the Kitimat location on May 15, 2012. It also calls it Prince Rupert Island, although the town of Prince Rupert is actually located on Kaien Island.

The map does apparently get the KM LNG project somewhat correct, attributing it to Apache Canada, but leaving off Apache’s partners, Encana and EOG.

The map recently also appeared on the website of Oregon Public Broadcasting in an article Five Keys To The Pacific Northwest’s Natural Gas Export Debate by reporter Amelia Templeton, which outlines the growing controversy over the plans to export US LNG through Coos Bay, Oregon via the Jordan Cove Project.

It appears that in Oregon, the Coos Bay LNG project is becoming as controversial as the Northern Gateway project is in Canada.

The issues outlined by Templeton include the threat of expropriation (called “eminent domain” in the US and also a key issue in the debate over the Keystone XL pipeline on the plains).  There are arguments on jobs versus the environment, especially the perceived threat to wild rivers and salmon spawning grounds. Finally one issue that is lower on the agenda in northwestern BC but a big worry in Oregon, the potential for a devastating earthquake along the Cascadia fault.

During the NEB hearings on the KM LNG (Apache/EOG/Encana) project in June, 2011, many of the  “expert” witnesses urged that that first Kitimat project go ahead quickly because of perceived competition from Oregon.

Unlike in Oregon, LNG projects are generally perceived positively in the northwest and all three are going ahead, although not as quickly as originally planned due to market volatility among prime potential customers in Asia.

 

TransCanada says it will reapply to build Keystone XL pipeline

TransCanada has issued a statement saying that it will apply to the United States government to build the Keystone XL pipeline from the Alberta bitumen sands to Texas.

Related: Obama adminstration rejects Keystone XL pipeline, TransCanada can reapply

The statement reads, in part:

This outcome is one of the scenarios we anticipated. While we are disappointed, TransCanada remains fully committed to the construction of Keystone XL. Plans are already underway on a number of fronts to largely maintain the construction schedule of the project,” said Russ Girling, TransCanada’s president and chief executive officer. “We will re-apply for a Presidential Permit and expect a new application would be processed in an expedited manner to allow for an in-service date of late 2014.”

TransCanada expects that consideration of a renewed application will make use of the exhaustive record compiled over the past three plus years.

“Until this pipeline is constructed, the U.S. will continue to import millions of barrels of conflict oil from the Middle East and Venezuela and other foreign countries who do not share democratic values Canadians and Americans are privileged to have,” added Girling. “Thousands of jobs continue to hang in the balance if this project does not go forward. This project is too important to the U.S. economy, the Canadian economy and the national interest of the United States for it not to proceed.”

TransCanada will continue to work collaboratively with Nebraska’s Department of Environmental Quality on determining the safest route for Keystone XL that avoids the Sandhills. This process is expected to be complete in September or October of this year.

TransCanada has committed to a project labour agreement with the Laborers International Union of North America, the International Brotherhood of Teamsters, the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, AFL-CIO, the International Union of Operating Engineers and the Pipeline Contractors Association. Any delay in approval of construction prevents this work from going to thousands of hard-working trades people.

TransCanada’s investment of billions of private dollars would create thousands more jobs in the U.S. manufacturing sector. The company has contracts with over 50 suppliers across the U.S.. Manufacturing locations for Keystone XL equipment include: Texas, Missouri, Pennsylvania, Michigan, Oklahoma, South Carolina, Indiana, Georgia, Maryland, New York, Louisiana, Minnesota, Ohio, Arkansas, Kansas, California and Pennsylvania. The benefits these companies and the people of their states continue to be delayed and the negative impacts will be felt.

Girling adds TransCanada continues to believe in Keystone XL due to the overwhelming support the project has received from American and Canadian producers and U.S. refiners who signed 17 to 18 year contracts to ship over 600,000 barrels of oil per day to meet the needs of American consumers.

