Vol. 17, No. 17 Week of April 22, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Pipe dreams showdown

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Kinder Morgan proposes larger-than-expected line to Vancouver for Alberta crude

Gary Park

For Petroleum News

The all-out contest to open new markets for Alberta crude oil producers, who are losing an estimated C$18 billion a year because of current export bottlenecks, and the battle against the rising tide of pipeline projects has reached a crescendo.

Kinder Morgan has emerged from virtual obscurity with plans to almost triple capacity on its Trans Mountain system from Alberta to the Pacific Coast, joining rivals TransCanada and Enbridge in the conflict over the shipment of oil sands crude to the Texas Gulf Coast and Asia.

After two years of low-key negotiations with potential shippers, Kinder Morgan has disclosed its plans to seek regulatory approval to enlarge Trans Mountain to 850,000 barrels per day from its current 300,000 bpd, setting the stage for what will be the ultimate showdown over pipelines and tankers in the British Columbia region.

The little-known Trans Mountain system has been operating for decades, carrying crude to a Washington state refinery and Port Metro Vancouver for shipment to California and Asia.

But there is no longer anywhere for it to hide. By targeting an addition of 550,000 bpd, Kinder Morgan has surpassed the 525,000 bpd planned for Enbridge’s Northern Gateway proposal.

It now hopes to file an application with Canada’s National Energy Board in 2014, start construction in 2016 and commence shipments in 2017, close to the schedule set for Northern Gateway.

Support exists

The indications are that both projects have enough support to succeed.

During an extended open season, Kinder Morgan received binding commercial support for 660,000 bpd of pipeline capacity, all for 20-year terms.

Ian Anderson, Kinder Morgan’s Canadian president, said the level of commitment equates to about 25 to 30 tankers a month (compared with the current five to 10) loading at the Westridge terminal in Port Metro Vancouver and navigating through a densely populated area to the Pacific Ocean.

He said the proposal has attracted so much interest from customers because it offers new access in Asia through a facility that already exists.

Anderson said the port, facilities, tanker pilots, tug operators and first-responders are already in place, supporting a belief that expansion of Trans Mountain and the Westridge terminal “has merit … and is a feasible way to go.”

He said Kinder Morgan also has the backing of the Alberta government and Canadian Prime Minister Stephen Harper.

“We share respectful, open relationships with many communities and organizations interested in our business,” Anderson said. “We are committed to an 18- to 24-month inclusive, extensive and thorough engagement of all aspects of the project with local communities along the proposed route and marine corridor …”

He said Kinder Morgan will consider providing financial support to communities for environmental initiatives.

Testing to come

But Anderson`s confidence that the people of British Columbia will ultimately support Kinder Morgan’s proposal is about to be tested.

Opposition to Northern Gateway from First Nations, environmentalists, landowners and municipal governments took years to surface, but has now coalesced into a formidable challenge.

Feeding off that campaign, the same groups, bolstered by municipal governments in the Greater Vancouver region, have wasted no time tackling Kinder Morgan, setting the stage for a battle that could rival U.S. opposition to TransCanada’s Keystone XL pipeline and far exceed Northern Gateway, which directly affects a small and scattered population.

Ben West, a spokesman for the Wilderness Committee, said the 40 percent increase in what Kinder Morgan had originally talked about will only strengthen public efforts to halt the project he described as “simply outrageous.”

“Every new tanker that is in (Port Metro Vancouver) is carrying at least two to three times as much crude as the Exxon Valdez spilled. More tankers mean more risk,” he said.

Opposition from Vancouver

Vancouver Mayor Gregor Robertson said he does not believe the people of his city endorse a “huge oil port. … It is totally at odds with our city brand and our identity and ethic.”

“I am fiercely opposed to (an increased number of tankers) in Vancouver’s harbor. We are gearing up as a city to deal with this, working with other local governments in the region and around the southern coast,” he said.

Burnaby Mayor Derek Corrigan said the Kinder Morgan plan is a wrong-headed decision that will generate no economic benefit for his city.

“We are well aware of the potential dangers and even when people claim to have all the safety procedures in place human error can cause a serious problem,” he said.

Corrigan acknowledged that the Canadian and British Columbia governments can override local concerns, but argued the Trans Mountain proposal is so politically charged that Kinder Morgan faces many obstacles.

A spokesman for Kinder Morgan conceded the company faces a “lot of work speaking to landowners and people on the (pipeline) right-of-way.”

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