Little difference between diluted bitumen and conventional crude affect on pipelines, Alberta review says

Energy Environment

    A study by an Alberta provincial government agency has concluded that diluted bitumen (also known in the industry as “dilbit”) is little different in its effects on pipelines than conventional or ‘non-oil sands derived’ crude oil.

A review of existing studies was conducted by Jenny Been, P.Eng for the provincial agency,  Alberta  Innovates – Technology Futures.  A news release on the website describes Been as a “corrosion specialist.”  The study “concludes that the characteristics of dilbit are not unique and are comparable to conventional crude oils during pipeline flow.”

Link News release and study (pdf) 
Comparison of the Corrosivity of Dilbit and Conventional Crude

Been’s study takes on the contention that dilbit has higher acid, sulfur, and chloride salts and higher concentrations of abrasive solids than conventional crude.  As well, the study looks at the belief that dilbit transmission pipelines operate at higher operating temperatures compared with crude, which would make the dilbit more corrosive. Environmentalists and other critics say  this leads to  a higher failure rate than pipelines carrying  crude.

The study compared the  properties  of  heavy,  medium,  and  light  conventional Alberta crude oils with three dilbit and one dilsynbit (a mixture of conventional gas diluent and synthetic gas) crude.

The review  concludes “that the characteristics of dilbit are not unique and are comparable to conventional crude oils.”

While two of the four dilbit crudes displayed a slightly higher naphthenic acid and sulfur concentration than the conventional Alberta heavy crudes, the review notes that there are conventional crudes on the market that have displayed higher values.  It says while there have been corrosion problems at refineries where the temperature can exceed  200 C, it says “the  much  lower  pipeline transportation temperatures, the compounds are too stable to be corrosive and some may even decrease the corrosion rate.”

The study also says “sediment  levels  of  the  dilbit  crudes  were  comparable  to  or  lower  than  the conventional crudes, except for a dilsynbit crude, which showed more than double the quantity of solids than most other crudes, but was still well below the limit set by regulatory agencies and industry….Erosion corrosion was found to be improbable and erosion, if present, is expected to be gradual and observed by regular mitigation practices.”

The study’s recommendations note that it is a review and “It has to be understood that this was a high-level review and a focused, peer-reviewed study has not been conducted.   The scope of the work did not include interviews with industry, regulators, or colleagues.”

It calls for the industry to create a database that would further study that differences between dilbit oils and conventional crude oils,  including further study of sludge formation and deposition in the pipeline and the links, if any,  “on sludge chemistry to pipeline sludge formation and sludge   corrosivity,   including   the   ability   of   the   sludge   to   support   microbial populations.”

Been says in the study that Enbridge supports an industry working group on pipeline corrosion management  that is  “addressing these issues by correlating sludge corrosivity with a chemical and microbial geochemical characterization of the sludge.   The work is further considering and optimizing monitoring technologies to enable measurement of the effectiveness of mitigation treatments.  It is recommended that this effort will continue to be supported.”
   
While the study is a review of existing knowledge on diluted bitumen and conventional oil in pipelines,  Been’s introductory remarks clearly show a bias in favour of the bitumen sands, saying, before the Keystone XL project approval was delayed by the U.S. State Department, “TransCanada Pipeline’s (TCPL’s) $13 billion Keystone pipeline system will provide a secure and growing supply of Canadian crude oil to the largest refining markets in the Unites States.”

Been also notes

Environmental  groups  opposed  to  the  pipelines  continue  to  find  material  to  fuel  their concerns: the more than 800,000 gallons of oil spilled into the Kalamazoo River in Michigan last year came from the Cold Lake oil sands region, and the Exxon Mobil spill of 42,000 barrels of oil in the Yellowstone River may have contained dilbit.   Protestors against the Keystone pipeline are gathering in demonstrations across North America leading to mass arrests and drawing widespread attention.

The arguments of these environmental groups don’t go unheard with congressmen and other government officials, who have iterated reported statements and concerns.  The United States Department of States (DOS) has spent the last three years in review with the industry, scientific community, and other interest parties (including numerous public meetings), evaluating the purpose and need for the Project (pipeline), alternatives, and the associated potential environmental impacts.   The result was issued on August 26, 2011 in a Final Environmental Impact Statement (FEIS), a comprehensive, detailed volume of work that is available to the public. Public hearings were held and online comments were accepted.

Been notes that as part of the Keystone assessment, the US  Department of Transportation’s  Pipeline and Hazardous Materials Safety Administration (PHMSA) issued 57
Project-specific Special Conditions above and beyond the requirements of the United States pipeline code for  Keystone XL. Been says TransCanada agreed to the incorporation of the 57 conditions and said would result in a pipeline with a greater degree of safety than typical domestic pipelines.

Environmental groups said the 57 conditions on Keystone were not sufficient, Been noted and the report goes on to say:

Alberta Energy Minister Ron Liepert considers it a challenge of combating emotion with facts, and assures that the facts could be obtained without too much difficulty.  Concerns continue to surface in the media and in the face of few factual studies and a strong confidence in …  tracking statistics that dilbit is not more corrosive than conventional oil, corrosivity claims continue to be used as fuel by certain environmental groups. 

Yet if Enbridge and other energy companies are still working on pipeline corrosion, as Been notes, then there are still problems to be solved.

Given the pro-Keystone statements in the Been’s paper, it is clear that a definitive, independent study is needed on the effects of  diluted bitumen in a pipeline, one that doesn’t come from either a pro-energy industry point of view, nor one conducted by an environmental group that would bring criticism from the energy industry.

Until there is such an independent study, the doubts of the environmental activists must be balanced with assurances coming from the energy industry.

 

TransCanada agrees to reroute Keystone XL around sensitive areas

Energy Environment Politics

TransCanada Corporation announced Monday that it will reroute the controversial bitumen pipeline around environmentally sensitive areas in Nebraska.

At a news conference, in the state capital, Lincoln and in a news release, posted on its website, the company said that it supports proposed Nebraska state legislation that would ensure a pipeline route will be developed in Nebraska that avoids the environmentally sensitive Sandhills region.

Alex Pourbaix, TransCanada president for Energy and Oil Pipelines said, “”I am pleased to tell you that the positive conversations we have had with Nebraska leaders have resulted in legislation that respects the concerns of Nebraskans and supports the development of the Keystone XL pipeline…I can confirm the route will be changed and Nebraskans will play an important role in determining the final route.”

The company says it will work with the US State Department and Nebraska’s Department of Environmental Quality will conduct an environmental assessment to define the best location for Keystone XL in Nebraska. “We will cooperate with these agencies and provide them with the information they need to complete a thorough review that addresses concerns regarding the Sandhills region.”

TransCanada said.

The decision comes just four days after last Thursday’s decision by the State Department to postpone consideration of the pipeline project to allow the agency to look at alternative routes.

The 2013 decision date would also avoid the US presidential election cycle which is beginning to ramp up at this time.

In the news release,

TransCanada emphasized the safety measures it is taking on the project.

Construction of the pipeline in Nebraska would consist of five or six new pump stations and over 275 miles of new pipeline. The project is expected to employ over 2,200 construction workers in the state.

Keystone XL will be safe, built with high strength steel and with the highest safety standards of any pipeline in North America. 21,000 sensors monitor the length of the pipeline by satellite 24 hours a day, 365 days a year, with data refreshed every five seconds. If there is a problem, automatic shut-off valves can be activated in minutes – shutting off the flow of oil.

“The U.S. Department of State announced last Thursday that further assessment of alternative routes for Keystone XL was needed in Nebraska to move forward with the National Interest Determination. Today’s proposed legislation is a critical step in making this happen,” Pourbaix added. “The safe and reliable operation of our pipelines and all of our infrastructure has been TransCanada’s priority for 60 years. This commitment will continue to guide us toward a positive outcome in Nebraska.”

The pipeline would carry bitumen from the Alberta bitumen sands to refineries in Texas.

Harper says oil to Asia “important priority,” Oliver wants to expedite Gateway Joint Review process

Energy Politics

Prime Minister Stephen Harper has told reporters at the APEC summit in Hawaii that pushing Canadian energy products to Asia are an “important priority” for his government given the postponement of the Keystone XL pipeline project.

Reuters reports from Honolulu:

“This does underscore the necessity of Canada making sure
that we are able to access Asia markets for our energy
products,” Harper told reporters on the sidelines of the
Asia-Pacific Economic Cooperation forum.


“That will be an important priority of our government going
forward and I indicated that yesterday to the president of
China.”

A couple of hours earlier, the industry newsletter Platts quoted Natural Resources Minister Joe Oliver as saying he wanted the Northern Gateway pipeline approval process expedited and limited to just one year.



Platts quoting a CBC interview (the quote, at this point is not on the CBC website story about Oliver) says:

Canadian Natural Resources Minister Joe Oliver said November 13 he wants a regulatory decision by early 2013, a year ahead of the current schedule, on Enbridge’s Northern Gateway project to expedite the shipment of Alberta oil sands crude to Asia….

“The Chinese are ready to buy,” he told the Canadian Broadcasting Corporation. “The issue is building the infrastructure to get our resources to China.”

To that end, Oliver said he now expects Northern Gateway’s hearings to be completed within a year of starting in January 2012.

While insisting that he will not interfere in the Northern Gateway process, Oliver said it is a “fundamental strategic objective” of the Canadian government to diversify its customer base for oil beyond the United States.

Oliver apparently made his statement before Stephen Harper was scheduled to meet with US President Barack Obama.

Enhanced by Zemanta

Keystone XL decision – more questions than answers: Blog

A blog by Edmonton based, University of Alberta business professor Andrew Leach, Keystone XL decision – more questions than answers, analyzes the Keystone postponement through the rose coloured glasses we see often from Alberta (referring, of course, to the provincial flower, not the political party) and is more intelligent than what we’ve seen from the business press across Canada.

Interestingly Leach says:

It took exactly 3 minutes after I first heard the news for me to hear
someone say, “if they don’t want our oil, we’ll send it to China!”
Surprisingly, it took another 3 hours for me to hear someone make
reference to letting Americans freeze in the dark

And later, Leach goes on to advise Albertans:

If Alberta wants to grow oilsands production beyond about 3 million barrels per day, we are going to need others to accept infrastructure in their backyards to get it to market. In the past, landowners along 1000s of miles of pipeline would have no easy way to come together and oppose the project – that has all changed and if you don’t believe me, ask the 4000 people who have signed up to intervene at the Northern Gateway Joint Review Panel hearings, or the 10000+ people who converged on the White House to oppose Keystone XL.

Editor’s Note: Leach was part of a wide ranging Twitter debate after the Keystone XL was postponed. A key article that sparked the debate was a piece in the New York Times by Michael Levi, that talked about NIMBYism in the Keystone case, A Shortsighted Victory in Delaying the Keystone Pipeline.  That three minute record seems typical of the attitude on Twitter from many Albertans, who assume that the Northern Gateway pipeline  will go ahead.

‘Keystone Cops’ crippling U.S. economy: National Post

Energy Politics

Diane Francis, writing in the National Post, in Keystone Cops’ crippling U.S. economy,  a wide ranging piece attacking the decision to postpone the Keystone XL pipeline, makes her contempt for all the people of northern British Columbia pretty clear in her push to get the Northern Gateway pipeline going

The other priority is to fast-track the proposed pipeline through British Columbia to the West coast to ship oil to Asian markets. The aboriginal claims must be settled financially and generously as quickly as possible before the trans-national non-state players in the environmental movement organize them and stop the pipeline.

Editor’s note: Why do the business columnists across the Canadian media continue to believe that the people of northern British Columbia, aboriginal and non-aboriginal, are so stupid and helpless that they are under the thumb of the so-called “trans-national non-state players in the environmental movement” rather than local residents concerned about the environment where the live, work and play?? (Sounds like an editorial, which will be forthcoming)